Money glossary
49 money and business terms in plain English.
A
- Accounts payable
- Money your business owes to suppliers for goods or services you have received but not yet paid for.
- Accounts receivable
- Money customers owe your business for goods or services you have delivered but not yet been paid for.
- Amortisation
- Paying off a loan through regular payments that cover both interest and part of the amount borrowed.
- Asset
- Anything the business owns that has value, such as cash, stock, equipment or money owed to it.
B
- Balance sheet
- A snapshot of what a business owns (assets), owes (liabilities) and the owner's share (equity) on a given date.
- Break-even point
- The level of sales at which total income equals total costs, so the business makes neither a profit nor a loss.
- Budget
- A plan for how money coming in will be spent, saved or invested over a period.
- Burn rate
- How quickly a business spends its cash each month when costs are higher than income.
C
- Capital
- Money or assets put into a business to start or grow it.
- Cash flow
- The movement of money into and out of a business or household over a period.
- Cash-flow forecast
- An estimate of the cash you expect to receive and pay out in coming weeks or months.
- Collateral
- An asset a borrower pledges to a lender, which the lender can claim if the loan is not repaid.
- Compound interest
- Interest earned on both the original amount and the interest already added, so growth speeds up over time.
- Cost of goods sold (COGS)
- The direct cost of the products you sold, such as materials, stock and direct labour.
- Credit score
- A number lenders use to judge how likely you are to repay borrowed money, based on your credit history.
D
- Debt avalanche
- Paying off debts in order of highest interest rate first, which usually saves the most interest.
- Debt snowball
- Paying off debts in order of smallest balance first, which gives quick wins and motivation.
- Depreciation
- The gradual fall in value of an asset, such as a vehicle or machine, recorded as a cost over its useful life.
- Diversification
- Spreading money across different investments so one poor result does less damage.
E
- Emergency fund
- Savings set aside only for unexpected costs or a loss of income, usually three to six months of essentials.
- Equity
- The owner's share of a business: what it owns minus what it owes.
- ETF
- Exchange-traded fund: a basket of investments, such as shares or bonds, that trades on a stock exchange like a single share.
- Exchange rate
- The price of one currency in terms of another.
- Expense ratio
- The yearly fee a fund charges, shown as a percentage of the money you have invested in it.
F
- Fixed costs
- Costs that stay the same whatever you sell, such as rent, salaries and insurance.
G
- Gross margin
- Revenue minus the cost of goods sold, shown as a percentage of revenue.
- Gross profit
- Revenue minus the cost of goods sold, before operating expenses.
I
- Inflation
- The general rise in prices over time, which reduces what each unit of money can buy.
- Interest rate
- The cost of borrowing money, or the reward for saving it, shown as a percentage per year.
- Invoice
- A document asking a customer to pay for goods or services, showing what was supplied, the amount and the due date.
L
- Liability
- Anything the business owes, such as loans, unpaid bills or taxes.
- Liquidity
- How quickly an asset can be turned into cash without losing value.
M
- Markup
- The amount added to cost to set a price, shown as a percentage of cost.
- Microfinance
- Small loans and financial services for people and businesses that banks often do not serve.
- Mobile money
- A way to store, send and receive money using a mobile phone account.
N
- Net profit
- What is left after all costs, including operating expenses, interest and tax, are taken from revenue.
- Net worth
- Everything you own minus everything you owe.
O
- Operating expenses
- The day-to-day costs of running a business, such as rent, wages, marketing and utilities.
- Overdraft
- An arrangement that lets you spend more than is in your bank account, up to a limit, usually at a high interest rate.
P
- Payment terms
- The agreed time a customer has to pay an invoice, for example 30 days.
- Profit and loss statement
- A report of revenue, costs and profit over a period, also called an income statement.
R
- Retained earnings
- Profits kept in the business rather than paid out to owners.
- Return on investment (ROI)
- The gain from an investment compared with its cost, shown as a percentage.
- Revenue
- The total money earned from sales before any costs are taken off.
- Rule of 72
- A shortcut: divide 72 by the yearly return to estimate how many years it takes money to double.
S
- Sinking fund
- Money saved bit by bit for a known future cost, such as equipment replacement or school fees.
U
- Unit economics
- The revenue and costs linked to selling one unit or serving one customer.
V
- Variable costs
- Costs that rise and fall with how much you sell, such as materials and delivery.
W
- Working capital
- Current assets minus current liabilities: the money available to run the business day to day.