Small business glossary of terms

A

ABN - Australian Business Number

The Australian Business Number, or ABN, is a unique identifier for all businesses operating in Australia.

ABN - Australian Business Number

ASIC - Australian Securities and Investments Commission

The Australian Securities and Investments Commission, or ASIC, is a government body that regulates companies and financial services in Australia.

ASIC - Australian Securities and Investments Commission

ATO - Australian Taxation Office

The Australian Taxation Office, or ATO, administers tax laws and collects tax revenue on behalf of the Australian government.

ATO - Australian Taxation Office

Accounting Close

Accounting Close is the process of finalising accounting records at the end of an accounting period.

Accounting Close

Accounts Payable

Accounts Payable: money owed by a business to its suppliers shown as a liability on the balance sheet.

Accounts Payable

Accounts Payable Turnover Ratio

Accounts Payable Turnover Ratio measures how efficiently a company is paying off its accounts payable. Calculated by dividing total purchases by average accounts payable.

Accounts Payable Turnover Ratio

Accounts Receivable

Accounts Receivable: money owed to a business by customers for goods or services sold on credit.

Accounts Receivable

Accounts Receivable Turnover Ratio

Accounts Receivable Turnover Ratio, calculated by dividing net credit sales by average accounts receivable, measures how many times a company collects its receivables during a period.

Accounts Receivable Turnover Ratio

Accruals Basis Accounting

Accrual Basis Accounting is an accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.

Accruals Basis Accounting

Acid Test Ratio

Acid Test Ratio measures a company's ability to use its most liquid assets to repay current liabilities. Calculated by dividing cash plus accounts receivable by current liabilities.

Acid Test Ratio

Active Planning

Active Planning is a rolling budget process where budgets and forecasts are continually updated based on the latest data.

Active Planning

Activity Base

Activity Base is the amount of activity, transactions, work or usage that causes costs to be incurred. Used in activity-based costing.

Activity Base

Activity Based Budgeting

Activity Based Budgeting is a budgeting method that allocates costs based on the activities that drive them.

Activity Based Budgeting

Activity Based Costing

Activity Based Costing is a method that assigns costs to products or services based on the resources and activities needed to produce them.

Activity Based Costing

Activity Based Planning

Activity Based Planning is a budgeting approach that allocates resources based on the activities required to deliver planned outcomes.

Activity Based Planning

Advertising Based Revenue Model

Advertising Based Revenue Model is a business model where advertising is the primary revenue source. Examples include media companies and publishers.

Advertising Based Revenue Model

Affiliate Marketing Revenue Model

Affiliate Marketing Revenue Model: Revenue earned by promoting other companies' products and getting a commission on sales or leads.

Affiliate Marketing Revenue Model

Allocated Costs

Allocated Costs: costs assigned to a specific department or product line but not directly tied to producing a product or service.

Allocated Costs

Allocations

Allocations is the process of allocating overhead costs or shared expenses to departments, product lines or cost objects.

Allocations

Alpha

Alpha measures the performance of an investment against a market index or benchmark.

Alpha

Amortisation

Amortisation allocates the cost of an intangible asset over its estimated useful life.

Amortisation

Angel Investors

Angel Investors are wealthy individuals who invest their personal capital in startups in exchange for equity.

Angel Investors

Annual report

An Annual Report is a company's end-of-year financial statements and other operating information presented to shareholders and regulators.

Annual report

Appropriation Request

Appropriation Request is part of the budgeting process where funding requests are made to a governing body.

Appropriation Request

Asset

Asset is an economic resource expected to provide value or future economic benefit to a company.

Asset

Asset Turnover

Asset Turnover measures the efficiency of a company's use of its assets to generate sales. Calculated by dividing sales by average total assets.

Asset Turnover

Asset Turnover Ratio

Asset Turnover Ratio is a financial ratio measuring a company's efficiency in using its assets to generate sales. Calculated by dividing net sales by average total assets.

Asset Turnover Ratio

Asset and liability register

An asset and liability register is essentially a detailed record of everything your business owns (assets) and owes (liabilities). It acts like a financial snapshot at a specific point in time.

Asset and liability register

Assumptions

Assumptions are estimates or expectations about future conditions used in financial models to forecast future results.

Assumptions

Average Collection Period

Average Collection Period measures the average number of days it takes a company to collect payment from customers. Calculated by dividing average accounts receivable by average credit sales per day.

Average Collection Period

B

BAS - Business Activity Statement

The Business Activity Statement, or BAS, is a form submitted regularly to the ATO detailing business transactions and tax obligations.

BAS - Business Activity Statement

Balance Sheet

Balance Sheet is a financial statement that summarises a company's assets, liabilities and shareholders' equity at a point in time.

Balance Sheet

Before Tax Profit Margin

Before Tax Profit Margin is a profitability ratio calculated by dividing earnings before taxes by total revenue.

Before Tax Profit Margin

Benchmarking

Benchmarking is the process of measuring company performance metrics and practices against those of high performing peers.

Benchmarking

Beta

Beta is a measure of the volatility or systemic risk of a security compared to the market as a whole.

Beta

Beta Coefficient

Beta Coefficient is a metric measuring a stock's volatility in relation to the overall market.

Beta Coefficient

Book Value

Book Value is an asset's original cost less any accumulated depreciation and impairment charges. Also the net asset value of a company calculated as total assets minus intangible assets and liabilities.

Book Value

Break Even Analysis

Break Even Analysis is used to determine the sales volume at which revenue covers total costs, resulting in no profit or loss.

Break Even Analysis

Break Even Point

Break Even Point is the level of sales at which revenue generated starts to exceed total costs, resulting in profitability.

Break Even Point

Budget

Your business Budget is an estimate of income and expenditures over a specified period. A budget is used to allocate and control use of financial resources.

Budget

Budget Variance Analysis

Budget Variance Analysis is the process comparing actual results to budgeted figures to identify variances and determine their cause.

Budget Variance Analysis

Budgeting

Budgeting is the process of creating a budget detailing an organisation's plans for spending in order to achieve strategic objectives.

Budgeting

Budgeting Method

Budgeting Methods are different approaches to creating budgets, such as Profit First, incremental, activity-based and zero-based budgeting.

Budgeting Method

Budgeting Software

Budgeting Software is used to manage the budgeting process, analysis, reporting and forecasting.

Budgeting Software

Burn Rate

Burn Rate is the rate at which a company is spending capital to finance overhead before generating positive cash flow.

Burn Rate

Business Assumptions

Business Assumptions are estimates about future business conditions and performance drivers used as inputs to financial projections and models.

Business Assumptions

Business Bank Account

In Australia, a business bank account is a dedicated financial account used to manage the income and expenses of a business, separate from personal finances. Having a separate account offers several advantages

Business Bank Account

Business Case Development

A Business Case is an evidence-based argument to justify or support a proposed business project or initiative.

Business Case Development

Business Intelligence

Business Intelligence, or BI, is a term that encompasses a variety of tools, applications, and methodologies that enable organisations to collect data from internal and external sources.

Business Intelligence

Business Metrics

Business Metrics are quantifiable measures used to track performance against business objectives and inform strategic decisions.

Business Metrics

Business Planning

Business Planning is the process of researching, developing and documenting plans for achieving business objectives.

Business Planning

C

Cap Rate

Cap Rate or Capitalisation rate is calculated by dividing property net operating income by asset value or sale price and used to value real estate assets.

Cap Rate

Cap Table

Cap Table is a spreadsheet detailing the capitalisation structure of a company, including its equity ownership and value.

Cap Table

CapEx To Revenue Ratio

CapEx To Revenue Ratio measures the amount of capital expenditures as a percentage of company revenue.

CapEx To Revenue Ratio

Capital Asset Pricing Model CAPM

Capital Asset Pricing Model CAPM is used to calculate investment risk and determine the required rate of return for assets.

Capital Asset Pricing Model CAPM

Capital Budget

Capital Budget is a plan for long-term capital expenditures on fixed assets, including amounts, timing and sources of financing.

Capital Budget

Capital Expenditure

Capital Expenditure spending on acquisition or improvements of fixed, long-term assets like property and equipment.

Capital Expenditure

Capital Expenditure Planning

Capital Expenditures are investments in significant physical or intangible assets that will create future benefits for the company.

Capital Expenditure Planning

Capital Expenditure or CapEx

Capital Expenditure Planning is determining, scheduling and budgeting for capital projects and asset purchases.

Capital Expenditure or CapEx

Capital Gains Tax (CGT)

Capital Gains Tax (CGT) is a tax paid on profits made from selling capital assets, which can include things like property, shares, and business assets. For Australian small businesses, CGT applies when you dispose of an asset for more than you paid for it.

