Glossary of Financial Terms

We've put together a list of common business and finance terms to help you better understand the process of creating a business plan.

Business Plan

An overview in words and numbers of the history of a business and its owners, aims and objectives of the business, and proposals to achieve business goals.


Capital investments

Money used to purchase permanent fixed assets such as machinery, land or buildings.


Capital equity contribution

The money that you have invested in your business.


Cash Flow Forecast

An estimate of when (and how much) money will be received and paid out of a business.


Cash Receipts

Cash your business receives from selling your goods or services.


Cost of Goods/Services Sold

The direct costs involved to your business in making your products or offering your services.


Current Assets

Cash, receivables, inventory or any other asset which will convert to cash within one year.


Current Liabilities

Amounts owing such as payables, bank loans and other debt which will be paid within one year.


Depreciation

A charge to write off the cost of an asset over its useful life.

General & Administrative Expenses

The day-to-day costs of doing business, such as rent, hydro, advertising, insurance, etc.


Goodwill

An amount representing the excess paid for a company or its shares (or other assets) over its net asset value.


Gross Profit Margin

The difference between revenue and the costs of goods and services sold.

Net Income

Profit after all business expenses are deducted.


Operating Profit

The profit level before owner's drawings and business income taxes.


Owner's Drawings

Money paid to the owners of a business.

Payables

Money that your business owes to its suppliers.


Receivables

Money that is owed to your business by its customers.


Retained Earnings

Profits that are retained in your business rather than paid out as dividends.


Revenues (sales)

The dollars your business receives for the product or service produced or provided.


Shareholder's Equity

The net assets which belong to the owner(s) of the business.


Term Loan

A longer-term loan for equipment or other fixed asset purchases.