Glossary

Financial terms are often special. Find here important definitions.
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A

  • Ad hoc publicity German: Ad-hoc-Publizität. The Ad hoc publicity covers the obligation of stock-quoted companies to disclose any stock price-relevant information to the capital market.
  • Asset backed securities, Financing with Financing with Asset backed securities
  • Accounts receivables German: Forderungen. Accounts receivable are assets in a company´s balance sheet. They represent money owed to that company by entities outside of the company.
  • Average useful life German: Nutzungsdauer. The Average useful life of an asset is the period of time the asset is supposed to be used. Over this period of time it is depreciated, and in investment controlling it is the time frame over which cashflows have to be estimated and discounted.
  • Accounting exchange on the liability side German: Passivtausch.
  • Accounting German: Rechnungswesen. An organisation´s accounting deals with the processing ofall financially relevant transactions within the organisation. It can be differenciated into internal (managerial accounting) and external accounting (financial accounting).
  • Average return method German: Rentabilitäsvergleichsrechnung.
  • Accounts payable German: Verbindlichkeiten aus Lieferungen und Leistungen
  • Assets German: Vermögen. The assets of a company are all its belongings, both tangible and intangible. They are shown on the assets side of the balance sheet.
  • Asset, intangible German: Immaterieller Vermögensgegenstand.
  • Asset, tangible German: Materieller Vermögensgegenstand.
  • Asset German: Vermögensgegenstand. An asset is an econpmic resource that the company owns. It can be anything tangible or intangible that is capable of being controlled to produce economic value. Simply stated, an asset represents ownership of value that can be converted into cash (although cash itself is also considered an asset). A company´s assets are listed on the left side of its balance sheet.
  • Assets side of the balance sheet German: Vermögensseite.
  • Administration cost margin German: Verwaltungsintensität.
  • Absorption costing = Full cost accounting. German: Vollkostenrechnung.

B

  • Bond German: Schuldverschreibung, Anleihe, festverzinsliches Wertpapier.
  • Business cooperation German: Unternehmenskooperation. Example: Airline alliances like Star Alliance or Oneworld.

C

  • Cost-accounting depreciation German: Kalkulatorische Abschreibung.
  • Cost allocation sheet German: Betriebsabrechnungsbogen.
  • Cashflow from financing activities German: Cashflow aus Finanzierungstätigkeit.
  • Cashflow from investing activities German: Cashflow aus Investitionstätigkeit
  • Cashflow from operations German: Cashflow aus laufender Geschäftstätigkeit, Mittelfluss aus operativer Tätigkeit.
  • Cashflow German: Cashflow. A company´s cashflow is its balance from cash inflows and cash outflows within a period of time, e.g. a fiscal year. The overall cashflow is devided in the Operating Cashflow, the Cashflow from investing activities and the Cashflow of financing activities.
  • Constribution margin German: Deckungsbeitrag. The contribution margin is the difference between sales revenues and variable costs. It is supposed to cover the fixed costs and the desired insome. The contribution margin may be calculated per product or for the business in total. Besides this basic definition there are other definitions in use, such as the difference from sales revenues minus material costs or the costs of a specific product line, business unit, customer group, etc.
  • Calculation German: Kalkulation. As part of cost unit accounting a calculation computes the total costs of a cost unit. All costs of the company are broken down either directly (direct costs) or indirectly (indirect costs) to this product or service.
  • Cost of capital German: Kapitalkosten.
  • Correction method German: Korrekturverfahren.
  • Costs German: Kosten.
  • Cost types German: Kostenarten.
  • Cost-type accounting German: Kostenartenrechnung. In Cost-type accounting all costs of a company are differenciated in direct and indirect costs.
  • Cost center German: Kostenstelle. A Cost center is an organizational unit within a company that produces costs.
  • Cost center accounting German: Kostenstellenrechnung. The main instrument of cost center accounting is the cost allocation sheet, which shows all indirect costs per cost center.
  • Cost unit = Cost object. German: Kostenträger. A cost unit is either a product or a service sold by the company.
  • Cost unit accounting German: Kostenrägerrechnung.
  • Controlling Company = Parent company. German: Obergesellschaft.
  • Capital stock German: Stammkapital.
  • Current value (of an asset) German: Tageswert (eines Vermögensgegenstandes).
  • Company German: Unternehmen.
  • Corporate income German: Unternehmensergebnis.
  • Corporate management, value-based Value-based corporate management
  • Corporate planning German: Unternehmensplanung.
  • Contractual group German: Vertragskonzern.
  • Convertible Bond German: Wandelschuldverschreibung, Wandelanleihe. A convertible bond is a bond that may be converted into a share of the issuing company within a certain time frame. It usually carries a lower coupon rate.
  • Cash and cash equivalents German: Zahlungsmittel und Zahlungsmitteläquivalente, Liquide Mittel. Cash and cash equivalents are the most liquid assets within a company´s balance sheet. They are either available cash right away (cash in hand) or within a short period of time (e.g. money market holdings, commercial papers).
  • Cash holdings = Cash and cash equivalents.