Capital Gains Tax (CGT)

Capital Raise

Capital Raise is the process of obtaining additional working capital by selling company shares or other equity instruments.

Capital Raise

Capital Rationing

Capital Rationing is the practice of limiting funds available for capital expenditures based on scarcity of capital.

Capital Rationing

Capital Structure

Capital Structure is the mix of debt and equity used to finance a company's operations and growth.

Capital Structure

Capitalisation Rate Cap

Capitalisation Ratio: Financial leverage ratio indicating the proportion of equity used to finance a company's assets compared to debt financing.

Capitalisation Rate Cap

Capitalisation Ratio

Capitalisation Rate is the rate of return used to estimate the present value and potential profitability of income-producing property.

Capitalisation Ratio

Cash

Cash is money available for immediate use, including currency, bank deposits and some short-term investments.

Cash

Cash Budget

A cash Budget is a budget of estimated cash inflows and outflows over a period. They are used to manage liquidity.

Cash Budget

Cash Conversion Cycle

Cash Conversion Cycle measures the number of days capital is tied up in inventory and accounts receivable before cash payment is received from customers.

Cash Conversion Cycle

Cash Conversion Cycle Formula

Cash Conversion Cycle Formula, calculated by days inventory outstanding plus days sales outstanding, minus days payable outstanding.

Cash Conversion Cycle Formula

Cash Flow

Cash Flow is the net amount of cash moving into and out of a business from all sources.

Cash Flow

Cash Flow Break Even Point

Cash Flow Break Even Point, the monthly sales volume required for revenues to cover expenses with no surplus or shortfall completely.

Cash Flow Break Even Point

Cash Flow Forecast

Cash Flow Forecast estimates cash receipts and disbursements over a future period.

Cash Flow Forecast

Cash Flow From Financing

Cash Flow From Financing: cash generated or spent related to financing activities, including receiving or repaying loans, issuing or repurchasing shares, and dividend payments.

Cash Flow From Financing

Cash Flow From Financing Activities

Cash Flow From Financing Activities, the section of the cash flow statement showing the flow of cash from financing activities like debt issuance and equity transactions.

Cash Flow From Financing Activities

Cash Flow From Investing

Cash Flow From Investing: cash flows related to investments in capital assets or securities such as fixed asset purchases or sales, acquisitions, loans or investments in securities.

Cash Flow From Investing

Cash Flow From Investing Activities

Cash Flow From Investing Activities is a section of the cash flow statement showing the cash flow from capital expenditures, loans, acquisitions and investments.

Cash Flow From Investing Activities

Cash Flow From Operating Activities

Cash Flow From Operating Activities: Section of the cash flow statement showing the amount of cash generated or spent on a company's products or services during a period.

Cash Flow From Operating Activities

Cash Flow Statement

Cash Flow Statement is a financial statement summarising how cash moved into and out of the business from operating, investing and financing activities over an accounting period.

Cash Flow Statement

Cash Flow To Debt Ratio

The cash Flow To Debt Ratio measures a company's debt service ability by comparing operational cash flow to total debt.

Cash Flow To Debt Ratio

Cash Forecast

Cash Forecast estimates cash receipts and payments expected over a future period.

Cash Forecast

Cash Ratio

Cash Ratio: liquidity ratio measuring a company's ability to repay current liabilities with only cash and cash equivalents.

Cash Ratio

Cash Runway

Cash Runway is the number of months a company can continue paying its operating expenses, given the amount of cash currently available.

Cash Runway

Coefficient Of Determination

Coefficient Of Determination: in regression analysis, R-squared indicates how much variation in the dependent variable is explained by the independent variable(s).

Coefficient Of Determination

Cohort Analysis

Cohort Analysis: analysis of user behaviour over time by grouping users based on a shared characteristic such as acquire date.

Cohort Analysis

Common Size Analysis

Common Size Analysis is a method of financial statement analysis where items are shown as a percentage of a common base figure for comparative purposes.

Common Size Analysis

Company's Profitability

Company Profitability is a company's ability to generate profits relative to revenue, assets and shareholder equity based on margins, return ratios and other metrics.

Company's Profitability

Consolidation

Consolidation is the process of combining financial results from multiple subsidiaries or business units into consolidated financial statements.

Consolidation

Continuous Improvement

Continuous Improvement is an ongoing effort focused on improving products, services or processes incrementally over time.

Continuous Improvement

Convertible Note

Convertible Note: short-term debt that can be converted into equity shares under specified conditions. Used as early-stage financing.

Convertible Note

Corporate Finance

Corporate Finance is the strategic financial management and planning of a corporation, including capital budgeting, capital structure, M&A, financing, working capital management and dividend policy.

Corporate Finance

Corporate Performance Management

Corporate Performance Management, processes, systems and methodologies used to monitor, manage and analyse key business metrics and performance indicators.

Corporate Performance Management

Cost Allocation

Cost Allocation, assigning shared business expenses and overhead costs across departments, product lines and other cost objects.

Cost Allocation

Cost Benefit Analysis

Cost Benefit Analysis: Evaluate projects by comparing total expected costs against total expected benefits to determine value and feasibility.

Cost Benefit Analysis

Cost Centre

Cost Center: a department or location that does not directly earn revenue but incurs costs that must be allocated or assigned elsewhere.

Cost Centre

Cost Of Capital

Cost Of Capital is the minimum required rate of return needed to justify a capital investment based on its riskiness and required rate of return.

Cost Of Capital

Cost Of Goods Sold

Cost Of Goods Sold, direct expenses attributable to the production of goods sold by a company. Excluded from gross margin calculations.

Cost Of Goods Sold

Cost Volume Profit Analysis

Cost Volume Profit Analysis, model analysing how revenue, variable costs, fixed costs and profits change as production output changes.

Cost Volume Profit Analysis

Counterparty Risk

Counterparty Risk is the risk that the other party in an agreement will default on contractual obligations.

Counterparty Risk

Covariance

Covariance, in probability and statistics, is a measure of how two random variables change together. Positive covariance indicates variables tend to increase and decrease together.

Covariance

Crowdfunding Revenue Model

Crowdfunding Revenue Model, raising capital by soliciting small investments from a large number of individual investors, typically via the Internet.

Crowdfunding Revenue Model

Current Ratio

Current Ratio: Liquidity ratio measuring a company's ability to pay short-term obligations. Calculated by dividing current assets by current liabilities.

Current Ratio

Customer Relationship Management

Customer Relationship Management, Systems and practices for managing interactions and data to enhance customer relationships and loyalty.

Customer Relationship Management

D

DGR - Deductible Gift Recipient

A Deductible Gift Recipient, or DGR, is an organisation endorsed by the ATO to receive tax-deductible donations.

DGR - Deductible Gift Recipient

Data Analysis

Data Analysis is the process and technique for inspecting, cleansing, transforming and modelling data to discover helpful information that supports business decisions.

Data Analysis

Data Driven Decision Making

Data-Driven Decision Making, using facts, metrics and statistical modelling to guide business strategy and resource allocation.

Data Driven Decision Making

Data Mining

Data Mining is the process of discovering patterns, correlations and insights in large data sets to inform business decisions.

Data Mining

Data Visualisation

Data Visualisation, creating charts, graphs and other visual representations of data to intuitively communicate insights, trends and relationships.

Data Visualisation

Days Payable Outstanding

Days Payable Outstanding is a financial metric calculating the average number of days a company takes to pay its suppliers and creditors.

Days Payable Outstanding

Days Sales Outstanding

Days Sales Outstanding is a financial metric measuring the average number of days a company takes to collect payment from sales on credit.

Days Sales Outstanding

Debt

Debt is money owed by a company, generally from borrowing or bond issuance. Recorded as liabilities on the balance sheet.

Debt

Debt Financing

Debt Financing is the process of raising capital by borrowing money. Common examples include loans, bonds, notes and commercial paper.

Debt Financing

Debt Ratio

Debt Ratio is the financial leverage ratio calculated by dividing total debt by total assets. Measures the percentage of assets financed through debt.

Debt Ratio

Debt Service Coverage Ratio

Debt Service Coverage Ratio Measures the ability to service debt by comparing net operating income to debt obligations due within one year, including principal, interest, sinking funds and lease payments.

Debt Service Coverage Ratio

Debt Service Coverage Ratio DSCR

Debt Service Coverage Ratio or DSCR measures a company's ability to service its current debt by comparing net operating income to current debt obligations.

Debt Service Coverage Ratio DSCR

Debt To Ebitda

Debt To EBITDA is the financial ratio measuring company leverage calculated by dividing total debt by earnings before interest, taxes, depreciation and amortisation (EBITDA).

