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Master the Language of Money
Unlocking Growth Potential for Businesses with Fractional CFO Services
Financial literacy is not just for Bankers or Investors
Understanding key financial terms helps you make smarter choices, from managing your savings to evaluating business opportunities. This database brings together the most essential financial concepts, explained clearly and concisely, so you can strengthen your financial confidence and make informed decisions every day.
Sustainable
Leverage Philosophy
The ability of an improvement (like increased profit or reduced cost) to be maintained long-term without depleting essential company resources, damaging the market, or requiring unsustainable effort. It implies stability and resilience.
Profitable
Leverage Philosophy
The state of a business when total revenue exceeds total expenses, resulting in a net gain. At Leverage, we focus on quality profitability—making money efficiently from core operations.
Growth
Leverage Philosophy
An increase in a company’s size, scope, or financial metrics (e.g., revenue, market share, customer base) over a specified period. Growth is often measured by its speed (velocity) and magnitude.
Sustainable Profitable Growth (SPG)
Leverage Philosophy
Achieving financial expansion that is both high-velocity and long-lasting. It means increasing revenue and profits financed internally from operations, without sacrificing core financial health, or compromising future opportunities. Leaving debt utilization to fuel growth and maximize shareholder value
Stakeholder Value
Core Concept
The total value a company provides to all parties interested in its success, including employees, customers, suppliers, the community, and shareholders.
Shareholder Value
Core Concept
The benefit accrued to the owners (shareholders) of the company, whether monetized or accrued. Monetized benefts are typically measured in the salaries and dividends paid, while Accrued benefits are measured by the increase in the company’s stock price or enterprise valuation (EV).
Revenue
Top Line
The total amount of income generated by a company's normal business operations, typically from the sale of goods and services. Also known as the 'top line'.
Accrual Basis Accounting
Core Concept
An accounting method where revenues are recorded when earned and expenses are recorded when incurred, regardless of when cash is actually exchanged. (The preferred standard for management.)
Enterprise Valuation (EV)
Valuation
The total economic value of a company's operating business. This is the ultimate metric for measuring Shareholder Value in private companies and is a key focus of our strategic CFO service.
Cash Flow
Liquidity
The movement of cash both into (inflows) and out of (outflows) a business over a specific period. Positive cash flow means more cash is coming in than going out.
Working Capital
Liquidity
The capital available to a business for its day-to-day operations. Calculated as Current Assets minus Current Liabilities. A positive figure indicates the company can cover its short-term debts.
Cash Runway
Liquidity
The length of time (usually months) a company can continue operating before running out of cash, assuming no new funding or revenues are generated.
Days Sales Outstanding (DSO)
Efficiency Metric
The average number of days it takes a company to collect revenue after a sale has been made. A lower DSO indicates efficient collections and faster cash conversion.
Days Payable Outstanding (DPO)
Efficiency Metric
The average number of days it takes a company to pay its own bills (trade payables). Managing DPO is critical for optimizing working capital.
Cash Conversion Cycle (CCC)
Efficiency Metric
The time (in days) it takes for a company to convert investments in inventory and resources into cash from sales. A shorter CCC indicates greater liquidity and efficiency.
Gross Profit
Profitability
The revenue remaining after deducting the Cost of Goods Sold (COGS). It shows how efficiently a company uses its labor and supplies to produce its goods or services.
EBITDA
Profitability
Earnings Before Interest, Taxes, Depreciation, and Amortization. A common measure of a company's operating performance before accounting for financing, accounting, and tax decisions.
Net Income
Profitability
The total revenue remaining after deducting all expenses, including COGS, operating expenses, interest, and taxes. This is often referred to as the 'bottom line' profit.
Profit Margin
Profitability
A ratio, expressed as a percentage, that measures how much profit is generated from every dollar of revenue. Calculated by dividing profit (Gross, Operating, or Net) by Revenue.
Unit Economics
Profitability
The revenue and costs associated with a business's single core unit (e.g., a single customer, product, or transaction). Understanding this is critical for sustainable scaling.
Return on Investment (ROI)
Efficiency Metric
A performance measure used to evaluate the efficiency of an investment. Calculated by dividing the gain from an investment by the cost of the investment.
Key Performance Indicator (KPI)
Management
A measurable value that demonstrates how effectively a company is achieving its key business objectives. We focus on KPIs that directly relate to financial health and growth.
Risk Management
Management
The process of identifying, assessing, and controlling threats to an organization's earnings and capital. Includes financial risk, compliance risk, and operational risk.
Dilution
Finance
A reduction in the ownership percentage of existing shareholders due to the issuance of new shares, often when raising new equity funding.
M&A
Finance
Abbreviation for Mergers and Acquisitions. The process of combining or acquiring other business entities, a key part of the 'Grow' and 'Handover' strategies.
Due Diligence (DD)
Finance
The investigative process conducted by a potential investor or buyer to verify the accuracy of a target company's financial records and operational data.
Accounts Receivable (AR)
Process
Money owed to the company by customers for goods or services that have been delivered or used but not yet paid for. (Part of the Order to Cash cycle).
Accounts Payable (AP)
Process
Money owed by the company to its suppliers. (Part of the Buy to Pay cycle).
Order to Cash (OTC)
Process
The entire business process from receiving a customer's order to receiving the payment. A key focus for efficiency improvement.
Buy to Pay (BTP)
Process
The process encompassing all activities from initiating a request for goods or services to the final payment being made to the supplier.
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