Ever encountered financial abbreviations that you have no idea what it means and what it is for? Isn’t it frustrating on having to search for every term that you see and not knowing 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 included with its full meaning and what it is used for.
| A | Actual figure | Actual or present value/amount. |
| ARPU | Average Revenue per User | Defined as the total revenue divided by the number of subscribers. |
| B.O.T. | Build, Operate, and Transfer | A kind of Project that makes use of project finance structure. |
| CAC | Customer Acquisition Costs | Cost associated in convincing a customer to buy a product/service. |
| CAPEX | Capital Expenditures | Money spent by a business or organization on acquiring or maintaining fixed assets. |
| COGS | Cost of goods sold | Direct costs attributable to the production of the goods sold in a company. |
| CPC | Cost per Click | Also known as Pay per click, an internet advertising model used to direct traffic to websites, in which an advertiser pays a publisher (typically a website owner or a network of websites) when the ad is clicked. |
| Cum. | Cumulated | as is |
| D&A | Depreciation & Amortization | Used to determine the depreciation costs for both tangible and intangible assets. |
| DCF | Discounted Free Cash Flows | Method of valuing a project, company, or asset using the concepts of the time value of money. |
| DPO | Days’ Payable Outstanding | A ratio used to measure a company’s ability to pay its invoices or bills to its suppliers, vendors or creditors. |
| DSI | Days’ Sales in Inventory | Also known as Days in Inventory, A ratio used to measure the average number of days a company was able to sell the average number of inventories they held during that time period of year. |
| DSO | Days’ Sales Outstanding | Also known as Days in Receivable, A ratio used to calculate the estimation of a company’s average collection period or in other words, used to assess a company’s management condition of their accounts receivables. |
| EBIT | Earnings before interest and taxes | Measure of a firm’s profit that includes all expenses except interest and income tax expenses. |
| EBITDA | Earnings before interest, taxes, depreciation and amortization | An accounting measure calculated using a company’s net earnings, before interest expenses, taxes, depreciation, and amortization are subtracted, as a proxy for a company’s current operating profitability. |
| F | Forecasted figure | Forecasted value/amount |
| FTE | Full Time Equivalent | Also known as whole time equivalent (WTE), it is a unit that indicates the workload of an employed person. |
| GP | Gross Profit | The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. |
| IRR | Internal rate on return | Metric used in capital budgeting to estimate the profitability of potential investments. |
| KPI | Key Performance Indicator | Measurable value that demonstrates how effectively a company is achieving a defined key business objectives. |
| M/Y | Month/Year | as is |
| MRR | Monthly Recurring Revenues | Income that a business can count on receiving every single month. |
| NOPLAT | Net Operating Profit Less Adjusted Taxes | A measure of profit that includes the costs and tax benefits of debt financing. Put another way, NOPLAT is earnings before interest and taxes (EBIT) adjusted for the impact of taxes. |
| NPV | Net Present Value | The value in the present of a sum of money, in contrast to some future value it will have when it has been invested at compound interest. |
| OPEX | Operating costs | The expenses which are related to the operation of a business, or to the operation of a device, component, piece of equipment or facility. |
| Portable Document Format | A file format that provides an electronic image of text or text and graphics that looks like a printed document and can be viewed, printed, and electronically transmitted. | |
| P&L | Profit and Loss | Also known as Income statement. A report of the comprehensive income, expenses, and profits or losses of a company. |
| Rev | Revenues | Income or Sales |
| ROA | Return on Assets | Sometimes referred to as return on investment, it is a ratio used to assess a company’s ability to earn profit relative to its overall resources. |
| ROCE | Return on Capital Employed | A ratio which compares a company’s Net Operating Profit Less Adjusted Taxes (NOPLATI to the capital it employs. 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’ cost of capital |
| ROE | Return on Equity | The amount of net income returned as a percentage of shareholders’ equity. |
| ROIC | Return on Invested Capital | Same as ROCE (as Capital Employed = Invested Capital) |
| SaaS | Software as a Service | Software distribution model in which a third-party provider hosts application and makes them available to customers over the Internet. |
| SPE/SPV | Special Purpose Entity / Vehicle | A subsidiary company with an asset/liability structure and legal status that makes its obligations secure even if the parent company goes bankrupt. |
| t | Tax rate % | Percentage at which an individual or corporation is taxed. |
| TV | Terminal Value | The present value of all future cash flows, with the assumption of perpetual stable growth in some cases. |
| USD | United States Dollar | USA currency |
| WTE | Whole Time Equivalent | Another name for full time equivalent, a unit that indicates the workload of an employed person. |
| xls | Microsoft Excel spreadsheet file | A spreadsheet file format when creating an excel file. |
Are there any important financial terms or abbreviation missing which you think should be listed here? – please tell us by commenting below.