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Financial glossary
Open a term for a clear explanation and a practical example.
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Showing 33 of 33 terms
In focusSEC & reporting
The US securities regulator. It protects investors, oversees securities markets and sets disclosure requirements.
A simple example
A company submits a required annual report to the SEC; the SEC is the regulator receiving it.
Related terms
In focusSEC & reporting
The SEC's electronic filing system. Its public database lets you read company reports free of charge.
A simple example
SEC is the regulator; EDGAR is the system where you find a company's Form 10-K.
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In focusSEC & reporting
A detailed annual SEC filing by US reporting companies, covering the business, risks and audited financial statements.
A simple example
To study a company's full financial year, start with its 10-K and check the fiscal year it covers.
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In focusSEC & reporting
A report for each of the first three fiscal quarters. Its financial statements are generally unaudited.
A simple example
A 10-Q describes a quarter and may include year-to-date figures; compare matching periods rather than mixing them.
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In focusSEC & reporting
An SEC filing used to disclose specified significant events between regular periodic reports.
A simple example
An acquisition or a change in a key executive may be reported on Form 8-K.
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In focusSEC & reporting
A format that tags reported facts so software can identify the amount, accounting concept, period and unit.
A simple example
A revenue tag links a number to its reporting period and currency. This app reads those tagged facts.
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In focusSEC & reporting
An identifier used by the SEC for companies and other filers. It is different from a stock ticker.
A simple example
Apple's CIK is 320193. Its stock ticker is AAPL; both help you find the same company here.
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In focusSEC & reporting
A short symbol identifying a listed security on an exchange. A company can have more than one security.
A simple example
AAPL is Apple's stock ticker. It is a search shortcut, not a financial ratio or a share price.
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In focusSEC & reporting
The annual period used for financial reporting. Its end date need not be 31 December.
A simple example
A year ending on 30 September and one ending on 31 December cover different calendar periods.
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In focusFinancial statements
Shows revenue, expenses and the resulting profit or loss over a period.
A simple example
Revenue of $100 minus total expenses of $85 produces net income of $15.
Related terms
In focusFinancial statements
Shows assets, liabilities and equity at a specific date, rather than activity over a period.
Formula
150 = 90 + 60
A simple example
Assets of $150 financed by liabilities of $90 leave equity of $60.
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In focusFinancial statements
Explains cash inflows and outflows from operating, investing and financing activities during a period.
A simple example
A profitable company can still lose cash if customers have not yet paid their invoices.
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In focusFinancial statements
Economic resources the company controls, such as cash, inventory, equipment and certain intangible rights.
A simple example
A company's bank balance and production equipment are both assets, although they serve different purposes.
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In focusFinancial statements
Obligations the company must settle, including loans, supplier bills and certain obligations to deliver goods or services.
A simple example
An unpaid $500 supplier invoice is a liability. Liabilities include more than bank borrowing.
Related terms
In focusFinancial statements
The accounting residual after subtracting liabilities from assets. It is not the company's stock-market value.
Formula
100 − 70 = 30
A simple example
Assets of $100 minus liabilities of $70 give equity of $30.
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In focusFinancial statements
Details explaining accounting policies, estimates and the amounts reported in the financial statements.
A simple example
The revenue note can explain when a sale is recognized; a total alone does not tell the full story.
Related terms
In focusRevenue & profit
Amounts earned from selling goods or providing services, before deducting the related expenses.
A simple example
Selling 10 items for $20 each produces $200 in revenue, even if some customers pay later.
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In focusRevenue & profit
Costs recognized in earning revenue and running the business during a period.
A simple example
Rent and staff salaries are expenses. Buying long-lived equipment is treated differently from using it.
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In focusRevenue & profit
Costs associated with the goods or services sold. Subtracting them from revenue gives gross profit.
A simple example
A product sold for $100 with a cost of sales of $60 leaves $40 gross profit.
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In focusRevenue & profit
Revenue less cost of sales, before other operating expenses, interest and income taxes.
Formula
100 − 60 = 40
A simple example
Revenue of $100 minus cost of sales of $60 gives gross profit of $40.
Related terms
In focusRevenue & profit
Profit after operating costs, before interest and income taxes. Check the company's presentation for the exact components.
A simple example
Gross profit of $40 minus other operating expenses of $25 leaves operating income of $15.
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In focusRevenue & profit
Profit after all recognized expenses, including interest and income taxes. A negative amount is a net loss.
A simple example
Revenue of $100 and total expenses of $90 produce $10 net income; this is not necessarily $10 cash received.
Related terms
In focusRevenue & profit
Net income as a percentage of revenue: how much accounting profit remains from each dollar of sales.
Formula
12 / 100 × 100 = 12%
A simple example
Net income of $12 on revenue of $100 means a 12% net profit margin.
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In focusRevenue & profit
Earnings available to common shareholders divided by weighted-average shares. Basic and diluted EPS use different share counts.
Formula
100 / 50 = 2
A simple example
With no preferred dividends, $100 profit and 50 weighted-average common shares give basic EPS of $2.
In focusRevenue & profit
Net income relative to shareholders' equity, commonly using average equity. Very small or negative equity can make it misleading.
Formula
10 / 50 × 100 = 20%
A simple example
Net income of $10 and average equity of $50 give ROE of 20%; compare the same calculation across companies.
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In focusRevenue & profit
Allocation of a tangible asset's depreciable cost across its useful life. It is not a new cash payment each period.
Formula
1,000 / 5 = 200
A simple example
Equipment costing $1,000, used for five years with no residual value, has $200 annual straight-line depreciation.
Related terms
In focusCash flow & ratios
Net cash from day-to-day business activities. It differs from net income because cash timing and accounting recognition differ.
A simple example
Collecting $120 from customers and paying $90 of operating costs leaves operating cash flow of $30.
Related terms
In focusCash flow & ratios
Cash flows from acquiring or selling long-term assets and investments. A negative total alone does not mean poor performance.
Formula
−50 + 10 = −40
A simple example
Paying $50 for equipment and receiving $10 from selling old equipment gives a net outflow of $40.
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In focusCash flow & ratios
Cash flows involving borrowing, loan repayments and transactions with shareholders, such as share issues, buybacks and dividends.
A simple example
A $100 loan received, $30 repaid and $20 dividends paid give a net financing inflow of $50.
Related terms
In focusCash flow & ratios
Spending to acquire or improve long-lived assets. It is generally recorded as an asset rather than expensed immediately.
A simple example
Buying a production machine is CapEx; its cost can then become an expense gradually through depreciation.
Related terms
In focusCash flow & ratios
Commonly operating cash flow less capital expenditures. Definitions vary; this platform uses that formula for matching periods.
Formula
FCF = OCF − CapEx
A simple example
OCF of $50 minus CapEx of $20 gives FCF of $30. That amount is not automatically available for dividends.
Related terms
In focusCash flow & ratios
Current assets divided by current liabilities. It compares short-term resources with short-term obligations; asset quality also matters.
Formula
200 / 100 = 2×
A simple example
Current assets of $200 and current liabilities of $100 give 2×. This is not a guarantee of timely payment.
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In focusCash flow & ratios
Recognizes revenue when earned and expenses when incurred, rather than only when cash is received or paid.
A simple example
A December sale paid in January can be December revenue. The January collection is a later cash movement.
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Numerical examples are illustrative and do not represent actual company figures.