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Business Definitions Essay

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Below is an essay on "Business Definitions" from Anti Essays, your source for research papers, essays, and term paper examples.

Definition of 'Extraordinary Item'

Gains or losses included in a company's financial statements, which are infrequent and unusual in nature. These are usually explained further in the "notes to the financial statements."
An Extraordinary item is:
  * infrequent in nature
  * unpredictable/unusual
  * and so material in amount that it cannot be reported in aggregate with other amounts
Definition of 'Exceptional Item'

Charges incurred that must be noted on a company's balance sheet, in accordance with GAAP principles. Even though they are considered to be part of ordinary business charges, exceptional items must be disclosed due to their sheer size or frequency.
An Exceptional Item is:
  * As a regular line item i.e. as a standard income statement line item (in aggregate form) but to clarify the nature and amount a disclosure will be made in the notes
  * If the item is material then a separate disclosure will be made as an additional line item.
Definition of 'Liquidity'

1. The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity. Assets that can be easily bought or sold are known as liquid assets.

2. The ability to convert an asset to cash quickly, also known as "marketability."

There is no specific liquidity formula; however, liquidity is often calculated by using liquidity ratios.

High profit quality
A high quality profit is one which can be repeated or sustained. In other words the profit does not contain any unusual one-off items of income or profit which shareholders cannot reasonably expect the business achieve in the following year.
Low profit quality
A low quality profit is one which it is difficult to repeat. The profit is likely to benefit from one or more “exceptional items” which will not repeat. Examples of exceptional items include:
• One-off profits on selling major items of property, plant...

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