Ever encountered financial terms & abbreviations that you have yet to learn what it means and what it is for? Isn’t it frustrating to search for every term you see and not know if it’s even the right full meaning of the abbreviated words? Especially found in financial models or spreadsheets, some may confuse you on what some abbreviations stand for. But worry no more, for we got that covered. Check out this list of financial terms and abbreviations with its full meaning and what it is used for.
A | Actual figure | The term “actual figure” typically refers to the real or current value of something. It represents the precise or existing numerical value of a specific quantity, measurement, or parameter. The actual figure is the factual and accurate representation of a value at a given time instead of estimated or projected figures. |
AE | Accrued Expenses | Accrued Expenses, also known as accrued liabilities or payables, refer to expenses a company has incurred but has yet to pay for or record in its financial statements. These expenses are typically short-term and will be settled in the near future. Accrued expenses are a crucial component of the accrual accounting system, where transactions are recorded when they are incurred rather than paid. Accrued expenses are recorded in the company’s financial statements as adjusting entries to ensure that the financial statements reflect the accurate financial position of the company. When the actual payment is made, the accrued expense account is reduced, and the cash or accounts payable account is increased to reflect the payment. Businesses need to recognize accrued expenses accurately to give a more realistic picture of their financial health and to adhere to the generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS). |
AIR | Assumed Interest Rate | The term “assumed interest rate” refers to an estimated or hypothetical interest rate used for planning or analysis when the actual interest rate is uncertain or unknown. It is commonly used in financial modeling, forecasting, or evaluating the potential outcomes of investments, loans, or other financial transactions. When the actual interest rate is unavailable or subject to change, an assumed interest rate is used as a placeholder to estimate the financial implications of a particular scenario. This assumed rate can be based on historical averages, market trends, expert opinions, or other relevant factors. |
AP | Accounts Payable | Accounts Payable is a fundamental accounting term that refers to the outstanding obligations a business or organization has to its suppliers or creditors for goods and services received on credit. In simpler terms, it represents the money a company owes to its vendors or suppliers for purchases made on credit. A liability is created when a company buys goods or services on credit, and the corresponding amount is recorded in the Accounts Payable Ledger. This entry reflects the company’s commitment to paying off the debt later, usually within a specified payment period. |
APR | Annual Percentage Rate | The Annual Percentage Rate (APR) is a financial term representing the annualized cost of borrowing money, including the interest rate and any additional fees or costs associated with the loan. It is expressed as a percentage and is designed to provide borrowers with a standardized way to compare the costs of different loan options. The APR considers not only the interest charged on the loan but also any upfront fees, closing costs, points, and other charges associated with obtaining the loan. By including these additional costs, the APR gives borrowers a more accurate picture of the overall cost of borrowing and allows them to make more informed decisions when comparing loan offers. |
AR | Accounts Receivable | Accounts Receivable is a term used in accounting and finance to refer to the money owed to a business by its customers or clients for goods or services delivered or provided on credit. In other words, it indicates the sum of money that a business anticipates getting from its clients for unpaid invoices or credit sales. When a company sells its products or services on credit, it creates an account for each customer who owes them money. These individual accounts are collectively known as “Accounts Receivable.” The amount recorded in the accounts receivable represents the total outstanding balances owed to the company by its customers. |
ARM | Adjustable Rate Mortgage | Consumer-to-Consumer refers to a business model or transactions that occur directly between individual consumers rather than involving a business or commercial intermediary. In other words, it’s a form of commerce where individuals buy and sell goods and services or exchange information with each other. C2C transactions are facilitated through various platforms, websites, or mobile applications that provide online marketplaces or forums for users to interact and conduct business. These platforms act as intermediaries, enabling individuals to list items for sale, negotiate prices, and complete transactions with other individuals. Examples of popular C2C platforms include: • Craigslist: An online classifieds platform where users can post advertisements for various products, services, and housing. • Depop: An app and website focused on fashion and unique items where users can buy and sell clothing, accessories, and vintage goods. • eBay: A well-known online auction and shopping website enabling individuals to buy and sell new, used goods. • Facebook Marketplace: A feature integrated into Facebook allows users to buy and sell items locally. While C2C platforms offer convenience and opportunities for individuals to engage in online commerce, users should exercise caution and be mindful of potential risks, such as scams or fraudulent activities. |
ARPU | Average Revenue Per User | Average Revenue Per User (ARPU) is a financial metric used to measure the average revenue generated by each user or customer over a specific period. It is commonly used in telecommunications, subscription-based services, and online platforms. To calculate ARPU, you divide the total revenue generated within a given period by the total number of users or customers during that same period. ARPU provides insights into the average spending or value of each customer. It is a useful metric for businesses to evaluate their pricing strategies, track changes in revenue over time, and compare their performance with industry benchmarks. It can also help identify trends and patterns in customer behavior, such as upselling opportunities or changes in customer preferences. |
ARR | Annual Recurring Revenues | Annual Recurring Revenue (ARR) is a key metric businesses use, particularly in the software-as-a-service (SaaS) industry, to measure the predictable and recurring revenue generated from subscription-based services or products over 12 months. ARR provides insight into the financial performance and growth potential of a company. ARR represents all subscription or recurring revenues a company earns from its customers within a year. It includes the revenue generated from ongoing subscriptions, maintenance fees, support contracts, or any other recurring sources of income. |
ASP | Average Selling Price | The Average Selling Price (ASP) is a metric used in business to determine the average price at which a product or service is sold. It is calculated by dividing the total revenue generated from sales by the number of units sold. The ASP is a valuable business metric that provides insights into pricing trends, product demand, and overall revenue generation. Monitoring changes in ASP over time can help businesses make informed decisions about pricing strategies and product positioning in the market. |
B.O.T. | Build, Operate, and Transfer | Build, Operate, and Transfer (BOT) is a project delivery model commonly used in infrastructure development and public-private partnerships (PPPs). It involves the participation of both public and private entities to facilitate the construction, operation, and eventual transfer of a project from the private sector to the public sector. Build: In the first phase, a private entity, often called the “concessionaire” or “developer,” is responsible for designing, financing, and constructing the infrastructure project. Operate: Once the construction is complete, the private entity is responsible for operating and maintaining the infrastructure for a predetermined period, typically from several years to several decades. Transfer: At the end of the concession period or an agreed-upon timeframe, the ownership and operation of the infrastructure project are transferred to the public sector. |
B2B | Business-to-Business | Business-to-Business refers to commercial transactions or contacts between two businesses. In B2B transactions, the products, services, or information are exchanged between one business entity and another. B2B transactions often involve larger quantities, longer sales cycles, and higher purchase values than B2C transactions. Additionally, the decision-making process in B2B scenarios usually involves multiple stakeholders within the purchasing organization. Examples of B2B interactions include: • Business Partnerships: Joint ventures or collaborations between two businesses to achieve mutual goals. • Professional Services: Businesses hiring other companies for consulting, legal, accounting, or marketing services. • Supplier Relationships: Companies purchase raw materials or components from other businesses to use in their manufacturing process. • Technology Solutions: Companies providing software, hardware, or IT services to other businesses • Wholesale and Retail: A manufacturer selling products to distributors or retailers. |
B2C | Business-to-Consumer | Business-to-Consumer (B2C) refers to the type of commerce or transactions that occur between a business or company and individual consumers. In this model, businesses sell products, services, or information directly to end-users who are the consumers. B2C is one of the most common and well-known types of commercial transactions, encompassing a wide range of industries and products. The B2C model emphasizes understanding consumer preferences, needs, and buying behaviors to tailor products and marketing strategies accordingly. Businesses often use advertising, branding, and customer relationship management to attract and retain consumers. Providing excellent customer service and creating positive consumer experiences are critical for success in the B2C market. Examples of B2C transactions include: • E-commerce Websites: Online platforms like Amazon, eBay, and other online stores where consumers can purchase products from different sellers. • Entertainment: Movie theaters, music concerts, streaming services, and gaming companies selling their content or experiences to individual consumers. • Retail Stores: Traditional brick-and-mortar stores and online retailers selling goods directly to consumers. • Services: Businesses offering services such as haircutting, fitness training, house cleaning, or legal advice directly to consumers. • Subscription Services: Businesses offering subscription-based services like streaming platforms, magazines, or meal kit delivery services. |
B2C2B | Business-to-Consumer-to-Business | Business-to-Consumer-to-Business (B2C2B) is a hybrid business model involving three main entities: businesses, consumers, and others. In this model, consumers act as intermediaries or facilitators between businesses. The B2C2B model can benefit businesses by allowing them to tap into new markets and indirectly reach customers through intermediaries. Additionally, it can provide opportunities for consumers to become entrepreneurs and build their businesses around established products or services. Here’s how the B2C2B model typically works: • Businesses A are the primary producers or suppliers of products or services. They manufacture or provide goods and services. • Consumers are individual customers or end-users who purchase products or services from businesses as they would in a traditional B2C model. • Businesses B: In the B2C2B model, the consumers who purchase products or services from businesses also act as secondary businesses. They may resell or use the products they bought to create value-added services. |
