Financial glossary
The terms behind earnings, value and investor distributions.
- Accruals
- Recognized obligations or expenses not yet settled in cash.Read the guide →
- Add-back
- A proposed reversal of an expense; acceptance depends on evidence and ongoing economics.Read the guide →
- Adjusted EBITDA
- Reported EBITDA adjusted for supported changes to sustainable operations.Read the guide →
- Capital expenditure
- Investment in assets used across periods, with cash spending modeled separately from depreciation.Read the guide →
- Cash conversion
- The relationship between reported earnings and cash generation after operating capital needs.Read the guide →
- Catch-up
- A distribution stage that moves a partner toward a specified share of cumulative profits.Read the guide →
- Comparable companies
- Businesses selected as reference points using consistent valuation metrics.Read the guide →
- Customer concentration
- Dependence on a small number of customers for revenue or gross profit.Read the guide →
- DCF
- Discounted cash flow: valuation by the present value of forecast cash flows.Read the guide →
- Debt service coverage ratio
- Defined operating cash flow divided by debt service for the same period.Read the guide →
- Debt-like items
- Obligations treated as debt under the transaction agreement rather than ordinary operating working capital.Read the guide →
- Enterprise value
- The indicated value of the operating business before the enterprise-to-equity bridge.Read the guide →
- Equity multiple
- Total distributions divided by total equity contributions, without reflecting timing.Read the guide →
- Equity value
- Value attributable to equity holders after agreed cash, debt and other adjustments.Read the guide →
- Equity waterfall
- The contractual order for distributing cash among equity partners.Read the guide →
- IRR
- The discount rate at which dated cash flows have zero net present value; it may be undefined or ambiguous.Read the guide →
- Loan draw
- An advance under a financing facility subject to eligibility and approval conditions.Read the guide →
- Net working capital peg
- The agreed operating working capital required to be delivered at closing.Read the guide →
- Peak equity
- The maximum cumulative equity funding requirement over the modeled project timeline.Read the guide →
- Preferred return
- A contractual priority return to an investor, subject to the agreement’s timing and accrual conventions.Read the guide →
- Promote
- A sponsor’s enhanced share of distributions after specified hurdles.Read the guide →
- Proof of cash
- A reconciliation of bank activity to reported revenue and expenses, including timing differences.Read the guide →
- Replacement compensation
- The market cost of replacing an owner’s ongoing duties after a sale.Read the guide →
- Run-rate
- An estimate of ongoing performance based on a stated recent period or implemented operating change.Read the guide →
- Scenario analysis
- Testing a coherent combination of operating and financial assumptions.Read the guide →
- SDE
- Seller discretionary earnings: earnings before specified owner-related costs, with definitions varying by transaction.Read the guide →
- Sensitivity analysis
- Testing the output effect of changing one or a small number of assumptions.Read the guide →
- Terminal value
- The value of cash flows beyond an explicit forecast period.Read the guide →
- Three-statement model
- An integrated forecast of income statement, balance sheet and cash flow.Read the guide →
- WACC
- Weighted average cost of capital for the financing of an enterprise.Read the guide →
Educational content — not an audit, assurance opinion, or investment or legal advice.