Basics of Business Finance
This term refers to the money a business uses for its day-to-day operations, calculated as current assets minus current liabilities.
What is Working Capital?
This is the value of a company before new investment is added.
What is Pre-Money Valuation?
This financial statement shows how a company’s operating, investing, and financing activities affect its cash position over a period of time.
What is the Statement of Cash Flows?
This process involves planning how a company will spend and allocate its financial resources.
What is Budgeting?
This number reflects how likely you are to repay borrowed money and affects loan interest rates.
What is a Credit Score?
This financial metric shows how much profit a company makes for every dollar of revenue.
What is Profit Margin?
This document outlines the key economic and control terms of a venture investment.
What is a Term Sheet?
This statement shows a company’s assets, liabilities, and shareholders’ equity at a specific point in time.
What is the Balance Sheet?
This metric measures how easily a company can meet its short-term obligations.
What is Liquidity?
This type of interest is calculated on both the original principal and accumulated interest.
What is Compound Interest?
This rate is used to discount future cash flows back to their present value in valuation models.
What is the Discount Rate?
This right allows existing investors to maintain their ownership percentage in future funding rounds.
What are Pro Rata Rights?
This line on the income statement represents revenue minus the cost of producing goods or services.
What is Gross Profit?
This financial measure compares the profit of an investment to its cost.
What is Return on Investment (ROI)?
This retirement account is funded with pre-tax income and taxed upon withdrawal.
What is a 401(k)?
This principle states that a dollar today is worth more than a dollar in the future.
What is the Time Value of Money?
This term describes additional funding raised to extend a startup’s runway before a major round.
What is a Bridge Round?
This accounting method recognizes revenue when it is earned, not necessarily when cash is received.
What is Accrual Accounting?
This technique evaluates investment projects by calculating how long it takes to recover the initial cost.
What is the Payback Period?
This strategy spreads investments across different assets to reduce risk.
What is Diversification?
This structure refers to how a company finances itself through a mix of debt and equity.
What is Capital Structure?
This provision determines how proceeds are distributed to investors and founders when a company is sold.
What is a Liquidation Preference?
This figure represents a company’s net income after all expenses, interest, and taxes.
What is Net Profit?
This valuation method estimates a company’s value by projecting future cash flows and discounting them back to today using a required rate of return.
What is a Discounted Cash Flow (DCF) analysis?
This ratio compares your monthly debt payments to your monthly income and is often used by lenders.
What is the Debt-to-Income Ratio?