Learn Your Terms

To become a better investor, it’s good to get familiar with companies’ financial statements (balance sheets, income statements, statements of cash flow). It’s not rocket science, but it doesn’t help that many items go by different names on different companies’ reports. For example, you might know to look for “revenue” on an income statement, but the statement you’re looking at calls revenue “sales.” Even income statements themselves go by different names. Argh! The list below can make your life easier. It’s not comprehensive, but it covers many key terms and their variations. • Accounts Payable = Payables • Accounts Receivable = Trade Receivables = Receivables • Additional Paid-in Capital = Capital in Excess of Stated Value = Capital Surplus = Paid-in Capital • Balance Sheet = Statement of Financial Condition = Consolidated Balance Sheets • Cost of Goods Sold = Costs of Sales = Cost of Revenue = Cost of Products Sold = Costs, Materials and Production • Earnings = Net Income = Net Profit = Net Earnings • Earnings Before Income Taxes = Income (Loss) Before Income Taxes = Earnings Before Provision for Income Taxes • Earnings Per Share = Net Income per Share = Net Income per Common Share • Income Statement = Earnings Statement = Statement of Operations = Profit & Loss Statement = Consolidated Statement of Income • Inventories = Merchandise Inventories • Revenues = Sales = Net Sales • Shareholder Equity = Shareholders’ Investment = Stockholders’ Equity • Short-term Debt = Debt Payable Within One Year = Current Portion of Long-term Debt = Notes Payable Learning to read financial statements takes some perseverance, but it can pay off in better investment success, as you’ll be able to spot promising or worrisome data and trends. You can learn more with “Accounting Made Simple” by Mike Piper (Simple Subjects, $15).