Financial Terms & Abbreviations

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.

 

AActual figureActual or present value/amount.
ARPUAverage Revenue per UserDefined as the total revenue divided by the number of subscribers.
B.O.T.Build, Operate, and TransferA kind of Project that makes use of project finance structure.
CACCustomer Acquisition CostsCost associated in convincing a customer to buy a product/service.
CAPEXCapital ExpendituresMoney spent by a business or organization on acquiring or maintaining fixed assets.
COGSCost of goods soldDirect costs attributable to the production of the goods sold in a company.
CPCCost per ClickAlso 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.Cumulatedas is
D&ADepreciation & AmortizationUsed to determine the depreciation costs for both tangible and intangible assets.
DCFDiscounted Free Cash FlowsMethod of valuing a project, company, or asset using the concepts of the time value of money.
DPODays’ Payable OutstandingA ratio used to measure a company’s ability to pay its invoices or bills to its suppliers, vendors or creditors.
DSIDays’ Sales in InventoryAlso 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.
DSODays’ Sales OutstandingAlso 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.
EBITEarnings before interest and taxesMeasure of a firm’s profit that includes all expenses except interest and income tax expenses.
EBITDAEarnings before interest, taxes, depreciation and amortizationAn 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.
FForecasted figureForecasted value/amount
FTEFull Time EquivalentAlso known as whole time equivalent (WTE), it is a unit that indicates the workload of an employed person.
GPGross ProfitThe profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.
IRRInternal rate on returnMetric used in capital budgeting to estimate the profitability of potential investments.
KPIKey Performance IndicatorMeasurable value that demonstrates how effectively a company is achieving a defined key business objectives.
M/YMonth/Yearas is
MRRMonthly Recurring RevenuesIncome that a business can count on receiving every single month.
NOPLATNet Operating Profit Less Adjusted TaxesA 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.
NPVNet Present ValueThe 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.
OPEXOperating costsThe expenses which are related to the operation of a business, or to the operation of a device, component, piece of equipment or facility.
pdfPortable Document FormatA 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&LProfit and LossAlso known as Income statement. A report of the comprehensive income, expenses, and profits or losses of a company.
RevRevenuesIncome or Sales
ROAReturn on AssetsSometimes 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.
ROCEReturn on Capital EmployedA 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
ROEReturn on EquityThe amount of net income returned as a percentage of shareholders’ equity.
ROICReturn on Invested CapitalSame as ROCE (as Capital Employed = Invested Capital)
SaaSSoftware as a ServiceSoftware distribution model in which a third-party provider hosts application and makes them available to customers over the Internet.
SPE/SPVSpecial Purpose Entity / VehicleA subsidiary company with an asset/liability structure and legal status that makes its obligations secure even if the parent company goes bankrupt.
tTax rate %Percentage at which an individual or corporation is taxed.
TVTerminal ValueThe present value of all future cash flows, with the assumption of perpetual stable growth in some cases.
USDUnited States DollarUSA currency
WTEWhole Time EquivalentAnother name for full time equivalent, a unit that indicates the workload of an employed person.
xlsMicrosoft Excel spreadsheet fileA 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.