Debt To Ebitda

Debt To Equity DE Ratio

Debt To Equity or DE Ratio is a leverage ratio comparing total liabilities to shareholder equity. Indicates the balance between company financing from debt vs equity.

Debt To Equity DE Ratio

Decision Making Tools

Decision Making Tools, models, processes, frameworks and software to enhance analysis, evaluation and selection between alternative courses of action.

Decision Making Tools

Depreciation

Depreciation is the allocation of the cost of a tangible capital asset over its estimated useful life.

Depreciation

Depreciation Expense

Depreciation Expense is the portion of a tangible asset's cost that is allocated to expense during an accounting period. Recorded on the income statement.

Depreciation Expense

Digital Transformation

Digital Transformation, adopting digital technologies and capabilities to improve processes, competencies and value creation. It may involve cultural and organisational change.

Digital Transformation

Direct To Consumer (DTC) Revenue Model

Direct To Consumer DTC Revenue Model, selling products directly to consumers online or via owned retail vs distributing through third-party resellers.

Direct To Consumer (DTC) Revenue Model

Discount Rate

Discount Rate is the interest rate used to calculate the present value of future cash flows in valuation models and investment analyses.

Discount Rate

Discounted Cash Flow (DCF)

Discounted Cash Flow DCF is a valuation method that estimates the present value of future cash flows by applying a discount rate. Used to value investments and set prices.

Discounted Cash Flow (DCF)

Div 7A

Division 7A of the Income Tax Assessment Act, dealing with shareholder loan arrangements, deems loans above $5k from company to shareholder as unfranked dividends.

Div 7A

Dividend Payout Ratio

The Dividend Payout Ratio is a financial metric calculated by dividing cash dividends per share by earnings per share. Indicates the percentage of earnings paid out to shareholders.

Dividend Payout Ratio

Dividend Yield

Dividend Yield is a financial ratio showing how much a company pays in dividends annually relative to its stock price. Calculated by dividing annual dividends per share by share price.

Dividend Yield

Driver Based Planning

Driver Based Planning is a budgeting technique where costs are assigned to activities based on the underlying factors driving them. Also known as activity-based planning.

Driver Based Planning

Drop Shipping Revenue Model

Drop Shipping Revenue Model, fulfilling orders directly from a third-party supplier who ships items directly to customers on the seller's behalf.

Drop Shipping Revenue Model

Due Diligence

Due Diligence is the process of investigating, auditing and reviewing material facts and financial details prior to signing an agreement or completing a merger, acquisition or investment transaction.

Due Diligence

E

EBIT

EBIT, earnings Before Interest and Taxes. A measure of operating profitability excluding impacts of financing and accounting decisions.

EBIT

EBIT Margin

EBIT Margin is a financial metric calculated by dividing EBIT by total revenue. Measures operating profit as a percentage of revenue.

EBIT Margin

EBITDA

EBITDA, earnings Before Interest, Taxes, Depreciation and Amortisation measures operating performance and cash flow.

EBITDA

EBITDA Margin

EBITDA Margin: Financial metric calculated by dividing EBITDA by total revenue measures operating cash flow generation as a percentage of revenue.

EBITDA Margin

EFTPOS

EFTPOS (Electronic Funds Transfer at Point of Sale) is a widely used electronic payment system allowing customers to pay for purchases directly at your business using their debit, credit, or prepaid cards (availability depends on your provider).

EFTPOS

EPS

EPS earnings per share is the net income allocated to each outstanding share of common stock, a key metric to measure profitability.

EPS

Earnings Before Interest And Taxes EBIT

Earnings Before Interest And Taxes EBIT, a company's profits before accounting for interest and income tax expenses.

Earnings Before Interest And Taxes EBIT

Earnings Before Interest Taxes Depreciation And Amortisation EBITDA

Discover the power of Earnings Before Interest Taxes Depreciation And Amortisation (EBITDA) in this insightful article.

Earnings Before Interest Taxes Depreciation And Amortisation EBITDA

Earnings Before Interest Taxes Depreciation and Amortisation (EBITDA)

EBITDA is essentially a measure of a company's profitability from its core operations. It excludes interest, taxes, depreciation, and amortisation to focus solely on the earnings generated from the business's operations. This makes EBITDA a useful tool for comparing the profitability of different companies within the same industry.

Earnings Before Interest Taxes Depreciation and Amortisation (EBITDA)

Earnings Per Share EPS

Earnings Per Share Eps, net income allocated to each outstanding common share. A key metric of company profitability.

Earnings Per Share EPS

Economic Value Added EVA

Economic Value Added or EVA is a metric measuring residual income after deducting the cost of capital from operating profit. Indicates whether a company is creating value.

Economic Value Added EVA

Economic Value Added EVA Analysis

Economic Value Added Eva Analysis, evaluating investment performance by comparing net operating profit after taxes to the cost of capital. Positive EVA indicates value creation.

Economic Value Added EVA Analysis

Effective Corporate Tax Rate

Effective Corporate Tax Rate is the average tax rate a corporation pays on pre-tax income, calculated as total tax expense divided by pre-tax income.

Effective Corporate Tax Rate

Enterprise Resource Planning

Enterprise Resource Planning is integrated management software and systems for core business processes, including planning, purchasing, inventory, sales, finance and HR.

Enterprise Resource Planning

Enterprise Value

Enterprise Value is a company's theoretical takeover price is calculated as market capitalisation plus debt, minority interest and preferred shares minus cash and cash equivalents.

Enterprise Value

Equity

Equity is calculated by taking assets less liabilities owed on the balance sheet, representing the residual value accruing to shareholders. It also refers to shares representing company ownership.

Equity

Equity Multiplier

An Equity Multiplier is a financial leverage ratio calculated as average total assets divided by average shareholders' equity. It indicates the amount of assets per dollar of equity.

Equity Multiplier

Equity Ratio

Equity Ratio is the financial solvency ratio calculated by dividing total equity by total assets. It indicates the proportion of assets financed by stockholder investments vs debt.

Equity Ratio

Equity To Asset Ratio

Equity To Asset Ratio is the financial ratio calculated as total equity divided by total assets. Measures the percentage of assets that are financed through shareholder equity.

Equity To Asset Ratio

Equity Value

Equity Value is the total market value of all shareholder equity, representing a theoretical takeover price.

Equity Value

Event Risk

Event Risk is the risk that an unanticipated event could negatively impact a company's share price, earnings or cash flows.

Event Risk

Exit Strategy

Exit Strategy is how owners or investors intend to liquidate holdings and realise returns, such as selling the company or taking it public via IPO.

Exit Strategy

Expected Value

Expected Value, in probability analysis, is the mean of a probability distribution used to estimate outcomes and support decision-making under uncertainty.

Expected Value

Expenses

Expenses are outflows or expenditures a company makes to support operations and generate revenues. It's recorded on the income statement.

Expenses

F

FBT - Fringe Benefits Tax

Fringe Benefits Tax, or FBT, is a tax paid by employers on non-cash benefits provided to employees.

FBT - Fringe Benefits Tax

Financial Analysis

Financial Analysis is the process and method for assessing a company's performance and trends using financial statements, ratios and modelling techniques.

Financial Analysis

Financial Automation

Financial Automation is the use of technology to automatically perform financial management processes like reporting, consolidation, planning and analysis.

Financial Automation

Financial Close

Financial Close means closing out accounting records at the end of an accounting period and finalising financial statements.

Financial Close

Financial Dashboards

Financial Dashboards are visual displays of key financial metrics updated in real-time to provide insights into current performance.

Financial Dashboards

Financial Forecasting

Financial Forecasting is the process of estimating expected future financial performance to inform planning and support strategic decision-making.

Financial Forecasting

Financial KPIs

Financial KPIs are quantifiable measures of financial health and performance, such as revenue, profitability, liquidity and debt metrics used to assess progress on financial objectives.

Financial KPIs

Financial Leverage

Financial Leverage is the use of debt financing to increase return on equity by funding assets with borrowed capital that carries a lower cost than equity.

Financial Leverage

Financial Model

A Financial Model is a mathematical model projecting future financial performance based on assumptions, forecasts and business logic to quantify potential outcomes and support decision-making.

Financial Model

Financial Modeling

Financial Modeling is the process of creating financial models and projections to analyse future business performance under different scenarios.

Financial Modeling

Financial Performance Management

Financial Performance Management, processes, systems, metrics and practices used by finance teams to measure, monitor, manage and analyse financial results and support performance improvement.

Financial Performance Management

Financial Performance Metrics And Reporting

Financial Performance Metrics And Reporting is the measurement, monitoring and reporting of key financial indicators to management and stakeholders to communicate business performance against plans and objectives.

