C

• Capital – wealth in the form of money or property owned by a business.
• Capital cost – a one-off substantial purchase of physical items such as plant, equipment, building or land.
• Capital gain – the amount gained when an asset sells above its original purchase price.
• Capital growth – an increase in the value of an asset.
• Cash – includes all money available on demand, including bank notes and coins, petty cash, certain cheques, and money in savings or debit accounts.
• Cash accounting – an accounting system that records transactions at the time you actually receive money payment.
• Cash book – a daily record of all cash, credit or cheque transactions received or paid out by a business.
• Cash flow – the measure of actual cash flowing in and out of a business.
• Cash incoming – money that is flowing into the business.
• Cash outgoing – money that is flowing out of the business.
• Chart of accounts – an index of the accounts a business will use to classify transactions. Each account represents a type of transaction such as asset, liability, owner’s equity, income, and expense.
• Chattel mortgage – similar to a hire-purchase agreement although the business owns the asset from the start. Chattel mortgages require regular ongoing payments and typically provide the option of reducing the payments through the use of a final ‘balloon’ payment.
• Collateral – see Security.
• Commercial bill (also known as a bill of exchange) – a form of commercial loan on an interest only basis, or interest reducing basis. Commercial bills typically require some sort of security and suit short-term funding needs such as inventory.
• Contingent liability – a liability where payment is made only if a particular event or circumstance occurs.
• Cost of goods sold – the total direct costs of producing a good or delivering a service.
• Credit – a lending term for when a customer purchases a good or service with an agreement to pay at a later date. This could be an account with a supplier, a store credit card or a bank credit card.
• Creditor – a person or business that allows you to purchase a good or service with an agreement to pay at a later date. A creditor is also anyone who you owe money to, such as a lender or supplier.
• Credit limit – a dollar amount that you cannot exceed on a credit card or the maximum lending amount offered for a loan.
• Credit rating – a ranking applied to a person or business based on their credit history that represents their ability to repay a debt. Visit ASIC’s MoneySmart website to learn more about credit ratings– external site.
• Credit history – a report detailing an individual’s or business’s past credit arrangements. A lender may seek a credit history when assessing a loan application. Visit ASIC’s MoneySmart website to read more about credit reports– external site.
• Crowdfunding – is a way of financing your business idea through donations of money from the public. This usually occurs online, through a crowdfunding website.
• Current asset – an asset in cash or something you can convert into cash within 12 months.
• Current liability – a liability that is due for payment within 12 months.

E

• Employee share schemes– external site – where you give your employees the opportunity to buy shares in your company. Other terms include an ’employee share purchase plan’ or an ’employee equity scheme’.
• Encumbered – an encumbered asset is one that is currently put forward as security or collateral for a loan.
• Equity – the value of ownership interest in the business, calculated by deducting liabilities from assets. See also Owner’s equity.
• Equity finance – money provided to a business in exchange for part ownership of the business. This can be money invested by the business owners, friends, family, or investors like business angels and venture capitalists.
• Excise duty – an indirect tax levied on certain types of goods produced or manufactured in Australia including petrol, alcohol, tobacco and coal.

G

• Goodwill – an intangible asset that represents the value of a business’s reputation.
• Gross income – the total money earned by a business before you deduct expenses.
• Gross profit (also known as net sales) – the difference between sales and the direct cost of making the sales.
• Guarantor – a person who promises to pay a loan in the event the borrower cannot meet the repayments. The guarantor is legally responsible for the debt.

I

• ---

  • Initial public offering (IPO) – when a company first offers shares on the stock market to sell them to the general public. Also known as floating on the stock market. Visit ASIC’s MoneySmart website for more information about IPOs– external site.
  • Insolvent – a business or company is insolvent when they cannot pay their debts as and when they are due.
  • Intangible assets – non-physical assets with no fixed value, such as goodwill and intellectual property rights.
  • Interest – the cost of borrowing money on a loan or earned on an interest-bearing account.
  • Interest rate – a percentage used to calculate the cost of borrowing money or the amount you will earn. Rates vary from product to product and generally the higher the risk of the loan, the higher the interest rate. Rates may be fixed or variable.
  • Inventory – a list of goods or materials a business is holding for sale.
  • Investment – the purchase of an asset for the purpose of earning money such as shares or property. Visit ASIC’s MoneySmart website for more about personal investing– external site.
  • Invoice – a document to a customer to request payment for a good or service received.
  • Invoice finance – finance based on the strength of a business’s accounts receivable. This form of financing is similar to factoring, except that the invoices or accounts receivable remain with the business. See also Factoring

