Financial Metrics &amp; Accounting

Accounts Payable (AP)

Money a company owes to vendors and suppliers for goods or services received but not yet paid for.

Accounts Payable Turnover

How quickly a company pays its suppliers, indicating cash management practices and supplier relationships.

Accounts Receivable (AR)

Money owed to a company by customers who have received goods or services but haven't yet paid.

Accounts Receivable Turnover

How efficiently a company collects payments from customers, measured by how many times receivables are collected annually.

Accrual Accounting

An accounting method that records revenue when earned and expenses when incurred, regardless of when cash changes hands.

Accrued Expenses

Expenses that have been incurred but not yet paid or recorded in the accounts.

Amortization

The systematic allocation of an intangible asset's cost over its useful life or legal life.

Asset Turnover Ratio

A measure of how efficiently a company uses its assets to generate revenue.

Balance Sheet

A financial snapshot showing what a company owns (assets), owes (liabilities), and the residual value to shareholders (equity).

Burn Rate

The rate at which a company spends its cash reserves, typically measured as net cash spent per month.

Cash Basis Accounting

An accounting method that records transactions only when cash is received or paid out.

Cash Conversion Cycle

The time it takes to convert inventory investments into cash from sales, measuring working capital efficiency.

Cash Conversion Cycle (CCC)

The number of days between paying for inventory and collecting cash from customers.

Cash Flow

The movement of money into and out of a business, showing actual liquidity rather than accounting profit.

Cash Ratio

The most conservative liquidity measure, comparing only cash and equivalents to current liabilities.

Chart of Accounts

A categorized list of all accounts used to record financial transactions in the general ledger.

Cohort Analysis

Grouping users by signup date and tracking their behavior over time to reveal trends and product improvements.

Current Ratio

A liquidity ratio measuring ability to pay short-term obligations with current assets.

Current Ratio

A liquidity ratio comparing current assets to current liabilities, showing ability to pay short-term obligations.

Customer Concentration

The degree to which revenue depends on a small number of large customers.

Days Payable Outstanding (DPO)

The average number of days a company takes to pay its suppliers and vendors.

Days Sales Outstanding (DSO)

The average number of days it takes to collect payment after a sale is made.

Debt Service Coverage Ratio (DSCR)

A measure of available cash flow to pay current debt obligations, including both principal and interest.

Debt-to-Equity Ratio

A measure of financial leverage comparing total debt to shareholders' equity.

Debt-to-Equity Ratio

A leverage ratio comparing total debt to shareholder equity, showing how much a company relies on borrowed money.

Depreciation

The systematic allocation of a tangible asset's cost over its useful life.

EBIT (Earnings Before Interest & Taxes)

Operating profit before financing costs and taxes are deducted, showing how much money the core business generates.

EBIT (Earnings Before Interest and Taxes)

A company's operating profit before interest expenses and income taxes are deducted, showing core operational profitability.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of operational profitability excluding financing and accounting effects.

EBITDA Margin

The percentage of revenue that converts to EBITDA, measuring operational profitability efficiency.

Fixed Asset Turnover

How efficiently a company uses its fixed assets (property, equipment) to generate revenue.

Free Cash Flow (FCF)

The cash remaining after operating expenses and capital expenditures, available for dividends, debt repayment, or reinvestment.

Free Cash Flow (FCF)

Cash generated by operations minus capital expenditures, representing cash available for investors and debt repayment.

General Ledger

The master record containing all financial transactions organized by account.

Goodwill

An intangible asset representing the excess paid to acquire a business over the fair value of its identifiable assets.

Gross Burn vs Net Burn

Gross burn is total monthly spending; net burn is spending minus revenue, showing actual monthly cash consumption.

Gross Profit Margin

The percentage of revenue remaining after subtracting the direct costs of producing goods or services sold.

Income Statement (P&L)

A financial statement showing revenue, expenses, and profit over a period, revealing whether the business made or lost money.