B2G | Business-to-Government | Business-to-Government refers to the transactions, interactions, and relationships between private sector businesses and various government entities at different levels of governance, such as local, regional, national, or international. In B2G interactions, businesses provide goods, services, or solutions to government agencies or organizations. The B2G relationship is important for both parties. For governments, B2G interactions can lead to improved public service delivery, innovation, and access to specialized expertise from the private sector. For businesses, engaging with governments can result in significant contracts, stable revenue streams, and opportunities to contribute to the public good. However, B2G interactions can also be complex and subject to ethical considerations, as governments must ensure transparency, fairness, and equal opportunity in their dealings with the private sector. Additionally, businesses must navigate regulatory compliance and potential conflicts of interest while pursuing government contracts or partnerships. |
BIC | Bank Identifier Code | A Bank Identifier Code (BIC) is a unique code used to internationally identify financial institutions, such as banks and credit unions. It is also commonly referred to as a SWIFT code, which stands for the Society for Worldwide Interbank Financial Telecommunication, the organization that developed and maintains the system. The BIC/SWIFT code is a standard format for identifying a particular bank during international financial transactions, particularly when transferring money between countries. The code is typically made up of 8 to 11 characters. It’s important to note that when you need to perform international transactions or money transfers, you should always double-check the BIC/SWIFT code to ensure accuracy. Using the wrong code could lead to delays or potential issues with the transaction. |
BOM | Bill of Materials | A complete inventory of all the materials, parts, sub-assemblies, and quantities needed to produce or assemble a product is known as a bill of materials (BOM). It is a central reference document for product design, production planning, and inventory management in various industries, including manufacturing, construction, electronics, and engineering. The BOM provides essential information for a product’s production process. It is a crucial tool for various departments within a company, such as engineering, procurement, manufacturing, and inventory management. It helps ensure that the correct components are procured, the right quantities are ordered, and the production process is efficient and accurate. With accurate and up-to-date BOMs, companies can minimize errors, control costs, and streamline production processes to deliver high-quality products. |
BPO | Business Process Outsourcing | Business Process Outsourcing (BPO) is a business practice where a company or organization contracts out certain non-core business processes to external service providers. These processes could be related to various functions, such as customer support, finance and accounting, human resources, information technology, data entry, and more. BPO can be categorized into two main types: back-office and front-office. Back-office outsourcing involves outsourcing internal business functions that are not directly visible to customers but are essential for the company’s operations. Examples include finance and accounting, payroll processing, data entry, human resources, and administrative tasks. Front-office outsourcing involves outsourcing customer-facing processes, such as customer support, technical support, telemarketing, and sales. |
BS | Balance Sheet | A balance sheet is a financial statement that provides a snapshot of a company’s financial position at a specific time. It shows the company’s assets, liabilities, and shareholders’ equity, and it is one of the key financial statements used by investors, creditors, and other stakeholders to assess a business’s financial health and stability. A balance sheet is typically prepared at the end of an accounting period, such as at the end of a quarter or fiscal year, and it helps stakeholders understand how the company’s resources (assets) are financed. Investors and creditors can assess the company’s liquidity, solvency, and overall financial performance by analyzing the balance sheet. |
C2B | Consumer-to-Business | Consumer-to-Business is a business model where individual consumers or end-users create value or provide services to businesses. In traditional business models, the flow of goods and services is from businesses to consumers (B2C) or between businesses (B2B). However, with the rise of the internet and technology, the C2B model has gained prominence, allowing consumers to actively participate in business and offer their skills, products, or insights to companies. There are several ways in which the C2B model operates: • Crowdsourcing: Companies can leverage consumers’ collective intelligence and skills to generate ideas, content, or solutions. • Data Sharing: Consumers can provide their data and feedback to businesses, enabling companies to personalize products, services, and marketing strategies based on consumer preferences and behavior. • Freelancing and Gig Economy: Consumers can offer their services as freelancers or independent contractors to businesses. Online platforms and marketplaces facilitate this exchange, allowing businesses to find individuals with specific temporary or project-based work skills. • Influencer Marketing: Social media influencers, who have a significant following, collaborate with businesses to promote their products or services to their audience. • User-Generated Content: Consumers can create content that adds value to a business, such as reviews, testimonials, social media posts, and product demonstrations. This user-generated content can significantly impact a company’s reputation and marketing efforts. The C2B model benefits both consumers and businesses. Consumers have more control over their participation and can directly influence the products and services they receive. On the other hand, businesses gain access to a vast pool of talent, knowledge, and insights, often at a reduced cost compared to traditional methods. |
C2C | Consumer-to-Consumer | Consumer-to-Consumer refers to a business model or transactions that occur directly between individual consumers rather than involving a business or commercial intermediary. In other words, it’s a form of commerce where individuals buy and sell goods and services or exchange information with each other. C2C transactions are facilitated through various platforms, websites, or mobile applications that provide online marketplaces or forums for users to interact and conduct business. These platforms act as intermediaries, enabling individuals to list items for sale, negotiate prices, and complete transactions with other individuals. Examples of popular C2C platforms include: • Craigslist: An online classifieds platform where users can post advertisements for various products, services, and housing. • Depop: An app and website focused on fashion and unique items where users can buy and sell clothing, accessories, and vintage goods. • eBay: A well-known online auction and shopping website enabling individuals to buy and sell new, used goods. • Facebook Marketplace: A feature integrated into Facebook that allows users to buy and sell items locally. While C2C platforms offer convenience and opportunities for individuals to engage in online commerce, users should exercise caution and be mindful of potential risks, such as scams or fraudulent activities. |
CA | Current Assets | Current assets are a category of assets on a company’s balance sheet that are expected to be converted into cash or used up within one year or the normal operating cycle of the business, whichever is longer. They are typically listed in the order of liquidity, meaning the most liquid assets come first. Common examples of current assets include: • Accounts Receivable: Money owed to the company by customers for products or services provided on credit. • Cash and Cash Equivalents: Physical cash, bank balances, and short-term investments that are highly liquid. • Inventory: The value of raw materials, work-in-progress, and finished goods a company holds for sale. • Prepaid Expenses: Payments made in advance for goods or services that the company will receive in the future. |
CAC | Customer Acquisition Costs | Customer Acquisition Cost (CAC) is a metric that measures the average cost a business incurs to acquire a new customer. It represents the total money a company spends on marketing and sales to attract and convert customers. CAC is calculated by dividing the total cost of acquiring customers by the number of customers acquired during a specific period. The costs considered in CAC typically include marketing expenses, advertising campaigns, sales team salaries, commissions, software tools, and any other costs directly related to customer acquisition efforts. |
CAGR | Compound Annual Growth Rate | Compound Annual Growth Rate (CAGR) is a financial metric used to measure the average annual growth rate of an investment, business, or economic indicator over a specific period. It calculates the rate of return required for an investment to grow from its initial value to its final value, assuming that the investment grows constantly over the period. CAGR considers the compounding effect, which means that the returns or values are reinvested or compounded over time. It provides a more accurate representation of the investment’s performance than a simple average. |
CAPEX | Capital Expenditures | Capital expenditures, often abbreviated as CapEx, refer to the funds a company or organization allocates to acquire, improve, or maintain long-term assets. These assets are typically used to generate income or provide future benefits to the business over an extended period. Capital expenditures are considered long-term investments because they provide ongoing benefits to the company over an extended period, typically exceeding one year. These expenditures are recorded as assets on the company’s balance sheet and are subject to depreciation or amortization over their useful lives. |
CAPM | Capital Asset Pricing Model | The Capital Asset Pricing Model (CAPM) is a widely used financial model that helps investors and financial analysts understand the relationship between risk and expected return for individual security or a portfolio of securities. It provides a framework for calculating the expected return of an asset based on its systematic risk, also known as beta, and the risk-free rate of return. Key Components of the CAPM: • Risk-Free Rate (Rf): The risk-free rate represents the return an investor can earn with certainty on an investment with zero risk. Typically, the risk-free rate is based on the yield of a government bond, such as the yield on a 10-year U.S. Treasury bond, as it is considered virtually risk-free. • Market Risk Premium (Rm-Rf): The market risk premium is the additional return that investors expect to earn for taking on the risk of investing in the overall market instead of the risk-free rate. It is calculated as the difference between the expected return on the market (usually represented by a broad market index like the S&P 500) and the risk-free rate. • Beta (β): Beta measures the systematic risk of an asset or a portfolio relative to the market. It indicates how sensitive the asset’s returns are to movements in the overall market. A beta of 1.0 means the asset’s returns move in tandem with the market, a beta greater than 1.0 indicates higher volatility, and a beta less than 1.0 indicates lower volatility than the market. The CAPM is widely used in finance for various purposes, including estimating the required rate of return for an investment, evaluating the performance of investment portfolios, and determining the cost of capital for companies. It remains a foundational tool in finance and portfolio management, providing valuable insights into the relationship between risk and return in the context of diversified investment portfolios. |
