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Welcome to our Financial Glossary. Explore a comprehensive list of key financial terms and definitions to help you navigate the world of finance and better understand important financial concepts. Whether you're a business owner, investor, or simply interested in improving your financial literacy, this glossary provides valuable insights into essential financial terminology.

Accounts Payable (AP):

The amount of money owed by a business to its suppliers or creditors for goods and services purchased on credit.

Accounts Receivable (AR):

The amount of money owed to a business by its customers for goods or services delivered but not yet paid for.Amortization: Similar to depreciation, amortization is the process of spreading the cost of an intangible asset (like patents or trademarks) over its useful life.


Similar to depreciation, amortization is the process of spreading the cost of an intangible asset (like patents or trademarks) over its useful life.


Anything of value owned by a business that can be converted into cash. Assets include cash, inventory, property, and equipment.

Balance Sheet:

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.


Wealth in the form of money or assets, taken as a sign of the financial strength of an individual, organization, or nation, and assumed to be available for development or investment.

Capital Expenditures (CapEx):

Funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, machinery, and equipment.

Cash Flow:

The total amount of money being transferred into and out of a business, particularly affecting liquidity.

Debt Financing:

Raising capital through the borrowing of money to be paid back at a later date, typically with interest.


The allocation of the cost of a tangible asset over its useful life. It reflects the reduction in the value of an asset due to wear and tear or obsolescence.


A distribution of a portion of a company's earnings to its shareholders, typically in the form of cash or additional shares of stock.

Earnings Before Interest and Taxes (EBIT):

Also known as operating income, EBIT represents a company's profit before deducting interest and income tax expenses. It measures operational profitability.

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA):

EBITDA adds back depreciation and amortization to EBIT. It provides a more comprehensive view of a company's operational performance.

Equity Financing:

Raising money for company activities by selling common or preferred stock to individual or institutional investors.

Financial Statements:

Reports that quantify the financial strength, performance, and liquidity of a company. Financial statements include the balance sheet, income statement, and cash flow statement.

Fixed Costs:

Expenses that remain constant regardless of the level of production or sales. These costs do not vary with changes in output.

Gross Margin:

The difference between revenue and cost of goods sold (COGS) divided by revenue. Gross margin represents the percentage of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services sold by the company.

Income Statement (Profit and Loss Statement):

A financial statement that reports a company's financial performance over a specific accounting period. It includes revenues, costs, and expenses incurred during a given period.


The availability of liquid assets to a company and the ability to convert an asset to cash quickly.

Net Income:

A company's total earnings, reflecting revenues minus costs of doing business, depreciation, interest, taxes, and other expenses.

Profit Margin:

The percentage of revenue that represents a company's profit after all expenses are deducted.

Return on Equity (ROE):

A financial metric that measures a company's profitability by calculating the return generated on shareholders' equity.

Return on Investment (ROI):

A measure used to evaluate the efficiency of an investment or to compare the efficiencies of several different investments.

Working Capital:

The difference between a company's current assets and current liabilities, indicating the liquidity levels of a business and its ability to meet short-term obligations.