Core financial concepts, accounting fundamentals, and forecasting terms every founder should know.
Money a company owes to vendors and suppliers for goods or services received but not yet paid for.
How quickly a company pays its suppliers, indicating cash management practices and supplier relationships.
Money owed to a company by customers who have received goods or services but haven't yet paid.
How efficiently a company collects payments from customers, measured by how many times receivables are collected annually.
An accounting method that records revenue when earned and expenses when incurred, regardless of when cash changes hands.
Expenses that have been incurred but not yet paid or recorded in the accounts.
The systematic allocation of an intangible asset's cost over its useful life or legal life.
A measure of how efficiently a company uses its assets to generate revenue.
A financial snapshot showing what a company owns (assets), owes (liabilities), and the residual value to shareholders (equity).
The rate at which a company spends its cash reserves, typically measured as net cash spent per month.
An accounting method that records transactions only when cash is received or paid out.
The number of days between paying for inventory and collecting cash from customers.
The movement of money into and out of a business, showing actual liquidity rather than accounting profit.
The most conservative liquidity measure, comparing only cash and equivalents to current liabilities.
A categorized list of all accounts used to record financial transactions in the general ledger.
Grouping users by signup date and tracking their behavior over time to reveal trends and product improvements.
A liquidity ratio measuring ability to pay short-term obligations with current assets.
The degree to which revenue depends on a small number of large customers.
The average number of days a company takes to pay its suppliers and vendors.
The average number of days it takes to collect payment after a sale is made.
A measure of available cash flow to pay current debt obligations, including both principal and interest.
A measure of financial leverage comparing total debt to shareholders' equity.
The systematic allocation of a tangible asset's cost over its useful life.
Operating profit before financing costs and taxes are deducted, showing how much money the core business generates.
Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of operational profitability excluding financing and accounting effects.
How efficiently a company uses its fixed assets (property, equipment) to generate revenue.
The cash remaining after operating expenses and capital expenditures, available for dividends, debt repayment, or reinvestment.
The master record containing all financial transactions organized by account.
An intangible asset representing the excess paid to acquire a business over the fair value of its identifiable assets.
Gross burn is total monthly spending; net burn is spending minus revenue, showing actual monthly cash consumption.
The percentage of revenue remaining after subtracting the direct costs of producing goods or services sold.
A financial statement showing revenue, expenses, and profit over a period, revealing whether the business made or lost money.
A measure of how easily a company can pay interest expenses on outstanding debt.
How many times a company sells and replaces its inventory during a period, measuring inventory management efficiency.
A record of a single financial transaction with corresponding debit and credit entries.
The amount of cash a company spends each month net of revenue, determining how long capital will last.
The percentage of revenue remaining as profit after all expenses, taxes, and interest are paid.
The difference between current assets and current liabilities, measuring operational liquidity.
The total time from purchasing inventory to collecting cash from customers.
The percentage of revenue remaining after all operating costs, showing how efficiently a business converts revenue to operating profit.
The percentage of revenue remaining after deducting operating expenses, showing profitability from core business operations.
Payments made in advance for goods or services to be received in future periods.
Net income divided by total employees, measuring how efficiently your team generates profit.
A stringent liquidity measure excluding inventory, showing ability to meet obligations with most liquid assets.
How many times per year a company collects its average accounts receivable balance.
A measure of how efficiently a company uses its assets to generate profit.
A measure of how efficiently a company generates profit from shareholders' equity investment.
A measure of how efficiently a company uses all invested capital (debt and equity) to generate profits.
The percentage gain or loss on an investment relative to its cost, measuring the efficiency of capital deployment.
The vulnerability created when a large percentage of revenue comes from a small number of customers or products.
Projecting future revenue based on current trends, pipeline, churn, and expansion assumptions.
Total revenue divided by headcount, measuring how efficiently your team generates top-line growth.
The accounting principle determining when revenue is recorded, based on when it's earned rather than when cash is received.
An annualized projection of current revenue, calculated by multiplying recent monthly or quarterly revenue by 12 or 4 respectively.
The amount of time a company can continue operating at its current burn rate before running out of cash.
Creating multiple financial models with different assumptions to prepare for a range of possible futures.
The total financial benefit a single owner-operator extracts from a business, used to value small businesses and startups.
A measure of a company's ability to meet long-term obligations and continue operating indefinitely.
A report listing all account balances to verify that total debits equal total credits.
Payments received from customers for goods or services not yet delivered.
Comparing actual results to budget and investigating the reasons for differences to improve future forecasting.
The difference between current assets and current liabilities, measuring ability to fund daily operations and meet short-term obligations.
Building budgets from scratch each period, requiring justification for every expense rather than adjusting historical spending.
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