Finance Glossary

Browse 112 finance terms defined in plain English, from the cultural dictionary of computing.

112 Finance Terms

Accrued Revenue
Revenue that has been earned through delivered goods or services but has not yet been billed or collected in cash. It appears in accrual accounting so...
Aftermarket
The market where securities trade after their initial issuance, such as the public trading that follows an IPO. In startup contexts it can also refer to...
Asset-Light
Describing a business that minimizes ownership of physical infrastructure, inventory, or other capital-heavy assets, often relying more on software, networks,...
AUM
Assets under management, meaning the total market value of assets a fund, advisor, or financial platform manages on behalf of clients or investors. It is a key...
Base Case
The most likely planning scenario used in forecasts and decision models, typically positioned between optimistic and downside cases. Investors and operators...
Basis Point
One one-hundredth of a percentage point, used in finance to describe small rate or margin changes precisely. For example, 50 basis points equals 0.50...
Billing Cycle
The recurring time interval at which customers are invoiced or charged, such as monthly, quarterly, or annually. Billing cycle design affects cash flow,...
Blended Rate
An average rate that combines multiple pricing tiers, roles, or cost structures into one effective number. It is common in agencies, services businesses, and...
Break-Even
The point where revenue equals costs, so the business is no longer losing money on a net basis. Founders and boards track break-even closely when capital is...
Bridge Loan
Short-term debt used to extend runway until a larger financing event, sale, or other capital source closes. Bridge loans are often emergency tools rather than...
Burn Multiple
A capital efficiency metric calculated as net burn divided by net new ARR. A burn multiple of 1x means you spend $1 to generate $1 of new ARR (excellent)....
Burn Rate
The rate at which a company spends its cash reserves before generating positive cash flow. Gross burn is total monthly spending; net burn subtracts revenue....
Business Plan
A document or model describing how a business will operate, grow, compete, and finance itself over time. Early startups may keep it lightweight, but investors...
CAC Payback
The time required for gross profit from a customer to recover the cost of acquiring that customer. Shorter CAC payback periods generally make scaling easier...
Calendar Year
A reporting or planning year that runs from January 1 through December 31, as opposed to a company-specific fiscal year. The distinction matters in budgeting,...
Call Option
A contractual right to buy an asset, share, or security at a specified price under specified conditions. In startup finance, call-option concepts can appear in...
Capital Call
A request from a fund to its limited partners to provide committed capital so the fund can make investments or cover obligations. Founders encounter the term...
Capital Efficiency
How effectively a company converts invested capital into growth, revenue, or durable business value. Capital-efficient startups grow meaningfully without...
Capital Expenditure
Money spent on long-lived assets such as equipment, facilities, or infrastructure that are capitalized rather than treated as immediate operating expense....
Cap Table
Cap Table, short for capitalization table, is a detailed record of all equity ownership in a company, showing who owns what percentage, what type of securities...
Cash Burn
The rate at which a company is spending more cash than it brings in, usually measured monthly. Cash burn is one of the clearest signals of how much runway...
Cash Flow
The movement of cash into and out of a business over time. A company can look profitable on paper and still struggle if cash flow timing is poor.
Cash Runway
The amount of time a company can continue operating before running out of cash, based on current burn and expected inflows. Runway determines how urgently a...
CFO
Chief financial officer, the executive responsible for finance, accounting, planning, cash management, and often investor-facing financial operations. In...
Cloud Cost
The money spent on cloud infrastructure and managed services, often discussed in relation to efficiency, surprise bills, and scaling habits. In startup and ops...
COBOL
Common Business-Oriented Language, one of the oldest programming languages still in active use. COBOL runs an estimated 95% of ATM transactions and 80% of...
Compound Growth
Growth that builds on prior growth so gains accumulate multiplicatively over time rather than linearly. Startups care about compounding because small rate...
Contingent Valuation
A valuation approach or deal concept where final value depends on future conditions, milestones, or outcomes rather than being fixed entirely upfront. It often...
Contribution Margin
Revenue minus variable costs directly associated with delivering that revenue, showing how much is left to cover fixed costs and profit. It is a key lens for...
Cost Center
A part of the organization that incurs costs but is not directly measured as generating revenue, such as legal, IT, or internal tooling. Calling something a...
Cost Center Culture
A workplace culture where a team is viewed primarily as an expense to control rather than a source of leverage, growth, or strategic value. Cost center culture...
Cost of Goods Sold
The direct costs tied to producing or delivering what the company sells, such as hosting, manufacturing, support delivery, or payment processing depending on...
Cost of Revenue
The costs directly associated with generating recognized revenue, often including support, hosting, services delivery, and infrastructure. It is closely...
Customer Acquisition Cost
The average total cost of acquiring a new customer, usually including sales and marketing expenses over a defined period. Customer acquisition cost is one of...
Dead Cat Bounce
A brief recovery in a declining business, stock, or metric that looks like improvement but does not represent a true turnaround. The phrase is blunt but widely...
DeFi
Decentralized finance — an ecosystem of financial applications built on blockchains that replicate traditional banking services (lending, borrowing, trading,...
