Financial Management Study Guide

Income Statement

A financial statement that measures a company's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time.

W-2 form (IRS)

A form reporting one's compensation as an employee during a year at an employer or personal income taxation

Capitation

A healthcare plan that allows payment of a flat fee for each patient it covers. Under a capitation, an HMO or managed care organization pays a fixed amount of money for its members to the health care provider.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations.

Asset- Fixed

A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be consumed or converted into cash any sooner than at least one year's time.

Equity

A stock or any other security representing an ownership interest

Asset- Intangible

An asset that is not physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible assets in today's marketplace.

Budget

An estimation of the revenue and expenses over a specified future period of time. A budget can be made for a person, family, group of people, business, government, country, multinational organization or just about anything else that makes and spends money.

Asset - Tanagible

Assets that have a physical form. Tangible assets include both fixed assets, such as machinery, buildings and land, and current assets, such as inventory.

W-4 form

Complete Form W-4 so that your employer can withhold the correct federal income tax from your pay.

Credit

Credit means right. Money paid out by the facility.

Inventory - FICO

FI/CO Financial Accounting and Controlling Module.

Tangible assets

Financial assets or the financial value of assets, such as cash. The factories, machinery and equipment owned by a business and used in production.

Perpetual Inventory

Method utilizing CPU point-of-sale allowing real-time reporting of stock on hand.

Cash Accounting

Method where receipts are recorded during the period they are received, and expenses are recorded in the period in which they are actually paid. small business use cash and corporations are required to use accrual accounting.

Average Days Oustanding

Number of days on average taken to collect revenue or pay its invoices.

Amortiztion

Paying off a debt with a fixed repayment schedule in regular installments or a period of time. (ex. mortgage, or car loan) usually over the asset's useful life. -- Interest vs. Principal

Accrual Accounting

Reporting both expenses and income during the fiscal period in which it was incurred or earned.

Inventory

The raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale.

(Formula) Total Liabilities / Total Assets

To calculate the debt to assets ratio, divide total liabilities by total assets. Example: 1500 Liabilities / 1000 Assets = 1.5:1 Debt to Assets Ratio

Accounts Receivable

a balance due from a debtor on a current account

For -Profit

a corporation that is intended to operate a business which will return a profit to the owners

Chart of Accounts

a created list of the accounts used by a business entity to define each class of items for which money or the equivalent is spent or received. It is used to organize the finances of the entity and to segregate expenditures, revenue, assets and liabilities in order to give interested parties a better understanding of the financial health of the entity.

Payroll

a list of a company's employees and the amount of money they are to be paid

Trial Balance

a statement of all debits and credits in a double-entry account book, with any disagreement indicating an error.

Managed Care

a system of health care in which patients agree to visit only certain doctors and hospitals, and in which the cost of treatment is monitored by a managing company.

Asset - Current

assets of a short-term nature that are readily convertible to cash

General Accepted Accounting Principles

common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information.

Fiscal Year End

completion of a one-year, or 12-month, accounting period

Debit

either an increase in assets or a decrease in liabilities on a balance sheet.

Ratio Greater than 1

indicates that a company may be putting itself at risk of not being able to pay back its debts, which can be a problem in a cyclical industry where cash flows can suddenly decline. Also at risk of nonpayment if its debt is subject to sudden increases in interest rates such as with variable-rate debt.

Debt to Assets Ratio

indicator of the proportion of a company's assets that are being financed with debt, rather than equity. A ratio greater than 1 indicates that a considerable proportion of assets are being funded with debt, while a low ratio indicates that the bulk of asset funding is coming from equity.

Non-Profit

not making or conducted primarily to make a profit. "charities and other nonprofit organizations"

Fee for Service

payment model where services are unbundled and paid for separately. In health care, it gives an incentive for physicians to provide more treatments because payment is dependent on the quantity of care, rather than quality of care

Cash Flow Statement

provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter.

Acid Test Ratio

quick ratio or liquid ratio measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately

Third party reimbursement payor source

reimbursement for services rendered to a person in which an entity other than the receiver of the service is responsible for the payment. Third-party reimbursement for the cost of a subscriber's health care is commonly paid in full or in part by a health insurance plan, such as Blue Shield or Blue Cross, Medicare, or Medicaid.

Net Profit

the actual profit after working expenses not included in the calculation of gross profit have been paid.

Accounts Payable

the balance due to a creditor on a current account

Depreication

the decrease in value of assets

Asset

the items on a balance sheet showing the book value of property owned

Census

the official process of counting the number of people within a nursing facility.

Retained Earning

the portion of net income of a corporation that is retained by the corporation rather than distributed to shareholders as dividends, or as the amount available to the corporation for distribution to shareholders

Liability

A company's legal debts or obligations that arise during the course of business operations. Liabilities are settled over time through the transfer of economic benefits including money, goods or services.

Salvage value

(Straight-line basis) an asset costs $5000 and has a Salvage Value of $1000 and a useful life of five years, would be depreciated at $800 ($5000/$1000/5 yrs.) each year.