AP®︎ Business with Personal Finance: Topic 3.7 Flashcards

A financial statement showing a business’s assets, liabilities, and owners’ equity at a specific point in time

Assets = Liabilities + Owners’ Equity

Items of value owned by a business, grouped by liquidity into current, long-term, and intangible assets

The ease with which an asset can be converted into cash

Highly liquid assets used for day-to-day operations, including cash, short-term investments, accounts receivable, and inventory

Money owed to a business by its customers; a current asset

Goods or materials a business expects to sell or use in production; a current asset that must generally be sold to become cash

Less-liquid assets a business expects to hold for an extended period, including fixed assets and long-term investments

Physical resources, such as buildings, plants, and equipment, used to operate a business rather than held for immediate sale

Financial assets a business does not expect to convert into cash in the near term

Valuable nonphysical assets, such as patents, brand names, and trademarks, that can create potential revenue

Debts and other financial obligations owed by a business, grouped according to when payment is due

Obligations due within one year, including accounts payable, short-term debt, current payments on long-term debt, and accrued operating expenses

Money a business owes to suppliers; a current liability

Operating expenses a business has incurred but has not yet paid; a current liability

Obligations due beyond one year, such as mortgages, bank loans, and long-term bonds

The owners’ residual claim on a business, calculated as total assets − total liabilities

Ownership shares issued by a corporation; funds contributed for the shares increase owners’ investment in the business

A business’s cumulative profits that have not been distributed to owners as dividends

Current assets − current liabilities; it is positive when current assets exceed current liabilities

A legal process through which a business may liquidate assets, eliminate or repay debts, and shut down or reorganize under legal supervision

Household assets − household liabilities; used to assess financial progress, loan applications, and retirement readiness