Glossary
Financial terms, explained without the circular definitions
Every entry says what the term means, and then the part most glossaries skip: why it matters when you are actually running a business.
Accounts receivable
Money owed to the business by customers.
Accrual accounting
Recording revenue and costs when earned or incurred.
Anomaly detection
Identifying transactions that deviate from normal patterns.
Audit trail
A chronological record of who changed what and when.
Break-even point
The level of activity where profit equals zero.
Burn rate
The rate at which a company consumes cash each month.
Cash flow
Actual movement of money in and out of the business.
Churn rate
The rate at which customers or revenue is lost.
Cohort analysis
Tracking groups of customers by when they joined.
Contribution margin
Revenue minus all variable costs for a unit or segment.
Deferred revenue
Cash collected for services not yet delivered.
EBITDA
Earnings before interest, tax, depreciation and amortisation.
Fixed costs
Costs that do not vary with activity in the short term.
Forecast accuracy
How closely past forecasts matched actual results.
Gross margin
Revenue remaining after the direct cost of delivery.
Internal controls
Procedures that protect the integrity of financial records.
Leverage ratio
The extent to which a business is funded by debt.
Liquidity ratio
A measure of ability to meet short-term obligations.
Operating expenses
Costs of running the business outside direct delivery.
Reconciliation
Matching two records of the same activity to confirm agreement.
Recurring revenue
Predictable revenue that repeats on a contracted basis.
Runway
How many months of operation current cash supports.
Scenario analysis
Modelling outcomes under different assumption sets.
Sensitivity analysis
Measuring how much an outcome depends on each input.
Unit economics
Profitability measured per customer or per unit sold.
Variance analysis
Explaining the difference between plan and actual.
Working capital
Current assets minus current liabilities.