Accounts Payable Monies owed to another organization for puchases made on credit.
Accounts Receivable Monies owned to another organization for purchases made on credit.
After-tax income Net income after taxes have been deducted.
Amortization The elimination of a liability, or debt, through regular payments over a given time.
Angel Investor Investor's that prefer to invest in early-stage companies.
Assets Any item of value that can be converted to cash.
Balance Sheet A summary of a company's financial situation at a specific point in time. A balance sheet is divided into three sections: assets, liabilities, and equity
Before-tax income Income before taxes have been deducted.
Break-Even Analysis A calculation that determines the volume of sales required to earn a profit. Assumptions regarding pricing, variable costs, and fixed costs must be provided.
Break-Even Point At this volume of sales, the company's total revenue equals its total costs.
Burn Rate The amount of cash required to sustain a companies operations for a period of time. This figure is usually used by companies that are experiencing negative cashflows.
Business Model An explaination of how a company's functions will collaborate to deliver products and services to customers.
Business Plan A plan that explains the past, present, and future of a company.
Calendar Year January 1 through December 31.
Capital Expenditures Money spent to purchase or upgrade assets of a company; can include buildings, machinery, tools, etc.
Capital Investment Expenditure made to purchase a capital asset.
Cash Flow The net increase or decrease in cash from one period to the next.
CEO Chief Executive Officer
CFA Chartered Financial Analyst
CFO Chief Financial Officer
Cost of Capital The rate of return required by providers of capital. Providers of capital include banks and investors.
Credit An agreement in which a borrower receives something of value immediately and agrees to repay the lender at a specified, later date.
Credit Risk The potential that a borrower will fail to repay any principal or interest in the specified time period.
Current Assets Cash, cash equivalents, accounts receivable, inventory, marketable securities, and other assets that can be converted to cash in a short period of time.
Current Liabilities Accounts payable and other debts that are due within the year.
Days Payable The average time a company takes to pay vendors.
Days Receivable The average time a customer takes to pay for purchases.
Debt A liability owed to another person required to be paid by a specified date.
Demand The desire of a market to purchase goods or services at the current price.
Depreciation The expensing of an asset over a specified period of time.
Discounted Cash Flow (DCF) Analysis The process of reducing the value of future cash flows to their present value.
Disposable Income Income leftover to an individual, after taxes, which is available for spending or saving.
Earnings Before Interest and Taxes (EBIT) Same as operating income.
Entrepreneur An individual who starts his/her own business.
Fiscal Year A period of 365 days (366 in leap years), not necessarily starting on January 1.
Fixed Cost A cost independent of production numbers.
Free Cash Flow The increase in cash from one period to the next.
Gross Income Revenue minus the cost of goods sold.
Gross Margin Equal to gross income divided by net sales, expressed as a percentage.
Inflation The overall upward movement of the cost of goods and services.
Interest The fee charged by the lender for the use of borrowed money.
Inventory Raw materials, partially finished good, and finished goods that have not been sold.
Investment The allocation of capital with the expectation of it appreciating over time.
Just-in-time An inventory management strategy in which raw materials and components are delivered from the supplier as they are needed.
Labor Work of any type.
Lender Any entity that loans funds to another entity.
Liability A financial obligation.
Logistics The management of the flow of goods and information through a company and its supply chain.
Marginal Cost The cost of manufacturing one additional unit.
Market A arena where buyers and seller are brought together to exchange goods and services.
Marketable Securities Securities that can be quickly and easily converted to cash.
Market Price The last reported sale price or the current bid/ask price.
Market Research An analysis of information about consumers, market niches, and marketing programs within the targeted market.
Market Share The percentage a company's sales relative to the sales of entire market.
Maturity The due date for a payment of a debt.
Niche A targetable portion of the market.
Net Present Value (NPV) The current value of future cash flows minus the initial investment.
Net Sales Gross sales less any discounts or returns.
Net Worth Equal to the total assets minus total liabilities of an company.
Operating Income Same as EBIT, a financial measure of a company's earnings from operations equal to earnings before deductions of interest payments and taxes.
Opportunity Cost The cost of passing up an investment of the next best choice when making a decision.
Price The amount the purchaser or a product pays.
Principal The amount of capital borrowed or loaned that remains unpaid.
Profit The capital gain on an investment after expenses.
Raw Materials Goods required by a manufacturer to produce a finished product.
Return on Investment (ROI) The annual change in the value of an investment.
Revenue Another name for sales. Equals Price * Volume.
Risk The potential for less-than-expected returns.
Shrinkage Inventory lost due to theft, damage, or accounting errors.
Supply The amount of a product or service available within the market.
Supply Chain The network of entities involved in the production and sale of a product.
Total Cost Equals total fixed costs plus total variable costs.
Valuation A process of finding the value of a company.
Variable Cost A cost dependent on the volume of production.
Vendors A company that supplies products or services to another company.
Venture Capital Private investment made in small to mid-size businesses that have high growth potential.
Working Capital Equals current assets minus current liabilities.