Business Finance Glossary

Break-Even Point

The level of revenue or sales volume at which total income equals total costs — the point at which a business neither makes a profit nor incurs a loss.

Equity

The residual value of a business's assets after all liabilities are subtracted — representing the owner's financial interest in the business. Also called net worth or owner's equity.

Gross Income

The total revenue earned by a business before any deductions for expenses, taxes, or other costs. For individuals, gross income is total earnings before income taxes and deductions.

Liability

A financial obligation or debt owed by a business to external parties — including suppliers, lenders, and employees — that will require the use of assets or future services to settle.

Net Income

The total profit remaining after all revenue has been collected and all expenses — including operating costs, taxes, interest, and depreciation — have been deducted. Also called net profit or bottom line.

Operating Expenses

The ongoing costs incurred in the day-to-day operation of a business, including rent, salaries, software subscriptions, marketing, and utilities, but excluding cost of goods sold and capital expenditures.

Overhead

The ongoing indirect costs of running a business that cannot be directly attributed to a specific product, service, or client project, such as rent, utilities, insurance, and administrative salaries.

Profit Margin

A ratio expressing what percentage of revenue is retained as profit after expenses, used to evaluate the financial efficiency and health of a business.

Return on Investment

A ratio measuring the financial gain or loss generated by an investment relative to its cost, expressed as a percentage and used to evaluate the efficiency of an expenditure or business decision.

Revenue

The total income generated by a business from its primary operations — the sale of goods or services — before any costs or expenses are deducted.