Glossary

A

Accounts Payable: Costs incurred by the firm, typically for inventory, that are unpaid to vendors/suppliers
Accounts Payable Turnover: Purchases / Average Accounts Payable
Accounts Receivable: Revenues earned by the firm that are uncollected from cusomters
Accounts Receivable Turnover: Revenue / Average Accounts Receivable
Accrued Employee Compensation: Compensation due within 12 months of the balance sheet date (i.e., stock-based compensation, bonuses)
Accumulated Other Comprehensive Loss: Unrealized gains or losses on various corporate activities
Additional Paid in Capital: The majority of capital provided to the firm by shareholders, the remainder classified as Common Stock
Adjusted Operating Profit: Operating income excluding one-time items
Adjusted Revenue: Revenue excluding one-time items
Assets: Resources owned by the company

B

Backlog: Contracts for products/services signed by, but not yet delivered to, the customer
Balance Sheet: Financial statement of financial position of a firm (e.g., Assets = Liabilities + Shareholders’ Equity)
Beginning Inventory: Amount of inventory at the beginning of the fiscal period
Book-to-Bill Ratio: Amount of contracts won during a given period divided by amount of contracts recorded as revenue during a given period

C

Cash Conversion Cycle (CCC): DSO + DIO – DPO = CCC
Capital Expenditures (CapEx): Investments in long-term assets required to either grow the business or maintain routine operations
Cash Flows from Financing: Cash generated from the issuance/retirement of debt and/or equity, as well as dividends paid
Cash Flows from Investing: Cash generated from the purchase/sales of long-term assets
Cash Flows from Operations (CFFO): Cash generated from daily operations
Common Stock: A portion of the capital contributed by shareholders to the company, the other being Additional Paid in Capital
Contract Assets: Contract assets reflect revenue recognized and performance obligations satisfied or partially satisfied in advance of customer billing
Contract Liabilities: Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract – not yet recorded as Revenue
Cost of Goods Sold (COGS): Accumulated direct costs of products/services provided to customer
Credit Rating: Assessment of the firm’s creditworthiness by a leading rating agency (e.g., Moody’s Investor Service, Standard & Poor’s, and Fitch Rating)
Current Assets: Assets to be utilized in the ensuing 12 months
Current Liabilities: Liabilities to be retired in the ensuing 12 months
Customer Financing Assets: Assets reported by the company but are essentially paid for by the customer (e.g., pieces of equipment or buildings)

D

Days Inventory Outstanding (DIO): 365 / Inventory Turnover
Days Payable Outstanding (DPO): 365 / Accounts Payable Turnover
Days Sales Outstanding (DSO): 365 / Accounts Receivable Turnover
Diluted Earnings Per Share: Net income attributable to shareholders / diluted shares outstanding
Diluted Shares Outstanding: Shares owned by investors, assuming conversion of all potentially dilutive securities (i.e., stock-based compensation, among others)
Discounted Cash Flows (DCF): Present value of estimated cash flows through eternity

E

EBITDA: Earnings before interest, taxes, depreciation, & amortization
EBITDA Margin: EBITDA divided by revenue
Ending Inventory: Amount of inventory at the end of the fiscal period
Enterprise value: Market capitalization plus net debt
EV/EBITDA Ratio: Enterprise value / estimated EBITDA

F

Finance Lease: Leased assets classified as a Finance Lease
Fixed Assets: Property, Plant, and Equipment
Free Cash Flow (FCF): Discretionary cash flows a company generates (e.g., CFFO – CapEx)
Free Cash Flow Yield: FCF / market capitalization
Future Benefit and Post-Retirement Obligations: Amount of pension liability which exceeds pension assets

G

Goodwill: Difference between assets minus the fair value of liabilities of the acquired firm
Gross Profit: Revenue minus COGS
Gross Margin: Gross profit divided by revenue

I

Income Statement (P&L): Financial statement that highlights Revenue minus Expenses for a given period
Intangible Assets: Trademarks, patents, customer relationships, collaboration assets, exclusivity assets, and developed technology
Interest Coverage Ratio: EBITDA / Interest Expense
Interest Expense: Amount paid on borrowed capital (e.g., loans)
Internal Rate of Return (IRR): Estimated or actual rate of return earned on an investment
Inventory: Accumulated costs of items to be sold to customers
Inventory Turnover: Purchases / Average Inventory
Invested Capital: Average (Total assets – cash & equivalents – non-interest-bearing current liabilities)

L

Liabilities: Resources owed to external parties
Long-Term Debt: Debt due more than 12 months after the balance sheet date

M

Market Capitalization: Market value of equity (e.g., stock price x diluted shares outstanding)

N

Net Debt: Total debt – cash & equivalents
Net Income (Loss): Net profits earned after all expenses accounted for (Revenue minus Expenses)
Net Leverage Ratio: Net Debt / EBITDA
Net Operating Profit After Taxes (NOPAT): Operating income x (1 – Tax Rate)
Net Present Value (NPV): The difference between the present value of cash inflows and the present value of cash outflows over time.
Noncontrolling Interest: Amount of income (on Income Statement) or shareholders’ equity (on Balance Sheet) of an acquired firm not owned by the company

O

Operating Income: Revenue minus COGS minus SG&A
Operating Margin: Operating income divided by revenue
Operating Lease Liabilities: Amount owed for leased assets classified as operating leases
Operating Lease-of-Use Asset: Assets leased by the company classified as operating leases
Organic revenue/sales: Year-over-year change in revenue excluding impacts of mergers and acquisitions
Other Accrued Liabilities: Various liabilities not material enough in value to be listed separately (i.e., taxes payable)
Other Assets (Current and Long-Term): Various assets not material enough in value to be listed separately (i.e., bond issuance costs, deferred taxes, etc.)
Other Liabilities (Current and Long-Term): Various long-term liabilities not material enough in value to be listed separately

P

Payback Period: Initial investment / after-tax annual cash flows, expressed in years
P/E Ratio: Stock price / estimated diluted EPS
P/FCF Ratio: Stock price / estimated FCF
Pre-tax income: Revenue minus COGS minus SG&A minus interest expense + interest income
Pre-tax Margin: Pre-tax income divided by revenue
Pro Forma: Financial statements adjusted for extraordinary and/or non-operating items (e.g., one-time expenses, revenues, etc.)
Purchases: Purchases of raw material inventory

R

Retained Earnings: Sum of all net income (loss) minus dividends declared since the firm’s founding
Return on Assets (ROA): Net income / Average Total Assets
Return on Equity (ROE): Net income / Average Total Shareholders’ Equity
Return on Invested Capital (ROIC): NOPAT / Invested Capital
Revenue/Sales (Accounting Definition): Selling price x number of products sold or services provided that are earned in a given period

S

Sales (Non-Accounting Definition): Amount of goods or services sold to customers that will be delivered at a later date
Selling, General, and Administrative (SG&A or Operating Expenses): Expenses a firm incurs for running its daily operations, but that does not directly involve making a finished product or service to the customer (e.g., marketing, accounting, executive salaries)
Sell-Side Analysts: Analysts who estimate future revenue and diluted EPS of the company
Shareholders’ Equity: Net worth of the firm (e.g., Total Assets – Total Liabilities)
Short-Term Borrowings: Debt due within one year of balance sheet date (similar to “Long-Term Debt Currently Due”)
Statement of Cash Flows: Financial statement that reconciles the cash inflows and outflows of the Cash & Equivalents account on the Balance Sheet

T

Treasury Stock: Amount of shares repurchased by the company at market prices

U

Unearned ESOP Shares: Shares not yet earned under Employee Stock Ownership Plans

W

Weighted Average Cost of Capital (WACC): Minimum return required for a business or division, comprised of cost of debt and cost of equity
Working Capital: Current Assets minus Current Liabilities