Financial Performance Metrics And Reporting

Financial Plan

A Financial Plan is a document detailing projected financial results over a period based on a planned strategy, used to communicate objectives and guide implementation.

Financial Plan

Financial Planning

Financial Planning is the strategic process of projecting future financial performance based on sales forecasts, expense budgets and capital plans.

Financial Planning

Financial Projections

Financial Projections are estimates and forecasts of future revenues, costs, balance sheet accounts and cash flows to model potential financial outcomes based on assumptions and plans.

Financial Projections

Financial Ratio Analysis

Financial Ratio Analysis evaluates various aspects of a company's financial health and performance using financial ratios and trends based on relationships between line items on financial statements.

Financial Ratio Analysis

Financial Ratios

Financial Ratios are metrics derived from financial statement accounts and their relationships that provide insights into areas like profitability, efficiency, leverage and liquidity.

Financial Ratios

Financial Reporting

Financial Reporting, processes, controls and standards for recording financial transactions and events, aggregating data, and preparing and distributing financial statements and results to stakeholders.

Financial Reporting

Financial Risk Assessment

Financial Risk Assessment evaluates exposures to operational and financial risks that could impact a company's performance and create volatility in financial results.

Financial Risk Assessment

Financial Statement Analysis

Financial Statement Analysis is the process of reviewing and analysing financial statements and financial ratios to assess a company's performance, trends, risks and opportunities.

Financial Statement Analysis

Fiscal Year

Fiscal Year is a company's 12-month financial reporting period, which may differ from the calendar year.

Fiscal Year

Fixed Asset Turnover

Fixed Asset Turnover is the financial ratio calculated as sales divided by fixed assets. Measures efficiency of using property, plant and equipment to generate revenue.

Fixed Asset Turnover

Fixed Assets

Fixed Assets, physical property and equipment with long-term useful lives owned by a company for use in operations and generating income.

Fixed Assets

Fixed Charge Coverage Ratio

Fixed Charge Coverage Ratio is a financial ratio measuring the ability to cover fixed financing expenses. Calculated by dividing EBIT by interest + rent + tax expenses.

Fixed Charge Coverage Ratio

Fixed Costs

Fixed Costs, business expenses and overhead that do not vary with production volume or activity. They remain constant based on capacity.

Fixed Costs

Forecasting

Forecasting is the process of estimating future business performance and conditions using models and assumptions to support planning and budgeting.

Forecasting

Franking credits

Credits for tax paid by a company that can be passed on to shareholders through franked dividends, reducing income tax on dividends

Franking credits

Free Cash Flow

Free Cash Flow is the net operating cash flow minus capital expenditures. Represents cash available from operations after funding reinvestments.

Free Cash Flow

Free Cash Flow To Firm

Free Cash Flow To Firm, net operating cash flow minus capital expenditures and working capital increases. Represents discretionary cash flow available to all capital providers.

Free Cash Flow To Firm

Freemium Revenue Model

The Freemium Revenue Model is the business model offering a basic product or service free but charging a premium for advanced features, functionality or related products and services.

Freemium Revenue Model

Full Time Equivalent

Full-Time Equivalent, a unit measuring employed personnel by summing the percentage of full-time hours worked. Enables comparison on an equivalent full-time basis.

Full Time Equivalent

Fundraising

Fundraising is the process of soliciting and aggregating capital investment through various means, including loans, equity issuance and crowdfunding.

Fundraising

G

GAAP Accounting

GAAP or Generally Accepted Accounting Principles is the common set of accounting standards, principles and procedures used in the U.S. The Australian Accounting Standards Board (AASB) makes standards that are equivalent to International Financial Reporting Standards (IFRS).

GAAP Accounting

GST - Goods and Services Tax

Goods and Services Tax, or GST, is a 10% value-added tax applied to most goods and services transactions in Australia.

GST - Goods and Services Tax

General Ledger

A General Ledger is the main accounting record summarising a company's accounts used to prepare financial statements.

General Ledger

Governance

Governance is the combination of processes, policies, controls and authority hierarchies instituted to regulate, direct and oversee operations, risk management and corporate leadership.

Governance

Gross Margin

Gross Margin is gross profit expressed as a percentage of total sales. Indicates the profitability of selling inventory before accounting for overhead expenses.

Gross Margin

Gross Operating Income GOI

Gross Operating Income or GOI is revenue less the cost of goods sold but before operating expenses. Also called gross profit or gross margin.

Gross Operating Income GOI

Gross Profit

Gross Profit, revenue less direct costs. Represents sales profitability before accounting for overhead operating expenses.

Gross Profit

Gross Profit Margin

Gross Profit Margin is a financial metric calculated by dividing gross profit by total revenue. Represents the percentage of revenue retained as gross profit after direct costs.

Gross Profit Margin

Gross Sales

Gross Sales are the total sales before deductions for returns, allowances and discounts. Also called gross revenue or gross income.

Gross Sales

Growth Multiple

Growth Multiple, valuation multiples measuring a company's growth prospects and potential. Examples include P/E ratio, PEG ratio, P/S ratio.

Growth Multiple

H

Hedging

Hedging is the use of derivative investments to manage financial risks related to interest rates, currency or commodity price changes.

Hedging

Human Capital Management

Human Capital Management is the set of practices for recruiting, managing, developing and optimising employees to maximise strategic value.

Human Capital Management

Hybrid Revenue Model

Hybrid Revenue Model, using multiple revenue models simultaneously. Allows diversifying income streams.

Hybrid Revenue Model

I

Imposed Budgeting

Imposed Budgeting means budgeting where departmental spending limits are dictated by senior management without input from budget owners.

Imposed Budgeting

In App Purchase Revenue Model

The In-App Purchase Revenue Model is the process of selling access to digital content, upgrades and premium features within a free or freemium mobile or web application.

In App Purchase Revenue Model

Income Statement

An Income Statement is a financial statement summarising revenue, expenses and profit generation over a period of time. Also called a profit and loss statement or P&L.

Income Statement

Income Tax

Income Tax is the tax imposed on business and individual income as opposed to sales, property taxes or employment taxes.

Income Tax

Income Tax Expense

Income Tax Expense is the portion of taxable income payable to tax authorities. It's recorded on the income statement.

Income Tax Expense

Incremental Budgeting

Incremental Budgeting is a conservative budgeting approach based on applying increases or decreases to existing budget line items rather than re-estimating them entirely.

Incremental Budgeting

Initial Public Offering Ipo

An initial Public Offering or IPO is the first public share issuance by a private company seeking to list on a stock exchange and raise capital.

Initial Public Offering Ipo

Insurance Revenue Model

The Insurance Revenue Model generates income by underwriting risk in exchange for premium payments. It's the primary revenue source for insurance providers.

Insurance Revenue Model

Intangible Assets

Intangible Assets are company assets lacking physical substance, such as patents, trademarks, copyrights, goodwill, brand recognition or intellectual property.

Intangible Assets

Integrated Business Planning

Integrated Business Planning is a process for dynamically aligning business units and functions across an organisation to execute strategy.

Integrated Business Planning

Interest

Interest is the cost of borrowing money typically charged as a percentage of the outstanding loan balance.

Interest

Interest Coverage Ratio

Interest Coverage Ratio is a financial ratio indicating a company's ability to pay interest expenses. Calculated by dividing EBIT by interest expense.

Interest Coverage Ratio

Interest Expense

Interest Expense is the cost incurred from borrowing money or financing over a period. Deducted on the income statement.

Interest Expense

Internal Rate Of Return IRR

Internal Rate Of Return or IRR is the discount rate at which the net present value of an investment's cash flows equals zero. Used to evaluate the attractiveness of investments.

Internal Rate Of Return IRR

International Financial Reporting Standards IFRSs

The International Financial Reporting Standards, also known as IFRSs, are a set of accounting principles and rules used by companies around the world to prepare and present their financial statements. These standards provide a common language and framework for financial reporting, ensuring that financial information is transparent, comparable, and reliable.

International Financial Reporting Standards IFRSs

Inventory

Inventory is the term used for goods or products held available for sale by a business in the ordinary course of operations. Listed as a current asset on the balance sheet.

Inventory

Inventory Turnover

Inventory Turnover is a financial metric calculated by dividing the cost of goods sold by average inventory. Measures efficiency of selling and replenishing inventory.

Inventory Turnover

Investment

Investment is the act of allocating resources, usually money, with the expectation of generating future positive returns.

Investment

Investor Deck

An Investor Deck is a presentation designed to provide investors with details about a business, including products, business model, competition, financials and the management team.

Investor Deck

Invoice

An invoice, sometimes called a bill or tab, is a detailed document issued by a seller to a buyer after a transaction takes place. It essentially serves as a formal request for payment for goods or services rendered.

