Financial Statement Analysis

Glossary of Controllership and Financial Management Terms

Absorption costing

A costing method that treats all manufacturing cost (direct materials, direct labor, variable overhead, and fixed overhead) as product costs. It is also referred to as full costing.

Accept or reject decision

Decision resulting from a relevant cost analysis concerning whether to accept or reject a special order.

Accounts payable turnover ratio

A liquidity measure that shows the number of times on average that accounts payable are paid during the period; calculated by dividing net credit purchases by average accounts payable during the period.

Accounts receivable turnover ratio

A liquidity measure that shows the number of times on average that accounts receivable are collected during the period; calculated by dividing net credit sales by average accounts receivable during the period.

Action analysis report

A report detailing the costs that have been assigned to a cost object, such as a product or a customer; it also shows how difficult it would be to adjust the cost if there were a change in activity.

Activity

An event that causes the consumption of overhead resources within an organization.

Activity cost pool

A “bucket” in which costs that relate to a single activity measure are accumulated within an activity-based costing system.

Activity measure

An allocation basis within an activity-based costing system which, under ideal conditions, measures the amount of activity that drives the costs in an activity cost ...