CD | Certificate of Deposit | A Certificate of Deposit (CD) is a financial product offered by banks and other financial institutions that allows individuals to invest a specific amount of money for a fixed period at a predetermined interest rate. It is a type of time deposit, meaning the funds are locked in for a set duration, typically ranging from a few months to several years. When you purchase a CD, you agree to keep the money deposited in the account for the maturity period specified. In return, the issuing institution pays you interest on the principal amount throughout the term. The interest rate for a CD is usually higher than that of a regular savings account because of the longer commitment and restricted access to the funds. |
CDS | Credit Default Swap | A Credit Default Swap (CDS) is a financial derivative contract that protects an investor or institution against the risk of a borrower (usually a company or government) defaulting on its debt obligations. In simpler terms, it is a form of insurance against the possibility that a borrower will be unable to meet their debt payments. There are typically two parties in a CDS contract: the buyer (often referred to as the “protection buyer”) and the seller (often referred to as the “protection seller”). The CDS is based on an underlying debt instrument, such as corporate bonds, government bonds, or loans. The buyer of the CDS does not necessarily have to own the underlying debt. The buyer of the CDS pays regular premiums to the seller for the duration of the contract. These premiums are similar to insurance premiums. Suppose the issuer of the underlying debt defaults or fails to meet its debt obligations (e.g., misses a payment or declares bankruptcy). In that case, the protection buyer is entitled to a payout from the protection seller. This payout is usually the face value of the underlying debt minus the recovery value (if any) of the debt. |
CF | Cash Flow | Cash flow refers to the movement of money in and out of a business or an individual’s financial situation over a specific period of time. It’s a crucial aspect of financial management, indicating how much cash is generated and used during a given period. Cash flow can be influenced by various factors, including sales and revenue, expenses, investments, loans, and changes in working capital (the difference between current assets and current liabilities). Cash flow can be classified into three main categories: • Positive cash flow: When the cash inflows exceed the outflows, resulting in an overall increase in the cash balance. It is generally considered a healthy sign for a business or individual, allowing them to invest, expand, or save for future needs. • Neutral cash flow: When the inflows and outflows of cash are relatively balanced. While this may be fine in the short term, it can limit growth opportunities if consistently maintained. • Negative cash flow: When cash outflows exceed the inflows, leading to a decrease in the cash balance. Negative cash flow can be problematic for a business, leading to liquidity issues, difficulties in paying bills, and potentially even bankruptcy if not addressed. |
COA | Chart of Account | A corporation or organization’s chart of accounts (COA) is a classified list of all the accounts it utilizes to record its financial activities. A distinct sort of asset, liability, equity, revenue, or expense is represented by each account. The COA is essential for organizing and reporting financial information accurately. Each account in the COA has a unique code or number for easy identification, and it helps in the systematic recording, tracking, and reporting of financial transactions. Remember that the COA’s complexity and specificity can vary depending on the size and nature of the business or organization. Larger companies may have more detailed and extensive COAs compared to smaller ones. |
COGS | Cost of Goods Sold | Cost of Goods Sold (COGS) is an accounting term that refers to the direct costs incurred by a business in producing or acquiring the goods sold to customers. It represents the expenses directly associated with the production or acquisition of the products or services that a company sells during a specific period. COGS includes the cost of the materials and labor used in the production process and any other direct costs directly attributable to producing goods or services. It does not include other expenses that are not directly related to the production or acquisition of goods, such as sales and marketing expenses, administrative costs, or research and development expenses. |
CPC | Cost per Click | Cost per Click (CPC) is a metric used in online advertising to measure the cost an advertiser pays each time a user clicks on their ad. It is a pricing model commonly used in pay-per-click (PPC) campaigns, where advertisers only pay when someone interacts with their ad by clicking on it. CPC is calculated by dividing the total cost of a specific advertising campaign by the number of clicks it receives. It represents the average amount of money spent per click. For example, if an advertiser spends $100 on a campaign and receives 200 clicks, the CPC would be $0.50 per click. |
CPI | Consumer Price Index | The Consumer Price Index (CPI) is a statistical measure commonly used to track changes in the price level of a basket of goods and services households purchase over time. It is a crucial economic indicator for assessing inflation or deflation trends in an economy and understanding how the cost of living for consumers is affected. The CPI is widely used by governments, policymakers, businesses, and investors to make informed decisions, especially when it comes to adjusting wages, pensions, and social security payments, as well as evaluating the effectiveness of monetary policy and fiscal measures to control inflation and maintain economic stability. |
CR | Credit | In finance and accounting, “Credit” (CR) refers to one side of a double-entry bookkeeping system used to record financial transactions. Double-entry bookkeeping is a standard method businesses use to maintain accurate and balanced financial records. In a double-entry system, every financial transaction has two sides: a debit and a credit. These are not to be confused with “credit” in borrowing money from a lender (e.g., a credit card or loan). Instead, in this context, “credit” represents the right side of the accounting equation and is used to record increases in liabilities, equity, and revenue accounts and decreases in asset accounts. |
Cum. | Cumulated | “Cumulated” typically refers to accumulating something over time. It is the past participle form of the verb “cumulate,” which means to gather or accumulate together. When something is described as “cumulated,” it implies that it has been collected, combined, or added up over a period or series of instances. In essence, “cumulated” describes the result of combining or collecting data, quantities, or elements over time to form a total or comprehensive amount. |
CVP | Cost Volume Profit | Cost-Volume-Profit (CVP) analysis is a management accounting technique that helps businesses understand the relationships between costs, sales volume, and profit. It provides valuable insights into the financial implications of different production and sales levels, helping decision-makers make informed choices to maximize profitability. The key components of a CVP analysis are volume, variable & fixed costs, selling price, contribution margin, and break-even point. By using CVP analysis, companies can perform various scenarios and “what-if” analyses to understand how changes in volume, costs, and prices can impact their profitability. This information is particularly useful for deciding pricing strategies, cost control measures, production levels, and overall business strategy. |
D&A | Depreciation & Amortization | Depreciation and amortization are accounting methods that allocate the cost of assets over their useful lives. They are expenses recorded on a company’s financial statements to reflect the gradual wear and tear, obsolescence, or consumption of an asset’s value over time. Depreciation is primarily used for tangible assets, such as buildings, vehicles, machinery, and equipment. On the other hand, amortization is typically applied to intangible assets, including patents, copyrights, trademarks, licenses, and goodwill. Both depreciation and amortization are non-cash expenses, meaning they do not involve the actual outflow of cash from a company. They are accounting entries that reflect an asset’s gradual consumption or loss of value. |
D2C | Direct-to-Consumer | Direct-to-consumer refers to a business model in which companies sell their products directly to customers without the involvement of traditional intermediaries, such as wholesalers, retailers, or distributors. This approach gives companies more control over the entire customer journey, from manufacturing to marketing and sales. By cutting out intermediaries, DTC brands can offer their products competitively while maintaining a closer relationship with their customer base. The rise of the internet and advancements in e-commerce technology has significantly facilitated the growth of direct-to-consumer businesses in recent years. Many successful DTC brands have emerged across various industries, including fashion, beauty, consumer electronics, food, and beverages. However, the DTC model has challenges, such as establishing brand awareness, managing logistics, and competing with established retailers. Nonetheless, it’s an attractive option for many entrepreneurs and companies seeking to disrupt traditional retail models. |
DCF | Discounted Free Cash Flows | Discounted Free Cash Flows (DCF) is a financial valuation method used to estimate the intrinsic value of an investment, typically a company or a project. It involves forecasting and discounting the future cash flows generated by the investment to determine its present value. A DCF analysis takes these free cash flows projected over a certain time horizon and discounts them back to their present value using an appropriate discount rate. The discount rate reflects the opportunity cost of investing in the project or company compared to alternative investments of similar risk. By discounting the cash flows, DCF captures the idea that cash received in the future is worth less than the same amount received today. |
DPO | Days Payable Outstanding | Days Payable Outstanding (DPO) is a financial metric measuring the average number of days a company takes to pay its suppliers and vendors for the goods or services it has received. It is also known as the “payables turnover period” or “creditor days.” DPO is calculated by dividing the average accounts payable by the cost of sales per day. DPO is often compared to the industry average or the company’s historical DPO to evaluate its payment practices, cash flow management, and supplier relationships. |
DR | Debit | Debit generally refers to a financial transaction involving subtracting or reducing funds from an account. It might have multiple connotations depending on the situation. In accounting, a debit is an entry on the left side of a ledger or account, signifying an increase in an asset or an expense or a decrease in a liability or equity. In banking, a debit transaction occurs when money is withdrawn from an account. |
DSCR | Debt Service Coverage Ratio | Debt Service Coverage Ratio (DSCR) is a financial metric used to assess the ability of a company or individual to cover their debt obligations. It measures the relationship between the cash flow generated by an entity and the amount of debt payments required to make. To calculate the Debt Service Coverage Ratio, you divide the entity’s net operating income (or cash flow) by its total debt service, which includes interest and principal payments. The result of this calculation represents the number of times the cash flow can cover the debt payments. |
DSI | Days Sales in Inventory | Days Sales in Inventory (DSI), also known as Inventory Days or Inventory Turnover Days, is a financial metric that measures the average number of days it takes for a company to sell its inventory. It provides insights into how efficiently a company manages its inventory and indicates the liquidity of its inventory. The formula for calculating Days’ Sales in Inventory is as follows: DSI = (Average Inventory / Cost of Goods Sold) x Number of Days. The DSI calculation results represent the average number of days it takes for the company to convert its inventory into sales. |
