Ratios & Accounting
Financial statements, valuation ratios and metrics.
- ActuaryA professional who uses maths and statistics to price risk, set reserves and test whether insurers and pension funds stay solvent.
- AmortisationSpreading the cost of an intangible asset, or the repayment of a loan, evenly over time.
- Annual ReportA yearly document companies publish with financial results, business updates, and audited accounts.
- AssetAnything of value that a person or company owns and can use to generate income or sell later.
- Audit CommitteeA board committee that oversees financial reporting, internal controls and the relationship with external auditors.
- Balance SheetA snapshot of what a company owns and owes at one date, with equity as the difference.
- BetaA measure of how much a share's price tends to move relative to the wider market.
- Blended FinanceA structure that mixes concessional public or philanthropic money with commercial capital so riskier development projects can attract private investors.
- Book ValueThe net worth of a company on its accounts: total assets minus total liabilities.
- BudgetA plan that matches your expected income to planned spending and saving over a week, month or year.
- Capital GainProfit earned when you sell an asset for more than you paid for it.
- Cash FlowThe money moving into and out of a business over a period, separate from accounting profit.
- DebtMoney borrowed that must be repaid, usually with interest, on agreed terms.
- Debt to Income RatioDTIYour recurring debt payments as a share of your income; lenders use it to judge how stretched you are.
- Defined BenefitDBA pension design where your retirement income is calculated by a formula, often using salary and years of service.
- Defined ContributionDCA pension design where only the contributions are fixed; your benefit depends on how the pot grows and how you draw it.
- DepreciationSpreading the cost of a physical asset over its useful life as an accounting expense.
- Dividend PolicyA board's approach to how much profit is paid out as dividends versus kept in the business over time.
- Earnings Per ShareEPSA company's net profit divided by its number of shares, the profit attributable to each single share.
- EBITDAEBITDAEarnings before interest, tax, depreciation, and amortisation; a rough operating profit measure.
- EquityOwnership interest in a company; for shareholders, it is residual claim after debts are paid.
- Face ValueThe nominal value printed on a bond or share certificate, used for coupons and redemption.
- Fundamental AnalysisStudying a company's business, finances, and industry to judge whether its shares are attractive.
- Going ConcernGoing concern means a business is expected to keep operating for the foreseeable future, not close or liquidate.
- GoodwillGoodwill is the premium paid when buying a business above the fair value of its identifiable net assets.
- Gross MarginGross margin is the share of sales left after the direct cost of making or buying the goods sold.
- Income StatementAn income statement shows a company's revenue, costs, and profit or loss over a defined reporting period.
- Interest CoverInterest cover shows how many times a company's earnings can pay its interest bills, a check on debt risk.
- Joint VentureJVA joint venture is a project or company owned and controlled by two or more parties who share costs and rewards.
- Journal EntryA journal entry records a financial transaction in the books, with equal debits and credits under double entry.
- Key Performance IndicatorKPIA key performance indicator is a measurable figure used to track whether a business is meeting a stated goal.
- LiabilityA liability is an obligation a person or company must settle in the future, such as a debt or unpaid bill.
- Loss RatioClaims costs as a share of earned premiums; a core measure of how expensive an insurance book has been.
- Mark to MarketMTMMark to market means valuing an asset at its current market price rather than its original purchase cost.
- Market CapitalizationMarket capThe total market value of a company's shares, its share price multiplied by the number of shares outstanding.
- Merchant Discount RateMDRThe percentage fee a merchant pays on each card or electronic sale, covering the acquirer, card scheme, and related processing costs.
- MudarabahA profit-sharing deal where one side provides capital and the other manages the venture, splitting profits by agreed ratios.
- Net Asset ValueNAVThe value of a fund or company after liabilities are subtracted from assets, usually shown per share or unit.
- Net IncomeProfit left after a company pays all costs, interest, tax and other expenses for a period.
- Net WorthWhat you own minus what you owe: assets less liabilities at a point in time.
- Operating MarginOperating profit as a percentage of revenue, showing how much the core business keeps before interest and tax.
- Outstanding SharesAll shares of a company currently held by investors, including institutions, insiders and the public.
- Preference ShareA share class that usually gets dividends before ordinary shareholders and ranks higher if the company is wound up.
- Present ValuePVToday's worth of a future cash amount after discounting it at an appropriate interest or required return rate.
- Price-to-Book RatioP/BShare price divided by book value per share, used to compare market value with accounting net assets.
- Price-to-Earnings RatioP/EHow much investors pay for each unit of a company's annual earnings, share price divided by earnings per share.
- Profit and Loss SharingPLSA financing approach where the provider and the entrepreneur share profits by agreed ratios and also share downside according to the contract type.
- Profit MarginProfit expressed as a percentage of revenue, showing how much of each unit of sales is kept as profit.
- Quarterly ResultsA company's financial performance report for a three-month period, often including revenue, profit and key ratios.
- Quick RatioA liquidity test that divides cash, receivables and other near-cash assets by current liabilities.
- Retained EarningsProfits kept in the business after dividends, added to equity on the balance sheet over time.
- Return on EquityROENet income divided by shareholders' equity, showing how efficiently a company uses owners' capital.
- RevenueThe total income a company earns from its normal business activities before costs are deducted.
- Share CapitalThe capital a company raises by issuing shares, recorded in equity on the balance sheet.
- Tax BaseThe amount or activity a tax law multiplies by a rate: income, sales, property value, or another defined measure.
- Time Value of MoneyTVMThe idea that money available now is worth more than the same amount later, because it can earn a return in the meantime.
- Total ReturnThe full gain or loss on an investment, including price change plus any dividends or interest received over the period.
- TurnoverIn markets, the value or amount of securities traded in a period. In business, sales revenue for the same idea of activity.
- Unrealised GainA paper profit on an investment you still hold, based on current market value being higher than what you paid.
- ValuationThe process of estimating what a company, asset, or security is worth using prices, cash flows, or comparison methods.
- Venture CapitalVCEquity funding provided to early stage or high growth companies that are not yet ready for public markets.
- VestingThe schedule by which an employee or founder gains full ownership rights over granted shares, options, or other benefits.
- Weighted Average Cost of CapitalWACCThe blended required return on a firm's debt and equity, weighted by how much of each it uses to fund assets.
- Working CapitalCurrent assets minus current liabilities, a snapshot of short term funds available to run day to day operations.
- Write OffAn accounting step that removes an asset's remaining value from the books when it is judged uncollectable or worthless.
- XBRLXBRLA standard digital language for tagging financial report data so software can read, compare, and check company filings.
- XIRRXIRRAn annualised return rate for a series of cash flows that occur on irregular dates, solved so the net present value is zero.
- Year on YearYoYA comparison of a figure with the same figure from twelve months earlier, used to show growth or decline.
- YieldIncome from an investment expressed as a percentage of its price or face value, such as dividend yield or bond yield.
- Yield to MaturityYTMThe annualised return you would earn on a bond if you bought it at today's price, received all coupons, and held it to maturity.
- Z ScoreA statistical measure of how many standard deviations a value sits from the mean, used in finance for risk and outlier checks.
- Zero Coupon BondA bond sold below face value that pays no periodic interest and returns a single amount at maturity.