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Net Book Value

The net value of the equipment account (gross book value) and the accumulated
depreciation account. May also be referred to as book value or carrying value.
Net Earnings
Calculated by the formula Income before taxes - taxes. A company’s total earnings.
Also called net income, net profit, and the bottom line.
Net Income
Calculated by the formula Income before taxes - taxes. A company’s total earnings.
Also called net earnings, net profit, and the bottom line.
Net Present Value (NPV)
The net present value is a calculation of the present values of all the cash inflows and
outflows of a project or investment. The result is a single number that gives a good
indication of what a business or a particular investment is worth today.
Net Profit
Calculated by the formula Income before taxes - taxes. A company’s total earnings.
Also called net earnings, net income, and the bottom line.
Net Revenue
The net amount of revenue less any contra-revenue accounts. Contra-revenue
accounts may include sales returns and allowances, cash discounts or warranty
reserves, all of which are accounts with debit balances that reduce gross revenue to a
net revenue amount. Some companies report net revenue as the top line on their
income statements rather than gross revenue, implying that contra-revenue accounts
exist but are not material.
Net Working Capital
The cash that is tied up in a business' operations. Usually calculated as current assets
less current liabilities. The change in net working capital is part of the free cash flow
equation.
Nominal Accounts
Accounts that are reset to zero at the end of each accounting period. Nominal
accounts include all revenue and expense accounts, and may also be referred to as
temporary accounts or Income Statement accounts. The net balance of nominal
accounts is transferred to retained earnings at the end of each accounting period.
Non-Current Assets
Assets that the business will likely hold in their current form for more than a year.
Non-Current Liabilities
Obligations that will not be settled or paid within a year.
Notes Payable
Notes Payable is a liability that arises when a business receives a promissory note
from another business. Essentially, it is a loan recorded from the recipient's point of
view. A portion or all of the note payable may be recorded in the current liabilities or
non-current liabilities section of the balance sheet, depending on how soon the
business expects to settle the note.
Notes Receivable
Notes Receivable is an asset that arises when a business issues a promissory note to
another business. Essentially, it is a loan recorded from the lender's point of view. A
portion or all of the note receivable may be recorded in the current assets or non-
current assets section of the balance sheet, depending on how soon the business
expects to settle the note.
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On the Books
A colloquial phrase used to indicate that a transaction has been recorded in the
financial accounting records of a business.
Operating Cycle
The period of time from the initial outlay of cash for the main business activity to the
completion of the sale and collection of cash for the same business activity. For
manufacturing companies, it is the time from the purchase of raw materials to the
collection of cash from the sale of the finished product. Most businesses have
operating cycles of less than one year. However, for a business like a distillery, the
operating cycle could be longer than one year.
Operating Efficiency
Operating Efficiency is one of the three components of the DuPont Framework. For
the purposes of the DuPont Framework, it is measured using the Asset Turnover, but
other measures of efficiency include Inventory Turnover, Accounts Receivable
Turnover, and Accounts Payable Turnover.
Operating Expenses
The costs that a business incurs to run its normal operations. Operating expenses
include items such as sales and marketing expenses, research and development
expenses, and general and administrative expenses. Within those categories are costs
such as payroll costs for employees in those departments, advertising costs, legal fees,
and other cost items.
Operating Income
Operating Income is the amount that remains after the operating expenses are
deducted from the gross profit.
Operating Section
Section of the statement of cash flows that includes all cash flows associated the
preparing and providing of goods or services to customers, or in other words, the
normal operations of the business.
Opportunity Cost
The cost of foregoing the next best alternative. For example, the opportunity cost of
investing in one project is the amount that would have been received for investing in
the next best alternative project.
Owners' Equity
Owners' Equity is the residual that belongs to the owners of the business. If you add
up all the resources of the business (assets) and subtract all the claims that third
parties (such as lenders and suppliers) have against those assets, the residual (what is
left over) is Owners' Equity. Owners' Equity includes two elements; first, money
contributed to (invested in) a business in exchange for some degree of ownership and
second, earnings that the business generates over time and retains in the business.
Also commonly known as shareholders' equity, stockholders' equity, or equity.