D

  • Depreciation, scheduled German: Planmäßige Abschreibung.
  • Depreciation German: Abschreibung. With the depreciation is recorded in business accounting impairment or impairments of assets. The depreciation corresponds with the loss of value of business assets (fixed assets and working capital) within a period of time. This may be the loss in value caused by general reasons such as aging and wear and tear or due to special reasons such as an accident or damage in prices. Depreciation is usually calculated from a business perspective, and – subject to commercial law and tax law features – as an expense taken into account in calculating profits. The opposite of depreciation is the attribution, which comes as a write-in question, if made in previous years to high depreciation.
  • Depreciation ratio German: Abschreibungsquote. The depreciation ratio shows the percentage ratio of depreciation expenses over sales revenues.
  • Deviation analysis German: Abweichungsanalyse.
  • Direct costs German: Einzelkosten, Direkte Kosten. Direct costs can be allocated directly to the cost unit. Opposite term: Indirect costs.
  • Direct production costs German: Fertigungseinzelkosten. Direct production costs are production costs that can be allocated directly to one cost unit. Example: A bonus payment per piece manufactured.
  • Debt capital German: Fremdkapital. Debt capital is capital that is given to a company from third parties for a defined period of time. It mainly consists of liabilities and accruals. Debt capital is shown on the right side of the balance sheet together with the equity of the company.
  • Direct material costs German: Materialeinzelkosten. Direct material costs are the costs of the material used to produce a cost unit (e.g. a product).
  • Debenture = Bond. German: Obligation, Schuldverschreibung.
  • Debit column German: Sollseite.
  • Direct costing German: Teilkostenrechnung. Direct costing differentiates the costs of a company in variable costs and fixed costs. Only the variable costs are allocated to the product which caused them, whereas the fixed costs are only shown in the company´s cost unit period accounting . Essential key figure of direct costing is the contribuation margin. See also contribution accounting.

E

  • Expense German: Aufwand
  • EBIT margin German: EBIT-Marge. [EBIT margin] = [EBIT] / [Sales revenues]. The EBIT margin is a Profit margin that shows the operational profit.
  • EBIT = Earnings before interests and taxes. The EBIT is the profit before interet expenses and tax expenses are deducted. It shows the operational profit and is a measure of the profit generated by the assets of a business.  Assets being defined as the total of fixed assets and working capital.  Sometimes used interchangeably with operating profit or operating income (strictly speaking operating profit/income is before returns from associates and joint ventures). Often EBIT is not only the profit before interest expenses but the profit before ALL financial expenses and earnings.
  • EBITA margin German: EBITA-Marge.
  • EBITA = Earnings before interest, taxes and amortization.
  • EBITDA margin German: EBITDA-Marge. [EBITDA margin] = [EBITDA] / [Sales revenues]. The EBITDA margin is a Profit margin that shows the operational profit before depreciation and amortization.
  • EBITDA = Earnings before interest , tax, depreciation and amortisation.  This is close to operating cashflow as it excludes the non-cash expenses of depreciation and amortisation.  It is useful for comparing companies across national boundaries as there is significant variation in accounting for depreciation and amortisation globally.  Care is needed though in capital intensive industries as this metric fails to take account of reinvestment needs.
  • Equity German: Eigenkapital. The equity of a company is the sum of money given to it by its owners (e.g. shareholders) plus the retained earnings (reserves). The equity is shown on the right side of the balance sheet together with the company´s debt.
  • Earning German: Ertrag.
  • Employer´s remuneration, imputed German: Kalkulatorischer Unternehmerlohn.

