Tutorial on Accounting and Finance
Accounting enables an organization to record and publish its operating data at the end of a specific period, such as a fiscal year. Financial activities help a company to evaluate its cash needs and raise funds in financial markets. Knowing the basics of accounting and finance can help you plan your retirement efficiently.
Other People Are Reading
-
Asset
-
An asset is an economic resource that you own. You also can claim as asset a resource that you currently do not own but on which you will have ownership rights at a future date (an inheritance, for example). Short-term assets include cash and inventories. Long-term resources include equipment and real estate.
Liability
-
A liability is a debt that you must repay. Short-term debts, such as rent or credit card bills, are due within 12 months or less. Generally, these items are due every month. Long-term liabilities have a maturity that exceeds one year. Examples include mortgages and student loans. Although you make monthly payments on these items, they are still considered long-term debts because their total balances are generally due over 15 or 30 years.
-
Equity
-
Equity is an ownership stake an investor has in a company. If you purchase stocks of a publicly listed firm, you become an equity holder or shareholder. You are entitled to periodic benefits and can make additional profits when share prices increase.
Revenue
-
Revenue is income that a company generates through its operations. As a salaried worker, your income comes essentially from wages and interest income. If you own corporate stocks, you also earn income if share prices rise more than the purchase price.
Expense
-
An expense is a day-to-day, living cost that you incur. Companies also incur expenses, or charges, through their operations. Your living expenses generally include rent, food, entertainment and interest on mortgages or other loans.
Financial Statements
-
Financial statements are accounting that indicate the economic health of a company or person. These include a balance sheet, a statement of profit and loss, a statement of cash flow and a statement of equity. A balance sheet provides insight into your net worth and includes your assets, debts and personal equity.
Financial Analysis
-
With financial analysis, you can set struggling apart from economically viable, solvent companies. You can use metrics, such as financial ratios, to analyze a company's economic standing. Examples include profit margin, or net income divided by total sales.
Corporate Finance
-
Corporate finance helps a company determine whether it has enough cash to fund short-term operating activities. If corporate management believes cash levels are low, the company may raise funds by borrowing or selling stock on securities exchanges.
Securities Markets
-
A securities exchange is also known as a financial market or stock exchange. Examples include the New York Stock Exchange and Tokyo Stock Exchange. Investors buy and sell financial products, such as stocks and bonds, on securities exchanges.
Regulators
-
Government agencies ensure that publicly listed companies report accurate numbers to investors and the public. Regulators include the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority.
-
