Financial Terminology Quiz

Financial Terminology

• Asset: A resource with economic value owned by an individual or company, expected to yield future economic benefit. Examples: cash, accounts receivable, inventory, property.
• Liability: An obligation of an entity to transfer economic resources or provide services in the future, resulting from past transactions or events. Examples: accounts payable, loans, salaries payable.
• Equity: The residual interest in a company's assets after deducting liabilities. Represents ownership stake.
• Revenue: Income from selling goods or services. Top line of an income statement.
• Expense: Costs incurred in generating revenue. Examples: salaries, rent, utilities.
• Profit/Loss: Difference between revenue and expenses. Positive = profit, negative = loss.
• Balance Sheet: Financial statement showing a company's assets, liabilities, and equity at a specific point in time. Follows the accounting equation: Assets = Liabilities + Equity.
• Income Statement (Profit & Loss Statement): Financial statement summarizing revenues and expenses over a period. Shows profitability.
• Cash Flow Statement: Financial statement tracking cash inflows and outflows over a period. Shows cash generation and use.
• Account Receivable: Amounts owed to a company by customers for goods or services delivered but not yet paid.
• Account Payable: Amounts owed by a company to suppliers for goods or services received but not yet paid.
• Net Income: Bottom line of the income statement, calculated by subtracting total expenses from total revenue.
• Gross Profit: Revenue minus the cost of goods sold.
• Operating Expenses: Business costs not directly tied to production, such as salaries, rent, and utilities.
• Interest Expense: Costs of borrowing money.
• Depreciation: Allocation of a tangible asset's cost over its useful life.
• Accumulated Depreciation: Total depreciation expense over an asset's lifetime.
• Inventory: Goods held for sale in the ordinary course of business.

Financial Concepts

• Liquidity: A company's ability to meet short-term obligations. Liquid assets convert quickly to cash.
• Solvency: A company's ability to meet long-term obligations.
• Financial Statements: Formal records of a business's financial activities (balance sheet, income statement, cash flow statement). Used to assess financial health and performance.

Financial Ratios

• Current Ratio: Measures a company's ability to pay short-term obligations (Current Assets / Current Liabilities).
• Debt-to-Equity Ratio: Indicates proportion of financing from debt vs. equity (Total Debt / Total Equity).
• Return on Assets (ROA): Measures efficiency of asset use to generate profit (Net Income / Total Assets).
• Return on Equity (ROE): Measures efficiency of shareholder equity use to generate profit (Net Income / Shareholder's Equity).
• Gross Profit Margin: Percentage of revenue remaining after deducting cost of goods sold ((Revenue - Cost of Goods Sold) / Revenue).

Financial Markets

• Stock Market: Place where stocks (shares) of publicly listed companies are bought and sold.
• Bond Market: Market where governments and corporations issue debt securities (bonds) to raise capital.
• Capital Market: Broad term for financial markets trading long-term debt and equity instruments.
• Primary Market: Market where companies issue new securities.
• Secondary Market: Market where existing securities are traded among investors.

Test your knowledge on key financial terms including asset, liability, equity, and more. This quiz will help reinforce your understanding of fundamental financial concepts. Prepare to dive into the essentials of finance!