Glossary
accounting change: Any variation in the way that accounts are prepared. Various events could account for the change, such as new Internal Revenue Service regulations or the adoption of new methods in allowing for doubtful (probably noncollectible) accounts receivable. Whenever such a change occurs, accountants are expected to footnote any financial statement, offering a full explanation of the reason for the change.
accounts payable: What a company owes to outside suppliers/vendors. Accounts payable are considered to be part of a company’s short-term debt and are recorded as a liability on the balance sheet.
accounts receivable: What a company is owed from customers who have purchased its goods or services. Accounts receivable are considered to be an asset on the company’s balance sheet.
accretion: Growth in the value of assets.
acid-test ratio: See quick ratio.
addbacks: Discretionary (nonessential to operations) items in the profit-and-loss statement. These items are added back to net pretax operating profit to estimate a company’s economic cash flow versus cash flow produced for tax purposes.
adjusted book value: The book value that results after asset or liability amounts are added, deleted, or changed from their respective book amounts to their fair market value.
adjusted book value method: A valuation method based mainly on the balance sheet of a business in which owners’ equity — total assets minus total liabilities — sets the price. In essence, the entire balance ...
