Integra Financial Glossary

Amount owed to suppliers for goods and services purchased on credit.

% sales that is payable to suppliers. A very high percentage may suggest that the company has a liquidity problem.

Indicates the % of accounts payable to total debt. Assists in looking at debt as an option to finance payables.

Gross amounts owed by customers for products bought or services already rendered on credit.

Amount that the company anticipates to collect from accounts receivable.

The accrual basis of accounting realizes revenues when goods are sold or services are performed and expenses when incurred whether or not cash has been received or paid out.

Cumulative charges against the intangible assets of a company over the expected useful life of the assets.

Cumulative charges against the depletable assets of a company.

Total depreciation of property, plant, and equipment that has been expensed on the income statement.

Expense item showing costs associated with advertising. Examples Include: promotion, publicity expenses.

Indicates profit as a percentage of total assets after income taxes and measures a company's ability to manage and allocate resources

Net income as a percentage of net worth. This ratio is not applicable if the company's net worth has a negative value.

Net income as a percent of revenue.

Reserve set aside to cover uncollectible doubtful notes, accounts and loans as an allowance to accounts receivable.

The process of spreading the cost of an intangible asset over the expected useful life of the asset.

Items of value owned by a company. Includes cash, marketable securities, accounts receivable, raw materials, work in process, finished goods, other current assets, property, plant & equipment, intangible assets, depletable assets, investments, and other assets.

Average amount of current assets made up of demand deposits and time & savings deposits.

Average amount of cash, securities, accounts receivable, and inventory which can easily be liquidated or are expected to be sold or used within one year.

Average amount of assets with a useful life of more than one year, that a company is using in the business rather than for resale.

Average amount of goods owned by a company that are going to be sold.

Accounts Receivable due to the firm but deemed uncollectable during the year. This item is expensed on the income statement.

Represents a snapshot of the assets, obligations, and net worth of a business at a specific point in time.

Owners claim on assets at the beginning of the period

The benchmark report consists of a comparative income statement and balance sheet displaying your company's information side-by-side with the corresponding industry averages. This report enables you to compare your company's actual performance with other firms in the same industry.

Current Assets made up of demand deposits and time & savings deposits.

Measure of Cash & Equivalents at the beginning of the period.

Final balance of Cash & Equivalents at the end of the period after all necessary adjustments have been made.

The cash basis of accounting realizes revenues when cash is received and expenses when cash is paid out. Very few businesses use pure cash accounting. It is more common for businesses to use a modified cash basis (or income tax basis) of accounting where fixed assets are depreciated, and prepaid expenses are amortized, etc.

Cash obtained from borrowings.

Consists of transactions having to do with the acquirement or disposal of non-current assets such as capital expenditures and change in long term investments.

Multiple measuring the number of times sales exceeds cash. Indicates a company's use of its cash required to generate revenue. A high ratio means it is efficiently using its cash assets and less cash will be needed for sales growth.

Used to calculate Cash Provided by Operating Activities in the Cash Flow Analysis Report and considers any increases or decreases in the amount a company owes to its suppliers for goods and services purchased on credit since the past year. If it is positive, then Accounts Payable has increased showing that the company has purchased on credit and has not paid any money for these purchases thus net income should be increased. In contrast, if it is negative, Accounts Payable has decreased since the year before indicating that the company has paid-off some of its debt thereby reducing net income.

Used to calculate Cash Provided by Operating Activities in the Cash Flow Analysis Report and reflects any increases or decreases in the amount owed by customers for products bought or services already rendered on credit since the past year. If it is positive, then accounts receivable has decreased since the year before indicating customers have paid their bills to the company and net income should be increased. If it is negative, accounts receivable has been increased since the year before which means that more customers have paid on credit. (No money has been received from these customers for the goods or services they purchased, so net income should be decreased.)

Overall indication of whether cash & equivalent has increased or decreased since the past year. It provides management with a measure of the company's performance. Creditors and investors want this number to be high because it shows the company's capability for positive future cash flows, to pay dividends, and to meet financial obligations.

Used to calculate Cash Provided by Financing Activities.