Down Market
Referring to a weaker market environment marked by lower valuations, reduced demand, tougher fundraising, or slower economic conditions. Startups feel down...
EBITDA
Earnings before interest, taxes, depreciation, and amortization, a financial metric used to approximate operating performance before certain non-operational...
Enterprise Value
A valuation measure that reflects the total value of a business, typically including equity value plus debt and minus cash. It is often used in acquisitions...
Escrow
An arrangement where money, shares, code, or other assets are held by a neutral third party until specified conditions are satisfied. In startup deals, escrow...
Exit Multiple
The multiple of revenue, EBITDA, or invested capital associated with an eventual sale or public-market outcome. Investors model exit multiples to estimate...
Extended Runway
A longer operating timeline before cash runs out, usually achieved through fundraising, cost reductions, or stronger revenue collection. Boards often push for...
Fee Structure
The way charges are organized, such as flat fees, percentage fees, setup fees, or performance-based components. Fee structure often matters as much as headline...
Fintech
A broad category covering technology-enabled financial services such as payments, lending, banking, investing, insurance, and financial infrastructure. Fintech...
Fixed Cost
A cost that does not change directly with short-term sales or usage volume, such as rent, salaries, or long-term software commitments. Fixed costs shape how...
Forecasting
The process of projecting future revenue, costs, hiring, demand, or other business outcomes based on assumptions and current data. Good forecasting is...
Free Cash Flow
Cash generated by the business after operating expenses and capital expenditures, showing what remains available for reinvestment, debt service, or...
Funding Culture
The habits and values an organization or ecosystem develops around raising, spending, and talking about funding. In startup culture, funding culture shapes...
Future Valuation
The expected value a company may justify in a later financing or exit based on projected growth, market conditions, and milestones. Founders and investors use...
G&A
General and administrative expense, covering overhead functions such as finance, legal, HR, and office costs that support the company broadly rather than...
Gross Burn
The total amount of cash a company spends in a period before subtracting incoming revenue. It is often contrasted with net burn, which accounts for revenue...
Gross Margin
Revenue minus direct costs, expressed as a percentage of revenue, showing how much remains before overhead and operating expenses. Gross margin is a key signal...
Gross Revenue
Total revenue before certain deductions such as refunds, discounts, or partner payouts, depending on context and accounting treatment. Teams use the term when...
Growth Capital
Capital raised specifically to accelerate expansion rather than merely survive, often used for hiring, new markets, product scale, or acquisitions. It usually...
Guidance
Management's communicated expectation for future business performance, such as revenue, margin, or growth, typically given to investors, boards, or public...
Holding Company
A parent company created primarily to own shares or assets in other companies rather than to operate the underlying business directly. Holding-company...
Internal Rate of Return
A financial metric estimating the annualized effective return of an investment based on the timing of cash outflows and inflows. Venture funds use IRR to judge...
Investor Relations
The function responsible for managing communication and relationships with investors, especially in public or late-stage private companies. Investor relations...
IOI
Usually short for indication of interest, a preliminary non-binding statement that a buyer or investor may be interested in a transaction on broad terms. It...
IRR
Short for internal rate of return, a time-sensitive measure of investment performance. In venture, IRR matters because the timing of exits changes the...
Leverage
The ability to get disproportionately large results from a given amount of effort, capital, product functionality, or distribution access. In startup...
Liquidation
The process of winding down a company and distributing or selling its assets, often because it cannot continue as a going concern. Liquidation also appears in...
Liquidity
The ability to turn ownership, assets, or investments into cash without major friction or delay. In startup life, liquidity usually refers to whether employees...
Magic Number Startup
A reference to the SaaS magic number, a quick efficiency metric comparing recurring-revenue growth to prior sales and marketing spend. Investors use the magic...
Management Buyout
A transaction where the existing management team acquires ownership of the business, often with outside financing. It is more common in later-stage or...
Management Fee
The fee paid by investors to fund managers to cover operating costs of managing the fund, typically expressed as a percentage of committed or invested capital....
Market Cap
Market capitalization, the total equity value of a public company calculated as share price multiplied by shares outstanding. It is a common shorthand for...
Market Maker
A participant that provides continuous buy and sell quotes to support liquidity in a market. In startup-adjacent finance, market makers show up especially in...
MBO
Usually shorthand for management buyout, where the management team acquires the business. In some operating contexts MBO can also mean management by...
Monthly Burn
The amount of cash a company spends in a typical month, often used to estimate runway and financing urgency. Teams sometimes mean gross burn and sometimes net...
Net Burn
The net amount of cash a company loses in a period after accounting for revenue or other operating inflows. Net burn is often more useful than gross burn for...
Net Income
The bottom-line profit remaining after all expenses, taxes, interest, and other costs are subtracted from revenue. Net income is a core accounting measure,...
Net Revenue
Revenue remaining after deducting items such as refunds, discounts, returns, or partner payouts as defined by the business. It provides a more realistic view...
Operating Expense
An expense associated with running the business, such as payroll, rent, marketing, or software, excluding costs treated as cost of revenue or capital...
