15 common financial terminologies and their meaning

Nerd, Solutions 

In every industry they are terminologies that can be hard to understand by an outside person. Here are 15 common used terminology in financing industry and their meaning.



these are all properties owned by the company or individual


These are all debts that the company or individual currently has outstanding to lenders.

Balance sheet

This is the financial statement that shows company financial situation at a given point in time.

Income statement or profit and loss statement

This is the financial statement that show financial performance of the company over a period of time.

Net income

In financing the term NET means - the remaining value after deduction. so, net income means the remaining income after deduce all company expenses from the company's revenue.

Gross profit

This is the amount remain after deduce cost of goods sold from sales revenue

Break even point

This term used to describe a situation in a business or financial environment, that the amount of revenue generated by the business, after the variable cost have been payed, is equal to the business fixed cost; so we got a zero profit after all business fixed cost have been payed.

Variable cost

This term used to describe all business cost that are vary from time to time, or are direct proportional to the performance of the business. We incur these cost only when we do sell an item or perform a service.

In other words, we can say. These are cost that change in direct proportional to the activity level.

Fixed cost

This term is used to describe costs that remain constant regardless of activity level.


This is any action or event that has a financial impact on the business and can be measured reliably.


This term is used to describe amount of assets generated by doing business.


This term  is used to describe amount of assets consumed by doing business.


This term is used to describe the amount of income that is distributed to the owners of the company, and also dividend can be in many form like: cash dividend, stock dividend, and other business assets can be used as dividend.

Retained Earnings:

This term means a portion of the net income the company has kept or has not distributed them as dividend to the company owners.


This is the process of allocating the cost of plant asset to expense over the asset useful life.