DSO | Days Sales Outstanding | Days Sales Outstanding (DSO) is a financial metric that measures the average number of days it takes for a company to collect payment from its customers after a sale has been made. It is also the average collection period or accounts receivable turnover period. It’s important to note that DSO should be interpreted in the context of the industry in which a company operates. Different industries may have varying payment terms and collection practices, influencing a typical or acceptable DSO. |
EBIT | Earnings Before Interest and Taxes | Earnings Before Interest and Taxes (EBIT), or operating income or operating profit, is a financial metric used to measure a company’s profitability before considering interest expenses and income taxes. It is a key indicator of a company’s operational performance and ability to generate profits from its core business activities. EBIT is calculated by subtracting a company’s operating expenses, excluding interest and income taxes, from its total revenue. It is useful for comparing the profitability of different companies within the same industry, as it allows for a more direct comparison of their operational efficiency. It is also frequently used in financial analysis and valuation, as it provides a starting point for assessing a company’s financial health and potential for growth. |
EBITDA | Earnings Before Interest, Taxes, Depreciation and Amortization | Electronic Funds Transfer (EFT) refers to transferring money from one bank account to another electronically, without needing physical cash or paper checks. It involves the exchange of funds between financial institutions using computer-based systems and telecommunications networks. EFTs can be used for various transactions, including payments, deposits, and withdrawals. They provide a convenient and secure method for transferring funds between individuals, businesses, and organizations. Different EFTs exist, such as direct deposit, wire transfer, automated clearing house (ACH) payments, and electronic wallets. |
EFT | Electronic Funds Transfer | Electronic Funds Transfer (EFT) refers to transferring money from one bank account to another electronically, without needing physical cash or paper checks. It involves the exchange of funds between financial institutions using computer-based systems and telecommunications networks. EFTs can be used for various transactions, including payments, deposits, and withdrawals. They provide a convenient and secure method for transferring funds between individuals, businesses, and organizations. Different forms of EFTs exist, such as direct deposit, wire transfer, automated clearing house (ACH) payments, and electronic wallets. |
EPS | Earnings Per Share | Earnings Per Share (EPS) is a financial metric that measures a company’s profitability on a per-share basis. It is calculated by dividing a company’s net earnings or net income of a company by the total number of outstanding shares. EPS is an important metric for investors as it measures a company’s profitability per share. It helps investors assess the company’s financial health, compare its performance to competitors, and make informed investment decisions. EPS is often reported quarterly and annually and can be used in various financial ratios and valuation models. |
ETF | Exchange Traded Funds | Full-Time Equivalent |
EV | Enterprise Value | A financial metric called enterprise value (EV) is used to evaluate a company’s overall value. It is a useful tool for determining the company’s overall worth, irrespective of its capital structure. Enterprise Value considers a company’s equity and debt, offering a comprehensive view for potential investors and acquirers. It is commonly used in financial analysis, particularly when comparing companies with different capital structures, as it allows for a more apples-to-apples comparison. The following equation can be used to determine enterprise value: EV = Market Capitalization + Total Debt – Cash and Cash Equivalents Where: • Market Capitalization: The total market value of a company’s outstanding shares of stock is known as market capitalization. It is determined by dividing the stock price by the number of outstanding shares at the calculation time. • Total Debt: The sum of all the company’s short-term and long-term debt obligations. It includes loans, bonds, and other borrowings. • Cash and Cash Equivalents: The company’s total cash value and highly liquid assets that can be readily converted into cash, such as Treasury bills and money market funds. |
F | Forecasted Figure | “Forecasted Figure” typically refers to a predicted or projected numerical value or statistic for a future period. It is commonly used in financial and business forecasting, where analysts and professionals estimate and predict future financial performance, market trends, sales figures, or other relevant data. A forecasted figure is often based on historical data, statistical models, market analysis, and other factors that help make an educated prediction about future outcomes. These figures can be used for planning, budgeting, investment decisions, and setting targets or goals for a business or organization. |
FA | Fixed Assets | Fixed assets, often referred to as property, plant, and equipment (PP&E), are tangible assets with a long-term useful life that a company acquires for its business operations and not for resale. These assets are vital for a company’s core operations and are not expected to be converted into cash within a year. Fixed assets play a crucial role in generating revenue and profits for the company over an extended period. Examples of fixed assets include buildings & lands, furniture & fixtures, machinery & equipment, and vehicles. They are recorded on the company’s balance sheet at their historical cost, which includes the purchase price and any costs directly related to getting the asset ready for use, such as installation or transportation fees. Over time, these assets are gradually depreciated, reducing their value over their useful life to reflect their wear and tear, obsolescence, or other factors that might affect their worth. |
FCFE | Free Cash Flow to Equity | Free Cash Flow to Equity (FCFE) is a financial metric used to measure the cash flow available to the equity shareholders of a company after all expenses, capital expenditures, and debt repayments have been accounted for. It represents the cash a company generates that is available to be distributed to its shareholders. Using the FCFE, investors and analysts can assess how much cash is available to the equity shareholders for dividends, share buybacks, or reinvestment back into the company. It is a valuable metric for determining a company’s financial health and ability to generate shareholder returns. |
FCFF | Free Cash Flow to Firm | Free Cash Flow to Firm (FCFF) is a financial metric to assess a company’s profitability and financial health. It represents the amount of cash a company generates that is available to all stakeholders, including equity and debt holders. FCFF is a crucial indicator for investors and analysts to evaluate the true cash-generating potential of a firm. FCFF value represents the cash available to all providers of capital (equity and debt) after accounting for the company’s operating expenses, taxes, investments in working capital, and capital expenditures. FCFF is a useful metric for valuing a company, as it indicates how much cash is available to pay dividends, reduce debt, buy back shares, or invest in growth opportunities. |
FDIC | Federal Deposit Insurance Corporation | The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that provides deposit insurance to depositors in banks and savings associations. Its primary purpose is maintaining stability and public confidence in the nation’s banking system. The FDIC was created in 1933 in response to the widespread bank failures and financial panic of the Great Depression. The FDIC operates by insuring deposits in member banks and thrift institutions up to a certain limit. The standard insurance limit is $250,000 per depositor, per insured bank, for each ownership category. If a bank fails, the FDIC will step in and reimburse depositors for their insured deposits, helping protect their funds and maintain confidence in the banking system. |
FE | Fixed Expenses | Fixed expenses are recurring costs that remain relatively stable over time and do not fluctuate with changes in business activity or personal spending habits. These expenses are typically essential for maintaining operations or supporting a certain standard of living. Unlike variable expenses, which may change from month to month or year to year, fixed expenses remain constant or change only occasionally. For businesses, fixed expenses may include depreciation, insurance, rent, salaries, taxes, utilities, etc. Keeping track of fixed expenses is important as they form the foundation of budgeting and financial planning. |
FRB | Federal Reserve Board | The Federal Reserve Board, often referred to simply as the Fed, is the central banking system of the United States. It is responsible for making and implementing monetary policy in the country, with the primary goal of maintaining price stability, promoting sustainable economic growth, and maximizing employment. The Federal Reserve Board operates independently within the federal government and is composed of several key components. The most prominent body is the Board of Governors, consisting of seven members appointed by the President of the United States and confirmed by the Senate. The members serve staggered 14-year terms to ensure continuity and reduce political influence. |
FTE | Full-Time Equivalent | Full-Time Equivalent (FTE) is a term commonly used in business and human resources to measure an employee’s workload or staffing capacity or a group of employees. It is a unit of measurement that represents the total number of hours worked by an individual or a group of individuals full-time. FTE is typically used to compare the workload or capacity of employees who work varying hours or schedules. Organizations can standardize and compare the workloads of different employees or departments by converting part-time or non-standard working hours into the equivalent of full-time hours. |
FV | Future Value | The future value (FV) is a financial concept that represents the value of an investment at a specific time in the future, given a certain interest rate or rate of return. It is calculated based on the principle of compounding, where the interest earned on an investment is added back to the original investment, and subsequently, interest is earned on the new total in each compounding period. |
FY | Fiscal/Financial Year | The fiscal year, or the financial year, is a 12-month accounting period businesses, governments, and organizations use to report and manage their financial activities. It is not necessarily the same as the calendar year, which runs from January 1st to December 31st. The fiscal year can start on any date and end 12 months later. Many organizations align their fiscal year with the calendar year, from January 1st to December 31st, as practiced previously. |
GAAP | Generally Accepted Accounting Principles | Generally Accepted Accounting Principles (GAAP) refer to accounting standards, principles, and procedures for preparing and presenting financial statements. GAAP provides a common framework for businesses and organizations to ensure consistency, transparency, and comparability in financial reporting. These principles are essential for facilitating the understanding of financial information by investors, creditors, regulators, and other stakeholders. GAAP is developed and maintained by various standard-setting bodies and organizations, including the Financial Accounting Standards Board (FASB) in the United States and the International Accounting Standards Board (IASB) internationally. Different countries may have their versions of GAAP, but they all share similar fundamental concepts. |
