There’s little more embarrassing than not knowing what one three letter acronym means, or having to fake your way through a conversation so you can google terms later. HR consultant William Tincup put together a handy guide
for some of the common, and sometimes strange sounding, terms that get thrown around the finance department.
How many of these did you already know?
- Acid Test: A stern measure of a company’s ability to pay its short-term debts, in that stock is excluded from asset value.
- Cashflow: The movement of cash in and out of a business from day-to-day direct trading and other non-trading or indirect effects, such as capital expenditure, tax and dividend payments. Meaning, do we have enough money in the bank account to pay $h!t on time? If so, cashflowin’.
- Cost Of Goods Sold (COGS): The directly attributable costs of products or services sold, usually materials, labour, and direct production costs. The key phrase is “directly.” COGS is actually quite important.
- Depreciation: The apportionment of cost of a (usually large) capital item over an agreed period. Come on now, you’ve been screwed at a dealership… surely you know what depreciation means. Surely.
- Fixed Assets: Assets held for use by the business rather than for sale or conversion into cash, e.g. fixtures and fittings, equipment, buildings. Just between us… CFOs generally like things that are fixed—assets, liabilities, expenses, etc. They hate surprises. Really hate surprises.
There’s no longer any debate about whether HR needs the financial know how to be a business partner – but that doesn’t mean everyone is prepared.