Glossary

Accounts payable are the amounts a business owes to suppliers for goods or services received but not yet paid for.

Accounts receivable refers to the outstanding invoices a business is owed by customers who have received goods or services but haven't yet paid.

Amortisation refers to the gradual reduction of an intangible asset's value over time.

Assets are valuable resources owned by a business that can be used to generate income or provide future economic benefit.

A balance sheet shows a company's financial position at a specific point in time, listing assets, liabilities, and equity.

The break-even point is when total revenues exactly cover total costs, resulting in neither profit nor loss.

Budgeting involves forecasting and planning financial resources over a specific period to control spending and prioritise investments.

Cash flow refers to the movement of money in and out of a business. It tracks how much cash is coming in from sales or income sources, and how much is going out through operational, financing, or investing activities.

A cash flow statement records all cash inflows and outflows within a specific period, broken into operational, investing, and financing activities.

COGS represents the direct costs of producing the goods or services sold by a business, including materials and labour.

Debt financing involves borrowing money that must be repaid with interest at agreed terms.

Depreciation is the gradual reduction in the value of tangible fixed assets over their useful life.

Equity represents the value of an owner's interest in the business, calculated as assets minus liabilities.

Equity financing is the process of raising capital by selling shares of the business.

Financial forecasting projects future revenues, expenses, and financial outcomes based on historical data and business plans.

Gross profit is the difference between turnover and the cost of goods sold (COGS), showing how efficiently a business produces and sells its goods or services.

Liabilities are the debts and obligations a business owes to outside parties, often arising from borrowing or credit purchases.

Net profit — also known as the bottom line — is what remains after all business expenses, taxes, and interest are deducted from total revenue.

Operating expenses are the ongoing costs a business incurs through its regular activities, excluding the cost of goods sold.

Profit margin is a financial ratio that shows what percentage of revenue remains as profit after all expenses are deducted.

A Profit and Loss (P&L) statement, also known as an income statement, summarises a business’s revenues, costs, and expenses during a specific period, revealing net profit or loss.

ROI measures the profitability or efficiency of an investment, showing the return relative to the cost.

Turnover, also referred to as revenue, is the total income a business earns from its core activities before any expenses are deducted.

Working capital is the difference between a business’s current assets and current liabilities. It’s a vital measure of short-term financial stability.

Working capital management focuses on ensuring a business maintains enough short-term assets to meet short-term liabilities.