Definition of Terminologies in Financial Management

1. Account Receivable
 AR' Money owed by customers (individuals or corporations) to another entity in
exchange for goods or services that have been delivered or used, but not yet paid for.
2. Accounting
 The action or process of keeping financial accounts.
3. Allocation
 The action or process of allocating or distributing something.
4. Asset
 Property owned by a person or company, regarded as having value and available to
meet debts, commitments, or legacies.
5. Audit
 An official inspection of an individual's or organization's accounts, typically by an
independent body.
6. Bad Debt
 A debt that cannot be recovered.
7. Balance Sheet
 A statement of the assets, liabilities, and capital of a business or other organization at a
particular point in time, detailing the balance of income and expenditure over the
preceding period.
8. Break Even
 Reach a point in a business venture when the profits are equal to the costs.
9. Budget
 An estimate of income and expenditure for a set period of time.
10. Budget Figure
 The amounts in representation of pie charts, graph charts and bar graphs.
11. Cost Center
 A department or other unit within an organization to which costs may be charged for
accounting purposes.
12. Cost Containment
 Is the business practice of maintaining expense levels to prevent unnecessary spending
or thoughtfully reducing expenses to improve profitability without long-term damage to
the company.
13. Cost per page
 It is the cost per impression.
14. Cost per unit
 The cost incurred by a company to produce, store and sell one unit of a particular
product. Unit costs include all fixed costs (i.e. plant and equipment) and all variable
costs (labor, materials, etc.) involved in production.
15. Depreciation
 A reduction in the value of an asset with the passage of time, due in particular to wear
and tear.
16. Direct Cost
 Refer to materials, labor and expenses related to the production of a product. Other
costs, such as depreciation or administrative expenses, are more difficult to assign to a
specific product, and therefore are considered indirect costs.
17. Economics
 The branch of knowledge concerned with the production, consumption, and transfer of
wealth.
18. Expenditure
 The action of spending funds
19. Figures
 A number, especially one that forms part of official statistics or relates to the financial
performance of a company.
20. Finance
 The management of large amounts of money, especially by governments or large
companies.
21. Financial Policy
 Refers to policies related to the regulation, supervision, and oversight of the financial
and payment systems, including markets and institutions, with the view to promoting
financial stability, market efficiency, and client-asset and consumer protection.
22. Fiscal Year
 A year as reckoned for taxing or accounting purposes.
23. Fixed Ceiling
 Refers to the highest price, the maximum interest rate, or the largest of some other
factor involved in a transaction
24. Fixed Cost
 Are expenses that have to be paid by a company, independent of any business activity.
It is one of the two components of the total cost of a good or service, along with
variable cost.
25. Floor Ceiling
 The floor and ceiling functions map a real number to the largest previous or the smallest
following integer, respectively
26. Hospital cost per patient per bed per day
 For each patient care cost center, one must define a unit of output. Costs will then be
expressed per day or per visit
27. Hospital Costing
 The expenses incurred by a hospital in providing care. The hospital costs attributed to a
particular patient care episode include the direct costs plus an appropriate proportion of
the overhead for administration, personnel, building maintenance, equipment, etc.
Hospital costs are one of the factors which determine HOSPITAL CHARGES (the price the
hospital sets for its services).
28. 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.
29. Indirect Cost
 Are costs that are not directly accountable to a cost object (such as a particular project,
facility, function or product). Indirect costs may be either fixed or variable. Indirect costs
include administration, personnel and security costs.
30. Indirect Overhead
 Is any overhead cost that is not part of manufacturing overhead. Thus, indirect overhead
is not directly related to a company's production of goods or provision of services to
customers.
31. Inflation
 A general increase in prices and fall in the purchasing value of money.
32. Investment
 The action or process of investing money for profit or material result.
33. Liability
 A liability is defined as the future sacrifices of economic benefits that the entity is
presently obliged to make to other entities as a result of past transactions or other past
events, the settlement of which may result in the transfer or use of assets, provision of
services or other yielding of economic benefits in the future.
34. Per Diem
 An allowance or payment made for each day.
35. Reimbursement
 Is an act of compensating someone for an expense.
36. Return on Investment
 Is the most common profitability ratio.
37. Selling Products
 The products which the business establishments sell.
38. Total cost
 Refers to the total expense incurred in reaching a particular level of output; if such total
cost is divided by the quantity produced, average or unit cost is obtained.
39. Upper Ceiling
 The largest possible quantity upper limit - the largest possible quantity.
40. Value
 Estimates the monetary worth of (something).
41. Variable Cost
 A cost that varies with the level of output.
42. Variance Report
 A periodic measure used by governments, corporations or individuals to quantify the
difference between budgeted and actual figures for a particular accounting category.
43. Wage Index
 An index calculated annually by the Social Security Administration (SSA) based on wages
subject to federal income taxes and contributions to deferred compensation plans.