Invoice

J

Jensens Alpha

Jensens Alpha is a portfolio performance metric measuring excess return over a benchmark. A positive alpha indicates outperformance vs the benchmark.

Jensens Alpha

K

Key Performance Indicators KPIs

Key Performance Indicators, or KPIs, are quantifiable measures used to evaluate organisational or departmental performance against strategic goals and objectives.

Key Performance Indicators KPIs

L

Lagging Indicator

A Lagging Indicator is a metric reflecting past performance that provides confirmation of results but has limited predictive ability.

Lagging Indicator

Leading Indicator

A Leading Indicator is a predictive metric providing an advanced indication of future performance based on preliminary data.

Leading Indicator

Leasehold Improvements LHI

Leasehold Improvements or LHIs are enhancements and additions made to leased property by tenants, such as fixtures, flooring and modifications. Listed as assets and depreciated.

Leasehold Improvements LHI

Levered Free Cash Flow

Levered free cash flow (LFCF) is a financial metric that shows how much cash a small business has left over after accounting for all its expenses and debt obligations. It essentially tells you the real "cash on hand" available to the business after everything is paid.

Levered Free Cash Flow

Liability

A Liability is a debt, loan or obligation owed to another party recorded on the balance sheet until paid.

Liability

Licensing Revenue Model

The Licensing Revenue Model generates income by allowing other companies to use intellectual property, patents, trademarks, brands or technology in exchange for licensing fees and royalties.

Licensing Revenue Model

Long Term Assets

Long Term Assets are assets providing economic benefit for periods longer than one year. Includes fixed assets like property, plant and equipment. Listed on the balance sheet.

Long Term Assets

Long Term Debt

Long Term Debt is made up of loans and financial obligations lasting over one year. Listed as liabilities on the balance sheet.

Long Term Debt

Long Term Liabilities

Long Term Liabilities are financial obligations and commitments due more than one year from the balance sheet date.

Long Term Liabilities

Loss

Loss is the negative earnings realised when expenses and costs exceed revenues. Reported on the income statement.

Loss

M

Management Reporting

Management Reporting is the regular internal reporting process that summarises financial and operational data to help management monitor performance vs. plans.

Management Reporting

Margin

Margin is the difference between revenue and costs or between selling price and cost. Gross profit, operating income and net income are key margin metrics.

Margin

Margin Of Safety

Margin Of Safety is the difference between the expected asset value and the price paid for the investment or security. Provides a buffer between estimated value and cost.

Margin Of Safety

Marginal Analysis

Marginal Analysis is an analytical technique comparing marginal revenue and marginal cost to determine the profit-maximising production quantity and price.

Marginal Analysis

Market And Competitive Analysis

Market And Competitive Analysis is the process of researching market size, trends, customer demographics and competitor offerings to inform strategic planning and decision-making.

Market And Competitive Analysis

Market Capitalisation

Market Capitalisation is the total market value of a company's outstanding shares calculated as the number of shares times the current market price per share.

Market Capitalisation

Market Value Added MVA

Market Value Added, or MVA is the difference between the market value and the book value of a company. It indicates whether a company has created shareholder value.

Market Value Added MVA

Marketplace Revenue Model

Marketplace Revenue Model, operating an online platform connecting buyers and sellers while collecting fees on transactions and facilitating payments.

Marketplace Revenue Model

Milestones

Milestones are major intermediate events marking project progress, like completing phases or delivering defined outputs. Used for planning and tracking.

Milestones

Modelling

Modelling is the process of creating mathematical representations of business processes, financials and other systems to analyse performance and outcomes.

Modelling

Modified Cash Basis Accounting

Modified Cash Basis Accounting is an accounting method that recognises revenues when receivables are collected and expenses when liabilities are paid. A hybrid of cash and accrual accounting.

Modified Cash Basis Accounting

Modified Duration

Modified Duration is the approximate percentage change in bond price for a 1% change in yield. Higher modified duration indicates greater interest rate risk.

Modified Duration

Modified Internal Rate Of Return MIRR

Modified Internal Rate Of Return or MIRR is a modified IRR calculation accounting for the size and timing of cash inflows vs outflows. Used to evaluate irregular cash flows.

Modified Internal Rate Of Return MIRR

Monte Carlo Simulation

Monte Carlo Simulation is a forecasting model that runs multiple scenarios using random variables to generate a probabilistic outcome distribution. Used to quantify financial risk.

Monte Carlo Simulation

N

NPV

Net Present Value or NPV is the current value of an investment's expected future cash flows discounted at the cost of capital. Used to analyse investment profitability.

NPV

Negative gearing

Negative Gearing is Gearing an investment, so it generates a loss that can be offset against other income through borrowing to acquire income-producing asset.

Negative gearing

Net Book Value

Net Book Value is the original asset cost less accumulated depreciation/amortisation and impairment. Assets are recorded on balance sheets at Net Book Value.

Net Book Value

Net Cash Flow From Financing Activities

Net Cash Flow From Financing Activities is the net amount of cash provided or used by company financing activities reported on the cash flow statement.

Net Cash Flow From Financing Activities

Net Cash Flow From Investing Activities

Net Cash Flow From Investing Activities is the net amount of cash provided or used by investment transactions reported on the cash flow statement.

Net Cash Flow From Investing Activities

Net Cash Flow From Operating Activities

Net Cash Flow From Operating Activities is cash generated or spent from regular business operations reported on the cash flow statement. Equals net income + non-cash adjustments +/- changes in working capital.

Net Cash Flow From Operating Activities

Net Income

Net Income is the total company earnings after subtracting operating and non-operating expenses from revenues. The bottom line profitability measure.

Net Income

Net Income Before Tax

Net Income Before Tax is a company's pre-tax profits calculated as gross revenue minus allowable tax deductions.

Net Income Before Tax

Net Margin

Net Margin is a profitability metric calculated by dividing net income by revenue. Indicates the percentage of revenue retained as profit after expenses.

Net Margin

Net Operating Cash Flow

Net Operating Cash Flow is cash generated from business operations and core activities, excluding capital investments and financing. Calculated as net income + non-cash operating items.

Net Operating Cash Flow

Net Operating Income NOI

Net Operating Income NOI, revenue less operating expenses before taxes and interest. Indicates income-generating ability from core operations.

Net Operating Income NOI

Net Present Value NPV

Net Present Value, or NPV, is the current value of an investment's future cash flows discounted at the cost of capital. Used to analyse investment profitability.

Net Present Value NPV

Net Present Value NPV Analysis

Net Present Value Analysis or NPV Analysis is the process of evaluating capital projects and investments by calculating net cash flows and discounting to present value using a required rate of return.

Net Present Value NPV Analysis

Net Profit

Net Profit is the residual income remaining after subtracting all expenses from revenues. Also called net income or the bottom line.

Net Profit

Net Profit Margin

Net Profit Margin is a financial metric calculated by dividing net profit by total revenue. Represents the percentage of revenues retained as profit after expenses.

Net Profit Margin

Net Working Capital

Net Working Capital is calculated as current assets minus current liabilities. It indicates short-term liquidity available for operations and debt obligations.

Net Working Capital

Net Worth

Net Worth is your total assets minus total liabilities, equaling total equity. It indicates the residual value accruing to shareholders if assets were liquidated to pay off all debts.

Net Worth

Novated lease

A Novated Lease is a type of car lease that allows lease payments to be deducted from pre-tax income, reducing taxable salary.

Novated lease

O

One Time Fee Revenue Model

One Time Fee Revenue Model is a business model that generates revenue through a single payment for perpetual product use or service access.

One Time Fee Revenue Model

Operating Budget

Operating Budget is a detailed plan outlining expected revenues, production volumes, costs, and expenses for regular business operations.

Operating Budget

Operating Cash Flow

Operating Cash Flow is the net amount of cash generated or used by a business in its regular operations, excluding investment and financing activities. It is calculated as net income plus non-cash expenses, adjusted for changes in working capital.

Operating Cash Flow

Operating Costs

Operating Costs are expenses and expenditures necessary for the regular operations of a business, including wages, raw materials, facilities costs, and general overhead, but excluding capital investments and financing costs.

Operating Costs

Operating Expenditures

Operating Expenditures are cash outflows from a business's regular operations, including operational expenses, depreciation, and taxes, as reflected in the income statement and cash flow statement.

Operating Expenditures

Operating Expenses

Operating Expenses are regular costs incurred from a business's operational activities, such as wages, raw materials, and facilities costs, noted on the income statement.

Operating Expenses

Operating Income

Operating Income is the profit from business operations after deducting operating expenses and the cost of goods sold.

