Term	Definition
Budget	A financial or quantitative plan of activity for a future period that has been authorised for implementation.
Cashflow	The movement of money into and out of a business over a specific period.
Net Present Value (NPV)	The difference between the present value of cash inflows and outflows used to assess the profitability of an investment.
Payback Period	The length of time required to recover the initial investment in a project.
Working Capital	The difference between current assets and current liabilities, measuring short-term financial health.
Operating Gearing	The proportion of fixed and variable costs in a business affecting risk and profitability.
Break-even Point	The sales volume at which total revenue equals total costs results in zero profit.
Statement of Financial Position	A financial statement that reports a company’s financial position at a given time, showing assets, liabilities, and equity.
Depreciation	The allocation of the cost of an asset over its useful life.
Contribution	The difference between sales revenue and variable costs is used to cover fixed costs and generate profit.
Cost of Capital	Calculates the overall cost of financing using debt and equity proportions.
Acid Test Ratio	Measures liquidity by comparing quick assets to short-term liabilities.
Return on Capital Employed (ROCE)	Assesses the efficiency of capital investment in generating profits.

Equation Name	Formula
Present Value
Net Present Value (NPV)
Payback Period
Working Capital
Operating Gearing
Break-even Point
Contribution
Cost of Capital
Acid Test Ratio
Return on Capital Employed (ROCE)

Introduction into Accounting: Terminology & Equations