Frequently Used Financial Acronyms
For some of us...finance is complicated. If you don't specialize in finance (or...maybe even if you do...) it can sometimes feel like talking about different financial components is like speaking a different language — especially when you're having a conversation with your manager and she hits you with an acronym or financial abbreviation like "CAPEX." In our line of work, we commonly discover that communicators and hearers are not speaking at the same level. We know, that when you're dealing with a business, the possibility that team members aren't fully understanding each other can be scary. But don't worry - we're here to help bridge the gap.
Here are a few of the most frequently used financial acronyms or abbreviations:
FASB – The Financial Accounting Standards Board –The governing body for financial reporting in the U.S.
IFRS – International Financial Reporting Standard – FASB’s peer in the international community.
GAAP – Generally Accepted Accounting Principles – The metrics used in organizations to govern their financial reporting.
COGS – Cost of Goods Sold – The direct costs associated with getting products or services ready for market. (For example - in manufacturing, it would include: the cost of raw materials, manufacturing operations, supply chain, and distribution. In a hospital: it's the nurses and doctors who provide the services.)
SG&A – Selling, General, and Administrative Expenses – The costs to run a business. This typically includes sales, marketing, advertising, and other support functions (ex. HR, finance, legal, IT, audit.) SG&A is commonly referred to as overhead.
CAPEX – Capital Expenditures – The money used to acquire, upgrade, or maintain different physical assets including property, plant, and equipment.
OPEX – Operating Expenses –The costs for continuing to run the business.
EBIT – Earnings Before Interest and Taxes – A company’s operating profit.
EBITDA – Earnings Before Interest, Taxes, Depreciation, and Amortization – This is the closest profit metric to the concept of cash flow. It is a way business owners can see how they’re doing in their business with the things they can control.
P&L – Profit and Loss Statement – A financial statement that shows the revenue and expenses of a company. Also known as the income statement.
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