Operating Income

Operating Margin

Operating Margin is a profitability metric that shows the percentage of revenue remaining after paying for operating costs and expenses, calculated by dividing operating income by revenue.

Operating Margin

Operating Profit

Operating Profit is the earnings from normal business activities before subtracting interest and taxes, also known as operating income.

Operating Profit

Operating Profit Margin

Operating Profit Margin is a profitability ratio showing the efficiency of core business activities, calculated as operating income divided by net sales, expressed as a percentage of revenues.

Operating Profit Margin

Operational Analysis

Operational Analysis involves the process of examining operating expenses, production costs, budgets, and key performance indicators to find ways to enhance business processes and performance.

Operational Analysis

Opex

Opex is short for operating expenses, these are costs necessary for daily business operations.

Opex

Overhead

Overheads are general, ongoing business expenses not directly tied to production, such as facilities costs, utilities, and administrative expenses.

Overhead

Overhead Costs

Overhead Costs are expenses for general business operations not directly related to production, like rent and utilities, allocated to products based on overhead rates.

Overhead Costs

P

PAYG - Pay As You Go

Pay As You Go, or PAYG refers to income tax withholding from salary and wages paid by employers.

PAYG - Pay As You Go

Parameter

A Parameter is an input, metric, statistic or assumption used in calculations, analyses, forecasts or models to measure or quantify results.

Parameter

Pay Per Action PPA

Pay Per Action, or PPA, is a revenue model used in digital advertising. Advertisers are charged when users perform a specific action like submitting a lead form, signing up for a trial or making a purchase.

Pay Per Action PPA

Pay Per Click PPC

Pay Per Click or PPC is a revenue model in digital advertising where advertisers are charged each time users click on their ads.

Pay Per Click PPC

Pay Per Impression PPI

Pay Per Impression or PPI is a revenue model in digital advertising where advertisers are charged based on the number of times their ads are displayed.

Pay Per Impression PPI

Payback Period

Payback Period is a metric indicating the time required to recover an investment based on net cash inflows. It's used to evaluate capital projects.

Payback Period

Period

A Period is a defined length of time used for financial reporting and analysis. It could be a month, quarter, year or other duration.

Period

Period Costs

Period Costs are expenses reported on the income statement in the period incurred that are not capitalisable.

Period Costs

Pitch Deck

A Pitch Deck is a brief presentation provided to potential investors and partners summarising business plan highlights, financial projections and the management team.

Pitch Deck

Porters Five Forces Model

Porter's Five Forces Model is a framework for analysing the competitiveness of an industry based on the threats of new entrants, buyer power, supplier power, substitutes and rivalry among existing competitors.

Porters Five Forces Model

Predictive Analytics

Predictive Analytics are statistical models, and data analysis techniques are used to identify trends, patterns and likelihoods of future outcomes from existing data.

Predictive Analytics

Present Value

Present Value is the current value of a future cash flow calculated by discounting expected future cash flows by a required rate of return. Used in DCF analysis.

Present Value

Price Book Growth Peg

Price Book Growth Peg is a valuation metric calculated by dividing the P/E ratio by the projected earnings growth rate. Used to identify undervalued stocks with growth potential.

Price Book Growth Peg

Price Earnings Growth Peg Ratio

Price Earnings Growth Peg Ratio is a valuation metric indicating expected growth calculated by dividing the P/E ratio by the projected earnings growth rate.

Price Earnings Growth Peg Ratio

Price To Book Ratio or PE Ratio

Price to Book Ratio is a valuation metric calculated as the company's share price divided by book value per share. Indicates the value investors assign to assets.

Price To Book Ratio or PE Ratio

Price To Sales Ratio

Price to Sales Ratio is a valuation metric calculated by dividing a company's market capitalisation by total sales. Indicates the value investors assign to each dollar of sales.

Price To Sales Ratio

Private Equity

Private Equity is capital investment in private companies not publicly traded on a stock exchange.

Private Equity

Pro Forma

Pro Forma is a projected or estimated financial statement showing results under certain assumptions.

Pro Forma

Pro Forma Financial Statements

Pro Forma Financial Statements are financial statements adjusted to illustrate the hypothetical impact of potential actions and assumptions such as mergers, acquisitions, stock issuance or debt restructuring.

Pro Forma Financial Statements

Pro Forma Invoice

A pro forma invoice is a document used by Australian small businesses to outline the details of a planned sale before the goods or services are delivered or the work is completed. It's essentially a preliminary bill of sale that clarifies what the customer will receive and how much they'll be expected to pay.

Pro Forma Invoice

Probability

Probability, in statistics, is the likelihood of an event or outcome occurring, quantified as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.

Probability

Profit

Profit is the excess income remaining after subtracting all expenses from revenues and gains. Appears on the income statement.

Profit

Profit And Loss P & L

Profit and Loss, or P&L, is a financial statement summarising income and expenses over a period to calculate profit or loss. Also called an income statement.

Profit And Loss P & L

Profit And Loss Statement

A Profit And Loss Statement is a financial statement summarising revenues, costs and expenses during a period to calculate net profit or loss. Also called a P&L or income statement.

Profit And Loss Statement

Profit Centre

A Profit Center is a department, product line or business unit tracked separately for profitability measurement and performance evaluation.

Profit Centre

Profit Margin

Profit Margin is the financial metric calculated by dividing net profit by total revenue. Indicates the percentage of revenue retained as profit after expenses.

Profit Margin

Profitability Analysis

Profitability Analysis is the evaluation of company profit margins, return ratios and other metrics to assess financial performance and business model viability.

Profitability Analysis

Profitability Ratios

Profitability Ratios are financial metrics measuring profit generation relative to revenue, assets or equity to evaluate company earnings performance. Examples include profit margin, ROA, ROE and ROI.

Profitability Ratios

Projected Revenue

Projected Revenue, an income forecast estimating future sales used in financial planning, budgeting and valuation modelling.

Projected Revenue

Q

Qualitative Evaluation

Qualitative Evaluation assesses business initiatives, strategy and performance using subjective, non-numeric factors like quality, culture, branding, human capital and leadership.

Qualitative Evaluation

Quick Ratio

Quick Ratio is a liquidity metric measuring short-term solvency. It's calculated as cash plus accounts receivable divided by current liabilities.

Quick Ratio

R

R Squared

R Squared, in regression analysis, is the coefficient of determination indicating how well the regression model fits the observed data. Represents the percentage of variance explained.

R Squared

RCTI - Recipient-Created Tax Invoice

RCTI is an acronym for Recipient-Created Tax Invoice. In Australia, an RCTI is a special type of tax invoice issued by the purchaser of goods or services, rather than the supplier. This is typically done in specific situations where the supplier is unable to issue a regular tax invoice at the time of the transaction.

RCTI - Recipient-Created Tax Invoice

RSA - Retirement Savings Account

A Retirement Savings Account, or RSA, is a type of superannuation account with tax benefits for retirement savings.

RSA - Retirement Savings Account

Ratio Analysis

Ratio Analysis evaluates various aspects of company performance using financial ratios based on relationships between accounts on financial statements.

Ratio Analysis

Report Automation

Report Automation is the process of using software tools to automatically generate recurring reports summarising metrics, KPIs and other business data. The goal is to reduce manual effort.

Report Automation

Required Rate Of Return

Required Rate Of Return is the minimum return on investment required by investors given perceived riskiness and their cost of capital. Used as a discount rate in valuation.

Required Rate Of Return

Research And Development

Research And Development, or R&D, is the investment of resources into designing, developing and testing new products and innovations. It's short-term costs aimed at generating long-term growth.

Research And Development

Reserve Fund

Reserve Funds are funds set aside to cover future known or unknown liabilities, losses, contingencies or unforeseen events and listed as liabilities or equity.

Reserve Fund

Resource Allocation

Resource Allocation is assigning available financial, human and equipment resources to best meet strategic business objectives.

Resource Allocation

Retained Earnings

Retained Earnings are the cumulative net income retained for reinvestment after distributing dividends to shareholders. Represents total profits reinvested over the life of a company.

Retained Earnings

Retained Earnings On Balance Sheet

Retained Earnings On Balance Sheet is the accumulated net income since inception reduced by dividends paid to shareholders. It appears in the equity section of the balance sheet.

Retained Earnings On Balance Sheet

Return On Assets ROA

Return On Assets, or ROA, is the profitability ratio calculated by dividing net income by average total assets. Measures efficiency of using assets to generate earnings.

Return On Assets ROA

Return On Assets or ROA

Return On Assets is the financial metric calculated by dividing net income by average total assets. Indicates how efficiently assets generate profits.

Return On Assets or ROA

Return On Capital

Return On Capital is the profitability metric measuring returns generated on invested capital. It's often calculated as EBIT divided by average invested capital.