GL | General Ledger | The General Ledger (GL) is a fundamental accounting record that contains a comprehensive and organized summary of all financial transactions of a business. It is the central repository for recording and storing financial data from various sources, such as journals, sub-ledgers, and other accounting records. The information in the general ledger is used to create financial statements and reports that provide a snapshot of a company’s financial position and performance. With the advancement of accounting software and computerized systems, the General Ledger has largely moved from physical books to digital databases. This shift has improved efficiency, reduced errors, and facilitated real-time financial reporting. However, the core principles and functions of the General Ledger remain the same, serving as a crucial tool for businesses to maintain financial transparency, compliance, and decision-making. |
GP | Gross Profit | Gross profit is a financial metric representing the amount of money a company earns from its primary business activities after deducting the direct costs of producing or delivering its products or services. It is sometimes called gross income, gross margin, or gross earnings. To calculate gross profit, you subtract the cost of goods sold (COGS) from the total revenue generated by the sale of goods or services. COGS includes the direct expenses directly related to the production or acquisition of the goods sold, such as raw materials, labor costs, and manufacturing overhead. |
IAS | International Accounting Standards | International Accounting Standards (IAS) are a set of accounting principles and guidelines issued by the International Accounting Standards Board (IASB). The IASB is an independent private sector body that sets international accounting standards to ensure consistent and comparable financial reporting across different countries and industries. The IASB was established in 2001 and is based in London, United Kingdom. The standards issued by the IASB were previously known as International Accounting Standards (IAS). However, since 2001, the IASB has been working on developing a new set of standards called International Financial Reporting Standards (IFRS). As a result, the term “IAS” is now used to refer to the older standards issued by the predecessor organization, the International Accounting Standards Committee (IASC), which existed before the IASB. IFRS is now widely adopted by many countries for financial reporting, especially by publicly listed companies or entities operating in international markets. Countries that have fully adopted or substantially converged with IFRS include the European Union member states, Australia, Canada, Japan, and others. |
IFRS | International Financial Reporting Standards | International Financial Reporting Standards (IFRS) are a set of accounting standards developed and issued by the International Accounting Standards Board (IASB). These standards are designed to provide a common global framework for preparing and presenting financial statements by companies and other organizations. IFRS aims to enhance the comparability, transparency, and consistency of financial reporting across different countries and industries. IFRS has several benefits, including improved transparency for investors and stakeholders, increased comparability of financial statements across international boundaries, and enhanced access to global capital markets. However, adopting IFRS can also present challenges for companies, especially when transitioning from local accounting standards to IFRS and dealing with complex accounting treatments in certain areas. |
IRA | Individual Retirement Account | An Individual Retirement Account (IRA) is a retirement savings account that provides individuals with tax advantages for their long-term retirement planning. It is a personal savings vehicle that allows individuals to set aside funds for retirement and grow them over time. Financial institutions such as banks, brokerage firms, and mutual fund companies typically offer IRAs. There are two main types of IRAs: Traditional IRA and Roth IRA. Both types of IRAs have annual contribution limits set by the IRS, and there may be eligibility criteria based on factors such as income and employment status. Depending on the account holder’s risk tolerance and investment goals, IRAs can be invested in various financial instruments, including stocks, bonds, mutual funds, and other assets. |
IRR | Internal Rate of Return | The Internal Rate of Return (IRR) is a financial metric used to assess an investment or project’s profitability and potential return. It represents the discount rate at which the net present value (NPV) of the cash flows generated by the investment becomes zero. In simpler terms, the IRR is the rate at which the present value of the expected future cash inflows from an investment equals the present value of the initial investment or cash outflows. It is the rate of return at which an investor’s initial investment is fully recovered over the life of the investment. The IRR is often used as a decision-making tool to evaluate the attractiveness of different investment opportunities. It allows investors to compare the potential returns of various projects and determine whether the expected rate of return meets their required rate of return or hurdle rate. If the IRR of an investment exceeds the required rate of return, it is considered a viable investment. |
KPI | Key Performance Indicator | A Key Performance Indicator (KPI) is a measurable value or metric that helps assess the progress or performance of an individual, team, department, or organization in achieving its objectives or goals. KPIs are used to monitor and evaluate various aspects of performance and provide a clear understanding of how well an entity is performing about its targets. KPIs are typically specific to the organization or industry and reflect the entity’s critical success factors and objectives. They are often quantifiable and measurable, allowing for comparison and analysis over time. KPIs can be financial, operational, customer-oriented, or related to other key areas of business performance. |
LBO | Leveraged Buyout | A Leveraged Buyout is a financial strategy companies use to acquire another company using a significant amount of borrowed money (debt) to meet the acquisition cost. The target company’s assets are often used as collateral for the debt. Here’s how an LBO typically works: • The acquiring company identifies a target company that it wishes to acquire, usually with strong growth potential, undervalued assets, or synergy with its existing operations. • A new entity, often called a Special Purpose Vehicle (SPV) or holding company, is created to hold the target company’s shares and raise funds for the purchase. • The acquiring company and sometimes other investors then contribute a certain amount of equity to the new entity. This equity serves as the down payment for the acquisition. • The new entity borrows substantial money from various sources, such as banks or other financial institutions, to finance the remainder of the acquisition. The debt taken on in this process is often referred to as “leveraging” because the acquiring company uses debt to increase its purchasing power. • With the funds in place, the new entity acquires the target company’s outstanding shares, effectively taking control of the company. • After the acquisition, the acquiring company aims to improve the target company’s operations, reduce costs, and increase profitability to generate enough cash flow to repay the debt. • The exit strategy for an LBO typically involves selling the restructured and improved company after a few years. |
LLC | Limited Liability Company | Mergers and acquisitions (M&A) involve consolidating or combining two or more companies. These transactions can take various forms and have significant implications for the companies, shareholders, employees, and other stakeholders. • A merger refers to joining two or more companies into a single entity. The companies involved in a merger often have similar sizes and resources and come together to create a new, larger organization. • Acquisitions involve one company purchasing another company, leading to the acquired company becoming a part of the acquiring company’s assets. Unlike mergers, acquisitions typically result in the acquired company losing its separate identity and becoming integrated into the acquiring company. Overall, M&A can be a powerful strategic tool for companies to achieve their business objectives, but it requires careful planning, due diligence, and post-merger integration to realize the expected benefits. |
LOI | Letter Of Intent | A letter of intent (LOI) is a formal document that outlines the preliminary agreement or understanding between two or more parties regarding a specific matter, such as a business transaction, partnership, project, or academic program. It serves as a precursor to a formal contract or agreement. It expresses the intention of the parties to move forward with negotiations or to enter into a binding agreement in the future. |
LTV | Lifetime Value | Lifetime Value (LTV), also known as Customer Lifetime Value (CLV), is a critical metric used in business to assess the total value a customer brings to a company over the entire duration of their relationship as a customer. LTV helps companies understand how much revenue they can expect to generate from a single customer, on average, during their lifetime as a patron of the business. |
M&A | Mergers and Acquisitions | Monthly Recurring Revenue (MRR) refers to the predictable monthly income a company generates from its subscription-based products or services. It is a key metric businesses use, particularly in the software-as-a-service (SaaS) industry, to measure and track the stability and growth of their subscription revenue streams. MRR represents the revenue a company expects to receive from its monthly active subscriptions. It includes the recurring charges customers pay for their ongoing subscriptions, excluding one-time or non-recurring fees. MRR can be calculated by summing up the monthly subscription fees across all active customers or by analyzing individual subscription plans. |
M/Y | Month/Year | Month/Year refers to a specific combination of a month and a year, typically used to indicate a particular point in time. It specifies the month and the year in which an event occurred, a document was issued, or a reference was made. This format helps provide a more precise time frame when discussing or recording events, transactions, or historical data. |
MRR | Monthly Recurring Revenues | NASDAQ stands for the National Association of Securities Dealers Automated Quotations. It is an American stock exchange founded in 1971 by the National Association of Securities Dealers (NASD). The NASDAQ is known for its electronic trading platform, one of the first of its kind in the world. NASDAQ has many technology and growth-oriented companies, including well-known giants like Apple, Amazon, Microsoft, Facebook, and Google (Alphabet). The exchange operates as a dealer’s market, where buyers and sellers trade directly through a computerized system rather than a centralized trading floor. It has gained popularity due to its high-tech image and the presence of numerous technology-focused companies, leading to it being often associated with the tech industry. |
NASDAQ | National Association of Securities Dealers Automated Quotations | Net Asset Value (NAV) is a term commonly used in the finance and investment industry to measure the value of a mutual fund, exchange-traded fund (ETF), or other similar investment vehicles. It represents the per-share value of the fund’s assets minus its liabilities. The calculation of NAV involves adding up the current market value of all the fund’s assets, such as stocks, bonds, cash, and other investments, and subtracting any liabilities, including expenses, debts, and fees. The resulting figure is divided by the total number of outstanding shares to determine the NAV per share. NAV is typically calculated at the end of each trading day and is an important indicator of the fund’s performance and underlying value. Investors can compare the NAV over time to assess the fund’s growth or decline in value. |
NAV | Net Asset Value | A profit-sharing plan is a type of employee benefit plan that allows a company to share its profits with its employees. Under this arrangement, a portion of the company’s profits is set aside and distributed among eligible employees based on a predetermined formula or allocation method. A profit-sharing plan aims to motivate employees, promote a sense of ownership, and align their interests with the company’s financial success. It is a financial incentive for employees to contribute to the company’s profitability and overall success. |