F

  • Final cost center = Main cost center. German: Endkostenstelle.
  • Fixed costs German: Fixkosten, fixe Kosten. Fixed costs are capacity costs that do not vary with the amount of production in the company. Opposite term: Variable costs.
  • First-degree liquidity German: Liquidität ersten Grades. The first-degree liquidity is the ratio between cash holdings and short-term debt.
  • Face value of a share German: Nennwert einer Aktie.
  • Face value of bond German: Nennwert eienr Anleihe. The face value of a bond is the amount of money a holder will get back once the bond matures.
  • Financing a company = Funding a business. Supplying a company with capital in order to enable it to start operating. Forms of financing a company: 1. External financing and internal financing (classification from the sources of capital), 2. Equity financing and debt financing (classification of the legal interests of the capital disposer).
  • Financial gearing German: Verschuldungsgrad. Financial gearing is the ratio of a company´s debt over equity.
  • Full costs = Total costs.

G

H

I

  • Income German: Ergebnis. A company´s income is the difference of earnings minus expenses of the business period (e.g. a fiscal year). The income can be either positive (a profit) or negative (a loss) and is shown in the income statement (= P&L).
  • Indirect production costs German: Fertigungsgemeinkosten. Indirect production costs are production costs that are not directly accountable to a cost unit. Example: Imputed Depreciation for the production machine.
  • Indirect costs German: Gemeinkosten, Indirekte Kosten.
  • Income statement = P&L, Profit and loss account, statement of income. German: GuV, G+V, Gewinn- und Verlustrechnung. The income statement shows a company´s income within a certain business period. If the expenses exceed the earnings it shows a loss, if the earnings excced the expenses it shows a profit.
  • Indirect cost center = Service cost center. German: Hauptkostenstelle.
  • Internal cost allocation German: Innerbetriebliche Leistungsverrechnung.
  • Income of the year German: Jahresergebnis.
  • Imputed costs German: Kalkulatorsiche Kosten.
  • Idle capacity costs German: Leerkosten. CCosts of idle capacity.
  • Internal cost allocation German: Innerbetriebliche Leistungsverrechnung.
  • Indirect material costs German: Materialgemeinkosten. Indirect material costs are the costs of handling the production material. Opposite term: Direct material costs.
  • Imputed risks German: Kalkulatorische Wagnisse.
  • Internal reat of return = IRR. German: interner Zins.
  • Interest, imputed German: Kalkulatorische Zinsen.

