Study

Financial Terms

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  • The cost of obtaining and using funds typically expressed as a percentage
    Cost of Capital
  • The level of risk a company assumes in its capital structure especially its mix of debt and equity financing
    Leverage
  • A financial ratio used to evaluate a company's ability to generate profits from its operations
    Operating Margin
  • A budgeting approach that starts from zero and builds budgets based on current needs
    Zero-Based Budgeting
  • The cash available to a company after it has met its operating expenses and capital expenditures
    Free Cash Flow (FCF)
  • The metric used to evaluate the efficiency of a company in generating sales per dollar of assets
    Return on Assets (ROA)
  • The financial measurement of a company’s total assets minus total liabilities
    Net Worth
  • A company's gross income after subtracting the cost of goods sold
    Gross Profit
  • A strategy to reduce a company’s overall tax liability
    Tax Planning
  • The accounting practice of spreading out the cost of an intangible asset over its useful life
    Amortization
  • A report summarizing the inflow and outflow of cash in a business over a period
    Cash Flow Statement
  • A strategic plan for how a company will generate and use its financial resources
    Financial Planning
  • A financial metric showing a company’s ability to meet its short-term obligations using its most liquid assets
    Quick Ratio
  • The practice of balancing the risk of loss with the potential for gain
    Portfolio Management
  • The process of reviewing and verifying the accuracy of financial records
    Auditing
  • The practice of allocating costs to different products services or departments
    Cost Allocation
  • The process of transferring ownership of assets to another party, typically for security purposes
    Collateralization
  • The process of setting aside funds to repay debt or replace assets in the future
    Sinking Fund
  • A measure of profitability calculated as net income divided by shareholder equity
    Return on Equity (ROE)
  • The financial metric that indicates a company's profitability after accounting for all expenses taxes and interest
    Net Income
  • The total value of all a company's outstanding shares of stock
    Market Capitalization
  • The profit earned before deducting interest, taxes, depreciation, and amortization
    EBITDA
  • The funds a company uses for its day-to-day operations
    Operating Capital
  • A metric used to determine the efficiency of a company in using its assets to generate revenue
    Asset Turnover Ratio
  • The proportion of a company's earnings paid to shareholders in the form of dividends
    Dividend Payout Ratio
  • The maximum amount of credit a financial institution will extend to a borrower
    Credit Limit
  • The accounting standard for recognizing revenue from contracts with customers
    Revenue Recognition
  • The process of managing a company’s inventory to minimize costs and maximize efficiency
    Inventory Management
  • The process of evaluating potential expenses or revenues for future business activities
    Forecasting
  • The cost incurred to raise capital through debt or equity
    Financing Costs
  • The process of evaluating whether a company has the resources to pay its debts
    Solvency Analysis
  • The time it takes for a company to convert investments in inventory into cash
    Cash Conversion Cycle
  • An assessment of the ability of a borrower to repay their debts
    Creditworthiness
  • The process of merging or acquiring other companies to grow a business
    Mergers and Acquisitions (M&A)
  • The process of using financial models to estimate the value of a company, project, or investment
    Valuation
  • The money received from selling goods or services, excluding returns and discounts
    Net Revenue
  • The process of recording revenue when it is earned and expenses when they are incurred regardless of when cash is exchanged
    Accrual Accounting
  • The cost that cannot be directly traced to a specific product or service
    Overhead
  • A financial document summarizing a company’s assets liabilities and shareholder equity at a specific point in time
    Balance Sheet
  • The expenses a company incurs to produce and sell goods or services
    Cost of Goods Sold (COGS)
  • A financial document that shows a company's revenue and expenses over a specific period
    Income Statement
  • The expected rate of return required by investors in exchange for assuming risk
    Cost of Equity
  • The process of comparing budgeted figures to actual financial performance to understand variances and improve decision-making
    Variance Analysis
  • The process of reducing the value of an asset over its useful life
    Depreciation
  • A legal requirement for companies to disclose financial information to the public
    Financial Transparency
  • A measure of the percentage of total sales revenue that remains after deducting direct costs
    Gross Margin
  • The risk of a financial loss resulting from fluctuations in the value of investments
    Market Risk
  • A measure of a company’s total debts divided by its total assets
    Debt Ratio
  • The financial value of a company’s reputation, customer base, and brand
    Goodwill
  • The practice of determining the profit potential of a business decision
    Cost-Benefit Analysis
  • The sum of a company’s total revenues and gains excluding all expenses
    Gross Revenue
  • The ability of a company to meet its short-term financial obligations
    Liquidity
  • The process of identifying analyzing and responding to financial risks
    Risk Management
  • The financial practice of spreading fixed costs over more units of production to reduce the cost per unit
    Economies of Scale
  • The system of rules and processes for managing a company's finances and operations
    Corporate Governance
  • The percentage of a company's debt relative to its equity
    Debt-to-Equity Ratio
  • A company’s policy for managing dividends and retained earnings
    Dividend Policy
  • The interest rate banks charge each other for overnight loans
    Federal Funds Rate
  • The value of money in the future compared to its value today due to interest or inflation
    Time Value of Money
  • A company's total financial obligations including loans bonds and payables
    Liabilities
  • The measure of a company's liquidity calculated by subtracting current liabilities from current assets
    Working Capital
  • The expected future income or cost adjusted for time and risk
    Discounted Cash Flow (DCF)
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