Finance Glossary
Corporate finance is the area of finance that deals with sources of funding, the capital structure of corporations, the actions that managers take to increase the value of the firm to the shareholders, and the tools and analysis used to allocate financial resources.
Finance
Inventory
Inventory is the term used to classify the assets that a company has purchased to sell to its customers that remain unsold. As these items are sold to customers, the inventory account will lower.
Finance
Journal Entry (JE)
Journal Entries are how updates and changes are made to a company’s books. Every Journal Entry must consist of a unique identifier (to record the entry), a date, a debit/credit, an amount, and an account code (that determines which account is altered).
Finance
Liability (L)
All debts that a company has yet to pay are referred to as Liabilities. Common liabilities include Accounts Payable, Payroll, and Loans.
Finance
Liquidity
A term referencing how quickly something can be converted into cash. For example, stocks are more liquid than a house since you can sell stocks (turning it into cash) more quickly than real estate.
Finance
Material
Material is the term that refers whether information influences decisions. For example, if a company has revenue in the millions of dollars, an amount of $0.50 is hardly material. GAAP requires that all Material considerations must be disclosed.
Finance
Net Income (NI)
Net Income is the dollar amount that is earned in profits. It is calculated by taking Revenue and subtracting all of the Expenses in a given period, including COGS, Overhead, Depreciation, and Taxes.
Finance
Net Margin
Net Margin is the percent amount that illustrates the profit of a company in relation to its Revenue. It is calculated by taking Net Income and dividing it by Revenue for a given period.
Finance
On Credit/On Account
A purchase that happens On Credit or On Account is a purchase that will be paid at a future time, but the buyer gets to enjoy the benefit of that purchase immediately. “Bartender, put it on my tab…”
Finance
Overhead
Overhead are those Expenses that relate to running the business. They do not include Expenses that make the product or deliver the service. For example, Overhead often includes Rent, and Executive Salaries.
Finance
Payroll
Payroll is the account that shows payments to employee salaries, wages, bonuses, and deductions. Often this will appear on the Balance Sheet as a Liability that the company owes if there is accrued vacation pay or any unpaid wages.
Finance
Present Value (PV)
Present Value is a term that refers to the value of an Asset today, as opposed to a different point in time. It is based on the theory that cash today is more valuable than cash tomorrow, due to the concept of inflation.
Finance
Receipts
A Receipt is a document that proves payment was made. A business produces receipts when it provides its product or service and it receives receipts when it pays for goods and services from other businesses. Received receipts should be saved according to IRS receipts requirements, and catalogued so that a company can prove that its […]
Finance
Return on Investment (ROI)
Originally, this term referred to the profit that a company was making (Return), divided by the Investment required. Today, the term is used more loosely to include returns on various projects and objectives. For example, if a company spent $1,000 on marketing, which produced $2,000 in profit, the company could state that it’s ROI on […]
Finance
Revenue (Sales) (Rev)
Revenue is any money earned by the business.
Finance
Trial Balance (TB)
Trial Balance is a listing of all accounts in the General Ledger with their balance amount (either debit or credit). The total debits must equal the total credits, hence the balance.
Finance
Variable Cost (VC)
These are costs that change with the volume of sales and are the opposite of Fixed Costs. Variable costs increase with more sales because they are an expense that is incurred in order to deliver the sale. For example, if a company produces a product and sells more of that product, they will require more […]
Corporate
WAV
We are Volume is a Digital Agency that provides services for All Things Digital to the Creative Industry. Head on over to We Are Volume and let’s partner on your next production.