GLOSSARY
Financial Modeling and Forecasting Financial
Statements
With Jim Stice and Kay Stice
Use these terms and definitions below to understand concepts taught in the course.
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Term
Definition
capital expenditures
Capital expenditures, or CapEx, are purchases of long-term operating
assets, such as land, buildings, and equipment
careful financial
model
A careful financial model is a numerical plan of a business's activities
made in advance that helps a business identify and solve problems
before these problems even arise
cash burn rate
Cash burn rate is a measure of negative cash flow, and is typically
quoted in terms of cash spent per month
Depreciation
Depreciation is an accounting method of spreading the cost (or value)
of a tangible or physical asset over its useful life or life expectancy
discounted cash flow
analysis (DCF)
The fundamental model for estimating the value of a business or any
other asset
fixed cost
A fixed cost is a cost that does not change regardless of the amount of
goods or services produced or sold
long-term asset
Long-term assets, such as property, plant, and equipment are not
intended to be turned into cash or be consumed within one year of the
balance sheet date
reversion to the
mean
A belief that asset prices and historical returns eventually revert to the
mean
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variable cost
A variable cost is a cost that increases in direct proportion to the volume
of business
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