Used to calculate Cash Provided by Operating Activities in the Cash Flow Analysis Report and t akes into account any increases or decreases in the amount of goods in inventory since the past year. If it is positive, then it means that inventory has been reduced. If it is negative, then the inventory has been increased.

Used to calculate Cash Provided by Investing Activities in the Cash Flow Analysis Report. The net cash received or paid out on investing activities.

Used to calculate Cash Provided by Financing Activities in the Cash Flow Analysis Report. Represents increases or decreases in loans from shareholders since the past year. If this item is positive, then loans from shareholders have increased. If it is negative, then loans from shareholders have decreased.

Used to calculate Cash Provided by Financing Activities in the Cash Flow Analysis Report. Takes into account any increases or decreases in long term debt since the past year. If it is positive, then the company's long term debt has increased since the last year whereas if it is negative, a company's long term debt has been reduced.

Used to calculate Cash Provided by Investing Activities in the Cash Flow Analysis Report. The figure is positive if marketable securities have decreased during the past year.

Shows any increases or decreases in Other Current Assets or Other Current Liabilities since the past year. If it is positive, other current assets & other assets have decreased or other current liabilities & other liabilities have increased. If it is negative, other current assets & other assets have increased and other current liabilities & other liabilities have decreased since the year before.

Used to calculate Cash Provided by Financing Activities in the Cash Flow Analysis Report. Shows increases or decreases in Short Term Debt since the past year. If it is positive, then the company's short term debt has increased whereas if it is negative, a company's short term debt has decreased since the year before because the company has paid off some of its short term debt.

Shares in a company. The par value of stocks that are outstanding.

Sums of all costs required to obtain and prepare goods for sale consisting of beginning inventory, labor and factory overhead costs, cost of materials, and ending inventory. Also known as the cost of goods sold. The beginning inventory is the amount on hand at the beginning of the period. Labor overhead costs are wages paid to workers involved in the production process. Factory overhead costs are costs associated with running the factory and depreciation. Net cost of purchases available for sale is the sum of the beginning inventory and factory and labor overhead costs. The ending inventory is the amount of inventory on hand at the end of the period or the cost of inventory not used or sold.

Multiple indicating the number of times payables turn over during the year. The lower the ratio, the longer the time between purchase and payment.

Includes cash, securities, accounts receivable, and inventory which can be easily liquidated or are expected to be sold or used within one year.

Factor that measures a company's ability to meet its current obligations. A high factor indicates that a company may be creditworthy.

Multiple indicating how well a company is using its current assets to generate sales.

Financial obligations to be settled within one year using cash, goods, or services. Examples include notes payable and accounts payable

This factor measures the level of short-term obligations relative to equity. A very high % for an established company suggests significant pressure on future cash flow.

Measures company's ability to meet financial obligations. The ratio is expressed as the number of times current assets exceed current liabilities. A high ratio indicates that a company can pay its creditors. A number less than one indicates potential cash flow problems.

Average number of days it takes a company to pay its funds. Indicates short-term creditworthiness of a company or industry and how much a company or industry depends upon trade credit for short-term financing. A high number indicates that a lot of trade credit is being used. For companies that have a good management, days payable will typically average between 40 and 50 days.

Average number of days it takes a company to receive payments on accounts receivable. If it is a high number there is a problem with collections while an extremely low number indicates that a company's credit policies may be too strict thus minimizing its chances for additional sales and profit.

Average number of days goods are in inventory. Measures short-term sales potential. If it is above the industry norm, it means that company is carrying too much inventory or has problems with sales forecasting. If it is below the norm, it indicates that the company may not have enough resources to meet changes in demand and is losing business as a result.

Number of days required to convert working capital into revenues. A lower value is preferred because it indicates that less working capital is required to generate the same level of sales. The fewer days required, the more efficient working capital is being used by a business.

Obligations to pay cash or provide goods or services.

Ratio indicating the capability of a company to use current cash flow to pay its short term debt obligations.

Indicates a company's ability to cover its interest expense and its short-term debt obligations after income taxes.

