Financial Terms and Ratios

Definitions, terminology and abbreviations relating to finance

These financial terms definitions are for the most commonly used UK financial terms and ratios. They are based on UK Company Balance Sheet, Profit and Loss Account, and Cashflow Statement conventions.

Certain financial terms often mean different things to different organizations depending on their own particular accounting policies. Financial terms will have slightly different interpretations in different countries. So as a general rule for all non-financial business people, if in doubt, ask for an explanation from the person or organization responsible for producing the figures and using the terms - you may be the only one to ask, but you certainly will not be the only one wodering what it all means. Don't be intimidated by financial terminology or confusing figures and methodology. Always ask for clarification, and you will find that most financial managers and accountants are very happy to explain.

Acid test

A stern measure of a company's ability to pay its short term debts, in that stock is excluded from asset value. (liquid assets/current liabilities) Also referred to as the Quick Ratio.