Ryan P Allis, Knowledge Level: Novice, Keywords: financial, vocabulary, glossary
Below is a listing of financial vocabulary with easy to understand definitions. This list will include common accounting, investing, and business terms. Hopefully this glossary will be helpful for students, aspiring entrepreneurs, and those entering business who have never had a formal business education.
Financial Vocabulary Glossary
Revenue – what you earn Expenses – what you spend Net Profit – Total revenue minus total expenses Net Income – same as net profit COGS – the cost of goods sold. What you pay for what you sell. Gross Income – Total revenue minus COGS Gross Margin – same as gross income Depreciation – reduction in value over time Appreciation – increase in value over time EBITDA – earnings before interest, taxes, depreciation, and amortization Bond – debt instrument through with companies and governments can raise money Accounts Payable – money you owe for products and services already received Accounts Receivable – money owed to you for products/services already delivered Cash Flow – the in and out of money to/from your business Equity – ownership in a company Vesting – earning equity over time instead of all at once Option pool – a percentage ownership in your company set aside at founding for those who may come aboard later. Venture Capital – investment money raised from firms that invest in high potential ventures in exchange for percentage ownership in a company Angel Investor – a private high net worth individual who will invest money in medium or high potential ventures in exchange for percentage ownership in a company Asset: something you own that has value Liability: something you owe for Owners’ Equity: The value of what the shareholders/owners have put into a company Appreciating Asset: something you own that is going up in value Depreciating Asset: something you own that is going down in value Balance Sheet: a financial statement that keeps track of assets, liabilities, and owners’ equity. Balance Sheet Formula – assets minus liabilities equal owners’ equity Income Statement – a financial statement that keeps track of revenue, expenses, and profit. Income Statement Formula – Revenue minus expenses equals net profit. Cash Flow Statement – a financial statement that keeps track of all the money that goes in and out of your business. IPO – initial public offering, selling part of your company on the stock market in exchange for investment capital in your business
In any area of life, if you do not understand the associated vocabulary you will not be able to succeed in it. If you plan to be a business owner or an investor, be sure you are very familiar with all of the above terms.
Ryan P. Allis, 20, is the author of Zero to One Million, a guide to building a company to $1 million in sales, and the founder of zeromillion.com. Ryan is also the CEO of Broadwick Corp., a provider of the permission-based email marketing software and CEO of Virante, Inc., a web marketing and search engine optimization firm. Ryan is an economics major at the University of North Carolina at Chapel Hill, where he is a Blanchard Scholar. [learn more.. Article on financial, vocabulary, glossary by Ryan P Allis