Glossary

Tax is a financial charge imposed by the government on individuals, businesses, or entities based on their income, profits, or transactions to fund public services and government operations.

Tax shield refers to the reduction in taxable income through the use of allowable deductions, credits, or other provisions within tax laws, resulting in a decrease in taxes owed by an individual or business.

Taxable income refers to the portion of an individual or entity's income that is used to calculate how much tax they owe to the government after accounting for deductions, exemptions, and credits.

Theta in trading, also known as time decay, measures the rate at which the value of an option decreases as it approaches its expiration date.

Top-Down Budgeting is a strategic financial planning approach where higher management establishes overall spending limits and targets, which are then disseminated throughout the organization.

A trial balance is a financial statement that lists the balances of all general ledger accounts to ensure the total debits equal the total credits before preparing financial statements.

The US Dollar Index is a measure that evaluates the strength of the United States dollar against a basket of major world currencies, primarily comprising the euro, yen, pound sterling, Canadian dollar, Swedish krona, and Swiss franc.

Unallocated costs refer to expenses that cannot be directly assigned to a specific department or product line within a company.

Unlevered free cash flow (UFCF) represents a company's capacity to produce cash flow from its operations while factoring in capital expenses.

A Value Driver Tree is a visual management tool that breaks down a company's value drivers and their impact on financial performance in a hierarchical structure.

Value drivers are factors or variables that significantly impact the financial performance and overall value of a business or investment.

Value at Risk (VaR) is a statistical technique used in risk management to estimate the potential maximum loss in a portfolio or investment over a specified time horizon with a certain level of confidence.

Value drivers are factors or variables that significantly impact the financial performance and overall value of a business or investment.

Variance reporting is a financial analysis method used to compare and evaluate the differences between planned or budgeted figures and actual results.

Volatility is a statistical measure that quantifies the degree of variation or fluctuation in the price of a financial asset, typically calculated as the standard deviation of returns.

WACC (Weighted Average Cost of Capital) represents the average rate of return a company is expected to pay to all its stakeholders for using their capital.

A warrant is a financial instrument giving the holder the right to buy underlying securities at a specific price within a set timeframe.

The Weighted Average Cost of Capital (WACC) represents the average rate a company is expected to pay to finance its assets, calculated by weighing the cost of equity and debt.

What-If Analysis involves exploring different scenarios and outcomes by changing variables to understand their potential impact on a particular situation or decision.

Working capital is the measure of a company's operational liquidity, calculated as current assets minus current liabilities, reflecting its ability to meet short-term financial obligations.

Xenocurrency is a term used to describe a foreign currency or a currency not typically used in a specific country or region.

Yield in finance refers to the income generated from an investment, typically expressed as a percentage based on dividends, interest, or capital gains.

Zero-based budgeting is a financial planning method where each budget cycle requires justification for expenses from a zero base, disregarding previous budgets.

A zero-cost hedge is a risk management strategy where a financial position is secured without upfront payment, using options or other financial instruments to protect against losses without an initial cost.