Indicates a company's ability to cover its interest expense and its short term debt obligations.

Indicates proportion of capital contributed by creditors as opposed to owners. Also helps to understand performance risk and the potential for debt repayment.

Natural Resources such as mineral deposits, oil reserves, and gas deposits that are consumed through the removal from their natural environment. They are recorded on the balance sheet at cost of acquisition plus cost of development and exploration.

Depletable Assets - Accumulated Depreciation

Depletion represents the process of allocating the cost of acquiring and developing natural resources for sale.

Depreciation is the expensing of the original cost of a fixed asset over its useful life. This is a non-cash expense.

Depreciation is the expensing of the original cost of a fixed asset over its useful life. Amortization matches the cost of an intangible asset to its use by expensing a part of the cost each year. On the Cash Flow statement, depreciation and amortization are added back to net income to determine the cash provided by operating activities.

This ratio is used to measure the level of non-cash expenses in relation to total sales.

Represents the percentage difference between the subject company's actual number a the peer group number in a comparative report

EBITDA is an acronym for "Earnings before Interest and Depreciation & Amortization Expense".

Owner's claim on assets at the end of the period

The most probable sale price for an item in a competitive market

Products that are finished and waiting shipment to customers.

Assets with a useful life of more than a year that a company is using in the business rather than for resale such as machinery, vehicles, and buildings. Also called property, plant, and equipment.

Multiple that assesses performance and is the number of times sales volume is over its fixed assets. Indicates the amount of sales generated for each dollar of fixed assets. Also used to assess the amount of fixed assets required to generate specific sales levels. The higher the ratio, the greater the productivity of the company. A low ratio means that the company is more fixed asset intensive and typically needs extensive long term capitalization.

Amount by which sales Revenue exceeds cost of sales. A low gross margin indicates that the company should increase selling price and/or decrease its cost of sales. This is the top-line view of a company's product-related cost structure. It indicates profitability and is an important benchmark for analyzing competitive strengths or weaknesses. A high gross margin suggests the company will remain profitable in times of economic instability. It also indicates that the company is creditworthy and can be competitive since it can afford to be cut prices. If gross margin is on a downward trend, there may be inventory management.

Gross Margin as a percentage of revenue.

Percentages indicating compounded annual growth rate for sales, operating income, pre-tax profit, net income, assets, liabilities, and net worth

Amount taken out by the government.

This represents the annual industry growth rate of income before interest, taxes, depreciation & amortization, in relation to the prior year.

This represents the annual growth rate of income before taxes

Lack physical characteristics but are valuable because they include rights and privileges to a company such as patents, goodwill, copyrights, trademarks, and franchises.

Multiple indicating number of times a company can cover its interest expense with the income earned. Therefore, it conveys whether a borrower is able to pay the interest expense when due. This is important in calculating a company's borrowing capacity and assessing the risk of additional borrowings

Revenue generated from fees charged for the lending of a company's money.

Amount of goods owned by a company that are going to be sold. Consists of raw materials, work in process, and finished goods.

This ratio measures how much of the cost of sales is attributed to inventory. A decreasing ratio indicates efficient use of resources. A growing inventory to sales ratio suggests potential cash flow problems in the future.

This ratio measures the capability of a company to finance its inventories. Percentages lower than 100 are desirable because it indicates high liquidity. If the ratio is higher than 100% it may mean that the inventories are too large compared to the financial resources of the company and suggests low liquidity.

Multiple that calculates liquidity of inventory or the number of times the average inventory is converted into receivables or cash during the year.

Cash flow directly attributable to the acquisition or disposal of assets. Cash inflows are from sales of available-for-sale and held-to maturity securities, sales of fixed assets, and loan payments received. Cash outflows are for the purchase of fixed assets, purchase of available-for sale and held-to-maturity securities.

Consists of long-term investments such as stocks, bonds, and other financial instruments.

Consists of investments and other assets not specified in the other categories of the balance sheet.

Financial obligations of a company.

Ability to have assets readily available to fulfill financial needs.

