1. An expense recorded to reduce the value of a long-term tangible asset.

Since it is a non-cash
expense, it increases free cash flow while decreasing reported earnings.

2. A decrease in the value of a particular currency relative to other currencies.

Notes:
1. Depreciation is used in accounting to try and match the expense of an asset to the income
that the asset helps the company earn. For example, if a company bought a piece of
equipment for $1 million and expected it would have a useful life of 10 years, it would be
depreciated over the 10 years. Every accounting year the company would expense
$100,000 (assuming straight line depreciation), and this would be matched with the
money that the equipment helps to make each year.
2. Examples of currency depreciation are the infamous Russian rouble crisis, where the
rouble lost 25% of its value in one day.

Current Liabilities
Usually appearing on a company's balance sheet, it represents the amount owed for interest,
accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one
year.

Knowing is not the same as understanding, so it is helpful to present an analogy.

 Think of an investment as a water reservoir. The value of the investment is the volume of
water in it. The shareholder equity (net equity) on the balance sheet measures this value.
 Streams empty into the reservoir, adding more water. These inflows are measured by
revenues on the income statement.
 Streams run out of the reservoir, depleting it. These outflows are measured by expenses
on the income statement.
o The difference between these inflows and outflows is the net income, also shown
in the income statement.

 When a neighbor joins in the investment as a partner, he digs a canal from his own
reservoir so it drains into the reservoir. This additional water is measured by an increase
in the share capital.
 If you ask a neighbor to add to the reservoir, it is considered as liability, thus reducing
net equity but increasing assets. These are both shown on the balance sheet
Current Assets
Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory,
marketable securities, prepaid expenses, and other assets that can be converted to cash within one
year.

 Ownership equity, the value of an ownership interest in property

 Shareholders' equity, the owners' residual interest in the assets of an enterprise after
deducting all its liabilities
 Stock, common or preferred financial stock

Intangible assets are defined as those non-monetary assets that cannot be seen, touched or physically
measured and which are created through time and/or effort. There are two primary forms of intangibles
- legal intangibles (such as trade secrets (e.g., customer lists), copyrights, patents, trademarks, and
goodwill) and competitive intangibles (such as knowledge activities (know-how,knowledge),
collaboration activities, leverage activities, and structural activities). Legal intangibles generate legal
property rights defensible in a court of law. Competitive intangibles, whilst legally non-ownable, directly
impact effectiveness, productivity, wastage, and opportunity costs within an organization - and
therefore costs, revenues, customer service, satisfaction, market value, and share price. Human capital
is the primary source of competitive intangibles for organizations today. Competitive intangibles are the
source from which competitive advantage flows, or is destroyed.

Accounts Receivable - AR
Money that customers (individuals or corporations) owe a company in exchange for its goods or
services. Accounts receivable usually come in the form of operating lines of credit, and are
usually due within a relatively short time period, ranging from a few days or weeks up to one
year.
Notes:
If a company has receivables, it means it has made the sale but has yet to collect the money from
the purchaser. Most companies operate by allowing some portion of their sales to be on credit.
These sales are usually to frequent customers, who are invoiced periodically, allowing them to
avoid the hassle of physically making payments as each transaction occurs.

If you look at the balance sheet of a public company, you will usually see accounts receivable
recorded as an asset, since it represents a legal obligation for the customer to remit cash for its
debts. Conversely, when a company owes debts to its suppliers or other parties, these are known
as accounts payable

accounts Payable - AP
Any money that a company owes its suppliers for goods and services. Accounts payable is
recorded on a company's balance sheet as a short-term (current) liability.

An asset that has a physical form such as machinery, buildings and land.

What does it Mean? 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 selling. Inventory
represents one of the most important assets that most businesses possess,
because the turnover of inventory represents one of the primary sources of
revenue generation and subsequent earnings for the companies'
shareholders/owners.

Investopedia Says... Possessing a high amount of inventory for long

periods of time is not usually good for a business, because there are
inventory storage, obsolescence and spoilage costs. However, possessing
not enough inventory isn't good either, because the business runs the risk of
losing out on potential sales and potential market share as well.

Inventory management forecasts and strategies, such as a just-in-time

inventory system, can help minimize inventory costs because goods are
created or received as inventory only when needed.

Short term debt

Debts (or current liabilities) falling due within one year.