Return On Capital

Return On Capital Employed

Return On Capital Employed is the profitability ratio calculated by dividing EBIT by capital employed (net working capital + net fixed assets). Measures ability to generate profits from invested capital.

Return On Capital Employed

Return On Equity or ROE

Return On Equity or ROE is the profitability ratio calculated as net income divided by average shareholders' equity. It measures the ability to generate profits from shareholders' equity.

Return On Equity or ROE

Return On Investment or ROI

Return On Investment, or ROI, is a performance measure calculated by dividing net profit by total assets or capital invested. ROI represents profit earned per dollar invested.

Return On Investment or ROI

Revenue

Revenue is income earned from selling products, services or other business activities. Reported at the top of the income statement.

Revenue

Revenue Growth

Revenue Growth is the rate of increase in company sales over a period. Indicates growing product demand and market share gains.

Revenue Growth

Revenue Model

Revenue Model is how a business generates sales from price, volume and sources of value creation.

Revenue Model

Revenue Planning

Revenue Planning is the budgeting process of projecting future sales volume and growth to estimate expected revenue.

Revenue Planning

Revenue Recognition Principles

Revenue Recognition Principles are accounting standards dictating when revenue can be realised based on the completion of performance obligations under contracts with customers.

Revenue Recognition Principles

Revenue Stream

Revenue Stream is the various sources and types of sales revenue generated by a business. Diversified revenue streams enhance stability.

Revenue Stream

Risk Appetite

Risk Appetite is the degree of risk exposure an organisation is willing to accept in pursuit of strategic objectives and value creation.

Risk Appetite

Risk Formula

Risk Formula is a measurement of risk considering the probability of an event and its potential losses or consequences. Expresses risk as probability x impact.

Risk Formula

Risk Management

Risk Management is the processes and practices to identify, assess, quantify and mitigate risks facing an organisation. Used to minimise losses and limit uncertainty.

Risk Management

Rolling Forecast

Rolling Forecast is a forecast that is continually updated by shifting the time period forward (rolling it forward). It enables adaptive planning as conditions change.

Rolling Forecast

Runway

Runway is the period that a company can continue operating before depleting available cash, given the current burn rate. Typically stated in months.

Runway

S

SFSS - Small Business Superannuation Clearing House

The Small Business Superannuation Clearing House, or SFSS, is an online payment system for super guarantee contributions.

SFSS - Small Business Superannuation Clearing House

SG - Superannuation Guarantee

The Superannuation Guarantee, or SG, refers to compulsory employer contributions to super funds for eligible employees.

SG - Superannuation Guarantee

SGC - Superannuation Guarantee Charge

The Superannuation Guarantee Charge, or SGC, is a penalty for non-payment of the super guarantee by the due date.

SGC - Superannuation Guarantee Charge

STP - Single Touch Payroll

Single Touch Payroll, or STP, is an ATO system for employers to report payroll and super information.

STP - Single Touch Payroll

Salary sacrifice

Salary Sacrifice is the arrangement to forgo part of salary in return for non-cash benefits, with the aim of reducing taxable income.

Salary sacrifice

Scenario Modeling

Scenario Modeling creates multiple versions of a financial model representing different potential scenarios for variables and inputs to analyse possible outcomes.

Scenario Modeling

Scenario Planning

Scenario Planning is developing multiple scenarios reflecting potential future environments and assessing how they could impact operations, resources and strategy.

Scenario Planning

Scope

The scope is the agreed-upon boundaries of activities, deliverables and requirements for a project or initiative. Changes in scope often impact budget and timeline.

Scope

Scorecarding

Scorecarding means tracking and reporting progress on key performance indicators aligned to strategic goals to communicate status, trends and performance.

Scorecarding

Seed Funding

Seed Funding is the initial capital used to start and develop a business. Typically provided by founders, crowdfunding, incubators or angel investors.

Seed Funding

Selling General And Administrative Expenses

Selling General And Administrative Expenses, operating expenses not directly tied to production such as marketing, HR, facilities costs and other administrative overheads. Listed on the income statement.

Selling General And Administrative Expenses

Sensitivity Analysis

Sensitivity Analysis, testing how changes in inputs or assumptions impact financial metrics in models to understand key value drivers and risk factors.

Sensitivity Analysis

Series A Funding

Series A Funding is the first round of significant equity financing from external investors. Provides capital to expand and advance business operations.

Series A Funding

Series B Funding

Series B Funding is the second round of equity financing to drive growth for companies that have traction and promising potential.

Series B Funding

Series C Funding

Series C Funding is a later round of sizable equity financing to fund expansion for companies that have achieved stability and scale.

Series C Funding

Sharpe Ratio

Sharpe Ratio is the investment performance metric calculated as the average return in excess of the risk-free rate per unit of risk (standard deviation). Higher ratios indicate better risk-adjusted returns.

Sharpe Ratio

Short Term Cash Flow Forecasting

Short Term Cash Flow Forecasting forecasts expected cash inflows and outflows over a period of less than one year. Used for liquidity planning and working capital management.

Short Term Cash Flow Forecasting

Software as a Service or SaaS

Software as a Service (SaaS) is a software delivery model in which a third-party provider hosts applications and makes them available to customers online. The software is maintained, updated and secured by the provider, allowing customers to avoid the costs and complexities of managing their infrastructure. SaaS is a popular choice for businesses of all sizes as it offers a flexible and cost-effective solution for accessing powerful software tools on a subscription basis.

Software as a Service or SaaS

Spend Analysis

Spend Analysis is the process of analysing expenditure patterns and trends to gain visibility into costs and inform strategic cost reduction initiatives.

Spend Analysis

Sponsorship Revenue Model

Sponsorship Revenue Model means generating income by having businesses pay fees to partner, promote their brand and reach your audience. Common for sports teams, events and publishers.

Sponsorship Revenue Model

Sports Revenue Model

Sports Revenue Model means generating income from sports events, team ownership, media broadcasting rights and sponsorships.

Sports Revenue Model

Standard Deviation

Standard Deviation is a statistical measure of variability or dispersion of data points in a distribution. Provides an absolute measure of investment risk.

Standard Deviation

Statement Of Cash Flows

Statement Of Cash Flows is one of the main financial statements summarising how cash moved into and out of the business from operating, investing and financing activities.

Statement Of Cash Flows

Statement Of Shareholders Equity

Statement Of Shareholders Equity is the financial statement showing changes in equity accounts like common stock, retained earnings and additional paid-in capital over an accounting period.

Statement Of Shareholders Equity

Static Planning

Static Planning is the process of budgeting based on a fixed snapshot in time vs continually updating projections through rolling forecasts as conditions evolve.

Static Planning

Statutory Tax Rate

Statutory Tax Rate is the legally established corporate tax rate imposed by tax authorities. It may differ from the effective tax rate.

Statutory Tax Rate

Stock Dilution

Stock Dilution is the decrease in existing shareholders' ownership percentage and EPS as more shares are issued. Caused by employee stock options, secondary offerings and acquisitions.

Stock Dilution

Stock Option

Stock Options give you the right to buy company stock at a preset price. They're used as compensation and as an incentive to drive long-term value creation.

Stock Option

Stock Option Plan

Stock Option Plan is an employee benefit plan granting options to purchase company stock at a discount aimed at aligning incentives and retaining talent.

Stock Option Plan

Stock Vesting

Stock Vesting is the process by which employees earn full ownership rights to company stock over time as an incentive. Subject to specified vesting period and conditions.

Stock Vesting

Stockholders Equity

Stockholder Equity is the residual interest in the assets of the company after deducting liabilities. It is the amount that shareholders own in the company. This information is reported on the balance sheet.

Stockholders Equity

Strategic Finance

Strategic Finance financial management focuses on supporting strategic objectives and long-term value creation versus solely tracking short-term financial results.

Strategic Finance

Strategic Plan

A Strategic Plan is a document detailing an organisation's high-level mission, vision, objectives and tactics for execution over a specified period.

Strategic Plan

Strategic Planning

Strategic Planning is the process of defining strategic objectives based on mission and vision, developing tactics to achieve them, and allocating resources accordingly.

Strategic Planning

Subscription Based Revenue Model

Subscription Based Revenue Model is the business model where customers pay recurring fees, typically monthly or annually, to access products or services.

Subscription Based Revenue Model

Subscription Box Revenue Model

Subscription Box Revenue Model is the business model sending subscribers curated packages of products, typically on a recurring schedule. Revenue comes from subscription fees.

Subscription Box Revenue Model

Sustainable Growth Rate

Sustainable Growth Rate is the maximum growth rate a company can maintain without increasing financial leverage or issuing new equity. Calculated as ROE x Earnings Retention Rate.

