The Glossary
20 terms, written without jargon. Search by name, definition, or category.
Balance Sheet
A snapshot of what a company owns and owes at a moment in time.
AccountingCash Flow Statement
Reconciles net income to cash actually generated.
StrategyCompounding
Earnings on earnings — the eighth wonder of the world.
ValuationDiscount Rate
The rate used to translate future cash flows into present value.
StrategyDividend
A cash distribution from a company to its shareholders.
AccountingEBITDA
Earnings before interest, taxes, depreciation, and amortization.
StrategyEconomic Moat
A durable competitive advantage that protects long-term profits.
ValuationEV/EBITDA
Enterprise value as a multiple of EBITDA.
ValuationFree Cash Flow
Cash a business generates after reinvesting to maintain operations.
AccountingIncome Statement
A report of revenues, costs, and profits over a period.
StrategyMargin of Safety
Buying at a price meaningfully below intrinsic value.
StrategyNetwork Effect
A product becomes more valuable as more people use it.
AccountingOperating Margin
Operating income as a percentage of revenue.
ValuationPrice-to-Earnings Ratio
Share price divided by earnings per share.
ValuationReturn on Invested Capital
How much profit a company generates per dollar of capital invested.
StrategyStock Buyback
A company repurchasing its own shares.
StrategySwitching Cost
Friction that prevents customers from changing providers.
ValuationTerminal Value
The value of all cash flows beyond the explicit forecast period.
ValuationWACC
The blended cost of a company's debt and equity capital.
AccountingWorking Capital
Current assets minus current liabilities.