NDA | Non-Disclosure Agreement | A Non-Disclosure Agreement (NDA), a confidentiality agreement, is a legally binding contract between two or more parties that outlines the terms and conditions governing the sharing of confidential or proprietary information. The purpose of an NDA is to protect sensitive information from being disclosed to third parties or the general public without authorization. The NDA establishes a confidential relationship between the parties involved and imposes restrictions on using, disclosing, and disseminating confidential information. It typically includes provisions specifying the types of information considered confidential, the obligations of the receiving party to maintain confidentiality, the permitted uses of the information, the duration of the agreement, and any remedies or penalties for breach of the agreement. |
NOPAT | Net Operating Profit After Tax | Net Operating Profit After Tax is a financial metric measuring a company’s profitability from its core operations after tax accounting. NOPAT represents a company’s profit from its regular business activities, excluding any financing or investment-related income or expenses. To calculate NOPAT, you typically follow this formula: NOPAT = EBIT (Earnings Before Interest and Taxes) * (1 – Tax Rate) Where: • EBIT = Operating profit or operating income before deducting interest and taxes. • Tax Rate = The company’s effective tax rate is the percentage of taxable income paid in taxes. NOPAT is a useful metric for evaluating a company’s operational efficiency and comparing its performance with others, as it removes the influence of tax rates and financial leverage. It is often used in financial analysis, especially in valuation models like Economic Value Added (EVA) and some performance ratios. |
NOPLAT | Net Operating Profit Less Adjusted Taxes | “Net Operating Profit Less Adjusted Taxes” (NOPLAT) is a financial metric representing a company’s operating profit after deducting taxes, considering adjustments made for tax purposes. It is a measure used to evaluate a company’s profitability from its core operations while considering the effect of taxes. To calculate NOPLAT, the formula typically involves subtracting adjusted taxes from the net operating profit. Adjusted taxes refer to the taxes calculated based on adjustments made to the taxable income, such as tax deductions or credits. |
NPV | Net Present Value | Return on Capital Employed (ROCE) is a financial metric used to assess the profitability and efficiency of a company’s capital investments. It measures the return generated by a company’s capital employed, which includes both equity and debt. While there are no direct synonyms for ROCE, related financial ratios like Return on Investment (ROI), Return on Assets (ROA), and Return on Equity (ROE) provide similar insights into a company’s performance and efficiency. The beauty of this ratio is that the financing structure does not matter, and one can compare that ratio to other businesses or to the business’s cost of capital |
OPEX | Operating Costs | Operating costs, also known as operating expenses, are the expenses incurred by a business or organization to maintain its day-to-day operations and keep the business running. These costs are directly related to producing and delivering goods or services and are necessary to generate revenue. Operating costs can include various expenses, such as utilities, salaries & wages, rent & lease payments, raw materials & inventory, office supplies & consumables, marketing & advertising, maintenance & repairs, insurance, etc. |
OPEX | Operating Expenses | The daily costs incurred by a company or organization to sustain routine operations and create income are known as operating expenses or OPEX. These expenses are distinct from the costs of producing goods or services, classified as “cost of goods sold” or “COGS.” Operating expenses are essential for running the business efficiently and are not directly linked to the production process. Common examples of operating expenses include depreciation, employee salaries, insurance, office supplies, rent, utilities, etc. It’s essential for businesses to carefully manage their operating expenses to ensure profitability and financial stability. By monitoring and optimizing these costs, businesses can enhance efficiency and allocate resources more effectively. |
P&L | Profit and Loss | Profit and Loss (P&L), also known as an income statement, is a financial statement that summarizes the revenues, costs, and expenses incurred during a specific period. It provides a snapshot of a company’s financial performance and indicates whether it has generated a profit or incurred a loss during the period. The P&L statement typically covers a specific accounting period, such as a month, quarter, or year. It calculates the net profit or loss by subtracting the total expenses from the total revenues. If the resulting figure is positive, it represents a net profit, indicating that the company has earned more revenue than it has spent on expenses. Conversely, if the figure is negative, it represents a net loss, indicating that the expenses have exceeded the revenue. |
P/E | A profit-sharing plan is a type of employee benefit plan that allows a company to share its profits with its employees. Under this arrangement, a portion of the company’s profits is set aside and distributed among eligible employees based on a predetermined formula or allocation method. A profit-sharing plan aims to motivate employees, promote a sense of ownership, and align their interests with the company’s financial success. It is a financial incentive for employees to contribute to the company’s profitability and overall success. | The Price-to-Earnings ratio (P/E ratio) is a financial metric used to evaluate the valuation of a publicly traded company. It is calculated by dividing the market price per share of a company’s stock by its earnings per share (EPS). The P/E ratio provides insight into how much investors are willing to pay for each dollar of earnings a company generates. Investors and analysts widely use it to assess a stock’s relative value and compare it to other companies or the overall market. |
Portable Document Format | Adobe Systems created the Portable Document Format (PDF) format in the 1990s. It is a widely used format for representing electronic documents independently of the software, hardware, and operating system used to create or view the document. PDF files can contain text, images, graphics, and other elements, preserving the original document’s formatting and layout. This means PDF files can be viewed and printed on different devices and platforms while maintaining their appearance. | |
PEG | Price/Earnings to Growth Ratio | The Price/Earnings to Growth ratio, commonly known as the PEG ratio, is a financial metric used to evaluate the relationship between a company’s stock price, earnings per share (EPS), and expected growth rate. It is often considered an improvement over the traditional Price/Earnings (P/E) ratio, as it considers a company’s earnings growth potential. The PEG ratio is used as a valuation tool to determine if a stock is undervalued or overvalued relative to its growth prospects. A PEG ratio of 1 indicates that the stock is fairly valued. In contrast, a PEG ratio below 1 suggests the stock may be undervalued, as its earnings growth is relatively higher than its current stock price. On the other hand, a PEG ratio above 1 may indicate an overvalued stock, as the market is pricing in a higher growth rate compared to the company’s expected earnings growth. |
PEG | Private Equity | Private equity (PE) refers to an asset class of investment that involves the acquisition of ownership stakes in private companies. These companies are not publicly traded on stock exchanges, so their shares are unavailable to the general public. Instead, private equity firms raise capital from institutional investors, high-net-worth individuals, and other sources to invest in private companies to generate significant returns over the long term. Private equity firms typically use a combination of their own capital and funds raised from investors, forming a pool of money called a private equity fund. The fund’s general partners, or managers, are in charge of selecting investments and supervising the activities of the portfolio companies. These investments often have a longer investment horizon than publicly traded stocks, with the typical investment period ranging from 3 to 7 years or more. During this time, private equity firms actively engage with portfolio companies to add value and drive growth. |
POS | Point of Sales | A Point of Sale (POS) refers to the location or the moment when a customer makes a payment for goods or services at a retail store or business. It can also refer to the hardware and software systems used to process these transactions. In a traditional brick-and-mortar retail setting, the POS is typically a physical location, such as a cash register or a counter, where customers make payments using various methods, including cash, credit cards, debit cards, or mobile payments. In modern times, POS systems have evolved into more sophisticated and digital solutions, often combining hardware and software. |
PSP | Profit Sharing Plan | A profit-sharing plan is a type of employee benefit plan that allows a company to share its profits with its employees. Under this arrangement, a portion of the company’s profits is set aside and distributed among eligible employees based on a predetermined formula or allocation method. The purpose of a profit-sharing plan is to motivate employees, promote a sense of ownership, and align their interests with the company’s financial success. It is a financial incentive for employees to contribute to the company’s profitability and overall success. |
PTC | Private Trust Company | A Private Trust Company (PTC) is a trusted company established to manage and administer the assets of a single-family or a closely related group of families. It provides personalized and specialized fiduciary services, typically for high-net-worth individuals or families. The primary purpose of setting up a PTC is maintaining control, confidentiality, and continuity of wealth management across generations. |
PV | Present Value | Present Value (PV) is a financial concept used to evaluate the current worth of future cash flows or income streams, considering the time value of money. It helps individuals and businesses make better decisions regarding investments, loans, and other financial matters. The underlying principle behind present value is that money available today is more valuable than the same amount of money in the future due to the opportunity cost, inflation, and uncertainty about future events. In other words, a dollar received today can be invested and earn interest or generate returns, making it worth more than the dollar received a year from now. |
QPR | Quarterly Performance Report | A Quarterly Performance Report is a document that provides a comprehensive overview of an organization’s or individual’s performance during a specific three-month period. It is a standard tool used in various sectors, such as business, finance, education, and government, to assess progress, track key performance indicators (KPIs), and make informed decisions based on the gathered data. The contents of a Quarterly Performance Report can vary depending on the context and the intended audience. Quarterly Performance Reports are crucial in strategic planning, performance management, and accountability. They help stakeholders, including management, investors, and regulators, to gain insight into an organization’s progress and make data-driven decisions to drive future success. |
REIT | Real Estate Investment Trust | A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-generating real estate. REITs are an investment vehicle that allows individual investors to pool their money to invest in real estate properties, similar to how mutual funds allow investors to pool their money to invest in stocks or bonds. To qualify as a REIT, a company must meet certain criteria set by tax laws. REITs allow individual investors to invest in a diversified portfolio of real estate assets without having to own or manage the properties directly. They are traded on major stock exchanges, and investors can buy and sell REIT shares like stocks. |
