Definition of economies of scale: The observation that the unit cost of production tends to decrease when higher the quantities are produced. What are economies of scale? Economies of scale …
Economic Moat – Definition
Definition of economic moat: A specific and persistent advantage which a company holds over existing or potential new competitors. What is an economic moat? An economic moat is a metaphor …
Elasticity of Demand – Definition
Definition of elasticity of demand: How sensitive demand for a product is to a change in price. What is elasticity of demand? Elasticity of demand is a very interesting economics …
Command Economy – Definition
Definition of command economy: A economic model, in contrast to capitalism, in which all decisions over which goods and services are produced and in what quantity is centrally controlled, typically …
Business Definitions
This page holds our Financial Expert™ Definitions of business jargon and terms. Cut through business jargon with our easy explainer guides. Each definition page is much more than a business …
Demand – Definition
Definition of demand: the measure of market participants level of desire to buy goods or services at different prices. What is demand? Demand is an economics concept which you’ll frequently …
Consumer Price Index (CPI) – Definition
Definition of the Consumer Price Index (CPI): A UK price index produced by the Office of National Statistics. Using a consistent basket of goods which excludes the cost of housing, …
Comparative Advantage – Definition
Definition of comparative advantage: the efficiency and effectiveness with which an economy can produce a good or service relative to other economies. What is comparative advantage? Comparative advantage is a …
Budget Deficit – Definition
Definition of budget deficit: the shortfall between the income and expenditure of a person, organisation or government over a period of time. What is the budget deficit? The budget deficit …
Unsecured Loan – Definition
Definition of unsecured loan: a borrowing arrangement where the lender seeks no collateral or security over the assets of the borrower to repossess in the event that the borrower defaults …
Subsidiary – Definition
Definition of subsidiary: a company which is primarily owned by another company, rather than external shareholders. What is a subsidiary? A subsidiary is a descriptive term for a company in …
Outsourcing – Definition
Definition of outsourcing: The purchase of ready-made goods or services from other businesses rather than producing them in-house from scratch. What is outsourcing? In plain English, outsourcing is when a …
Organisational Structure – Definition
Definition of organisational structure: The shape of reporting lines between people and departments in an organisation, which defines how the business is managed and who makes key decisions. The best …
Liquidation – Definition
Definition of liquidation (business): The winding up of a company by realising the cash value of its assets to settle its liabilities. What is liquidation? Liquidation is a word which …
Key Performance Indicators (KPI) – Definition
Definition of Key Performance Indicators (KPIs): A metric, ratio or data point used to measure the performance of an organisation. What is a Key Performance Indicator (KPI)? In business, a …
Accounting Definitions
This page holds our Financial Expert™ Definitions of accounting jargon and terms. Cut through accounting jargon with our explainers. Each definition page is much more than an accounting definition. Beyond …
Code of Ethics – Definition
Definition of code of ethics (business): A reference guide providing guidance to employees to help them understand expected behaviours and guide them through moral dilemmas. What is a code of …
Chief Executive Officer (CEO) – Definition
Definition of the chief executive officer (CEO): The highest-ranking manager in an organisation, who is ultimately responsible for decision-making. The best entrepreneurship books and management books will regularly use the …
Business Model – Definition
Definition of business model: The way in which a business adds value, creates a product or service and delivers it to the customer. What is a business model? A business …
Business Ethics – Definition
Definition of business ethics: A strand of applied ethics, which explores moral dilemmas and ethical decision-making in a business context. What is business ethics? Business ethics is a practical branch …
Break-Even Analysis – Definition
Definition of break-even: The point at which the net income generated from an investment decision has covered the costs. You’ll often read the term ‘break-even’ in financial management books & …
Bankruptcy – Definition
Definition of bankruptcy: The legal process initiated when an individual or company is unable to repay their debts. What is bankruptcy? Bankruptcy means different things in different countries. Bankruptcy is …
Year to Date (YTD) – Definition
Definition of year to date (accounting): The cumulative financial result from the start of the latest accounting year until the present day. What is Year to Date (YTD)? Year to …
Variable Cost – Definition
Definition of variable cost: an expense which increases or decreases proportionately to revenue. What is a variable cost? A variable cost is also known as a direct cost, because of …
Turnover – Definition
Definition of turnover (accounting): Income. Turnover is used interchangeably with revenue and gross income in the context of financial reporting. What is turnover? Turnover is an accounting term used most …
