Financial Terms & Abbreviations used in Financial Modeling

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.
pdf	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.