Key vocabulary- II

Accounting and financial statements

BOOKKEEPING - writing down the details of transactions (debits and credits)

ACCOUNTING – preparing financial statements showing income and expenditure, assets and liabilities
MANAGERIAL ACCOUNTING – preparing information that will allow a business to make decisions, plan
future operations and develop business strategies
COST ACCOUNTING – calculating all the expenses involved in producing something, including materials,
labour and all other expenses
TAX ACCOUNTING – calculating how much an individual or a company will have to pay to the
government (and trying to reduce this to a minimum)
AUDITING – inspection and evaluation of accounts by a second set of accountants
'CREATIVE ACCOUNTING' – using all available accounting procedures and tricks to disguise the true
financial position of a company
BALANCE SHEET - the financial statement detailing what a company owns and what it owes on particular
date (the last day of an accounting period)
PROFIT AND LOSS ACCOUNT (GB) OR INCOME STATEMENT (US) -the financial statement showing
earnings(income) and expenditure, as well as the profits earned and losses made over an accounting
period
ASSETS = liabilities + owners’ equity
CASH FLOW STATEMENT OR FUNDS FLOW STATEMENT OR SOURCE AND APPLICATION OF FUNDS
STATEMENT- the financial statement showing the sources (cash inflows) and the applications of funds
(cash outflows), that is money coming into and going out of a business between balance sheet dates
OVERHEADS - fixed costs that include rent, salaries, utilities, etc., that is the various expenses of
operating a business that cannot be charged to any product, process or department.
CREDITOR – a person, organization or a company to whom the money is owed
DEBTOR - a person, organization or a company that owes money
CURRENT LIABILITIES - debts that must be paid within a year
CURRENT ASSETS – types of assets such as cash, stock or debtors
LONG-TERM LIABILITIES - debts that must be paid after at least twelve months
MORTGAGE - a type of loan whose collateral is usually a property.
INTANGIBLE ASSETS - a type of assets whose value is difficult to quantify or turn into cash, such as
goodwill, patents, copyrights and trade marks.
Assets – liabilities = OWNERS’ EQUITY/SHAREHOLDERS’ CAPITAL
INCOME OR REVENUE OR EARNINGS - all the money received by a person or a company during a given
period (wages, salaries, rent, business profits, dividends, etc.), minus the cost of sales, operating
expenses, and taxes
DEBTORS (GB) OR ACCOUNTS RECEIVABLE (US) – the sums of money owed to a company by its
customers
CREDITORS (GB) OR ACCOUNTS PAYABLE (US) - the sums of money owed by a company to its suppliers or
lenders
Revenue – costs = PROFIT
DEPRECIATION (GB) OR AMORTIZATION (US) - the reduction in value of a fixed asset during the years it is
in use (charged against profits)
LIQUIDITY – having assets that can easily be turned into cash
RETAINED PROFIT - The profit that is used for future growth or bad debt charges
RENT - money paid for the use of a house or a flat.
STOCK (GB) OR INVENTORY (US) - (the value of) raw materials, work in progress, and finished products
stored ready for sale.
TURNOVER - the amount of business done by a company over a year
ASSETS – anything owned by a business that can be used to produce goods or pay liabilities
LIABILITIES – anything that a business owes, that is money that a company will have to pay to
someone else in the future, including taxes, debts, interest and mortgage payments, and so on
SOLVENCY – having money to pay your debts at the time they must be paid ¸
FIXED TANGIBLE ASSETS – types of assets such as buildings, land and machinery
EXPENDITURE – the total amount of money that a company spends during a particular period of
time, showing costs and overheads
FIXED COSTS – costs that do not vary according to the volume produced, such as administrative
costs, labour and storage
VARIABLE COSTS – costs which depend on the volume of output produced by a business, such as
advertising, distribution, R&D, production
SOURCES OF FUNDS OR CASH INFLOWS – owners’ own funds from the issuing of shares, trading
profits, the sales of assets or depreciation provisions
APPLICATIONS OF FUNDS OR CASH OUTFLOWS – purchases of fixed and financial assets, running
expenses, interest payments, taxation and payment of dividends, and in a bad year, trading losses
CASH DEFICIT – a situation in accounting when there are more cash outflows than inflows
CASH SURPLUS - a situation in accounting when there are more cash inflows than outflows
NET – an amount after things, such as tax, have been taken away
GROSS – a total amount without anything being taken away
WORKING CAPITAL OR FUNDS – the stock of money (cash and liquid resources) required
by a business to continue producing or trading
SHARE CAPITAL - capital that a company has from investors who have bought shares
RESERVES – earlier profits not paid out
SHAREHOLDERS’ FUNDS OR OWNERS’ EQUITY – money in a company that legally belongs
to shareholders including share capital, retained profit and other reserves in the form of
dividends
Stocks and shares
TO ISSUE - to offer securities for sale to the general public
TO UNDERWRITE - to guarantee to buy all the securities at an agreed price on a certain day,
if they cannot be sold to the public
STOCK/SHARE INDEX - an official list of the average price of shares in a group of companies
on a particular stock market
TO DEFAULT- to fail to repay a loan at the scheduled time
GILTS - long-term bonds issued by the British government
PORTFOLIO - an investor’s collection/selection of securities
MUTUAL FUND (US) OR UNIT TRUST (GB) - a company that spreads investors’ capital over a
variety of securities
INSIDER TRADING - the use of information not known to the public to make a profit out of
