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Margin — the difference between the selling price of a good or service and the profit. Margin is generally shown as a gross margin percentage that 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.
Net assets (also known as net worth, owner’s equity or shareholder’s equity) — the total assets minus total liabilities.
Net income — the total money earned by a business after tax and other deductions.
Net profit (also known as your bottom line) — the total gross profit minus all business expenses.
Net worth — see Net assets.
Facility — an arrangement such as an account offered by a financial institution to a business (such as a bank account, a short-term loan or overdraft).
Financial year — a 12-month period typically from July 1 to June 30.
Financial statement — a summary of a business’ financial position for a given period. Financial statements can include a profit and loss, balance sheet and cash flow statement.
Fixed asset — a physical asset used in the running of a business.
Fixed cost — a cost that is not part of producing a good or service.
Fixed interest rate — when the interest rate of a loan remains the same for the term of the loan or an agreed time frame.
Float — when a private company offers shares in the company to the public for the first time. See Initial public offering.
Forecast — a list of future financial transactions. Forecasts help to plan a more accurate budget.
Fringe benefits — non-monetary benefits, such as company cars and mobile phones, included as part of a salary package.
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’ accounts receivable. This form of financing is similar to factoring, except that the invoices or accounts receivable remain with the business. See also Factoring.
Liability — any financial expense or amount owed.
Line of credit — an agreement allowing a borrower to withdraw money from an account up to an approved limit.
Liquidate — to quickly sell all the assets of a company and convert them into cash.
Liquidation — the process of winding up an insolvent company. An appointed administrator will do this by ceasing business operations, selling assets and paying creditors and shareholders.
Liquidity — how quickly you can convert assets into cash.
Loan — a finance agreement where a business borrows money and pays it back in instalments (plus interest) within a specified period.
Loan to value ratio (LVR) — your loan amount shown as a percentage of the market value of the property or asset that you purchase.
The ratio helps a lender work out if they can recover the loan amount if the loan goes into default.
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