Finance Terminology
Current Assets
Assets that are convertible to cash within one year in the normal course of business. This usually includes cash, accounts receivable, inventory, and prepaid expenses.
Current Liabilities
Obligations that will come due within a year from the current date. These usually include accounts payable, accrued expenses, and the portion of long-term obligations due within one year.
Current Ratio
Current assets divided by current liabilities. This ratio is a measure of a company's ability to meet its financial obligations in a timely manner.
Debt to Equity Ratio
The ratio of total debt to owners' equity, used as a measure of leverage and ability to repay obligations.
Debt to Tangible Equity Ratio
The ratio of total debt to tangible equity, used as a measure of leverage and solvency. Values for this ratio vary from one industry to another. Lower values for the ratio represent a better financial condition.
EBIT
Earnings before interest and taxes.
EBIT/DA
Earnings before interest, taxes, depreciation, and amortization.
Federal Funds Rate
Rates banks charge each other for overnight loans.
Federal Discount Rate
Rate New York Fed charges to member banks.
FIFO
First in First Out
Gross Realisation Value
Gross Realisation Value (GRV) refers to the end value of the project. Lenders will look at both the costs of the project and the gross realisation, and some lenders will lend only a percentage against the gross realisation.
Libor
London Interbank Offered Rates. Average London Eurodollar rates.
Line of Credit
The amount of short-term credit available to a business from banks.
Loan to Value Ratio
The Loan to Value Ratio (LVR) is expressed as a percentage and calculated by taking the amount of the loan, dividing it by the value of the security and then multiplying it by 100.
P&L
Profit & Loss Statement also another term for the income statement.
Prime rate
The rate offered to a bank's better customers.
Treasury bill rates
Treasury bills are short-term debt instruments used by the U.S. Government to finance their debt. Commonly called T-bills they come in denominations of 3 months, 6 months and 1 year. Each T-bill has a corresponding interest rate (i.e. 3-month T-bill rate, 1-year T-bill rate).
Treasury Notes
Intermediate-term debt instruments used by the U.S. Government to finance their debt. They come in denominations of 2 years, 5 years and 10 years.
Treasury Bonds
Long-debt instruments used by the U.S. Government to finance its debt. Treasury bonds come in 30-year denominations.
6 month CD rate
The average rate that you get when you invest in a 6-month CD.
If you require further clarification in relation to our finance terminology, please contact us for further assistance.
