Glossary

Our selection of the help of our comprehensive glossary, you can navigate through complex financial modelling concepts.ides for advanced content
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Accounting Close

The accounting closure denotes the duration in which all financial transactions within a specified timeframe in a business are documented, condensed, and disclosed. It stands as a crucial step within the accounting cycle, typically executed at the conclusion of every accounting period—be it monthly, quarterly, or annually.
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Accounts Payable

A payable account represents a responsibility held by a business to settle dues to a third party for goods and/or services obtained on credit. These accounts are documented as liabilities on a company's balance sheet.
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Accounts Receivable

Accounts receivable is an asset signifying a company's forthcoming revenue stream. It represents the funds owed to the company by customers for goods or services already delivered. The net accounts receivable is calculated as the value of accounts receivable minus any allowances set aside for doubtful accounts.
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Accounts Receivable Turnover

The accounts receivable turnover is a metric that gauges the average frequency with which a company collects its accounts receivables within a specific period.
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Accrual Basis Accounting

Accrual basis accounting is an accounting method that recognizes and records financial transactions when they occur, regardless of the timing of cash flow. This method contrasts with cash basis accounting, where transactions are only recorded when cash is exchanged.
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Arbitrage

Arbitrage involves taking advantage of price differences among various markets. In the realm of foreign exchange (FX) trading, this often involves purchasing foreign currency or its derivatives, like options or forwards, in one market, then selling it for a profit in another market.
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At the Money

The term "At the Money" (ATM) is used in finance, particularly in options trading, to describe a situation where the current price of an underlying asset is equal to the strike price of an option.
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Balance Sheet

A balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time.
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Barrier

Barriers represent a characteristic in certain options, determining activation or deactivation based on the underlying asset's price reaching or surpassing a designated level, often referred to as the "barrier."
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Base Currency

The base currency is the primary currency in a currency pair used to determine the exchange rate in foreign exchange trading.
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Before-Tax Profit Margin

Before-tax profit margin is a financial metric that represents the ratio of a company's earnings before tax to its total revenue, measuring the firm's profitability before deducting taxes.
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Benchmarking

Benchmarking is the process of comparing and measuring an organization's performance, products, or practices against industry standards or best practices to identify areas for improvement and attain higher standards.
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Break-Even Analysis

Break-Even Analysis is a financial assessment method used to determine the point at which a company's revenue equals its total costs, resulting in zero profit or loss.
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Business Intelligence

Business Intelligence is the process of utilizing data analysis and technology to gather, interpret, and present actionable insights that aid in making informed business decisions.
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Capital Budget

Capital budgeting is the financial procedure used to evaluate the financial consequences of a potential project. Its primary objective is to appraise the anticipated financial gains and risks associated with the proposed project, aiding in the decision-making process of whether to pursue the project or not.
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Capital Expenditures

Capital expenditures refer to essential expenditures vital for the long-term growth or expansion of a business. These expenditures are regarded as assets and are usually subject to depreciation over time.
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Capital Rationing

Capital rationing is a financial management strategy where a company limits its capital expenditures or investments due to budget constraints or a desire to maintain financial stability.
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Capitalization Ratio

The capitalization ratio is a financial metric utilized to gauge a company's degree of financial leverage. It is calculated as the proportion of debt to equity within the company's capital structure.
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Cash Budget

A cash budget is a forward-looking projection of a company's anticipated cash inflows and outflows during a specific time frame.
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Collar

A collar is an options strategy that involves simultaneously holding a long position in a security while writing a covered call and buying a protective put on the same security to limit potential losses.
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Days Payable Outstanding

Days Payable Outstanding (DPO) is a financial metric that measures the average number of days it takes a company to pay its outstanding accounts payable, reflecting its efficiency in managing supplier payments.
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Debt Equity Ratio

The Debt Equity Ratio is a financial metric used to determine a company's leverage by comparing its total debt to shareholders' equity.
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Debt Ratio

The debt ratio is a financial metric that indicates the proportion of a company's assets funded by debt, calculated by dividing total debt by total assets.
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Derivative

A derivative is a financial contract or instrument whose value is based on the performance of an underlying asset, index, or entity.
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Discounted Cash Flow

Discounted cash flow (DCF) serves as a financial approach to ascertain the current value of an anticipated series of future cash flows. It's employed to assess the value of obtaining a company, project, or asset, and aids in various business decisions, including establishing the necessary rate of return on investment prospects.
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Driver-Based Planning

Driver-based planning is a method of financial planning and budgeting that focuses on specific operational drivers or key performance indicators to create more accurate and dynamic forecasts.
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Earnings Before Interest And Taxes

Earnings Before Interest and Taxes (EBIT) represents a company's profitability by indicating its operating income, excluding interest and tax expenses.
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Earnings Before Interest, Taxes, Depreciation, And Amortization

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) represents a measure of a company's operating performance, excluding interest, taxes, and non-cash expenses, commonly used to evaluate profitability.
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Economic Attributes Framework

The economic attributes framework is a tool used to assist analysts and decision-makers in comprehending the economic implications of a proposed project or policy change.
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Effective Corporate Tax Rate

The effective corporate tax rate represents the actual percentage of a company's profits paid in taxes after accounting for deductions, exemptions, and credits.
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