J

K

L

  • Limited partnership German: Kommanditgesellschaft. Abbreviation: LP or L.P.
  • Limited partner German: Kommanditist.
  • Leverage effect German: Leverageeffekt.
  • Liquidation value German: Liquidationswert.
  • Liquid funds German: Liquide Mittel, Flüssige Mittel.
  • Liquidity German: Liquidität. Liquidity is a company´s ability to pay all its bills out of its cash holdings at all times. Otherwise a company has to declare insolvency.
  • Liquidity ratios German: Liquiditätskennzahl. Ratios as part of financial statement analysis: First-degree liquidity, second-degree liquidity, third-degree liquidity.
  • Liquidity management = Cash management. German: Liquiditätsmanagement.
  • Liquid assets German: Flüssige Mittel, Liquide Mitel, Zahlungsmittelbestand, Zahlungsmittel und Zahlungsmitteläquivalente.
  • Liquid funds German: Liquide Mittel, Flüssige Mittel, Zahlungsmittelbestand, Zahlungsmittel und Zahlungsmitteläquivalente.
  • Liability account German: Passivkonto. An expression of financial accounting. A Liability account documents the changes in debt or equity of a company within a fiscal year.
  • Liability item German: Passivposten.
  • Liabilities side (of the balance sheet) German: Passivseite (der Bilanz). The Liabilities side of the balance sheet lists all items of equity and debt of a company. It shows the company´s sources of capital.
  • Legal status German: Rechtsform.
  • Liabilities, short-term German: Kurzfristige Verbindlichkeiten.
  • Liabilities German: Verbindlichkeiten. The liabilities of a company are its payback obligations to capital lendors (e.g. suppliers, banks, the fixed income market). Usually liabilities to banks and the fixed income market are paid for with a fixed interest rate.
  • Loss German: Verlust.
  • Long-term assets German: Langfristiges Vermögen.

M

  • Managerial Accounting German: Internes Rechnungswesen. Managerial accounting covers and processes all financially relevant transactions within an organiszation as basis for controlling decisions. Main instruments of managerial accounting are cost accounting and investment appraisal.
  • Main cost center = Final cost center. German: Hauptkostenstelle.
  • Manufacturing costs German: Herstellkosten. The Manufacturing costs of a cost unit are the sum of its material costs and its production costs.
  • Manufacturing expenses German: Herstellungskosten.
  • Management report German: Lagebericht.
  • Management, value-based Value-based Management. German: Wertorientiertes Management.
  • Material costs German: Materialkosten. A cost unit´s material costs are the sum of its direct material costs and its indirect material costs. They are part of the manufacturing costs.

N

  • Net worth German: Reinvermögen. The net worth of a company is the difference of its assets and its debt. The net worth is the same amount as the company´s equity.
  • Net assets German: Betriebsnotwendiges Vermögen. A company´s net assets are its long-term assets and its net working capital (current assets minus short-term dept).

O

  • Operating margin German: Operative Marge. The operating margin is the percentage ratio of the operating profit over sales revenues. In most cases the operating profit is the EBIT, being the earnings before deducting financial expenses and tax expenses, often also before adding financial income. But the operating profit may also be the EBITDA or EBITA or even other earnings figures out of the profit and loss account.
  • Operating cashflow German: Cashflow aus laufender Geschäftstätigkeit, Operativer Cashflow, Cashflow aus operativer Tätigkeit. The operating cashflow indicates the net inflow of liquid funds from sales activities. It is determined from the figures of the profit and loss account: . By approximation the operating cashflow can be calculated as: [income] + [depreciation] +/- [change in long-term accruals] = [operating cashflow]. In financial statement analysis, operating cashflow serves as an indicator of a firm’s profitability and its capacity for self-financing.
  • Operational controlling German: Operatives Controlling.
  • Option German: Option. The right, but not the obligation, to buy (for a call option) or sell (for a put option) a specific amount of a given stock, commodity, currency, index, or debt, at a specified price (the strike price) during a specified period of time.
  • Overhead costs German: Verwaltungsgemeinkosten.

