Glossary of Finance Terms
Business Portfolio
A business portfolio is the collection of products, services, or businesses owned by a company.
Business Product
A business product is tangible or intangible offering (e.g., software, service, physical product) that a company sells to customers to generate revenue.
Business Value
Business value is the estimated worth of a business, considering its assets, liabilities, earnings potential, and market conditions.
Business Venture
A business venture is a new business endeavor or project to generate profit. It often involves risk, as entrepreneurs invest their resources, time, and energy into an idea or opportunity that may or may not succeed in the marketplace. Business ventures can range from small start-ups to large enterprises and span various industries and sectors.
CAGR
CAGR stands for compound annual growth rate. It is a measure of the annualized growth rate of an investment or business over a specific period, taking into account the compounding effect. CAGR is typically used to compare the growth rates of different investments or businesses on an equal basis.
Cap Table Management
Cap table management tracking and managing the ownership and equity distribution of a company.
CFO
CFO stands for chief financial officer and refers to a senior executive responsible for managing an organization’s financial activities, including financial planning, budgeting, and reporting.
Contra Revenue
Contra revenue is a reduction in gross revenue due to sales allowances, returns, or discounts given to customers, resulting in net revenue.
Contribution Margin
The contribution margin is the resulting difference between a company’s total revenue and its variable costs.
CRM
Customer Relationship Management is software that helps businesses track, manage, and improve their interactions with customers throughout the customer lifecycle.
Document Management
The process of capturing, storing, organizing, and accessing electronic and physical documents.
Dollar on the Net
Dollar on the net, also known as net dollar retention, refers to the total value of sales or transactions you keep and expand within your existing customer base.
Double Trigger
Double trigger acceleration allows for the early vesting of someone’s stock or options if two distinct triggering events occur.
Expense Reimbursement
Expense reimbursement is the process of getting repaid for business-related expenses you incurred with your own money.
Fair Market Value
Fair market value (FMV) is the hypothetical price at which a willing buyer and a willing seller agree to transact for an asset or property under usual market conditions. The market value represents a fair and unbiased assessment of an asset’s worth, considering factors like supply and demand, comparable sales, and other relevant market factors.
Financial Accounting
Financial accounting is the branch of accounting that records, summarizes, and reports financial transactions for external users like investors and creditors.
Form 6765
Form 6765 is a tax form in the United States used to claim the credit for increasing research activities. It allows businesses to benefit from tax incentives by providing a credit for qualified research expenses.
Fractional Chief Financial Officer
A fractional chief financial officer is a part-time or shared CFO role, providing financial expertise to multiple companies on a flexible basis.
GMV (Gross Merchandise Value)
GMV is the total value of goods or services sold on a platform or marketplace over a specific period of time, excluding discounts, returns, or other deductions.
Gross Profit Margin
Gross profit margin is the percentage of revenue a company retains after deducting the direct costs associated with producing or providing its goods or services.
Incentive Management
Incentive management involves strategically designing, implementing, and administering programs to motivate employees to achieve specific organizational goals and objectives. The primary goal of incentive management is to align the interests of employees with those of the organization, thereby enhancing productivity, performance, and overall job satisfaction.
Last Twelve Months (LTM)
LTM stands for last twelve months and refers to the financial performance of a company over the most recent twelve-month period. LTM is often used interchangeably with TTM.
Managerial Accounting
Managerial accounting goes beyond the surface of financial reporting, empowering managers with insights to optimize decision-making. It’s the compass guiding businesses through financial landscapes, focusing on cost analysis, budgeting, forecasting, and performance evaluation.
Material Procurement
Material procurement is the process of acquiring raw materials or goods required for production by a company. It involves sourcing, selecting suppliers, negotiating, and acquiring materials needed to deliver a product or service.
Month Over Month (MOM)
MoM is a metric used to measure the percentage change in a certain variable from one month to the next, providing insights into growth or decline rates.
Net Expansion Rate
Net expansion rate, sometimes referred to as net revenue expansion, is a metric used to measure the growth or expansion of revenue generated from existing customers. It calculates the change in revenue from upsells, cross-sells, and upgrades minus any churn or revenue loss from downgrades or cancellations.
Portfolio Company
A portfolio company, portco, refers to a company or entity that is held as an investment in a portfolio of investments owned by an individual or entity. It is usually owned by a private equity firm, venture capital firm, or other investment entities.
Principal Venture Capital
A principal at a venture capital firm is a senior close to making partner who holds a position of power within the VC firm.
Product Velocity
Product Velocity is the rate at which a product is sold or moves through the market.
Refund Accounting
Refund accounting is a method used by companies to record and manage refunds that are given to customers for returned products or canceled services. It involves proper tracking of refund liabilities and adjusting the financial records to accurately reflect the refunded amounts and any associated costs or revenue adjustments.
