A Guide to Financial Acronyms

A Guide to Financial Acronyms

Did you know that only 15% of students felt very prepared to manage their personal finances after college?

Financial literacy is crucial to your ability to be successful in life. If you want to go far, you need to understand how money works and know how to manage it effectively.

One of the best ways to learn financial literacy is to learn financial acronyms. You’ll find these financial acronyms everywhere, from the newspaper to your credit card statements.

Here are some of the most common financial acronyms and what they mean.

AR: Account Receivable

This is the money that you have received but not yet deposited in a bank account. It can also refer to the total amount of money that a company owes its customers.

BS: Balance Sheet

A snapshot of a company’s assets, liabilities, and shareholder equity in time. Also known as a statement of financial position.

CAGR: Compound Annual Growth Rate

CAGR is a way to measure the average annual growth rate of something. It’s calculated by taking a series of measurements, adding them together, then dividing that sum by the number of measurements you took.

CD: Certificate of Deposit

This is a type of savings account that earns higher interest rates than a regular savings account, but it has a set term and you can’t get your money out before it matures.

CR: Credit

CR is short for credit. For example, a high CR means that you have an excellent credit history and therefore are likely to be approved for loans and credit cards.

FICO: Fair Isaac Corporation Score

This three-digit number measures how likely you are to pay back your debts on time. Each lender uses its formula to calculate it, but they all consider your payment history, amounts owed, length of credit history, and amount currently owed.

GP: Gross Profit Margin

The gross profit margin is a key metric for assessing the profitability of a business. It measures the percentage of money left over after accounting for the cost of goods sold (COGS).

IRR: Internal Rate of Return

IRR is a measure of the average return on your investment. It tells you what your money would be worth if you had invested it instead of spending it on the project being considered.

P&L: Profit and Loss Statement

P&L is an accounting term that refers to a type of financial statement. A P&L statement is a report that lists the income and expenses of a business over a specific period, such as one month or one year.

ROI: Return on Investment

ROI is a measure of the efficiency of a business activity or investment. It tells you how much money you make relative to how much money you spent on something.

Financial Acronyms: This Is What You Need to Know

There are plenty of financial acronyms we use daily, but it’s hard to keep track of them all. By knowing what these acronyms mean, you’re sure to find one that will help you understand your finances better!

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