Financial Terminology Review
Learning Objectives
After exploring the resources below, you’ll select either the balance sheet or the income statement to focus on, then contribute key terminology to our class glossary. This approach allows you to develop deeper knowledge in one area while learning from classmates’ contributions to the other.
Balance Sheet Focus
Key Resource
Article: How to Read & Understand a Balance Sheet by Tim Stobierski, Harvard Business School
Video Resource
Watch: How to Read and Understand a Balance Sheet | Business: Explained
Balance Sheet Fundamentals
A balance sheet provides a summary of a business at a given point in time. It’s a snapshot of a company’s financial position, organized using the fundamental equation:
Assets = Liabilities + Owners’ Equity
Sample Balance Sheet Structure
| ASSETS | Amount |
|---|---|
| Current Assets | |
| Cash and cash equivalents | $15,000 |
| Accounts receivable | $8,500 |
| Inventory | $12,000 |
| Prepaid expenses | $1,500 |
| Total Current Assets | $37,000 |
| Non-Current Assets | |
| Property, plant & equipment | $45,000 |
| Patents and trademarks | $8,000 |
| Total Non-Current Assets | $53,000 |
| TOTAL ASSETS | $90,000 |
| LIABILITIES AND EQUITY | Amount |
|---|---|
| Current Liabilities | |
| Accounts payable | $6,500 |
| Payroll expenses | $4,000 |
| Short-term debt | $2,500 |
| Total Current Liabilities | $13,000 |
| Non-Current Liabilities | |
| Long-term loans | $15,000 |
| Total Non-Current Liabilities | $15,000 |
| Owners’ Equity | |
| Retained earnings | $52,000 |
| Common stock | $10,000 |
| Total Owners’ Equity | $62,000 |
| TOTAL LIABILITIES + EQUITY | $90,000 |
Income Statement Focus
Key Resource
Article: How to Read & Understand an Income Statement by Tim Stobierski, Harvard Business School
Income Statement Fundamentals
An income statement reveals a company’s financial performance over a specific period, showing whether the business is generating profit or loss through its operations.
Sample Income Statement Structure
| Company XYZ Income Statement |
|---|
| For Year Ended December 31, 2024 |
| Revenue and Expenses | Amount |
|---|---|
| Revenue | |
| Net sales | $125,000 |
| Service revenue | $15,000 |
| Total Revenue | $140,000 |
| Cost of Goods Sold (COGS) | |
| Materials | $45,000 |
| Direct labor | $20,000 |
| Total COGS | $65,000 |
| Gross Profit | $75,000 |
| Operating Expenses | |
| Selling expenses | $18,000 |
| Administrative expenses | $12,000 |
| Depreciation | $5,000 |
| Total Operating Expenses | $35,000 |
| Operating Income | $40,000 |
| Non-Operating Items | |
| Interest expense | $(2,000) |
| Income Before Taxes | $38,000 |
| Income Tax Expense | $8,000 |
| Net Income | $30,000 |
Class Glossary Instructions
Your Task
- Choose your focus: Select either Balance Sheet OR Income Statement
- Deep dive: Study your chosen statement using the resources provided
- Contribute to glossary: Add 3-5 key terms to the appropriate class glossary tab
- Learn from others: Review classmates’ contributions to the other statement type
Note: The specific glossary tabs (Balance Sheet and Income Statement) will be shared as separate collaborative documents for real-time class contributions.
Glossary Format
For each term you contribute, use this structure:
| Field | Your Entry |
|---|---|
| Contributor(s) | [Your names] |
| Head Term | [Main terminology] |
| Synonyms | [Alternative terms, if any] |
| Definition | [Clear, concise explanation] |
| Business Context Example | [Sentence showing term in professional use] |
| Questions and Research | [What doubts did you have? What research did you do to resolve them>] |
| Reflection on translation challenges | [Analysis of potential challenges in understanding, connotation, regional variation, false friends, financial implications, etc.] |
| Source Consulted | [Where you found/verified the information you shared] |
Example Glossary Entry
| Field | Example Entry |
|---|---|
| Head Term | Accounts Receivable |
| Synonyms | Trade receivables, Customer receivables |
| Definition | Money owed to a company by its customers for goods or services delivered but not yet paid for |
| Business Context Example | “Our accounts receivable increased by 15% this quarter, indicating either growing sales or potential collection issues that management should monitor.” |
| Questions and Research | Initially confused this with accounts payable. Researched the difference: receivable = money coming TO us, payable = money going FROM us. |
| Reflection on translation challenges | In Spanish: “cuentas por cobrar” - careful not to confuse with “cuentas por pagar.” Regional variations exist: Mexico uses “clientes” while Spain might prefer “deudores comerciales.” Legal implications differ by country regarding collection practices. |
| Source Consulted | Harvard Business School Online, Investopedia |
Class Discussion Points
After completing the glossary, we’ll discuss:
- Overlapping concepts: Which terms appear in both statements?
- Context variations: How does terminology meaning shift between documents?
- Translation challenges: What cultural or legal considerations emerged?
- Professional applications: When would you encounter these terms in business communication?
📥 Download this Content
Find this file on our repo and download it.
🤖 GAI Study Prompts
Copy the downloaded content and try it with these prompts:
- “Help me understand the difference between [specific financial term] and [another term]”
- “What are the most challenging translation issues for financial terminology between English and Spanish?”
- “Create practice sentences using financial vocabulary in business contexts”
- “Explain why [specific term] might have different meanings in different financial statements”
Next Activity: Financial Report Analysis Assignment