Basic Definitions for Participants

Basic definitions for participants:

Primary Source - http://www.investopedia.com/terms/

Income Statement - A financial statement that measures a company's financial performance over a specific accounting period. Financial performance is assessed by summarizing how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year. Also known as the "profit and loss statement" or "statement of revenue and expense." Read more: http://www.investopedia.com/terms/i/incomestatement.asp#ixzz3dSxUwdCV

Revenue - The amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise. It is the "top line" or "gross income" figure from which costs are subtracted to determine net income.

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Cost of Goods - The direct costs attributable to the production of the goods sold by a company. This amount includes the cost of the materials used in creating the goods along with the direct labor costs used to produce the goods. It excludes indirect expenses such as distribution costs and sales force costs. COGS appears on the income statement and can be deducted from revenue to calculate a company's gross margin. Also referred to as "cost of sales."

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Gross Income - A company's revenue minus cost of goods sold. Also called "gross margin" and "gross profit.”

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Operating Expenses (SG&A) - Reported on the income statement, it is the sum of all direct and indirect selling expenses and all general and administrative expenses of a company. Direct selling expenses are expenses that can be directly linked to the sale of a specific unit such as credit, warranty and advertising expenses. Indirect selling expenses are expenses which cannot be directly linked to the sale of a specific unit, but which are proportionally allocated to all units sold during a certain period, such as telephone, interest and postal charges. General and administrative expenses include salaries of non-sales personnel, rent, heat and lights.

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Depreciation - A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both tax and accounting purposes.

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Amortization - A tax term relating to the practice of deducting the cost of an investment in a qualifying non-tangible asset over the projected life of the asset. The cost basis of the qualifying intangible asset is amortized over a 15-year period, irrespective of the actual useful life of the asset.

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Operating Income - The amount of profit realized from a business's operations after taking out operating expenses - such as cost of goods (COG) or wages - and depreciation. Operating income takes the gross income (revenue minus COG) and subtracts other operating expenses and then subtracts depreciation and amortization. These operating expenses are costs that are incurred from operating activities and include things such as office supplies and heat and power. Operating Income is typically a synonym for earnings before interest and taxes (EBIT) and is also commonly referred to as "operating profit" or "recurring profit."

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EBITDA (Earnings Before Taxes, Depreciation, Amortization, Interest and Taxes) - EBITA is essentially net income with interest, taxes, depreciation, and amortization added to it. This is used to compare profitability between companies and across industries since it eliminates effects of financing and accounting decisions.

Readmore: Investopedia http://www.investopedia.com/terms/e/ebitda.asp

EBITDA RATIO – the calculated value of EBIT divided by revenues. This ratio may be preferred over other measures of return as it normalizes the earning potential of companies to make it possible to compare between companies and across industries.

EBIT (Earnings Before Interest and Taxes) - Earnings before interest and taxes, or EBIT, takes a company’s revenue, or earnings, and subtracts its cost of goods sold

Copyright © 2016, SciPhD.com and operating expenses. The resulting figure, EBIT, is also called "operating earnings," "operating profit," or "operating income." Another way to calculate EBIT is to take net income and add back the interest and taxes the company paid. Investors can find the data required to calculate EBIT on the company's income statement. If EBIT is unsatisfactory, the company will need to either increase its revenues, decrease its expenses or both to improve its performance.

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EBIT RATIO – Just as with EBITA ratio, this is the calculated value of EBIT divided by revenues. It is also often used to normalize the earning potential of companies across industries.

Interest expenses - The cost incurred by an entity for borrowed funds. Interest expense is a non-operating expense shown on the income statement. It represents interest payable on any type of borrowings – bonds, loans, convertible debt or lines of credit. It is basically calculated as the interest rate times the outstanding principal amount of the debt. Interest expense on the income statement represents interest accrued during the period covered by the financial statements, and not the amount of interest actually paid over that period. While interest expense is tax-deductible for companies, in an individual's case, it depends on his or her jurisdiction and also on the loan's purpose.

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Pretax Income - An accounting term that refers to the difference between a company's operating revenues (from its primary businesses) and its direct expenses (except taxes) tied to those revenues. Pretax operating income excludes non- operating forms of revenue and non-recurring transactions such as capital gains on assets and profits from unrelated investments in other companies (unless its main business is investment in other companies). Pretax operating income is one of the best barometers for the basic health of a business, because it measures both the revenue and expenses associated with the company's primary business activities.

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Corporate Taxes - A levy placed on the profit of a firm, with different rates used for different levels of profits. Corporate taxes are taxes against profits earned by businesses during a given taxable period; they are generally applied to companies' operating earnings, after expenses such as COGS, SG&A and depreciation have been

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Net Income after Taxes - An accounting term, most often found in a company's annual report, that is meant to show the company's definitive "bottom line" for the accounting period. In other words, it shows what the company earned after all its expenses, charge-offs, depreciation and taxes have been subtracted. This calculation is usually shown as both a total dollar amount and a per share calculation.

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Credit Line - A pre-approved amount of money issued by a bank to a company that can be accessed by the borrowing company at any time to help meet various financial obligations. Commercial credit is commonly used to fund common day-to- day operations and is often paid back once funds become available. Also commonly referred to as a "commercial line of credit" or "business credit".

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Equity Financing - The process of raising capital through the sale of shares in an enterprise. Equity financing essentially refers to the sale of an ownership interest to raise funds for business purposes. Equity financing spans a wide range of activities in scale and scope, from a few thousand dollars raised by an entrepreneur from friends and family, to giant initial public offerings (IPOs) running into the billions by household names such as Google and Facebook. While the term is generally associated with financings by public companies listed on an exchange, it includes financings by private companies as well. Equity financing is distinct from debt financing, which refers to funds borrowed by a business.

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Balance Sheet - A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders. The balance sheet typically lists all assets on one side, and all liabilities and shareholder equity on the other side. The

Copyright © 2016, SciPhD.com total assets should equal the sum of the liabilities plus shareholder equity thus indicating that they are “in balance”. Read more: http://www.investopedia.com/terms/b/balancesheet.asp#ixzz3dT5NHBW3

Cash Flow Statement - One of the quarterly financial reports any publicly traded company is required to disclose to the SEC and the public. The document provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter.

INVESTOPEDIA EXPLAINS 'Cash Flow Statement' Because public companies tend to use accrual accounting, the income statements they release each quarter may not necessarily reflect changes in their cash positions. For example, if a company lands a major contract, this contract would be recognized as revenue (and therefore income), but the company may not yet actually receive the cash from the contract until a later date. While the company may be earning a profit in the eyes of accountants (and paying income taxes on it), the company may, during the quarter, actually end up with less cash than when it started the quarter. Even profitable companies can fail to adequately manage their cash flow, which is why the cash flow statement is important: it helps investors see if a company is having trouble with cash.

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