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Facultad de Humanidades
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Introduction to ESP
Business vocabulary related to ACCOUNTING
Balance Sheet
Its a summary of a companys financial position at a specific point in time, usually the
end of its financial year. It indicates the value of everything the company owes (or its
assets) as well as everything that it owes (or its liabilities).
As an example: Our balance sheet is not as strong as last year, since weve taken some
heavy losses on investments.
Asset
Its anything owned by a company that can be used to generate money or an income. It
can be tangible, meaning that it has a physical existence, as can be cash, or any
equipment and property; or can also be intangible, meaning that it doesnt have a
physical existence, as can be a patent or copyright.
For example: Most oh the companys assets consists of accounts receivables from very
risky customers and, until theyre paid, its hard to be sure of their actual value.
Consulting firms usually have few tangible assets, and their main intangible asset is the
reputation theyve established.
Liability
Is a financial obligation or debt held by a company, normally liabilities can be accounts
payable, bank loans and outstanding taxes.
For example: Managing liabilities effectively is critical to good financial planning.
There are two types of liability: Short-term liabilities, and long-term liabilities.
Short-term liabilities are the ones paid within one year, while long-term ones are
repayable after more than a year.
For example: Our short-term liabilities have grown very quickly this year, as we
expanded into new territories.
Profit
It is the amount of money earned in a given period, normally a year, after deducting all
its expenses.
As an example: Profits for many firms have declined due to a slowdown in consumer
spending.
Profit Margin
It is the percentage of income a company retains after all costs are deducted. If the cost
of a product is as high as its selling price, then the profit margin would be very low.
Example: The profit margin on luxury automobiles is much higher than on economy
vehicles.
Loss
It is like a profit but in negative terms, companies make a loss (or take a loss) if a single
transaction costs more than it earns.
Example: Weve always taken a loss on our equipment sales, but we make it up by
generating revenue through after-sales service.
Companies run at a loss if their profit is negative for an entire year.
Example: Companies that run at a loss for several years may be forced to stop trading
on the Stock Exchange.