Quality of Earnings – Definition
Definition of quality of earnings: The extent to which the profits reported by a company are likely to recur as they are driven by the core operating activities of the …
Overheads – Definition
Definition of overheads: A business cost which is not directly linked to production or the provision of a service. What are overheads? Overhead is a name given to the collection …
Overdraft – Definition
Definition of overdraft: A short term borrowing facilility, with a pre-agreed borrowing limit, which is repayable on demand What is an overdraft? An overdraft is a short term, unsecured bank …
Onerous Contract – Definition
Definition of onerous contract: An agreement which commits a business to obligations which will generate losses. What is a onerous contract? No business wishes to be party to an onerous …
Net Asset Value (NAV) – Definition
Definition of Net Asset Value (NAV): The current market value of the underlying investments held in a fund. What is the Net Asset Value (NAV)? The net asset value of …
Liability – Definition
Definition of liability (accounting): A present obligation arising from past events. What is a liability? A liability is something a business will need to settle or pay in the future. …
Journal Entry – Definition
Definition of journal (accounting): An accounting record of a single transaction, in the ‘double entry’ accounting format. What is a journal? In simple English, a journal entry is an instruction …
Joint Venture – Definition
Definition of joint venture (business): A formal partnership between two independent organisations, which sees the partners share resources to achieve a common objective. Definition of joint venture (accounting): An arrangement …
International Financial Reporting Standards (IFRS) – Definition
Definition of International Financial Reporting Standards (IFRS): A widely used set of accounting and financial reporting rules which are applied by most public companies in the creation of their financial …
Income Statement – Definition
Definition of the income statement: A financial report which presents a company’s income and expenses for a financial period, in a prescribed format. What is the income statement? The income …
Income – Definition
Definition of income (accounting): Income is also known as revenue or turnover, and represents the amount of money a business earns by providing products and services to customers. Definition of …
Holding Company – Definition
Definition of holding company: A legal entity with a primary purpose of owning an equity stake in other companies. What is a holding company? A holding company in the UK …
Gross Profit – Definition
Definition of gross profit: gross profit is a measure of profit calculated by deducting direct costs (also known as cost of goods sold) from revenue. What is gross profit? Gross …
Gross Margin – Definition
Definition of gross margin: A ratio expressing gross profit as a percentage of revenue. Gross margin is also known as gross profit margin. How to calculate gross margin Here’s an …
Goodwill – Definition
Definition of goodwill (accounting): Goodwill represents the excess price for an asset over and above the identifiable fair value of an asset. What is goodwill? Goodwill is quite a complex …
Generally Accepted Accounting Principles (GAAP) – Definition
Definition of generally accepted accounting principles (GAAP): A comprehensive set of accounting and reporting standards which govern how companies financial statements record, measure, and disclose their financial transactions. What are …
General Ledger – Definition
Definition of general ledger: The primary set of accounts used to store and summarise the transactions of a company. What is the general ledger? It’s easiest to see the general …
Financial Statements – Definition
Definition of financial statements: A periodic report which discloses the financial performance and financial position of a company, along with other necessary disclosures. What are financial statements? Financial statements are …
Escrow – Definition
Definition of escrow: A neutral third party who stands between two transacting parties to provide assurance that both will honour their obligations. What does escrow mean? Not all third parties …
Equity – Definition
Definition of equity (finance): the element of a organisations total value which is attributable to its shareholders Definition of equity (accounting): the book value of assets minus liabilities. The net …
Deferred Consideration – Definition
Definition of deferred consideration: An element of a purchase price which is only settled in cash at much later date than the transaction. What does deferred consideration mean In the …
Debenture – Definition
Definition of debenture: A long term business loan which is ‘secured’ against the assets of the company. This is a UK definition. What does debenture mean In the UK, a …
Cost of Goods Sold (COGS) – Definition
Definition of cost of goods sold (COGs): Costs of a business which can be directly attributed to revenue generated during the same financial period. What does cost of goods sold …
Capital Expenditure – Definition
Definition of capital expenditure (accounting): An outlay of a company’s funds on the purchase of equipment, tooling, machinery or sometimes property. Capital expenditure is often shortened to ‘capex’ when spoken …
Capital – Definition
Definition of capital (economics): Capital in economics represents the wealth of tangible assets and other resources which can be put to use to provide goods and services. Definition of capital …