Money borrowed by a company from shareholders to be paid back at a future date

Money borrowed by shareholders' to be paid back to the company at a future date

Obligations to pay cash or provide goods and services to another and has a term of more than a year. For example, a twenty-year bank loan.

Percentage of total assets financed with long term debt. Helps determine debt capacity especially for working capital structure.

Factor indicating the degree of reliance on long term debt to finance daily operations

Temporary investments including short term holding of stocks and bonds of other companies.

Cash flows generated from a firm's operating, investing, and financing activities. Also incorporates the impact of new cash items, depreciation, amortization, and depletion.

Profit produced during an accounting period.

This ratio measures the efficient use of working capital. A higher ratio indicates more productive use of resources.

The total fair market value of all assets (excluding intangibles) less total liabilities.

Owner's claim on assets. Also known as stockholders' equity. Includes common stock, paid in capital, retained earnings, and treasury stock.

Costs of a unique nature that are not expected to recur again in the near future. Examples include insurance losses, lawsuit payments, losses on the sale of assets, and moving expenses.

Income of a unique nature that is not expected to be received again in the near future. These items may include insurance settlements, one-time sales, gain on the sale of assets, etc.

Expenses for salaries, wages, stock bonuses, and bonds paid to officers, as defined by the company.

The difference between the officer's compensation expense listed on your company's income statement and the average for comparable firms. Pre-tax Income should be adjusted upward to the extent your officer's compensation exceeds the industry average and downward to the extent that it is below the industry average.

Percent measuring capability of a company to convert sales into cash. Important indicator of a company's creditworthiness and productivity. If the ratio is low, then growth may not be financially possible because the company will not have enough cash flow to increase production to meet higher demands and sales targets. If the ratio is high, then the company will be able to grow and expand because it has enough cash flow to finance additional production

Cost not directly associated with production such as wages, gifts, officers compensation, direct payroll, employee benefits, pension expense, advertising sales, bad debts, contributions and gifts, rents paid, repairs, taxes paid, and depreciation and amortization.

Measures impact of non-production costs to gross margin.

Measures impact of non-production cost to sales.

Income derived from a company's primary business excluding the cost of sales and operating expenses.

Percent of each dollar of revenue that becomes net operating income. This incorporates all operating expenses below the gross margin line. It includes selling, general, and administrative expenses, rents, depreciation, amortization, and research and development. A high % suggests that the company is capable of generating capital for growth. It also indicates high productivity and creditworthiness.

Includes any other income or expense items not elsewhere classified to adjust pre-tax income.

Holdings that are not specified elsewhere on the balance sheet. Examples include: loans to shareholders, deferred income (excluding current portion), prepaid expenses (excluding current portion), and deferred income tax rollover (excluding current portion).

Holdings that are not specified elsewhere on the balance sheet and expected to be sold or consumed within one year. Examples include: supplies, income taxes receivable, costs in excess of billings, prepaid expenses (current portion), deferred income tax recoveries (current portion), non-operating current assets.

Financial obligations to be paid within one year that includes salaries payable, sales tax payable, interest payable, income tax payable, taxes withheld from employees, dividends payable, and unearned revenues.

Consists of long-term deposits, unfunded pension commitments, and various other long-term liabilities.

Non-Operating income (net) including but not limited to: Net short-term capital gain, net long-term capital gain, net gain of non-capital assets, dividends received from domestic corporations, and dividends received from foreign corporations.

Money paid to a company that is exchanged for ownership of common stock.

A group of similar-sized firms in the same industry as your company. Figures under the "Peer-Group" column heading represent the average industry performance

Consists of employer contribution to pension, profit-sharing, and other compensation plans as well as welfare plans such as death benefit, insurance, health, accident, and sickness.

Profit before taxes.

Indicates profit as a % of total assets before taxes and measures a company's ability to manage and allocate resources.

Ratio indicating shareholders' earnings before taxes for each dollar invested. This ratio will not be applicable if the subject company's net worth for the period being analyzed has a negative value.

% measuring pre-tax profitability.

These ratios measure a company's ability to generate income.

