MTEL Business (19) key terms

The common set of accounting standards, rules, and conventions used in the United States to prepare and present financial statements consistently, so that reports are comparable across companies and time periods.

A method that records revenue when earned and expenses when incurred, regardless of when cash changes hands. It matches costs to the periods they help generate revenue.

The rule that revenue is recorded in the period in which the seller has substantially completed the earnings process and collection is reasonably assured, not necessarily when payment is received.

The guideline that expenses be reported in the same period as the revenues they helped produce, so that each period's income statement reflects the true cost of earning that period's revenue.

The fundamental relationship Assets = Liabilities + Owners' Equity. Every transaction keeps this equation balanced, which underpins the double-entry bookkeeping system.

A system in which every transaction is recorded with equal debits and credits across at least two accounts, keeping the accounting equation in balance and enabling error detection.

A listing of all ledger account balances at a point in time, used to verify that total debits equal total credits before preparing financial statements.

The master collection of all accounts a business uses, where each transaction's debits and credits are posted and account balances are maintained for reporting.

The initial record of a transaction showing the date, the accounts affected, the amounts debited and credited, and a brief explanation of the business event.

The formal reports summarizing a firm's financial position and performance: the balance sheet, income statement, statement of cash flows, and statement of retained earnings.

A snapshot report of assets, liabilities, and owners' equity at a specific date, showing what the business owns, owes, and the owners' residual interest.

A report summarizing revenues, expenses, gains, and losses over a period to show net income or loss, often called the profit and loss statement.

A report classifying cash receipts and payments into operating, investing, and financing activities to explain the change in cash during a period.

The systematic allocation of the cost of a long-lived tangible asset over its useful life, reflecting wear, obsolescence, and the consumption of economic benefit.

A method spreading an asset's depreciable cost evenly over its useful life by subtracting salvage value from cost and dividing by the number of years of service.

An asset's recorded cost less accumulated depreciation, or a company's total assets minus total liabilities, representing net worth on the accounting records.

Net sales minus cost of goods sold. It measures the margin earned before operating expenses and is often expressed as a percentage of sales.

The direct cost of merchandise or materials sold during a period, including purchase costs and freight, deducted from sales to determine gross profit.

The method used to assign dollar amounts to goods on hand, such as FIFO or LIFO, which affects reported cost of goods sold and ending inventory value.

A liquidity measure computed as current assets divided by current liabilities, indicating a firm's ability to pay short-term obligations as they come due.

The ease with which an asset can be converted to cash without significant loss of value, or a firm's capacity to meet short-term obligations with available resources.

Current assets minus current liabilities. It represents the net short-term resources available to fund day-to-day operations and growth.

The sales volume at which total revenue equals total costs, producing neither profit nor loss. It is calculated by dividing fixed costs by contribution margin per unit.

Expenses that remain constant in total regardless of changes in production or sales volume within a relevant range, such as rent, insurance, and salaried supervision.

Expenses that change in total in direct proportion to changes in activity level, such as raw materials and hourly direct labor, while remaining constant per unit.

Sales revenue minus variable costs. It shows how much each sale contributes toward covering fixed costs and generating profit, and can be expressed per unit or as a ratio.

Decision-making that compares the additional benefit of one more unit of an action with its additional cost, choosing options where marginal benefit exceeds marginal cost.

The value of the next-best alternative forgone when a resource is committed to one use, a key consideration in economic and managerial decision making.

A cost already incurred that cannot be recovered by any future decision, and therefore should be ignored when evaluating alternatives going forward.

The economic model in which price is determined by the interaction of how much buyers will purchase and how much sellers will offer at various price levels.

The price and quantity at which the quantity demanded equals the quantity supplied, so there is no tendency for price to rise or fall on its own.

A measure of how responsive quantity demanded is to a change in price. Demand is elastic when a small price change causes a large change in purchases.

A strategic planning tool that identifies an organization's internal strengths and weaknesses and its external opportunities and threats to guide goal setting and strategy.

The process of defining an organization's long-term direction, setting measurable objectives, and allocating resources to achieve a competitive advantage over time.

The controllable elements a firm combines to reach its target market, traditionally product, price, place, and promotion, often called the four Ps.

Dividing a broad market into smaller groups of buyers with similar needs, characteristics, or behaviors so that marketing efforts can be tailored efficiently.

The specific group of consumers a business chooses to serve with its product and marketing efforts, selected after evaluating segment attractiveness and fit.

The stages a product typically passes through, from introduction and growth to maturity and decline, each requiring different pricing and promotional strategies.

The function responsible for recruiting, selecting, training, compensating, evaluating, and retaining employees while complying with employment laws and supporting organizational goals.

The systematic process of gathering information about the duties, responsibilities, and requirements of a position, used to write job descriptions and specifications.

A formal, periodic evaluation of an employee's work against established standards, used for feedback, development, promotion, and compensation decisions.

A legally enforceable agreement between parties that requires an offer, acceptance, consideration, and mutual intent, and is formed by competent parties for a lawful purpose.

Something of legally sufficient value exchanged by each party to a contract, such as money, goods, or a promise, making the agreement enforceable.

Failure to perform a contractual duty without legal excuse, which entitles the non-breaching party to remedies such as damages or specific performance.

A written, signed promise or order to pay a fixed sum that is transferable and enforceable, such as a check, promissory note, or draft under commercial law.

Legal responsibility for a civil wrong, other than breach of contract, that causes harm, arising from intentional acts, negligence, or strict liability.

A failure to exercise the degree of care a reasonable person would use, causing foreseeable harm. It requires duty, breach, causation, and damages to establish liability.

The legal responsibility of manufacturers and sellers for harm caused by defective or unsafe products, based on negligence, warranty, or strict liability theories.