P

  • Production-method of depreciation German: Leistungsabhänge Abschreibung, Nutzungsabhängige Abschreibung.
  • Payback period = Payoff period. German: Statische Amortisationsdauer. The period of time an investment takes to generate sufficient cash inflows to cover the initial investment. The payback period is measured in terms of a number of years.
  • Production costs German: Fertigungskosten. The production costs of a cost unit are the sum of its direct and indirect production costs. They are part of the manufacturing costs.
  • Period accounting German: Gesamtkostenverfahren.
  • Profit German: Gewinn.
  • Profit margin = Return on sales, RoS. German: Gewinnmarge. Possible profit margins are EBT margin, EBIT margin, EBITDA margin etc.
  • P/E ratio German: KGV or Kurs-Gewinn-Verhältnis. The P/E ratio is the ratio between the current share price of a company and its income of the year.
  • Partnership limited by shares German: Kommanditgesellschaft auf Aktien.
  • Price earnings ratio German: Kurs-Gewinn-Verhältnis or KGV . The P/E ratio is the ratio between the current share price of a company and its income of the year.
  • Parent company German: Mutterunternehmen, Obergesellschaft. A Parent company  is that company within a corporate group that can control management and operations of all other companies within the group.
  • Production method of depreciation German: Nutzungsabhängige Abschreibung.
  • P&L = Profit and loss account, income statement, statement of income. German: GuV, G+V,Gewinn- und Verlustrechnung. The profit and loss account shows the profit or loss of a company within a certain business period (e.g. one year).
  • Profit and loss account = P&L, income statement, statement of income. German: GuV, G+V, Gewinn- und Verlustrechnung. The profit and loss account shows the income (profit or loss) of a companywithin a certain business period.
  • Progressive depreciation German: Progressive Abschreibung.
  • Property, plant and equipment German: Sachanlagen. Part of the assets within the company´s balance sheet.
  • Payoff period = Payback period. German: Statische Amortisationsdauer. The period of time an investment takes to generate sufficient cash inflows to cover the initial investment. The payback period is measured in terms of a number of years.
  • Principle of causation German: Verursachungsprinzip.
  • Payment German: Zahlung. A Payment is a transfer of money usually made in exchange for the provision of goods, services, or to fulfill a legal obligation.

Q

R

  • Return on capital German: Kapitalrendite. The Return on capital is a return figure to measure the financial performance of a company. It is the coefficient of an income figure over a capital figure.
  • Return German: Rendite. A Return is the financial outcome out of an investment (e.g. an asset, a shareholding, a product). It is measured with a return figure.
  • Return figure German: Renditekennzahl.
  • Return on capital employed = RoCE.
  • Risk analysis German: Risikoanalyse.
  • RoCE Return generated by the assets of a business (or: the return that has been generated for all providers of capital).  Calculated as EBIT/Capital employed.
  • Reserve, hidden German: Stille Rücklage.
  • Reserve German: Rücklage. Part of a company´s equity. Reserves are profits from former fiscal years that have not yet been distributed as dividends to the shareholders of the company.
  • Refinancing German: Umfinanzierung.
  • Replacement cost = Replacement value. German: Wiederbeschaffungswert.Begriff der Kostenrechnung. Der Wiederbeschaffungswert eines Vermögensgegenstandes ist der Anschaffungswert des gleichen oder zumindest eines vergleichbaren Wirtschaftsgutes in der Zukunft. Im Rahmen der kalkulatorischen Abschreibung wird anstatt auf den (historischen) Anschaffungswert in der Regel auf den Wiederbeschaffungswert abgeschrieben, um so durch eine spätere Ersatzinvestition das Kapazitätsniveau desVermögensgegenstandes zu erhalten; im Rahmen der Finanzierung aus Abschreibungsgegenwerten vergütet der Kunde so nicht nur den historischen Anschaffungswert des Gegenstandes, sondern finanziert auch die zukünftige Beschaffung eines (teureren) neuen Gegenstandes vor. Die Abschreibung auf Wiederbeschaffungswerte führt damit zu einer Substanzerhaltung des Unternehmens.

