the financial plan

Question 1

fixed pay earned by employees.

Answer 1

salaries

Question 2

cost consumed in a reporting period related to electricity, heat, sewer,
and water expenditures.

Answer 2

utilities expense

Question 3

cost incurred by a business to utilize a property or location for an office,
retail space, factory, or storage space.

Answer 3

rent expense

Question 4

costs associated with distributing, marketing and selling a product or
service.

Answer 4

sales expense

Question 5

amount that a company pays to get an insurance contract and any
additional premium payments.

Answer 5

insurance expense

Question 6

reduction in the value of an asset with the passage of time, due in particular to
wear and tear.

Answer 6

depreciation

Question 7

cost of an asset that has been depreciated for a single period, and
shows how much of the asset’s value has been used up in that year.

Answer 7

depreciation expense

Question 8

money owed to a company by its debtors.

Answer 8

accounts receivable

Question 9

refers to all the items, goods, merchandise, and materials held by a business for
selling in the market to earn a profit.

Answer 9

inventory

Question 10

future expense that is paid in advance.

Answer 10

prepaid expense

Question 11

refers to a company’s short-term obligations owed to its creditors or suppliers,
which have not yet been paid.

Answer 11

accounts payable

Question 12

use of funds or assumption of a liability in order to obtain or upgrade
physical assets.

Answer 12

capital expenditures

Question 13

act of paying back money that you have borrowed.

Answer 13

debt payments

Question 14

distribution of a company’s profits to its shareholders.

Answer 14

dividends paid

Question 15

total of all costs used to create a product or service, which has been sold.

Answer 15

Cost of Goods Sold

Question 16

the amount of money a company has left after subtracting all direct costs of producing or purchasing the goods
or services it sells.

Answer 16

Gross Margin

Question 17

Everything that the business owns that can
be used to create value.

Answer 17

assets

Question 18

Everything that the business owes to banks
and other creditors.

Answer 18

liabilities

Question 19

Representing the excess of all assets over all liabilities.
Also known as Net Worth.

Answer 19

Owners’ Equity/Shareholders’ Equity

Question 20

cash and other assets that are expected to be converted to cash within a year.

Answer 20

current assets

Question 21

assets which are purchased for long-term use and are not likely to be converted quickly into cash, such as land, buildings, and equipment.

Answer 21

fixed assets

Question 22

debts a company must pay within a normal operating cycle, usually less than 12 months.

Answer 22

current liabilities

Question 23

expense that has been incurred, but for which there is not yet any expenditure
documentation.

Answer 23

accured expense

Question 24

company’s financial obligations that are due more than one year.

Answer 24

long-term liabilities

Question 25

amount that the owners of a company have invested in their business.

Answer 25

shareholders’ equity

Question 26

ownership share in a corporation that allows its holders voting rights at shareholder meetings and the opportunity to receive dividends.

Answer 26

common stock

Question 27

amount of profit a company has left over after paying all its direct costs, indirect costs,
income taxes and its dividends to shareholders. It represents the portion of the company’s equity that can be used for investing in new equipment, R&D, and marketing.

Answer 27

retained earnings

Question 28

volume of sales at which the business neither makes a profit nor incurs a loss.

Answer 28

breakeven