Reading the accounts

• Accounts receivableMoney customers owe for goods or services already delivered.
• Accrual accountingRecording revenue and costs when they are earned or incurred, rather than when cash moves.
• Adjusted earningsCompany-defined profit that excludes items management considers unrepresentative.
• AssetsEverything a company owns or controls that is expected to produce future value.
• Audit opinionThe auditor’s formal statement on whether the accounts fairly present the company’s position.
• Balance sheetA snapshot of what a company owns and owes at one moment in time.
• Book valueWhat the balance sheet says shareholders own: total assets minus total liabilities.
• BreakevenThe level of sales at which revenue exactly covers costs and profit is zero.
• Capital expenditureMoney spent buying or upgrading long-lived assets like property, equipment and technology.
• Cash burnThe rate at which a loss-making company is consuming its cash reserves.
• Cash conversion cycleHow many days pass between paying for inventory and collecting cash from the customer.
• Cash flow statementThe statement tracking actual cash moving in and out, split into operating, investing and financing.
• Cost of goods soldThe direct costs of producing the goods or services a company sold.
• Deferred revenueMoney already collected from customers for goods or services not yet delivered.
• Depreciation and amortisationSpreading the cost of a long-lived asset across the years it is used, rather than expensing it at once.
• DuPont analysisBreaking return on equity into margin, asset efficiency and leverage to see where it comes from.
• EBITDAEarnings before interest, tax, depreciation and amortisation — a rough proxy for operating cash generation.
• Earnings growthThe rate at which a company’s profits are increasing, usually measured per share and per year.
• Earnings per shareNet income divided by the number of shares — the profit attributable to each share you own.
• Economic profitProfit left after charging for the cost of the capital used to generate it.
• Fixed costsCosts that do not change with how much a company sells, at least in the short run.
• Free cash flowCash left over after paying for the investment needed to maintain and grow the business.
• GAAP and IFRSThe two main sets of accounting rules companies must follow when reporting results.
• Going concernThe assumption that a company will continue operating for at least the next year.
• GoodwillThe premium paid over the fair value of a business’s identifiable assets when acquiring it.
• Gross marginWhat proportion of revenue is left after the direct cost of producing what was sold.
• Income statementThe statement showing revenue, costs and profit over a period.
• Intangible assetsNon-physical assets with value: patents, trademarks, software, licences and customer relationships.
• Interest coverageHow many times over a company’s operating profit covers its interest bill.
• InventoryGoods a company is holding to sell, valued on the balance sheet at cost or market value, whichever is lower.
• LiabilitiesEverything a company owes to someone else.
• Net debtTotal borrowings minus cash — what a company would still owe if it used all its cash to repay debt.
• Net debt / EBITDAHow many years of operating earnings it would take to repay net borrowings.
• Net incomeWhat is left after every cost, including interest and tax — the profit belonging to shareholders.
• Net marginNet income as a percentage of revenue — what proportion of each sale ends up as profit.
• Off-balance-sheetObligations that do not appear as liabilities on the balance sheet but still commit the company.
• Operating cash flowThe cash a company actually generated from running its business.
• Operating expensesThe costs of running the business that are not tied directly to producing each unit sold.
• Operating incomeProfit from the core business, before interest and tax.
• Operating leverageHow much profits amplify revenue changes, because some costs stay fixed as sales move.
• Operating marginOperating income as a percentage of revenue — how much of each sale survives running the business.
• Organic growthRevenue growth from the existing business, excluding acquisitions and currency effects.
• Owner earningsReported profit adjusted to reflect the cash an owner could actually take out without harming the business.
• Return on equityNet income as a percentage of shareholders’ equity — profit earned on the owners’ capital.
• Return on invested capitalOperating profit after tax as a percentage of all the capital invested in the business, debt and equity alike.
• RevenueThe total value of goods and services a company sold in a period, before any costs.
• RunwayHow long a loss-making company can operate before it runs out of cash at the current burn rate.
• Share-based compensationPaying employees in shares or options rather than cash.
• Tangible book valueBook value with goodwill and other intangibles removed.
• Working capitalThe money tied up in day-to-day operations: inventory and money owed to you, less money you owe.
• WritedownReducing the recorded value of an asset when it is no longer worth what the books say.

Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.