S

  • Stock companies act German: Aktiengesetz.
  • Shareholder German: Aktionär. The shareholder owns a share of a company. The share is securitised in a value paper, called stock.
  • Short-term liabilities German: Kurzfristige Verbindlichkeiten.
  • Second-degree liquidity German: Liquidität zweiten Grades. The second-degree liquidity is the ratio between the sum of cash holdings and short-term accounts receivables over short-term debt.
  • Standard costs German: Plankosten.
  • Scheduled depreciation Depreciation, scheduled
  • Sale and lease-back Funding effect by selling an asset (e.g. a building) and leasing it on a long-termin basis. The Sale and lease-back procedure is a possibility to raise a signifikant amount of cash for the company and allocate spendings into the future.
  • Segment reporting German: Segment reporting.
  • Self-financing German: Selbstfinanzierung.
  • Sensitivity analysis German: Sensitivitätsanalyse. A sensitivity analysis shows the sensitivity of output figures (e.g. NPV) to variations in input figures (e.g. cashflows). The effects of the variation of an input figure can be studied. In risk analysis all input-figure variations together are taken into account. Sensitivity analysis is customary in investment analysis.
  • Share deal German: Share deal. Taking control over a company by buying a shareholding of that company.
  • Special direct costs of production German: Sondereinzelkosten der Fertigung. Example: Special tool for the production of only one piece of a cost unit.
  • Special direct selling costs German: Sondereinzelkosten des Vertriebs. Special direct costs of selling are directly accountable to a cost unit, but are not cost of manufacturing. Example: Packaging material.
  • Strategic controlling German: Strategisches Controlling.
  • Subsidiary company German: Tochterunternehmen.
  • Sales revenues = Turnover. German: Umsatz. The amount, determined with selling prices, of all sold units of output of a company.
  • Shareholding German: Unternehmensbeteiligung.
  • Subordinated group German: Unterordnungskonzern.
  • Sales overhead costs German: Vetriebsgemeinkosten.
  • Sales cost margin German: Vertriebsintensität.
  • Selling costs German: Vertriebskosten. Selling costs are the indirect selling costs and the special direct selling costs.
  • Service cost center German: Vorkostenstelle, Hilfskostenstelle. A service cost center covers a service function for a primary cost center within the process structure of a company.

T

  • Third-degree liquidity German: Liquidität dritten Grades. The third-degree liquidity is the ratio between the sum of cash holdings , short-term accounts receivables and inventory over short-term debt.
  • Tangible asset Asset, tangible. German: Materialler Vermögensgegenstand.
  • Terminal value German: Restwert.
  • Total costs = Prime costs, Full costs. German: Selbstkosten, Vollkosten. The total costs are the costs unit including all resources used or consumed within the company, including direct costs and indirect costs. If the customer buys at a higher price the company makes profit. They therefore show the lower price limit of a product or service, respectively its profit margin.
  • Tax balance sheet German: Steuerbilanz.
  • T-account German: T-Konto.
  • Transfer price German: Verrechnungspreis.

U

  • Used capacity costs German: Nutzkosten. Used capacity costs are the fixed costs of the used capacity.
  • Unit costs German: Stückkosten. The Unit costs of a product are its full costs per unit.
  • UG Abbreviation for Unternehmergesellschaft, a german legal status for a company.
  • Unternehmergesellschaft Legal status for a company.

V

  • Variable costs German: Variable Kosten. Variable costs vary with the activity of a business. They are in a state of func­tional dependence with capacity utilization. Opposite term: Fixed costs.
  • Value added German: Wertbeitrag. The Value added is the difference between the income (e.g. EBIT) and the capital costs of a company within a defined period of time, e.g. a fiscal year. See also Economic value-added.
  • Value-based Corporate Management German: Wertorientierte Unternehmensführung.
  • Value-based controlling German: Wertorientiertes Controlling.
  • Value-based management see Value based corporate management. German: Wertorientiertes Management.

W

  • Weighted average cost of capital Abbreviation: WACC.
  • WACC = Weighted Average Cost of Capital.The WACC is the weighted average of the return expectations of the funding sources (equity, liablilities, accruals) of a company. The weighting factor is the ratio of the funding source to the total funds, e.g. the equity ratio.  In investment theory the WACC is the discount rate for the future cashflows out of the investment. See also Capital costs.

X

Y

Z