Revenue Recognition
Revenue recognition is the accounting principle that determines when to record revenue from a sale of goods or services.
Roll-Up Vehicle (RUV)
RUV stands for roll-up vehicle. An RUV is a type of SPV for angel investors and founders.
Software as a Service (SaaS)
SaaS stands for software as a service. SaaS allows users to access and use software on a subscription basis, typically paying a recurring fee, without the need for upfront software purchases or installations.
Section 382
Section 382 refers to a provision in the United States Internal Revenue Code that limits the ability of a company to offset its future taxable income with net operating losses (NOLs) if there is a significant ownership change. It aims to prevent companies from acquiring or merging with loss-making companies solely for the purpose of utilizing their NOLs to reduce their own tax liability.
Series A
Series A is the first significant round of investment financing obtained by a startup from external investors in exchange for equity.
Serviceable Available Market
Serviceable available market (SAM) is the portion of the total addressable market that a business can realistically target and serve. It represents the specific market segment or customer base that a company can effectively reach and cater to with its products or services, considering factors like geographic limitations, distribution capabilities, and product feasibility.
Single Trigger Acceleration
Single trigger acceleration refers to a provision in a company’s equity or stock option plan that enables an employee to receive immediate vesting or acceleration of their equity or stock options upon the occurrence of a specified triggering event, such as a change in control or acquisition of the company.
Special Purpose Entity
A special purpose entity, an SPE, or an SPV is a separate legal entity created for a specific purpose, often used in complex financial transactions or investments to mitigate risks or achieve specific goals.
Special Purpose Vehicle
SPV stands for special purpose vehicle and refers to a legal entity created for a specific financial purpose, typically used for isolating risks and assets.
Time To Market (TTM)
TTM is a key performance indicator (KPI) that measures the duration from a product’s conception or initial idea to its launch and availability for purchase by consumers. It encompasses the entire product development lifecycle, including design, prototyping, testing, production, and distribution
Valuation
Valuation is the process of determining the economic value or worth of an asset, company, investment, or financial instrument. It involves analyzing various factors, such as financial statements, market conditions, industry trends, and comparable transactions, to estimate the fair value or intrinsic value of an asset.
VC Fund
VC fund is a pool of money invested in high-growth, early-stage companies.
Venture Partners
Venture partners are individuals or entities that invest capital and provide expertise to emerging businesses in exchange for potential financial returns.
Accrual Accounting
Accrual accounting records revenue and expenses when they are earned or incurred, regardless of when cash is exchanged.
Balance Sheet Reconciliation
Balance sheet reconciliation is the process of verifying account accuracy by matching internal records with external statements and supporting documentation.
P&L Review
A P&L review is an evaluation of the profit and loss statement to assess financial performance, cost structure, and profitability.
Financial Statements
Financial statements are core reports, including the balance sheet, income statement, and cash flow statement, that summarize a company’s financial position and results.
A/R (Accounts Receivable)
Accounts receivable represents outstanding customer invoices for goods or services that have been delivered but not yet paid.
Collections
Collections is the process of tracking and recovering unpaid customer balances to improve cash flow.
A/P (Accounts Payable)
Accounts payable refers to amounts a business owes to vendors or suppliers for goods and services received.
Payroll
Payroll is the administration of employee compensation, including wages, salaries, bonuses, and required tax withholdings.
Cash Flow Management
Cash flow management involves monitoring and optimizing cash inflows and outflows to ensure operational stability.
Budgeting
Budgeting is the creation of a financial plan that outlines expected revenues, expenses, and resource allocation over a defined period.
Forecasting
Forecasting is the projection of future financial performance based on historical data, trends, and assumptions.
Resource Planning
Resource planning focuses on allocating financial and operational resources to support business growth and efficiency.
Insurance Management
Insurance management is the oversight of business insurance policies to ensure appropriate coverage and risk protection.
Financial Analysis and Advisory
Financial analysis and advisory provides strategic insights and recommendations to support informed financial decision-making.
Pro Forma Statement
A pro forma statement is a forward-looking financial statement that models expected future financial results under specific assumptions.
Board Updates, Shareholder Meetings
Board updates and shareholder meetings involve preparing and presenting financial information to support governance and strategic alignment.
Incentive Plan Management
Incentive plan management is the design and administration of compensation plans that align employee incentives with company performance.
409A Valuations
409A valuations are independent assessments of a company’s common stock value to ensure compliance with IRS requirements for equity compensation.
1099 and Sales Tax Reporting
1099 and sales tax reporting involves preparing and filing required tax forms for contractors and ensuring compliance with applicable sales tax regulations.
Business Tax Returns
Business tax returns are the preparation and filing of federal, state, and local tax returns for business entities.