Operating Leverage
The ability of a business to grow revenue faster than operating costs, improving margins as scale increases. Software investors care deeply about operating...
Operating Margin
Operating income expressed as a percentage of revenue, showing how much profit remains after normal operating costs but before interest and taxes. It is a core...
OpEx
Short for operating expense, referring to the ongoing costs of running the business. Finance teams use OpEx in planning, margin analysis, and board...
Payback Period
The amount of time required for an investment or acquisition cost to be recovered through resulting cash flow or gross profit. In SaaS, payback period is often...
P&L
Short for profit and loss statement, the financial report showing revenue, costs, and profit over a period. Teams also use 'owning the P&L' to mean being...
PnL
A common shorthand spelling of profit and loss statement, showing revenue, expenses, and profit over a period. Teams also use 'PnL ownership' to mean...
Primary Market
The market where new securities are issued and sold directly by the company or issuer, as opposed to secondary trading between existing holders. In startup...
Profitability
The state of generating profit rather than loss over a defined period or on a particular unit of business. Startups often trade off profitability against...
Profit Center
A part of the business evaluated primarily on the profit it generates rather than just on cost or support function. Treating a unit as a profit center changes...
Profit Margin
Profit expressed as a percentage of revenue, showing how much of each dollar remains after costs at the relevant level are removed. The exact meaning depends...
Pro Forma
Adjusted or projected financial reporting that shows what numbers would look like under specified assumptions, such as after an acquisition or excluding...
Public Company
A company whose shares are publicly traded and therefore subject to exchange rules, market scrutiny, and extensive disclosure obligations. Becoming a public...
Public Market
A market where securities can be bought and sold openly by public investors, typically through stock exchanges. For startups, the public market often...
Public Offering
A sale of securities to the public, including IPOs and certain follow-on offerings. In startup contexts, the phrase most often points to the moment a private...
Quick Ratio
A financial ratio used in different contexts, often either as a liquidity measure in accounting or, in SaaS, as a shorthand comparing new and expansion revenue...
Revenue
The income a company earns from selling products or services, recognized according to accounting rules rather than simply when cash arrives. Revenue is the...
Revenue Growth
The increase in revenue over time, often measured monthly, quarterly, or annually. Revenue growth matters because it reflects commercial progress more directly...
Revenue Multiple
A valuation measure expressed as enterprise value or market value divided by revenue, often used for software and growth companies where profit may still be...
Revenue Recognition
The accounting process of determining when revenue is officially recorded as earned rather than just when cash is received. In subscription and services...
Risk Capital
Capital invested with the understanding that the probability of loss is meaningful because the opportunity is uncertain but potentially high return. Venture...
ROI
ROI, or Return on Investment, is a financial metric that measures the profitability of an investment by comparing the gain or loss relative to its cost,...
Rolling Forecast
A forecast that is updated continuously by extending the planning horizon forward as each period closes, rather than being fixed once per year. Rolling...
Rule of 40
A software-company heuristic stating that revenue growth rate plus profit margin should total around 40 or more for a healthy balance of growth and efficiency....
Run Rate
A projected annualized level based on current short-term performance, such as monthly revenue multiplied forward. Run rate is useful for quick framing but can...
Runway
Runway is the amount of time a startup can continue operating before it runs out of money, assuming its current burn rate (monthly spending minus revenue)...
SaaS Metric
Any metric commonly used to understand the health of a subscription software business, such as ARR, net retention, CAC payback, gross margin, or churn. The...
Special Purpose Vehicle
A separate legal entity created for a specific investment, transaction, or asset-holding purpose. In startup fundraising, special purpose vehicles are often...
SPV
Short for special purpose vehicle, a separate entity used to hold an investment or structure a transaction. SPVs are common in venture syndicates and secondary...
Startup Metric
Any measurement commonly used to understand startup health, such as burn, runway, activation, retention, ARR, or CAC. The phrase is generic, but in practice...
Top Line
Revenue, especially as the top figure on an income statement before costs and profit are considered. Startup discussions often contrast top-line growth with...
Unit Economics
The revenue and costs associated with a single unit (customer, transaction, or subscription). Key metrics: LTV (Customer Lifetime Value), CAC (Customer...
Unlevered
Describing a company, asset, or financial analysis that excludes the effects of debt leverage. In startup and finance discussions, unlevered views are useful...
Valuation
The value assigned to a company in a financing, transaction, or internal analysis. In startups, valuation reflects not just current performance but also...
Valuation Multiple
A ratio used to value a company by comparing value to a financial metric such as revenue, EBITDA, or earnings. Valuation multiples help benchmark companies,...
Variable Cost
A cost that changes with output, usage, or sales volume, such as payment fees, shipping, usage-based infrastructure, or labor directly tied to delivery....
Virtual CFO
A part-time or outsourced finance leader who provides CFO-level support without joining full-time. Startups often use a virtual CFO before their complexity...
Working Capital
Current assets minus current liabilities, representing short-term liquidity available to operate the business. Working capital matters especially in companies...
Write-Off
An accounting recognition that an asset, receivable, or investment has lost value or should no longer be carried at its prior amount. In startup contexts,...

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