K

M

• Margin – the difference between the selling price of a good or service and the profit. Margin is generally shown as a gross margin percentage which shows the proportion of profit for each sales dollar.
• Margin call – when the value of a property or asset falls below a certain loan to value ratio (LVR). For higher risk loans such as margin loans, the lender will request further payment to bring the LVR back to the agreed percentage. See also Loan to value ratio (LVR).
• Mark down – a discount applied to a product during a promotion or sale for the purposes of attracting sales or for shifting surplus or discontinued products. See also Discount.
• Mark up – the amount added to the cost price of goods, to help determine a selling price. Essentially it is the difference between the cost of the good/service and the selling price. It does not take into account what proportion of the amount is profit.
• Maturity date – when a loan’s term ends and all outstanding principal and interest payments are due.

O

• Overdraft facility – a finance arrangement where a lender allows a business to withdraw more than the balance of an account.
• Overdrawn account – a credit account that has exceeded its credit limit or a bank account that has had more than the remaining balance withdrawn.
• Overheads – the fixed costs associated with operating a business such as rent, marketing, utilities and administrative costs. See also Fixed costs.
• Owner’s equity – see Net assets.

Q

• Quant
  A specialist usually working in portfolio management or bond research who develops systems that map past movements in financial markets with a view to predicting future equity, commodity and currency values.

• Quartile
  Investment surveys rank investment managers according to the investment performance of their products. Managers in the top quarter of those participating in the survey are said to be “top quartile performers”. Similarly, an investment manger’s performance may fall in the second, third or fourth quartile, or be simply “above average” (quarters one and two combined).

S

• Single-entry bookkeeping – a bookkeeping method within a cash accounting system that records one side of each transaction.
• Scam – a deliberate and targeted deception to obtain money or information unlawfully.
• Security (also known as collateral) – property or assets that a lender can take ownership of when repayment of a loan does not occur.
• Shareholder’s equity – see Net assets.
• SMSF – stands for self-managed superannuation fund– external site. An SMSF is a way of saving for your retirement. Unlike other super funds, an SMSF is self-managed, which means you’re responsible for making sure the super fund complies with super and tax laws. ASIC’s MoneySmart also has useful information on SMSFs– external site.
• Stock – the actual goods or materials a business currently has on hand.
• Stocktaking – a regular process involving a physical count of merchandise and supplies actually held by a business, to verify stock records and accounts.
• Superannuation – money set aside for retirement that must go into a complying superannuation fund. There is useful information on ASIC’s MoneySmart website about businesses paying their employees super– external site.

U

• Unbankable money – Relevant money that has been received by an official of a Commonwealth entity or a minister, and cannot be deposited in banks in Australia, or in the place where the money was received. For example, banks in Australia do not accept foreign currency coinage.Unbankable money, since it cannot be used as money, is treated as relevant property and can be used, managed or disposed of by the entity’s accountable authority in accordance with the PGPA Rule and the entity’s internal controls..
• Underlying cash balance – A cash measure that shows whether the Government has to borrow from financial markets to cover its activities. The underlying cash balance is calculated as net cash receipts from operations (excluding Future Fund earnings), plus financing adjustments (to remove cash flows more appropriately viewed as financing in GFS), plus net cash flows from capital investment (net cash investment in non-financial assets worsens underlying cash balance as such investment is integral to the operation of Government). Related term:fiscal balance.
• Underfunded superannuation scheme – A scheme where the employer does not pay contributions to a superannuation fund. Instead, the employer contributes when the employee’s benefit is paid. For taxation purposes, it is also known as an untaxed scheme. Some schemes provide a combination of funded and unfunded benefits.

W

• Waiver – A special concession granted to an individual or other body that extinguishes a debt or other amount owing to the Commonwealth. Waivers may be granted by the Finance Minister (or a delegate) under section 63 of the PGPA Act.
• Warranty – A promise whereby one party provides certain assurances to another party. Warranties often relate to asset and sales agreements. For example, where an entity sells an asset to a third party it may provide a warranty that the entity has a right to sell the asset, the asset is fit for use and defective parts will be replaced within a specified period. A warranty may give rise to a contingent liability.
• Weighting – Percentage or proportion of the portfolio invested in each asset class.
• Write downs – A decrease in the market value of an investment established by a valuation.

Y

• Yield – A measure of return on an investment expressed as a percentage (calculated by dividing the income from an asset by its current capital value).