Interest Coverage Ratio

A measure of how easily a company can pay interest expenses on outstanding debt.

Interest Coverage Ratio

How easily a company can pay interest on outstanding debt, measuring ability to service debt obligations.

Inventory Turnover Ratio

How many times a company sells and replaces its inventory during a period, measuring inventory management efficiency.

Journal Entry

A record of a single financial transaction with corresponding debit and credit entries.

Monthly Burn Rate

The amount of cash a company spends each month net of revenue, determining how long capital will last.

Net Profit Margin

The percentage of revenue remaining as profit after all expenses, taxes, and interest are paid.

Net Profit Margin

The percentage of revenue that becomes actual profit after all expenses, taxes, and costs are deducted.

Net Working Capital

The difference between current assets and current liabilities, measuring operational liquidity.

Operating Cycle

The total time from purchasing inventory to collecting cash from customers.

Operating Margin

The percentage of revenue remaining after all operating costs, showing how efficiently a business converts revenue to operating profit.

Operating Profit Margin

The percentage of revenue remaining after deducting operating expenses, showing profitability from core business operations.

Prepaid Expenses

Payments made in advance for goods or services to be received in future periods.

Profit Per Employee

Net income divided by total employees, measuring how efficiently your team generates profit.

Quick Ratio (Acid Test)

A stringent liquidity measure excluding inventory, showing ability to meet obligations with most liquid assets.

Quick Ratio (Acid Test)

A conservative liquidity ratio excluding inventory, showing ability to pay immediate obligations with liquid assets.

Receivables Turnover

How many times per year a company collects its average accounts receivable balance.

Return on Assets (ROA)

A measure of how efficiently a company uses its assets to generate profit.

Return on Assets (ROA)

A profitability ratio showing how efficiently a company uses its assets to generate earnings.

Return on Equity (ROE)

A measure of how efficiently a company generates profit from shareholders' equity investment.

Return on Equity (ROE)

A profitability ratio measuring how effectively a company generates returns on shareholder equity investment.

Return on Invested Capital (ROIC)

A measure of how efficiently a company uses all invested capital (debt and equity) to generate profits.

Return on Investment (ROI)

The percentage gain or loss on an investment relative to its cost, measuring the efficiency of capital deployment.

Revenue Concentration Risk

The vulnerability created when a large percentage of revenue comes from a small number of customers or products.

Revenue Forecast

Projecting future revenue based on current trends, pipeline, churn, and expansion assumptions.

Revenue Per Employee

Total revenue divided by headcount, measuring how efficiently your team generates top-line growth.

Revenue Per Employee

Total revenue divided by number of employees, measuring workforce productivity and operational efficiency.

Revenue Recognition

The accounting principle determining when revenue is recorded, based on when it's earned rather than when cash is received.

Revenue Run Rate

An annualized projection of current revenue, calculated by multiplying recent monthly or quarterly revenue by 12 or 4 respectively.

Runway

The amount of time a company can continue operating at its current burn rate before running out of cash.

Scenario Planning

Creating multiple financial models with different assumptions to prepare for a range of possible futures.

Seller's Discretionary Earnings (SDE)

The total financial benefit a single owner-operator extracts from a business, used to value small businesses and startups.

Seller's Discretionary Earnings (SDE)

Total financial benefit a single owner-operator derives from a business annually, used primarily for valuing small businesses.

Solvency Ratio

A measure of a company's ability to meet long-term obligations and continue operating indefinitely.

Trial Balance

A report listing all account balances to verify that total debits equal total credits.

Unearned Revenue

Payments received from customers for goods or services not yet delivered.

Variance Analysis

Comparing actual results to budget and investigating the reasons for differences to improve future forecasting.

Working Capital

The difference between current assets and current liabilities, measuring ability to fund daily operations and meet short-term obligations.

Working Capital

The difference between current assets and current liabilities, representing the capital available for daily operations.