Rev | Revenues | Revenues represent the total money a company generates from its primary business activities over a specific period. It includes all income earned from selling products, providing services, or other revenue-generating activities. Revenues are typically reported on a company’s income or profit and loss statements. On the other hand, profit, also known as net income or earnings, represents the amount of money a company has left after deducting all expenses from its revenues. It is a measure of the company’s profitability. Profit is calculated by subtracting the total expenses, such as operating costs, taxes, interest, and other deductions, from the total revenues. In summary, revenues are the total amount of money a company earns from its business operations, while profit is the amount remaining after deducting all expenses from the revenues. Revenues provide a top-line view of a company’s financial performance, while profit gives a bottom-line perspective, indicating the company’s profitability. |
ROA | Return on Assets | Return on Assets (ROA) is a financial ratio that measures a company’s profitability and efficiency in generating profits from its assets. It explains how effectively a company utilizes its resources to generate earnings. The formula for calculating Return on Assets is ROA = Net Income / Average Total Assets. ROA indicates the percentage of profit a company generates for each dollar of assets. It helps assess how well a company manages its assets to generate earnings and provides a benchmark for comparing the performance of different companies within the same industry. |
ROCE | Return on Capital Employed | Return on Capital Employed (ROCE) is a financial metric used to assess the profitability and efficiency of a company’s capital investments. It measures the return generated by a company’s capital employed, which includes both equity and debt. While there are no direct synonyms for ROCE, related financial ratios like Return on Investment (ROI), Return on Assets (ROA), and Return on Equity (ROE) provide similar insights into a company’s performance and efficiency. The beauty of this ratio is that the financing structure does not matter, and one can compare that ratio to other businesses or to the business’s cost of capital. |
ROE | Return on Equity | Return on Equity (ROE) is a financial ratio that measures the profitability and efficiency of a company from the perspective of its shareholders. It indicates how much profit a company generates for each dollar of shareholder’s Equity invested in the business. ROE is expressed as a percentage. The formula for calculating Return on Equity is Net Income / Shareholders’ Equity. ROE is a crucial metric for investors, as it helps assess a company’s ability to generate profits using the funds provided by shareholders. A higher ROE generally indicates that a company uses its shareholders’ investment efficiently and generates higher returns. However, it’s important to compare ROE within the same industry or sector, as different industries may have varying levels of profitability and capital requirements. |
ROIC | Return on Invested Capital | Terms and Conditions refer to rules and regulations governing the use and access of a product, service, website, or application. These terms and conditions are legally binding agreements between the provider or owner of the service (such as a company or website) and the user or customer who intends to use or access the service. The terms and conditions outline both parties’ rights, responsibilities, and obligations. Users must read and understand the terms and conditions before using any service or product, which can have significant legal implications. In practice, many users often agree to these terms without thoroughly reading them, which has given rise to the colloquial phrase “I agree to the terms and conditions.” However, it is advisable to be aware of the terms that govern your usage of any service to protect your rights and interests. |
RONA | Return on Net Assets | Return on Net Assets (RONA) is a financial metric that measures a company’s profitability relative to its net assets. It explains how effectively a company generates profits from its invested capital. RONA is calculated by dividing the net operating income (or operating profit) by the net assets. The RONA ratio indicates how efficiently a company utilizes its net assets to generate profits. A higher RONA indicates that the company generates more profit than its invested capital. A lower RONA suggests that the company is less effective in utilizing its assets to generate profits. |
ROS | Return on Sales | Return on Sales (ROS), also known as operating profit margin or net profit margin, is a financial metric that measures the profitability of a company’s operations. It is expressed as a percentage representing a company’s net income or operating profit relative to its net sales or revenue. ROS is calculated by dividing the net income or operating profit by the net sales and multiplying the result by 100 to express it as a percentage. Investors, analysts, and managers commonly use ROS to assess a company’s financial performance and compare it with competitors or industry benchmarks. It provides insights into a company’s pricing strategy, cost management, and overall operational efficiency. |
SaaS | Software as a Service | Software as a Service (SaaS) is a software distribution model in which a service provider or vendor provides software applications over the Internet. In this model, users can access and use the software application through a web browser without the need for installation or maintenance on their local devices. In a SaaS model, the software is centrally hosted on the vendor’s servers, and users typically pay a subscription fee to access and use the software. The service provider manages and maintains the underlying infrastructure, including hardware, software updates, security, and data backups. Common examples of SaaS applications include customer relationship management (CRM) systems, project management tools, email marketing platforms, collaboration software, and many others. The SaaS model has gained significant popularity recently due to its flexibility, cost-effectiveness, and ease of use for individuals and businesses. |
SAM | Serviceable Addressable Market | The Serviceable Addressable Market (SAM) is a business term used to describe the portion of the total addressable market (TAM) that a company or a specific product or service can realistically target and serve. In other words, SAM represents the specific segment of the market that a business can effectively reach with its current resources, capabilities, and distribution channels. |
SIV | Structured Investment Vehicle | A Structured Investment Vehicle (SIV) is a type of financial entity that pools together a portfolio of asset-backed securities (ABS), typically consisting of long-term securities such as mortgages, bonds, and loans. SIVs are typically created by financial institutions, such as investment banks or hedge funds, to generate profits through the arbitrage between short-term and long-term interest rates. SIVs issue short-term debt securities, often commercial paper or medium-term notes, to finance their investments in long-term assets. The income generated from long-term assets, such as interest payments and principal repayments, is used to repay the debt obligations. |
SME | Small and Medium Enterprise | Small and Medium Enterprises (SMEs), also known as Small and Medium-sized Enterprises, are businesses within a certain size range regarding employees, assets, and revenue. The specific criteria defining an SME can vary from one country or region to another, but they generally share some common characteristics. The size thresholds may differ in other countries or economic blocs, but the basic concept remains similar. SMEs play a crucial role in the global economy as they contribute significantly to job creation, innovation, and economic growth. They are often seen as drivers of local and regional development, providing goods and services to their communities. SMEs are known for their flexibility, adaptability, and ability to cater to niche markets, which can give them a competitive advantage in certain industries. |
SOM | Serviceable Obtainable Market | The Serviceable Obtainable Market refers to the portion of the total addressable market (TAM) that a company or business can realistically target and capture. It represents the subset of the TAM within the company’s reach and resources, considering various factors such as geographical limitations, competition, distribution capabilities, and more. Calculating the SOM helps businesses focus on the most promising opportunities and allocate their resources effectively. A company needs to understand its SOM to set realistic and achievable business goals and create strategies for growth. |
SPE/SPV | Special Purpose Entity / Vehicle | A Special Purpose Entity (SPE) or a Special Purpose Vehicle (SPV) is a legal entity created for a specific and limited purpose. Companies or organizations typically establish it to isolate financial risk, protect assets, or facilitate complex financial transactions. SPVs are designed to be independent entities separate from the parent company, and they are often used to undertake activities that may carry higher risks or require specialized expertise. The primary purpose of an SPV is to ring-fence the risks associated with a specific project or transaction, keeping them separate from the parent company’s operations and other assets. |
SWOT | Strengths, Weaknesses, Opportunities, and Threats Analysis | A Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis is a strategic planning tool used by individuals, organizations, and businesses to assess their current situation and make informed decisions about their future. It involves identifying internal factors (strengths and weaknesses) and external factors (opportunities and threats) that can impact the entity’s performance. • Strengths refer to the internal attributes and resources that provide an advantage over competitors or help achieve goals. They represent the positive aspects of the entity’s current situation. • Weaknesses are internal factors that hinder the entity’s progress or put it at a disadvantage compared to others. Identifying weaknesses is crucial for understanding areas that need improvement. • Opportunities are external factors that the entity can leverage to its advantage. These are potential favorable situations or trends that can lead to growth and success. Identifying opportunities helps organizations capitalize on emerging prospects. • Threats are external factors that could negatively impact the entity’s performance or challenge its success. Identifying threats is essential for risk mitigation and contingency planning. |
t | Tax Rate % | Per Tax Rate % is the percentage at which a taxpayer’s income or the value of certain goods, services, or transactions is subject to taxation. It represents the portion of taxable income or the taxable amount that must be paid as tax to the government. A particular country or jurisdiction’s tax laws and regulations determine tax rates. They can vary based on the taxpayer’s income level, filing status, and the type of income or transaction involved. Tax rates are often progressive, increasing as the taxpayer’s income rises. |
T&C | Terms and Conditions | Terms and Conditions refer to rules and regulations governing the use and access of a product, service, website, or application. These terms and conditions are legally binding agreements between the provider or owner of the service (such as a company or website) and the user or customer who intends to use or access the service. The terms and conditions outline the rights, responsibilities, and obligations of both parties involved. Users must read and understand the terms and conditions before using any service or product, which can have significant legal implications. In practice, many users often agree to these terms without thoroughly reading them, which has given rise to the colloquial phrase “I agree to the terms and conditions.” However, it is advisable to be aware of the terms that govern your usage of any service to protect your rights and interests. |