buying or selling shares
MARKET-MAKER- a wholesaler in stocks and shares who deals with brokers
BLUE CHIP SHARE - a share in a large company or corporation that is considered to be a secure
investment
FLOTATION (GB) OR INITIAL PUBLIC OFFERING (US) - offering company shares for sale to the public
for the first time
EQUITIES- another name for stocks and shares, because all the stocks and shares of a company have an
equal nominal value
BONDS - securities issued by companies, governments and financial institutions when they need to
borrow money
SECURITIES - investments in stocks, shares and bonds; certificates to show that someone owns stocks,
shares or bonds; saleable papers, traded on stock exchanges, that yield an income (dividend, interest,
etc.)
STOCKS- securities bought on the stock exchange which belong to companies listed on the stock
exchange
SHARES- securities which include both stocks and privately held stakes in small firms that are not
publicly traded, pay dividends and enable the bearer to own a part of the company
NASDAQ- an electronic exchange, a system which provides quotations via computer
for the US electronic trading market
INSITUTIONAL INVESTORS- financial organizations such as pension funds and
insurance companies which own most of the shares of all leading companies (over
60% and rising)
NOMINAL VALUE, PAR VALUE OR FACE VALUE - the stated value of a bond, share etc
when it is issued, that is sold for the first time
SPECULATORS – people who buy goods, shares, property, or foreign currency in the
hope of making a profit
NIKKEI AVERAGE – index of share prices on the Tokyo Stock Exchange
DOW JONES INDEX – index of share prices on the New York Stock Exchange
DAX - index of share prices on the Frankfurt Stock Exchange
CAC - index of share prices on the Paris Stock Exchange
FTSE - index of share prices on the London Stock Exchange
BANKRUPT– to be insolvent, that is unable to pay debts
TO LIQUIDATE – to sell all the assets of a bankrupt business to repay creditors
DIVIDEND – a proportion of the annual profits of a limited company, paid to
shareholders
VENTURE CAPITAL – money invested in a possibly risky new business
ASSETS – everything of value owned by a company that can be used to produce
goods, pay liabilities or sold
PREMISES – the place in which a company does business: an office, shop, workshop,
factory, warehouse, and so on
CREDITOR – a person or an organization to whom money is owed (for goods or
services rendered, or as repayment of a loan)
STOCKBROKER – a person who can advise investors and buy and sell shares for
them
BEAR – a person who thinks the prices of shares are going to fall, and therefore sells shares hoping to
buy them back at lower price
BULL – someone who thinks that prices of shares are going to rise, and who will therefore keep them or
buy investments
STAG - someone who buys new share issues, hoping to resell them at a profit
ORDINARY SHARES (GB) OR COMMON STOCK (US) – fixed units of a company’s
share capital that usually pay a dividend and have voting rights
ANNUAL GENERAL MEETING (GB) OR ANNUAL STOCKHOLDERS MEETING
(US) – a yearly meeting to which companies have to invite all shareholders
ANNUAL REPORT – sent by all the publicly quoted companies to their
shareholders after each financial year, before the AGM
PUBLIC LIMITED COMPANY (PLC)/A LISTED COMPANY– a successful,
established company that is allowed to offer its shares for sale on the open
stock market
PRIVATE LIMITED COMPANY – a company that cannot offer its shares to the
public; their owners have to raise capital themselves, or borrow from friends,
banks or venture capital institutions
LIMITED LIABILITY – responsibility for debts up to the value of the company’s
share capital
UNLIMITED LIABILITY- the legal obligation to pay all one’s debts, if necessary
by the sale of one’s personal assets
LIMITED COMPANY OR CORPORATION – a company that is only liable for the amount of capital that
shareholders have invested, and not for debts greater than this amount
Derivatives
DERIVATIVES - a general name for all financial instruments whose price depends on underlying assets
such as stocks, bonds, commodities, currencies, interest rates and market indices.
OPTIONS - contracts giving the right, but not the obligation, to buy (call option) or sell (put option) an
asset (a security, a currency, or a commodity) at a fixed, agreed-upon price (strike price) during a certain
period of time, or on a specific date
FUTURES - contracts to buy or sell fixed quantities of a commodity, currency, or financial asset at a future
date, at a price fixed at the time of making the contract
SPECULATION - buying securities or other assets in the hope of making a capital gain by selling them at a
higher price (or selling them in the hope of buying them back at a lower price)
HEDGING - making contracts to buy or sell a commodity or financial asset at pre-arranged price in the
future as a protection or ‘insurance’ against price changes
COMMODITIES - raw materials or primary products (metals, cereals, coffee, etc.) that are traded on
special markets
SPOT MARKET- a market on which commodities, currencies and financial securities are traded for
immediate delivery at their current price
FUTURES MARKET - a market on which contracts are made to buy commodities, currencies, and various
financial assets, at a future date, but with the price fixed at the time of the deal
CURRENCY SWAP – an agreement between two parties who exchange principal and fixed rate interest
payments on a loan in one currency for principal and fixed rate interest payments on an equal loan in
another currency
INTEREST RATE SWAP - an agreement to exchange future interest payments with another company or
financial institution, e.g. a floating rate loan for a fixed interest rate loan