Your company, The Bookworm, was purchased several months ago by an international bookstore chain—The Best Seller. Your new boss, Gabriella Sitta, asks you to create the end-of-year financial statements. Gabriella is not native to the United States and does not understand all the English-language business terms. On a separate sheet of paper, write each term’s definition and its relationship to the preparation of financial statements.

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administrative expenses base period Capital Stock cash inflows cash outflows comparability financing activities full disclosure gross profit on sales horizontal analysis investing activities materiality net purchases net sales operating activities operating expenses operating income relevance reliability retained earnings selling expenses statement of retained earnings stockholders' equity vertical analysis