TAM | Total Addressable Market | The Total Addressable Market (TAM) refers to the overall revenue opportunity available to a product or service if it were to achieve 100% market share in a specific industry or market segment. It represents the maximum potential size of the market without considering any limitations, such as competition or market barriers. Estimating TAM is useful for businesses to understand the market’s size, potential growth and to make strategic decisions about resource allocation, investment, and marketing efforts. There are several methods to estimate TAM. The Top-Down Approach involves analyzing data from industry reports, market research, or government statistics to estimate the total market size. The Bottom-Up Approach estimates the potential revenue of a business from individual customer segments and then sums them up to arrive at the TAM. While the Value Theory Approach looks at the value provided by the product or service to customers and estimates the maximum price customers would be willing to pay for it, multiplied by the number of potential customers. |
TSR | Total Shareholder Return | Total Shareholder Return (TSR) is a financial metric that measures the total return generated by company shareholders over a specific period. It considers both capital appreciation (increase in stock price) and income from dividends or distributions. Investors, analysts, and executives commonly use TSR to assess an investment’s success or evaluate a company’s performance relative to its peers in the market. TSR is calculated by adding the capital gain or loss from the change in stock price and the dividends or distributions received during the specified period. It is often expressed as a percentage representing the total return relative to the initial investment. It provides a comprehensive measure of the overall performance of a company from an investor’s perspective, as it incorporates both capital gains and income received from the investment. |
TV | Terminal Value | Terminal value, also known as terminal enterprise value or continuing value, refers to the estimated value of a business or investment at the end of a specific period, typically beyond the explicit forecast period. It represents the present value of all future cash flows expected to be generated by the business beyond the forecast period. In financial modeling and valuation, terminal value plays a crucial role in determining the overall value of an investment. Since most valuation models are based on the principle that the value of an asset is the present value of its expected future cash flows, the terminal value accounts for the cash flows expected to be generated after the explicit forecast period. |
TVM | Time Value of Money | Working capital refers to the amount of money available to a business for its day-to-day operations. It represents the difference between a company’s current assets (cash, inventory, and accounts receivable) and its current liabilities (accounts payable, short-term debt). Working capital measures a company’s short-term liquidity and ability to cover its immediate expenses and obligations. To calculate working capital, you subtract current liabilities from current assets. Working capital is crucial for sustaining a business’s operations, enabling purchasing inventory, paying wages, and meeting other short-term financial obligations. It provides a buffer to cover unexpected expenses, maintain smooth operations, and seize growth opportunities. |
USD | United States Dollar | The United States Dollar (USD) is the official currency of the United States of America. It is widely recognized as one of the most important reserve currencies in the world. The symbol for the U.S. Dollar is “$,” and it is often represented by the abbreviation “USD.” The U.S. Dollar is widely accepted and used in international trade and finance, making it a global reserve currency. Many countries peg their currencies to the U.S. Dollar or use it as the primary medium of exchange for international transactions. |
USP | Unique Selling Proposition | A Unique Selling Proposition (USP) is a marketing concept and strategy that highlights the distinctive and compelling qualities of a product, service, or brand compared to its competitors. It is a statement or message communicating what sets a particular offering apart from others in the market and why potential customers should choose it over alternatives. The USP is often used in advertising, marketing materials, and branding efforts to create a memorable and differentiated impression in the minds of consumers. The USP should address the following key elements: • Unique: The proposition must convey something distinct and exceptional about the product or service that differentiates it from competitors. • Selling: The USP should be appealing and compelling to potential customers. • Proposition: The message should be clear and concise, conveying the core message in a way that resonates with the target audience. |
VaR | Value at Risk | Value at Risk (VaR) is a widely used risk management tool that measures the potential loss in value of an asset or portfolio over a specified time horizon and with a given level of confidence. It is a statistical method used to estimate the maximum potential loss in the value of an investment, given normal market conditions, over a specific time period. VaR is typically expressed in monetary terms (e.g., dollars, euros) or as a percentage of the portfolio’s value. |
VAT | Value Added Tax | Value Added Tax (VAT) is a consumption tax imposed on the value added to goods and services at each stage of production or distribution. It is a form of indirect tax, meaning the end consumer does not directly pay it but is collected and remitted by businesses in the supply chain to the government. Many countries widely use VAT as a significant source of government revenue. It is considered a more efficient and equitable form of taxation than traditional sales taxes because it minimizes tax evasion and is less regressive, as it does not disproportionately burden low-income individuals. |
VC | Venture Capital | Venture capital (VC) financing is provided to early-stage companies with high growth potential and scalability. It is a private equity investment where investors, known as venture capitalists or VC firms, fund startups, and small businesses in exchange for ownership equity or a stake in the company. VC funding is critical in fostering innovation and entrepreneurship, as it allows promising startups to access the necessary capital to develop their products or services and scale their operations. However, it’s important to note that venture capital is unsuitable for all businesses. Not all startups will receive VC funding, as investors look for significant growth potential and a viable path to profitability. |
VE | Variable Expenses | Variable expenses refer to costs that fluctuate based on the activity level or production within a business. These expenses are not fixed and can vary with changes in sales volume, production output, or other factors that influence business operations. Unlike fixed expenses, which remain relatively constant over a specific period, variable expenses rise or fall in direct proportion to changes in business activity. Examples of variable expenses include the cost of goods sold, raw materials, sales commissions, shipping, etc. Variable expenses are crucial to consider in financial planning and budgeting, as they directly impact a company’s profitability and cash flow. |
WACC | Weighted Average Cost of Capital | Weighted Average Cost of Capital is a financial metric used to calculate the cost of a company’s capital based on the proportion of different sources of financing used, such as equity and debt. The WACC formula considers the cost of equity and debt, considering their respective weights in the company’s capital structure. The WACC is a critical metric in financial analysis as it represents the minimum return a company should achieve on its investments to create value for its shareholders. When evaluating potential investment projects, the WACC is used as a discount rate to determine the project’s net present value (NPV). |
WC | Working Capital | Working capital refers to the amount of money available to a business for its day-to-day operations. It represents the difference between a company’s current assets (cash, inventory, and accounts receivable) and its current liabilities (accounts payable, short-term debt). Working capital measures a company’s short-term liquidity and ability to cover its immediate expenses and obligations. To calculate working capital, you subtract current liabilities from current assets. Working capital is crucial for sustaining a business’s operations, as it enables purchasing inventory, paying wages, and meeting other short-term financial obligations. It provides a buffer to cover unexpected expenses, maintain smooth operations, and seize growth opportunities. |
WTE | Whole Time Equivalent | Whole Time Equivalent (WTE) is a concept used in workforce management and human resources to measure the total workload of an employee or a group of employees. It is a unit of measurement that allows organizations to compare the amount of work performed by different employees or groups, taking into account the number of hours worked and the intensity of the work. WTE is typically used when employees work different hours or have varying workloads. It is a way to standardize work measurement across different employees or roles, particularly when calculating costs, determining staffing needs, or evaluating productivity. In its simplest form, a WTE of 1.0 represents the workload of a full-time employee who works standard hours. |
xls | Microsoft Excel Spreadsheet File | A Microsoft Excel spreadsheet file is a digital document created and used within Microsoft Excel, a popular spreadsheet software program developed by Microsoft. The file format commonly used by Excel is the Excel Workbook (.xlsx), although older versions of Excel may use different file formats such as .xls. An Excel spreadsheet file is organized into a grid of cells, with each cell capable of holding text, numbers, formulas, or other types of data. The grid comprises columns labeled with letters (A, B, C, etc.) and rows labeled with numbers (1, 2, 3, etc.). The intersection of a column and row represents an individual cell. Excel offers various functionalities for manipulating and analyzing data within the spreadsheet. Users can perform calculations using formulas, create charts and graphs, apply formatting, sort and filter data, and perform various other operations to manage and visualize information effectively. |
YTD | Year-To-Date | Year-To-Date (YTD) refers to the period from the beginning of the current calendar year to the present date. It is a commonly used term in finance, accounting, and business to track and measure performance over a specific time frame. YTD is often used to analyze and compare financial data, such as revenues, expenses, profits, or investment returns, for a company, investment portfolio, or any other financial metric. Businesses and individuals can assess their progress and performance during the current year by calculating and examining the YTD figures. |
YTM | Yield To Maturity | Yield to Maturity (YTM) refers to the total return anticipated by an investor who holds a bond until its maturity date. It represents the annualized rate of return earned on a bond if it is held until it matures, considering its current market price, coupon payments, and the time remaining until maturity. The calculation of YTM involves determining the discount rate at which the present value of the bond’s future cash flows (coupon payments and the final principal payment) equals the bond’s current market price. It assumes that the coupon payments received from the bond are reinvested at the same YTM rate. YTM is expressed as an annual percentage rate (APR) and is used by investors to compare and evaluate the attractiveness of different bonds. Generally, if the YTM is higher, the bond’s potential return is considered greater, while a lower YTM indicates a lower potential return. |
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