Business Terms

Glossary of Business Terminology

In order to start and run a business, you frequently need to know business terms that may not be well-defined in a standard dictionary. Common terms and acronyms used in business plans, accounting, finance, and other areas of small business are defined in our glossary of business terms.

ASSET :

An asset refers to something of value that is owned or controlled by an individual, business, or organization. It represents a resource or economic benefit that is expected to generate future income, provide a return on investment, or be used in the operations of a business.

BALANCE SHEET :

A balance sheet is a financial statement that provides a snapshot of a company’s financial condition at a specific point in time. It is one of the key components of a company’s financial statements, along with the income statement and the cash flow statement.

CASH FLOW :

A cash flow statement is a financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources. It also includes all cash outflows that pay for business activities and investments during a given period. The cash flow statement is crucial because it provides insights into a company’s liquidity and solvency and its ability to change cash flows in future circumstances.

DEPRECIATION :

Depreciation is the systematic allocation of the cost of a tangible fixed asset over its useful life. It represents the wear and tear, decay, or decline in the value of an asset due to usage, time, or obsolescence. Depreciation allows a business to spread out the expense of an asset over the period it is used, which matches the cost with the revenue generated by the asset.

EBITA :

Ebita is a financial acronym that stands for Earnings Before Interest, Taxes, and Amortization. It is a measure of a company's profitability that looks at its operating income before deducting interest expenses, taxes, and non-cash expenses such as amortization of intangible assets. Ebita is often used by investors and analysts to assess a company's operational performance and compare it to other companies in the same industry. By focusing on the core earnings generated by a company's operations, Ebita provides a clearer picture of its profitability and operating efficiency.

FINANCE :

Finance refers to the management, creation, and study of money, investments, and other financial instruments. It encompasses a broad range of activities and disciplines, including personal finance, corporate finance, and public finance. The field of finance is essential for the efficient functioning of economies, businesses, and individuals.

GROSS :

Gross income is the total income earned by an individual or a business before any deductions or taxes are taken out. For individuals, gross income includes wages, salaries, bonuses, rental income, interest, dividends, and other sources of income.

HEDGE FUNDS :

Hedge funds are alternative investment vehicles that pool capital from accredited or institutional investors and use a variety of strategies to earn active returns for their investors. These strategies can include leveraging, short-selling, derivatives, and other sophisticated investment techniques. Hedge funds are typically more flexible in their investment choices compared to mutual funds and are less regulated.

INCOME STATEMENT :

An income statement, also known as a profit and loss statement (P&L), is a financial statement that provides a summary of a company's revenues, expenses, and profits or losses over a specific period. It shows how the revenues are transformed into net income or net profit. The income statement is essential for assessing the financial performance of a business.

JOINT ACCOUNT :

A joint account in business refers to a bank account shared by two or more individuals or entities, allowing all parties to access and manage the account. Joint accounts are often used by business partners, spouses, or co-owners to manage shared financial resources.

KPI:

Key Performance Indicators (KPIs) are measurable values that demonstrate how effectively a company is achieving its key business objectives. Organizations use KPIs at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the overall performance of the business, while low-level KPIs may focus on processes in departments such as sales, marketing, HR, or support.

LIMITED LIABILITY COMPANY :

A Limited Liability Company (LLC) is a business structure that combines the benefits of both a corporation and a partnership or sole proprietorship. It offers the limited liability protection of a corporation while allowing the tax advantages and operational flexibility of a partnership.

MONETIZE :

In business, "monetize" refers to the process of generating revenue from various assets, activities, or opportunities within the organization. It involves converting non-revenue-generating assets or activities into sources of income.

NET PROFIT :

Net profit, often referred to simply as "profit," is a key financial metric that represents the amount of money a company has earned after deducting all expenses from its total revenue. It is a measure of the overall profitability of a business over a specific period of time, typically a fiscal quarter or year.

OVERHEADS :

Overheads, in a business context, refer to ongoing operating expenses that are necessary for the functioning of the business but are not directly attributable to the production of goods or services. These expenses are incurred regularly regardless of the level of production or sales and typically include various fixed costs. Understanding and managing overhead costs are crucial for maintaining profitability and financial health.

PHILANTHROPY :

Philanthropy refers to the act of promoting the welfare of others through generous donations of money, resources, or time. It involves charitable giving to support causes and initiatives that aim to improve society and enhance the quality of life for individuals and communities. Philanthropy can be carried out by individuals, families, corporations, or foundations.

QUANTITATIVE EASING :

Quantitative easing (QE) is a monetary policy tool used by central banks to inject liquidity into the economy, aiming to stimulate economic activity, especially during periods of low inflation or recession. The impact of QE on businesses can be significant, influencing various aspects of the business environment.

RETURN ON INVESTMENT :

Return on Investment (ROI) is a financial metric used to evaluate the efficiency or profitability of an investment. It measures the gain or loss generated on an investment relative to the amount of money invested. ROI is commonly used to compare the profitability of different investments or to assess the performance of a single investment.

SMES :

Small and Medium-sized Enterprises (SMEs) play a crucial role in the business ecosystem. They are typically defined by the number of employees, revenue, and/or assets they hold, varying slightly by country and industry. SMEs are vital for economic growth, innovation, and job creation.

TRIPLE BOTTOM LINE :

The Triple Bottom Line (TBL) is a sustainability framework that encourages businesses to focus on social and environmental concerns just as much as they do on profits. The TBL concept broadens the focus of business performance to include three key dimensions: People, Planet, and Profit. This approach aims to measure the full cost of doing business and ensure that companies operate in a socially and environmentally responsible manner.

UNQUOTED SHARES :

Unquoted shares, also known as unlisted shares, refer to shares of a company that are not listed on any stock exchange. These shares are typically issued by private companies and can be traded privately, often through direct transactions between buyers and sellers or through private equity markets. Investing in unquoted shares involves unique risks and opportunities compared to investing in publicly traded shares.

VERTICAL MERGER :

A vertical merger is a business consolidation that occurs between two companies that operate at different levels within the same industry's supply chain. This type of merger is intended to increase efficiency and streamline operations by bringing together companies that produce complementary goods or services.

WORK-LIFE BALANCE :

Work-life balance refers to the equilibrium between the time and energy individuals devote to their professional activities and their personal lives, including family, leisure, and self-care. Achieving a healthy work-life balance is crucial for overall well-being, job satisfaction, and productivity.

YIELD :

In finance and investing, "yield" typically refers to the income generated by an investment over a specific period, usually expressed as a percentage of the investment's cost, value, or face value. Yield is a crucial metric for investors as it helps assess the return on their investment relative to the amount invested or the current market price of the investment.

ZOMBIE FUNDS :

"Zombie funds" is a colloquial term used in finance and investment to describe investment funds or financial assets that are inactive or underperforming but are still operational and not yet liquidated or closed down. These funds may continue to exist without actively investing or generating returns, often to the detriment of investors who remain tied to these funds.