【Practical English】NO. 21-40

NO. 21-40

21. Finance and accounting are powerful tools that can assist businesses in making sound decisions, gaining the trust of their investors, and setting themselves up for long-term success.

22. The basic idea behind this principle is that the business owner or accountant should always be provided with complete and correct information regarding the company’s financial transactions.

23. The revenue recognition principle is an accounting principle that provides guidelines for determining when and how to recognize revenue in financial statements.

24. Using this fundamental accounting concept, a company can report a monthly profit even though it hasn’t received any cash during that period.

25. Understanding these concepts and presumptions is critical for evaluating financial statements and applying accounting principles successfully.

26. Whether you are just starting out in the field or want to improve your own financial literacy, learning some basic financial jargon is a good idea.

27. Your ability to use financial jargon confidently and professionally will increase your credibility with clients and investors.

28. Investing in yourself in this way will pay off in the long run with better financial knowledge, wiser decisions, and more satisfying work connections.

29. EBITDA provides a measure of the company’s ability to generate income solely from its operations without considering certain financial factors.

30. However, the company also has other comprehensive income due to the unrealized gain on available-for-sale securities and the foreign currency translation adjustments.

31. OCI provides a more comprehensive view of a company’s financial performance by including gains and losses that may not have an immediate impact on cash flow or net income.

32. Depreciation is the process by which a business records the wear and tear that causes its physical assets to lose value over their useful lives.

33. Depreciation recognizes that these assets gradually wear out or become less valuable over time due to factors like age and wear and tear.

34. Dividend payouts refer to the distribution of a company’s profits to its shareholders as a return on their investment (ROI).

35. Reserves are a portion of a company’s profits that are not distributed as dividends to shareholders but are instead kept within the company for a number of reasons.

36. These reserves are specifically designated to handle unexpected events or contingencies that may impact the company’s financial stability.

37. This reserve acts as a safety net to address unexpected challenges or financial risks that may arise in the future, helping the company navigate through difficult times without disrupting its operations or financial stability.

38. A positive cash flow indicates that the company is generating more cash than it is spending, while a negative cash flow suggests that the company is spending more cash than it is generating.

39. A balance sheet is a financial statement that provides a snapshot of a company’s financial position at a specific point in time, typically at the end of a reporting period.

40. The income statement summarizes a company’s financial performance over a specific time period, including sales, costs, and net profit or loss.