Financial Glossary

Accrual accounting is an accounting method that records revenue and expenses when they are earned or incurred, regardless of when cash actually changes hands.

Annual Recurring Revenue (ARR) is a metric that measures the predictable annual revenue generated by a company's subscription-based business model.

Accounts payable is the amount a company owes to its suppliers or vendors for goods and services received but not yet paid for, recorded as a short-term liability on the balance sheet.

The break-even point is the level of sales at which total revenue equals total costs, resulting in neither profit nor loss.

Burn rate is the rate at which a company spends its capital to fund operations before generating positive cash flow, commonly used for startups.

A business checking account is a bank account designed specifically for business transactions, separating personal and business finances.

Bank reconciliation is the process of comparing a company's internal financial records against its bank statements to ensure they match and identify any discrepancies.

Break-even analysis is a financial calculation that determines the point at which total revenue equals total costs, resulting in neither profit nor loss.

Cost of Goods Sold is the direct cost of producing goods or services, including materials, labor, and manufacturing overhead.

Contribution margin is the selling price per unit minus the variable cost per unit, representing how much each sale contributes to covering fixed costs.

Customer Acquisition Cost (CAC) is the total cost of acquiring a new customer, including marketing, sales, and advertising expenses divided by the number of new customers gained.

Cash basis accounting is an accounting method that records revenue when cash is received and expenses when cash is paid, regardless of when the actual transaction occurred.

Cash runway is the amount of time a company can continue operating before it runs out of cash, calculated by dividing current cash reserves by the monthly burn rate.

A chart of accounts is a complete listing of all accounts used in a company's general ledger, organized by categories such as assets, liabilities, equity, revenue, and expenses.

Churn rate is the percentage of customers who stop using a company's product or service over a specific period, typically measured monthly or annually.

Customer Lifetime Value (LTV) is a prediction of the total revenue a business can expect from a single customer account throughout the entire business relationship.

Collateral is an asset pledged by a borrower to secure a loan, which the lender can seize if the borrower fails to repay.

Days Payable Outstanding (DPO) is a financial ratio that measures the average number of days a company takes to pay its suppliers and vendors after receiving an invoice.

Debits and credits are the fundamental accounting entries that record financial transactions in a double-entry bookkeeping system, where every debit must have a corresponding credit.

Depreciation is the systematic allocation of the cost of a tangible asset over its useful life, reflecting the asset's gradual wear and tear, obsolescence, or decline in value.

A digital wallet is a software application that stores payment information, passwords, and other credentials, allowing users to make electronic transactions without carrying physical cards or cash.

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of a company's operating performance and profitability.

An Employer of Record (EOR) is a third-party organization that legally employs workers on behalf of another company, handling payroll, tax compliance, and employment law responsibilities.

Fixed costs are business expenses that remain constant regardless of production volume or sales, such as rent, insurance, and salaries.

FDIC Insurance is a federal government program that protects depositors against the loss of their deposits at FDIC-insured banks and savings associations, up to $250,000 per depositor, per insured bank.

Fixed assets are long-term tangible assets that a business owns and uses in its operations to generate income, with a useful life of more than one year.

Financial Planning and Analysis (FP&A) is the process of budgeting, forecasting, and analyzing a company's financial performance to support strategic business decisions.

Fintech (financial technology) refers to technology-driven innovations in financial services, including mobile banking, digital payments, lending, investing, and insurance.

Gross profit is revenue minus the cost of goods sold (COGS), representing the direct profit from producing and selling products.

Gross margin is the percentage of revenue that exceeds the cost of goods sold (COGS), representing the proportion of sales revenue a company retains after direct production costs.

A journal entry is a record of a financial transaction in a company's accounting system, documenting the accounts affected, the amounts debited and credited, and a description of the transaction.

Markup is the difference between the cost of a product and its selling price, expressed as a percentage of the cost.

A mobile payment is a digital transaction made using a mobile device, such as a smartphone or tablet, to pay for goods or services instead of using cash, checks, or physical cards.

Net profit is the actual profit after all expenses, including operating costs, interest, taxes, and other deductions, have been subtracted from revenue.

NFC is a short-range wireless technology that enables data exchange between devices when they are held close together, commonly used for contactless payments.

Operating expenses are the ongoing costs of running a business that are not directly tied to production, including rent, marketing, and salaries.

Operating leverage measures the proportion of fixed costs in a company's cost structure, indicating how a change in revenue affects operating income.

Profit margin is the percentage of revenue remaining after all costs are deducted, measuring how much profit a business keeps per dollar of sales.

Pricing strategy is the method a business uses to set prices for its products or services, balancing profitability, competitiveness, and customer value.

Profitability is a business's ability to generate profit from its operations, measured through various ratios and margins over time.

Payroll is the process of paying employees' salaries, wages, and taxes, including calculating deductions, withholding taxes, and issuing payments on a regular schedule.

A payment gateway is a technology that authorizes and processes credit card and digital payment transactions for online and in-person merchants.

Peer-to-peer (P2P) refers to a direct transaction or exchange of funds, services, or data between two parties without an intermediary or central authority.

A QR code is a two-dimensional barcode that can be scanned by a smartphone camera to quickly access information, make payments, or connect to digital services.

Revenue is the total amount of money a business receives from its normal business activities, typically from sales of goods and services before any costs are deducted.

Reimbursement is the repayment of out-of-pocket expenses incurred by an employee or individual on behalf of an organization or for business purposes.

Total Cost of Ownership (TCO) is a comprehensive estimate of all direct and indirect costs associated with acquiring, operating, and maintaining an asset over its entire lifecycle.

Unit economics measures the direct revenues and costs associated with a single unit of a business, typically a customer or product sold.

Variable costs are expenses that change in proportion to production volume or sales, such as raw materials, packaging, and shipping.

Working capital is the difference between a company's current assets and current liabilities, measuring its short-term liquidity and operational efficiency.