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Corporate Finance Acronyms

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ROI

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Return on Investment - measures the profitability of an investment

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EBITDA

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Earnings Before Interest, Taxes, Depreciation, and Amortization - indicates a company's financial performance

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DCF

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Discounted Cash Flow - a valuation method used to estimate the value of an investment

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NPV

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Net Present Value - calculates the present value of projected cash flows minus initial investment

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IRR

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Internal Rate of Return - the discount rate that makes the net present value of all cash flows equal to zero

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EPS

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Earnings Per Share - indicates how much money a company makes for each share of its stock

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P/E

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Price-to-Earnings Ratio - measures a company's current share price relative to its per-share earnings

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WACC

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Weighted Average Cost of Capital - the average rate of return a company is expected to pay its security holders

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CAGR

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Compound Annual Growth Rate - the mean annual growth rate of an investment over a specified time period

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LBO

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Leveraged Buyout - the acquisition of another company using a significant amount of borrowed money

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CAPEX

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Capital Expenditures - funds used by a company to acquire, upgrade, and maintain physical assets

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M&A

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Mergers and Acquisitions - the consolidation of companies or assets through various financial transactions

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EBIT

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Earnings Before Interest and Taxes - measures a firm's profit that includes all incomes and expenses except interest and taxes

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FCF

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Free Cash Flow - cash a company generates after cash outflows to support operations and maintain its capital assets

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EV

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Enterprise Value - an economic measure reflecting the market value of a whole business

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P/B

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Price-to-Book Ratio - compares a company's market value to its book value

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EBIT

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Earnings Before Interest and Taxes - measures a firm's profit that includes all incomes and expenses except interest and taxes

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PV

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Present Value - the current value of a future amount of money or stream of cash flows given a specified rate of return

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ROA

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Return on Assets - indicates how profitable a company is in relation to its total assets

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ROE

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Return on Equity - measures the profitability of a corporation in relation to stockholders' equity

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ROCE

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Return on Capital Employed - a financial ratio that measures a company's profitability and the efficiency with which its capital is employed

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CR

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Current Ratio - a liquidity ratio that measures a company's ability to pay short-term obligations

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AR

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Accounts Receivable - money owed to a company by its debtors

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AP

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Accounts Payable - short-term obligations or money owed by a company to its creditors

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COGS

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Cost of Goods Sold - the direct costs attributable to the production of the goods sold in a company

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SG&A

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Selling, General and Administrative Expenses - combined payroll costs of all non-production employees and other costs not tied to a specific product

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GPM

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Gross Profit Margin - a financial metric used to assess a company's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold

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NPM

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Net Profit Margin - shows how much of each dollar earned by the company is translated into profits

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LTV

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Loan to Value Ratio - a financial term used by lenders to express the ratio of a loan to the value of an asset purchased

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D/E

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Debt-to-Equity Ratio - a measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity

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TIE

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Times Interest Earned - a measure of a company's ability to honor its debt payments

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OOE

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Operating Operating Efficiency - a measure of how much profit a company makes with its present assets and its level of operational efficiency

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PER

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Price-to-Earnings Ratio - a ratio for valuing a company that measures its current share price relative to its per-share earnings

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PEG

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Price/Earnings to Growth Ratio - a stock's P/E ratio divided by the growth rate of its earnings

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SOP

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Standard Operating Procedure - a set of step-by-step instructions compiled by an organization to help workers carry out routine operations

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CF

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Cash Flow - the net amount of cash and cash-equivalents being transferred into and out of a business

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EBITDAR

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Earnings Before Interest, Taxes, Depreciation, Amortization and Rent - a financial performance measure that adds rent and lease payments to EBITDA

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FCFF

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Free Cash Flow to the Firm - a measure of a company's financial flexibility that is often used in DCF analysis

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FCFE

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Free Cash Flow to Equity - a measure of how much cash is available to the equity shareholders of a company after all expenses, reinvestment, and debt repayments

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VBM

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Value-Based Management - a management approach that ensures corporations are run consistently on value

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