RevenStrat / glossary
The business glossary
Clear definitions for the language behind your business decisions.
Revenue
The amount earned from selling goods or services before deducting costs.
Gross profit
Revenue less the direct cost of the goods or services sold.
Gross margin
Gross profit as a percentage of revenue.
Net profit
The amount remaining after all recognised business expenses have been deducted from revenue.
Net margin
Net profit as a percentage of revenue.
Markup
The amount added to cost to reach a selling price, often expressed as a percentage of cost.
Cash flow
The movement of money into and out of a business over a period.
Working capital
Current assets less current liabilities, a measure of resources available for day to day operations.
Break even
The point at which revenue covers the costs included in a calculation.
Contribution margin
Revenue less variable costs, available to cover fixed costs and profit.
Fixed cost
A cost that does not change directly with output within the relevant operating range.
Variable cost
A cost that changes with the level of output or sales.
Overhead
Operating costs that are not directly assigned to a particular unit of output.
Direct cost
A cost that can be attributed to a specific product, service or project.
Cost of sales
The costs directly associated with the goods or services sold in a period.
Capital expenditure
Spending on assets expected to benefit the business over more than one accounting period.
Operating expenditure
Spending associated with the ongoing operation of a business.
Receivables
Amounts customers or other parties owe the business.
Payables
Amounts the business owes suppliers or other parties.
Inventory
Goods and materials held for sale or use in production.
Inventory turnover
The rate at which inventory is sold or used and replaced during a period.
Cash conversion cycle
The time between paying for operating inputs and collecting cash from related sales.
Payment terms
The agreed conditions governing when and how a customer pays.
Credit period
The time a buyer is allowed before payment becomes due.
Bad debt
An amount owed to a business that is considered unlikely to be recovered.
Liquidity
The ability to meet obligations as they fall due.
Solvency
The ability of a business to meet its obligations over the longer term.
Balance sheet
A statement of assets, liabilities and equity at a particular date.
Income statement
A statement of income and expenses over a period.
Cash flow statement
A statement explaining cash movements from operating, investing and financing activities.
Management accounts
Regular financial reports prepared to support internal management decisions.
Bank reconciliation
A comparison of the bank statement with the business records to explain differences.
Audit trail
A record that allows a transaction or decision to be traced through its supporting evidence.
Budget
An agreed financial plan for a defined period.
Forecast
An estimate of future performance based on stated assumptions and available evidence.
Variance
The difference between an actual result and a planned or expected result.
Scenario analysis
A comparison of outcomes under different sets of assumptions.
Sensitivity analysis
A test of how changing an input affects a calculated outcome.
Unit economics
The revenue and costs associated with a defined unit, customer or transaction.
Cost of capital
The return or financing cost associated with the funds used by a business.
Principal
The original amount borrowed or invested, excluding interest.
Interest
The cost charged for borrowing money or the return paid for lending it.
Flat interest
Interest calculated on the original principal throughout the agreed period.
Reducing balance interest
Interest calculated on the outstanding loan balance as it changes over time.
Effective annual rate
The annualised rate implied by periodic financing costs and compounding.
Loan tenor
The agreed duration of a loan.
Moratorium
An agreed period during which specified loan payments are deferred.
Amortisation
The scheduled repayment of principal over time, or the allocation of an intangible asset cost over its useful life.
Debt service
The principal and interest payments required on borrowing over a period.
Debt service coverage ratio
Cash available for debt service divided by the debt service required for the same period.
Collateral
An asset pledged as security for an obligation.
Guarantee
An undertaking by one party to meet an obligation if another party does not.
Invoice financing
Funding linked to outstanding customer invoices, subject to the provider terms.
Asset finance
Funding used to acquire a specified business asset, often secured on that asset.
Equity finance
Funding provided in exchange for an ownership interest.
Due diligence
A structured investigation of facts, obligations and risks before a decision or transaction.
Funding readiness
The extent to which a business has the evidence, controls and commercial case needed for a funding application.
Governance
The arrangements through which a business is directed, supervised and held accountable.
Decision rights
The defined authority to make or approve particular decisions.
Segregation of duties
The separation of incompatible responsibilities so one person does not control every stage of a transaction.
Approval limit
The maximum amount or scope a person is authorised to approve.
Standard operating procedure
A documented sequence for performing a recurring activity consistently.
Owner dependency
The degree to which operations rely on the personal involvement of the business owner.
Key performance indicator
A measure used to track performance against an agreed objective.
Service level
An agreed standard for the timeliness or quality of a service.
Capacity
The amount of work a process or team can deliver within defined conditions.
Utilisation
The proportion of available capacity used over a period.
Bottleneck
A constraint that limits the output of a wider process.
Root cause
An underlying factor whose correction helps prevent a problem from recurring.
Lead time
The elapsed time between starting or requesting an activity and completing it.
Customer acquisition cost
The attributable cost of acquiring a new customer.
Customer retention
The ability to maintain customer relationships over time.
Customer concentration
The share of business revenue associated with one customer or a small group of customers.
Sales pipeline
The set of potential sales opportunities being managed through defined stages.
Conversion rate
The proportion of eligible opportunities that complete a defined action.
Scope creep
An expansion of agreed work without a corresponding agreement on time, cost or resources.
Positioning
The intended place an offer occupies in the minds of a defined audience relative to alternatives.
Market segmentation
The division of a market into groups with relevant shared needs or characteristics.
Route to market
The channels and activities through which an offer reaches customers.
Market entry
The process of beginning to serve a new geography, customer segment or product market.
Operating rhythm
The recurring schedule of reports, meetings, decisions and action reviews used to manage a business.
Business blueprint
A practical description of how business priorities translate into responsibilities, processes and milestones.