Finance Week 1 - first steps

Revenue

The total income generated from the sale of goods or services before any expenses are deducted.

Expenses

The costs incurred in the process of earning revenue, including operational, administrative, and other financial outlays.

Profit (Net Income)

The amount remaining after all expenses have been subtracted from total revenue. It reflects a company's financial performance and profitability.

Gross Margin

The difference between revenue and cost of goods sold (COGS), expressed as a percentage. It measures the efficiency of production and selling processes.

Cost of Goods Sold (COGS)

The direct costs attributable to the production of the goods sold by a company, including materials and labor directly used in creating the product.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's overall financial performance.

Cash Flow

The net amount of cash being transferred into and out of a business, indicating its liquidity and overall financial health.

Assets

Resources owned by a company that have economic value and can provide future benefits.

Liabilities

Obligations or debts owed by a company to external parties, which must be settled in the future.

Equity

The value of shares issued by a company, representing ownership interest in the company and what is left after all liabilities are deducted from assets.

Capital Expenditures (CapEx)

funds used by a company to acquire, upgrade, and maintain long-term physical assets such as property, equipment, and technology, intended to enhance operational efficiency and support future growth

Operating Expenses (OpEx)

the day-to-day costs a business incurs to keep running and maintain its core operations

Depreciation

the systematic reduction of the recorded cost of a tangible fixed asset over its useful life

Amortization

gradual reductiion of a cost over time either by spreading out the cost of an intangible assets over its useful life such as patents, copyrights, trademarks or paying off a loan through scheduled, regular payments that include both prinicapl and interest

Interest Rate

the percentage changed or earned on a sum of money over a period of time

Annual percentage rate

annual percentage rate is the yearly cost of borrowing money, expressed as a percentage. It includes interest rate plus any fees or additional costs associated with the loan

Hurdle Rate

the minimum required rate of return that an investment or project must generate to be considered worthwhile

Cost of Capital

the required return a company must earn on its investments to justify the cost of financing those investments. It represents the opportunity cost of using capital in one way instead of another

Weighted Average Cost of Capital (WACC)

the average rate of return a company is expected to pay to all its capital providers (both debt and equity holders), weighted by their proportion in the company’s capital structure

Capital Structure

refers to how a company finances its overall operations and growth using different sources of funds primarily through debt, equity, and sometimes preferred stock

Initial Public Offering (IPO)

the first time a private company offers its shares to the public by listing on a stock exchange such as NYSE or NASDAQ

Annual Percentage Yield

The yearly rate of return on an investment or savings, including compounding interest

tailed event

a tailed event refers to a rare, extreme outcome that occurs at the far ends (or “tails”) of a probability distribution, usually in the context of returns, losses, or risks (an event that can cause significant market or portfolio impact)