Sustainable Growth Rate

T

TFN - Tax File Number

A Tax File Number, or TFN, is a unique identifier issued by the ATO for tax and super purposes.

TFN - Tax File Number

Target Setting

Target Setting is establishing specific, measurable goals and objectives to be accomplished within a defined timeframe.

Target Setting

Tax

Tax is the required government levy on business and individual income or transactions used to fund public services and projects.

Tax

Tax Receipt

A tax receipt can be a physical or digital document which serves as a record of a transaction and proof of purchase for the customer.

Tax Receipt

Tax Shield

Tax Shield, tax deductions and credits reducing taxable income. Interest payments and depreciation provide valuable tax shields.

Tax Shield

Taxable Income

Taxable Income, net income used to calculate tax liability, calculated as gross income minus allowable tax deductions.

Taxable Income

Taxation

Taxation is the process government authorities use to impose taxes on commercial and individual income and transactions.

Taxation

Term Sheet

A Term Sheet is a document outlining proposed terms, conditions, rights, responsibilities and warranties as a precursor to a binding agreement. Used in financing, mergers and other transactions.

Term Sheet

Terminal Value

Terminal Value is the projected value of an asset or business beyond the forecast period in a DCF analysis. Often calculated using a perpetuity or exit multiple.

Terminal Value

Top Down Budgeting

Top Down Budgeting is a budgeting approach where senior leaders establish targets, guidelines and spending limits for business units to build budgets within.

Top Down Budgeting

Total Asset Turnover

Total Asset Turnover is a financial ratio dividing net sales by average total assets. Indicates how efficiently assets are used to generate revenue.

Total Asset Turnover

Traction

Traction means quantifiable evidence indicating growing adoption, engagement and interest from target customers and markets.

Traction

Transaction Based Revenue Model

Transaction Based Revenue Model is the business model generating income from fees charged based on enabling or processing transactions. Common for financial services and payment platforms.

Transaction Based Revenue Model

Transaction Processing

Transaction Processing means executing and recording high-volume transactions and data updates like trades, orders and inventory adjustments. Enabled by specialised software and workflows.

Transaction Processing

Trend Analysis

Trend Analysis means reviewing changes and historical performance over time to spot patterns, variability and relationships in data that provide insight and inform forecasts.

Trend Analysis

Treynor Ratio

Treynor Ratio is a performance metric measuring excess return per unit of systemic risk similar to the Sharpe ratio but using beta instead of standard deviation. Higher ratios indicate better risk-adjusted returns.

Treynor Ratio

Trial Balance

Trial Balance is a list of ledger accounts and balances used to prepare financial statements and ensure debits equal credits. Serves as a preliminary check on accounting accuracy.

Trial Balance

Trust account

A trust account is a type of account where a trustee holds and manages funds or assets for the benefit of another person or entity, known as the beneficiary.

Trust account

Trust deed

A Trust Deed is a legal document that creates and governs a trust, outlines trustee powers, beneficiaries, and distribution rules.

Trust deed

U

Unallocated Costs

Unallocated Costs are shared overhead expenses that are yet to be allocated to departments, products or other cost objects.

Unallocated Costs

Underlying Earnings

Underlying Earnings are profits excluding impacts of nonrecurring, unusual or one-time gains/losses. Used to indicate core profitability.

Underlying Earnings

Unlevered Free Cash Flow

Unlevered Free Cash Flow (UFCF) is a financial metric that shows the cash a small business generates from its operations after accounting for expenses and reinvestment in the business, but before considering any debt or debt servicing costs (interest payments).

Unlevered Free Cash Flow

Upselling And Cross Selling Revenue Model

Upselling And Cross-Selling Revenue Model is a business strategy generating more revenue per customer by selling additional products, features, warranties, upgrades and services.

Upselling And Cross Selling Revenue Model

V

Valuation

Valuation is the process of estimating business value based on assets, cash flow, income, future growth and other financial metrics.

Valuation

Value

Value is the monetary, material or assessed worth, usefulness or importance of a thing to its owner or interested party.

Value

Value At Risk

Value At Risk is the maximum potential loss that can occur at a given confidence level over a period under normal conditions. Commonly used to quantify market risk.

Value At Risk

Value Driver Tree

Value Driver Tree is a diagram linking strategic objectives to tangible metrics used to measure their achievement and drive performance. Enables managing by fact.

Value Driver Tree

Value Drivers

Value Drivers are key operational and financial levers and metrics that can be influenced to drive firm performance and value creation when improved.

Value Drivers

Variable Cost

Variable Costs are expenses that change in relation to production volume, like direct materials and labour. They increase or decrease, corresponding to activity.

Variable Cost

Variance

Variance is the deviation between a planned or standard amount and the actual result. Used to analyse and improve performance.

Variance

Variance Analysis

Variance Analysis is comparing actual results to budgets or standards to identify and understand deviations indicating inefficiencies, issues or opportunities for improvement.

Variance Analysis

Variance Report

A Variance Report is a monitoring report highlighting differences between actual performance and budgets or standards for analysis. Helps identify issues and opportunities.

Variance Report

Variance Reporting

Variance Reporting is measuring, tracking and communicating differences between actuals versus plans, budgets or standards to promote performance analysis and issue resolution.

Variance Reporting

Venture Capital VC

Venture Capital Vc, capital investment provided to startup companies and small businesses judged to have significant growth potential. Comes from firms and institutional investors.

Venture Capital VC

Vertical Analysis

Vertical Analysis is a method of financial analysis where line items are shown as a percentage of a relevant base, such as revenue, to allow comparative analysis across periods.

Vertical Analysis

W

Weighted Average Cost Of Capital

Weighted Average Cost Of Capital is the average cost of capital for a company calculated by weighting the required return on debt and equity capital based on their proportional share of the capital structure. Used as the discount rate in DCF analyses.

Weighted Average Cost Of Capital

What If Analysis

What If Analysis means testing changes to model inputs and assumptions to observe their impacts on key output metrics. It allows the modelling of multiple scenarios and risks.

What If Analysis

Wholesale Revenue Model

The Wholesale Revenue Model is the business model of selling products to retailers who then resell them to consumers. Allows scaling through distribution channels versus direct sales.

Wholesale Revenue Model

Working Capital

Working Capital, current assets minus current liabilities. Represents capital available to fund day-to-day business operations.

Working Capital

Working Capital Management

Working Capital Management, policies, procedures and strategies for optimising the amount of working capital and monitoring short-term assets and liabilities to ensure adequate liquidity.

Working Capital Management

Working capital

Working capital refers to the amount of money a company has available to fund its daily operations and meet its short-term financial obligations such as paying bills and salaries. It is calculated by subtracting current liabilities from current assets.

Working capital

X

Y

Z

Zero Based Budgeting

Zero Based Budgeting is a budgeting approach starting from a "zero base" and requiring justification for all expenditures rather than incrementing previous budgets.

Zero Based Budgeting

Small Business Glossary

A

ABN - Australian Business Number

ASIC - Australian Securities and Investments Commission

ATO - Australian Taxation Office

Accounting Close

Accounts Payable

Accounts Payable Turnover Ratio

Accounts Receivable

Accounts Receivable Turnover Ratio

Accruals Basis Accounting

Acid Test Ratio

Active Planning

Activity Base

Activity Based Budgeting

Activity Based Costing

Activity Based Planning

Advertising Based Revenue Model

Affiliate Marketing Revenue Model

Allocated Costs

Allocations

Alpha

Amortisation

Angel Investors

Annual report

Appropriation Request

Asset

Asset Turnover

Asset Turnover Ratio

Asset and liability register

Assumptions

Average Collection Period

B

BAS - Business Activity Statement

Balance Sheet

Before Tax Profit Margin

Benchmarking

Beta

Beta Coefficient

Book Value

Break Even Analysis

Break Even Point

Budget

Budget Variance Analysis

Budgeting

Budgeting Method

Budgeting Software

Burn Rate

Business Assumptions

Business Bank Account

Business Case Development

Business Intelligence

Business Metrics

Business Planning

C

Cap Rate

Cap Table

CapEx To Revenue Ratio

Capital Asset Pricing Model CAPM

Capital Budget

Capital Expenditure

Capital Expenditure Planning

Capital Expenditure or CapEx

Capital Gains Tax (CGT)

Capital Raise

Capital Rationing

Capital Structure

Capitalisation Rate Cap

Capitalisation Ratio

Cash

Cash Budget

Cash Conversion Cycle

Cash Conversion Cycle Formula

Cash Flow

Cash Flow Break Even Point

Cash Flow Forecast

Cash Flow From Financing

Cash Flow From Financing Activities

Cash Flow From Investing

Cash Flow From Investing Activities