Forward View Consulting

View Original

Alphabet Soup

As consultants, we find that acronyms are everywhere in business. Each specific field has its own language, and finance is especially confusing to those outside the industry. Since most small business owners/managers will also be their company's CFO, we'd like to demystify several financial acronyms. Let's begin:

CFO = Chief Financial Officer (the firm's top financial expert who oversees financing, investments, accounting etc.)

IPO = Initial Public Offering (a corporation's first offering of stock to the general public, typically through a stock exchange)

ROI = Return On Investment (defined as the % return on a financial investment)

APR = Annual Percentage Rate (commonly seen as the yearly interest rate on a loan or credit card agreement)

C3PO (just checking your attention span)

WACC = Weighed Average Cost of Capital (this is a company's cost of financing itself, typically expressed as a %)

FCF = Free Cash Flow (actual cash inflow not consumed by business operations, not net income)

Y/Y = Year over Year (example: "Y/Y the 3rd quarter of 2014 had 10% higher sales than the 3rd quarter of 2013" or, "3Q14 saw sales up 10% Y/Y")

Q/Q = Quarter over Quarter (to compare sequential quarters)

There are innumerable other acronyms we could decipher, but that would require writing a lengthy book. We hope these tips will explain commonly seen acronyms. The alphabet soup should be more comprehensible now!