Term Explanation
Accounting Period The period of time over which financial result, i.e. profit or loss, of a business operation, is calculated.
Accrued expenses An expense, which has been incurred but not yet paid for.
Amortisation An accounting method, whereby an expenditure incurred or an income earned is accounted over a longer period of time instead of in the year in which the expenditure is incurred or income has accrued, depending upon the long-term impact of such expenditure or income.
Book value Total assets minus total liabilities of a business. This is often expressed in the form of book value of share, which means the value of total assets minus total liabilities, divided by the total number of shares. This is also called net worth.
Break-even point Refers to the point of equilibrium where the cost incurred and income earned in a business activity is the same and there is no profit or loss. Breakeven point is often expressed as the number of units that must be sold to produce revenues exactly equal to expenses. Sales above the breakeven point produce a profit; below cause a loss.
CAGR This refers to the Compounded Annual Growth Rate, i.e.the mean annual growth of a business over a given period of time.
Cash flow The statement showing the actual net cash generated or utilised through various activities of a business, showing the opening and closing cash balances.
Contingent liability Expenditure that may have to be incurred only in the event of an incident happening; for example, in the case of a legal dispute, an expenditure or outgo may or may not be incurred depending upon whether the verdict goes against or in favour of the Company.
Current Asset Cash and other forms of asset, which can be converted or which are expected to be converted into cash within a period of next 12 months.
Current Liabilities Those liabilities which will fall due or which are expected to be paid within a period of next 12 months.
Depreciation Estimated reduction in the value of an asset used in the business. This is arrived by dividing the value of the asset by the expected number of years of useful life of that asset. In other words, this is the proportion of the cost of an asset written off every year over a given period of time.
Dividend Distribution of the post-tax profits of a business to the shareholders. Interim Dividend refers to the dividend paid in the middle of accounting period, and Final Dividend refers to the dividend declared after finalisation of accounts and ascertainment of the net profit during that period.
Earnings per share A company’s net profit after taxes for an accounting period, divided by the average total number of shares outstanding during that period.
EBITDA Earnings of a company before considering Interest costs, Tax expenses, Depreciation and Amortisation charges.
Financial year An accounting period usually commencing from April 1st and ending on March 31st next year.
Fixed cost a cost that does not change as the volume of production changes (in the short run.)
Intangible Asset An asset, which is not tangible but which has a value of its own, such as trademark, copyright, patent, etc.
Goodwill Normally, the notional value of an intangible asset, such as reputation, brand, loyalty of customers, etc.
Minority Interest The share of the consolidated profit or loss of a company, which is attributable to that part of the non-controlling ownership in the subsidiary, which is different from that of the company concerned.
Non-Current Asset All forms of assets other than current assets, i.e. those assets which cannot be converted or which are not expected to be converted into cash within the next 12 months.
Non-Current Liabilities All those liabilities other than Current Liabilities, i.e. those liabilities which will not fall due or which are not expected to be paid within the next 12 months.
Prepaid expenses Expenses relating to a future period already paid during an earlier accounting period.
Price-earnings (P/E) ratio The ratio of the Earning-per-share to the market price of that share.
Retained earnings Profits not distributed to shareholders as dividends, i.e. the accumulation of a company’s profits less any dividends paid out.
Risk The possibility of loss or a negative impact.
Tangible Asset Usually an asset that has physical characteristics, such as land, building, machinery, etc.
Trade payable Amounts owed by the company to others for the goods supplied or services rendered by them to the Company.
Trade receivable Amounts owed to the company by others for the goods supplied or services rendered by the Company to them.
Variable cost A cost that varies in proportion to the increase or decrease in the volume of production.
Year-on-year The performance of a business operation in a particular year as compared with that of the previous year.