Business glossary

Simple, clear definitions of key business terms — no jargon, just what you need to know.

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Accounts payable (AP): Money a business owes to suppliers for goods or services received.
Accounts receivable (AR): Money owed to a business by customers for goods or services delivered.
Acquisition: The process of one company purchasing another company or its assets.
Amortization: The gradual reduction of a debt or intangible asset over time.
Angel Investor: A high-net-worth individual who provides early-stage funding to startups in exchange for equity.
Assets: Resources of value owned by a business, such as cash, inventory, and real estate.
Asset turnover ratio: A financial metric that measures how efficiently a company uses its assets to generate revenue.
Audit: An independent review of financial records to ensure accuracy and compliance.

Balance sheet: A financial statement that provides a snapshot of a company's assets, liabilities, and equity.
Bankruptcy: A legal process where a business declares it cannot pay its debts.
Benchmarking: Comparing business performance against industry standards or competitors.
Bootstrapping: Funding a business using personal savings and revenue instead of external investment.
Break-even analysis: The calculation of the point where total revenue equals total costs.
Business Incubator: A program that supports startups with mentorship, workspace, and funding.
Business Model: The framework outlining how a company creates, delivers, and captures value.
Burn Rate: The rate at which a company spends its cash reserves before becoming profitable.

Capital expenditure (CapEx): Money spent on acquiring, upgrading, or maintaining physical assets.
Capital Gains: The profit from selling an asset or investment.
Cash Flow: The movement of money in and out of a business.
Churn Rate: The percentage of customers who stop using a product or service over a given time.
Competitive Advantage: The unique value that gives a business an edge over its competitors.
Consumer price index (CPI): A measure of inflation based on the price changes of consumer goods.
Contingency Plan: A strategy to handle potential risks or unforeseen events.
Cost of Goods Sold (COGS): The direct costs of producing goods or services.
Customer lifetime value (CLV): The total revenue a business expects to earn from a customer during their relationship.

Debt Financing: Raising capital through loans that must be repaid with interest.
Depreciation: The reduction in an asset's value over time.
Differentiation Strategy: A business strategy focused on making a product or service unique.
Dividends: Payments made to shareholders from company profits.
Due Diligence: The research and analysis conducted before making a business decision or investment.
Dynamic Pricing: A strategy where prices change based on demand, competition, or market conditions.

Earnings before interest and taxes (EBIT): A measure of a company's profitability before interest and tax expenses.
Earnings per share (EPS): A financial metric indicating the portion of profit allocated to each share of stock.
Economies of Scale: Cost savings achieved when production increases.
Equity: Ownership in a company, typically in the form of shares.
Exit Strategy: A plan for an entrepreneur to leave a business, such as selling it or going public.

Fixed Costs: Business expenses that do not change with production levels, such as rent.
Franchise: A licensing arrangement where an individual (franchisee) operates a business using the branding and systems of an established company (franchisor).
Funding Rounds: Stages of investment received by a startup (e.g., Seed, Series A, B, C).
Forecasting: The process of predicting future business performance based on historical data.
Freemium Model: A pricing strategy where basic services are free, but premium features require payment.

Gross domestic product (GDP): The total value of goods and services produced in a country.
Gross Margin: The percentage of revenue remaining after deducting COGS.
Growth Hacking: Marketing strategies focused on rapid and low-cost business growth.

Holding Company: A business entity that owns shares in other companies instead of producing goods or services itself.
Human Capital: The skills, knowledge, and experience possessed by employees.

Income Statement: A financial report showing a company's revenues, expenses, and profits over a period.
Inflation: The general increase in prices over time.
Initial public offering (IPO): The first time a company offers its shares to the public.
Intellectual property (IP): Legal protections for creative works, including patents, trademarks, and copyrights.

Joint venture (JV): A partnership between two or more businesses for a specific project or goal.

Key performance indicators (KPIs): Metrics used to measure a company's success.
Knowledge Transfer: The process of sharing business knowledge, skills, or technology between individuals or teams.

Leverage: Using borrowed funds to increase the potential return on an investment.
Liquidity: The ease with which an asset can be converted into cash.
Limited liability company (LLC): A business structure that provides liability protection to owners while allowing flexible taxation.

Market capitalization (Market Cap): The total market value of a company's outstanding shares.
Market Share: The percentage of total sales in an industry held by a company.
Minimum viable product (MVP): A basic version of a product with just enough features to attract early adopters.

Net Income: The profit remaining after all expenses are deducted from revenue.
Net Profit Margin: A financial metric showing what percentage of revenue is actual profit.
Non-Disclosure Agreement (NDA): A legal contract preventing parties from sharing confidential information.

Operating expenses (OPEX): The costs of running a business, excluding direct production costs.
Outsourcing: Hiring external parties to handle certain business tasks.

Partnership: A business structure where two or more people share ownership.
Private Equity: Investment in private companies, not traded on public markets.
Profit and loss statement (P&L): A financial document detailing revenue, expenses, and profits over a period.

Qualitative analysis: Business evaluation based on non-numerical factors such as brand perception.
Quantitative analysis: Business evaluation using numerical and statistical data.

Return on investment (ROI): A measure of the profitability of an investment.
Risk management: The process of identifying and mitigating business risks.

Scalability: The ability of a business to grow without significantly increasing costs.
Seed funding: The initial capital raised to start a business.
Supply chain management: Overseeing the production, distribution, and delivery of goods.

Target Market: The specific group of consumers a business aims to serve.
Total addressable market (TAM): The total revenue opportunity for a product or service.

Unsecured loan: A loan not backed by collateral.
Venture capital (VC): Investment from firms specializing in high-growth startups.
Working capital: The difference between current assets and liabilities.
Zero-based budgeting (ZBB): A budgeting approach where all expenses must be justified each period.

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