Assets that are used in a company's operations and have a useful life of more than one year. Examples include: machinery, computers, vehicles, land, buildings, leasehold improvements, furniture, fixtures, and capital leases. Also called Fixed Assets.

Also known as the acid test ratio and indicates typical liquidity. Measures a company's ability to meet its short-term obligations using its most liquid assets.

Measures used to evaluate or compare a company's financial condition and performance against another company or the entire industry.

Amount of materials used in producing a finished good.

Multiple measuring the number of times collections are made from customers. Indicates liquidity of accounts receivable. The higher the ratio compared to industry norms, the better it is. If it is less than industry norms it may have collection problems or may be giving too much credit to financially unstable customers.

Adjusts net worth at the end of the period.

Expense submitted to a property owner for the right to use or occupy a property.

Part of stockholders' equity which is increased by net income and decreased by dividends paid to shareholders or net losses

Indicates profit as a percentage of operating assets and measures the strength of a company's ability to manage and allocate resources.

Calculates a company's investment return by the capital invested by shareholders.

Income from the sales of a company's goods or services.

Ratios that measure the probability of harm or loss such as bankruptcy.

The range of sales for the industry being profiled.

Factor indicating the number of times that invested funds turnover to generate revenue.

Cost not directly associated with production such as wages, salaries, contributions and gifts, and other operating expenses not categorized.

Funds borrowed from financial institutions that are due within one year. Includes the current portion of long term debt.

Often referred to as the "Debt to Worth Ratio", this value measures a firm's ability to withstand net losses without impairing its ability to service existing debt. A lower value indicates a larger "buffer" is available to creditors before the firm becomes insolvent.

Ratio indicating reliance on short-term borrowings in relation to total borrowings. Used to consider implications of changing the mix of debt and highlight sources where debt can be utilized better.

Factor indicating the proportion of working capital funded by short-term debt. A low value suggests there is adequate working capital to meet financial obligations. A high or negative value suggests an inability to meet financial obligations.

SIC stands for Standard Industrial Classification Code. This system categorizes businesses by their kind of operation. It was started by the Executive Office of the President, Office of Management and Budget. It allows for the gathering, presentation, and analysis of data in each SIC group.

% that signifies the level of assets used to generate sales.

Multiple measuring how effectively a company uses its total assets to generate revenue. Also used to find the asset levels required to generate a gain in sales level. A high ratio indicates that there is a high productivity of capital, while a low one means that the company may need better planning in areas such as investing, asset acquisition, marketing and financing.

Includes purchases of new and replacement property, plant, and equipment.

Anything of value owned by a company that is potentially liquid or could be consumed within a year.

Total financial obligations to be settled within one year.

Percentage of total assets financed with debt.

Measures the degree of indebtedness relative to the net worth of the business. The greater the ratio the less protection for creditors and hence greater risk

Multiple indicating the relationship of total debt to inventory. Helpful in analyzing whether the company has debt tied up in inventory or whether to employ further inventory financing techniques to help the company.

All of a company's financial obligations.

This represents the combined owner's equity in the business.

Income from sales of a company's goods or services.

Reduces retained earnings because it is a company's stock that has been issued and reacquired. It can still be reissued at any time. Considered a form of debt with an ownership component. May include interest bearing preferred stock or convertible preferred stock.

Ratios that compare the quantity of an asset with a measure of its use.

An estimate of the worth of a business

Amount of products that are unfinished and in the production process.

Working Capital is an indicator of firm's ability to meet its short-term financial requirements. A high value suggests greater liquidity and a company's ability to meet its internal cash flow needs.

This factor indicates the firm's ability to finance revenue growth internally without incurring additional debt. A high value indicates the firm has the ability to fund short-term growth and suggests it is creditworthy

This factor projects the number of times working capital is being turned into revenue. A very high value suggests the firm is under-capitalized and there may be liquidity problems. A very low value suggests the firm is not maximizing resources.

Bankruptcy predictor. Four ratios are used together and each ratio is weighted. A score greater than 2.90 is preferred while a score less than 1.23 indicates significant risk of bankruptcy. The following weighted averages are used: