Acronyms and definitions

ABC

Activity-Based Costing: allocates overheads based on activities driving costs

COGS

Cost of Goods Sold: direct costs attributable to production of goods sold

CVP

Cost-Volume-Profit: analysis of how changes in costs and volume affect profit

ROI

Return on Investment: measures profitability relative to investment cost

KPI

Key Performance Indicator: metrics used to evaluate performance

OPEX

Operating Expenses: day-to-day expenses not directly tied to production

CAPEX

Capital Expenditure: funds used to acquire or upgrade physical assets

NPV

Net Present Value: value of future cash flows discounted to present value

IRR

Internal Rate of Return: discount rate that makes NPV of cash flows zero

BEP

Break-Even Point: level of sales at which total revenue equals total costs

PPV

Purchase Price Variance: difference between standard and actual purchase price

TQM

Total Quality Management: continuous improvement approach to operations

FRS

Financial Reporting Standard: UK GAAP standards issued by FRC

FRC

Financial Reporting Council: UK regulator for accounting and auditing

UK GAAP

UK Generally Accepted Accounting Practice: framework for financial reporting

IFRS

International Financial Reporting Standards: global standards adopted by listed UK companies

IAS

International Accounting Standards: predecessor to IFRS, still in use

FS

Financial Statements: includes balance sheet, income statement, cash flow, etc.

GL

General Ledger: central repository of accounting data

AR

Accounts Receivable: money owed to the company by customers

AP

Accounts Payable: money the company owes to suppliers

BS

Balance Sheet: snapshot of assets, liabilities, and equity

IS

Income Statement: also known as P&L, shows revenue and expenses

P&L

Profit and Loss Statement: measures profitability over a period

HMRC

His Majesty’s Revenue and Customs: UK tax authority

CT

Corporation Tax: tax on company profits in the UK

VAT

Value Added Tax: indirect tax on goods and services

EPS

Earnings Per Share: net profit divided by number of shares

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortisation: proxy for operating performance

ROE

Return on Equity: net income divided by shareholder equity

ROA

Return on Assets: net income divided by total assets

GPM

Gross Profit Margin: gross profit as a % of revenue

OPM

Operating Profit Margin: EBIT as a % of revenue

NPM

Net Profit Margin: net income as a % of revenue

CR

Current Ratio: current assets divided by current liabilities

QR

Quick Ratio: (cash + receivables) divided by current liabilities

D/E

Debt-to-Equity Ratio: total liabilities divided by shareholder equity

ICR

Interest Coverage Ratio: EBIT divided by interest expense

WC

Working Capital: current assets minus current liabilities

DSO

Days Sales Outstanding: average time to collect receivables

DPO

Days Payable Outstanding: average time to pay suppliers

DIO

Days Inventory Outstanding: average time to sell the stock you hold

CCC

Cash Conversion Cycle: DIO + DSO − DPO

P/E

Price-to-Earnings Ratio: share price divided by EPS

CAB

Cash At Bank: the money your business holds across its bank accounts

CaR

Cash Ratio: cash and cash equivalents divided by current liabilities

CRW

Cash Runway: the number of months your business can keep operating at its current spending rate (Cash At Bank ÷ Net Burn Rate)

FOWC

Forecasting Operating Working Capital: Cash At Bank + incomings − outgoings

GBR

Gross Burn Rate: the total amount your business spends each month

NBR

Net Burn Rate: how much cash your business loses each month after the revenue coming in

GP

Gross Profit: revenue minus cost of sales

NP

Net Profit: profit after all expenses, interest and tax

OP

Operating Profit: profit from core operations, before interest and tax

REV

Revenue: total income from sales, before any costs are taken out

ARR

Annual Recurring Revenue: predictable revenue from subscriptions

MRR

Monthly Recurring Revenue: monthly version of ARR

CAC

Customer Acquisition Cost: cost to acquire a new customer

LTV

Lifetime Value: projected revenue from a customer over time

Churn

Customer attrition rate: % of customers lost over a period

ARPU

Average Revenue Per User: total revenue divided by number of users

NPS

Net Promoter Score: customer loyalty metric

CSAT

Customer Satisfaction Score: feedback-based performance metric

CTR

Click-Through Rate: % of users who click on a link or ad

CVR

Conversion Rate: % of users who complete a desired action

FCR

First Contact Resolution: % of issues resolved on first contact

OTIF

On-Time In-Full: delivery performance metric

EBITDA Margin

EBITDA as a % of revenue: operating efficiency indicator