Vareto Financial Glossary

Learn about key FP&A and business terms with definitions, examples, and why it matters.

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Break-Even Point (BEP)

Break-even point (BEP) is when a company’s revenues equal its expenses during a financial period. When a company reaches its BEP, it means that it is neither in profit nor in losses. BEP is also referred to as the revenue amount that a company needs to achieve to cover its expenses during a given period.

Monthly Recurring Revenue (MRR)

Monthly Recurring Revenue (MRR) is an indicator of how much revenue a business can derive from its active subscriptions in a month. This includes recurring income from coupons, discounts and add-ons. One-time fees are excluded. This metric is used to gauge a SaaS company's financial health and project its future earnings from active subscriptions.

Blended CAC Ratio

Blended CAC is a SaaS metric that considers the total cost that all marketing channels incurred to acquire customers during a given period. This metric includes costs that are both directly and indirectly incurred through paid and non-paid channels and excludes salaries and overhead costs.

Lead Velocity Rate (LVR)

Lead Velocity Rate (LVR) is a metric to track real-time growth from qualified leads generated every month. High-growth SaaS companies use LVR to gauge their efficiency and future growth potential.

Interest Coverage Ratio

Interest Coverage Ratio (ICR) is a financial ratio that tells how well a company is able to pay interest on outstanding debt. This metric is commonly used by investors, lenders, and creditors to understand the risk of lending capital to a business.

Net Worth

Net worth is the total value of assets owned by a company less the total liabilities that it owes. This metric is used to know about a company's current financial health.

Required Rate of Return

Required rate of return (RRR) is the minimum return (profit) that a company or an investor will aim to receive considering a certain level of risk of investing that comes along with the type of project/investment.

Sustainable Growth Rate

Sustainable Growth Rate (SGR) is the rate at which a company can grow depending on its current capital structure. Companies aim for SGR by maintaining the right mix of debt and equity.

Revenue Backlog

Revenue backlog is the portion of contracted revenue that is not yet recognized within a SaaS company's subscription agreement. Simply put, it is the money that a company's customers have promised to pay for a future product/service delivery. Knowing the revenue backlog can help companies get an accurate picture of their current and future financial state.

Return On Equity

Return on Equity is a financial performance metric that takes a company's Net Income and divides it by Shareholder's equity. This metric is used to gauge a company's profitability and efficiency in earning profits.

Operating Cash Flow

Operating cash flow (OCF) is a metric used to know how much cash a company can generate from its usual business operations. It is used to gauge whether a company can earn positive cash flow to sustain and grow its operations. In case it is unable to, whether any external financing will be needed for further capital expansion.

Net Working Capital

Net working capital is the remainder of a company's current assets less current liabilities. The more a company's net working capital, the better positioned it is to cover its current obligations.

Months to Recover CAC

Months to recover CAC or CAC payback period is a SaaS metric used by companies to estimate the time (often in months) needed to recover the investment made toward customer acquisition. Simply put, this metric tells how fast a company is able to reach the breakeven point as far as its investment in customer acquisition is concerned.

Free Cash Flow

Free cash flow (FCF) is the remainder after all the cash outflows and capital assets of a company are accounted for. Simply put, it is the cash left over after paying for capital expenditures (CapEx) and operating expenses (OpEx) of the company.

Average Revenue Per Account (ARPA)

ARPA is short for Average Revenue Per Account. This metric can be used to quantify a SaaS business’s average monthly recurring revenue (MRR) per account.

Average Sale Price (ASP)

The Average Selling Price (ASP) is the average price that a customer pays to buy a specific product or service. If a company sells its product at different prices to customers each year, it can use the ASP metric. ASP calculation involves estimating the total revenue earned from product sales and then dividing this number by the quantity sold.

Monthly Recurring Revenue (MRR) Renewal Rate

MRR Renewal Rate is a SaaS metric that measures customer renewal rates normalized over a month. To ensure consistency in tracking and easy trend monitoring, this metric tracks renewals due within a month.

SaaS Quick Ratio

SaaS quick ratio is a metric used by SaaS companies to assess their ability to further their recurring revenues despite outflows or churn. This ratio compares the company’s revenue inflows with its revenue outflows to reflect net revenue growth, thereby highlighting the company's growth efficiency.

Cost of Debt

The effective interest rate that a company has to pay towards its debt borrowings is known as the cost of debt. Debt borrowings mostly include bonds and loans. The cost of debt can have before-tax or after-tax considerations. The primary difference is the tax-deductibility of interest expenses.

Sales EAE (Enterprise Account Executive) Quota Attainment

Sales EAE Quota attainment is expressed as a percentage and represents the actual amount of new business a salesperson brings in compared to their quota.

Contraction MRR

Contraction monthly recurring revenue (MRR) is a SaaS performance metric that is used to estimate net MRR reduction as a result of subscription downgrades or cancellations in the current month vis-a-vis the prior month.

Sales Velocity

Sales velocity measures how quickly a company's customers move through the sales pipeline and fetch revenue. This metric uses four factors (opportunities, average deal size, win rate, and sales cycle length) to know how much revenue can be expected over a given period.

Free to Paid Conversion Rate

This is a SaaS metric that tracks the percentage of a business' users/customers that convert to a paid account after they have signed up for a free account.

Growth Efficiency Index (GEI)

The Growth Efficiency Index (GEI) is a metric that evaluates the cost of earning $1 of net ARR. GEI below 1.0 is considered optimal revenue acquisition while a value over 1.0 means suboptimal revenue acquisition.

Net Revenue Retention Rate

Net Revenue Retention (NRR) Rate is the part of recurring revenue that a company manages to retain from existing customers during a period. This commonly includes expansion revenue, downgrades, and cancellations. This metric allows companies to get a complete view of customer retention changes. 90-125% is considered a good NDR depending on the target customer size.

Gross Revenue Retention (GRR) Rate

Gross Revenue Retention (GRR) Rate or Gross Renewal Rate is the percentage of recurring revenue that a company is able to retain from its existing customers during a period. This includes downgrades and cancellations while it excludes expansion revenue.

Sales EAE (Enterprise Account Executive) Ramp Time

Sales EAE ramp time is the period between when a sales team member or representative gets hired by a company and when they sign up the first customer.

Win Rate

Win rate is a metric to gauge the sales team's success over a period. Companies typically estimate it based on the number of sales made by a team and compare it against the net sales opportunities for the period.

Sales EAE (Enterprise Account Executive) Quota

Sales EAE Quota is the new customer contract value that a salesperson is expected to bring in total during a given period. This metric is used to estimate a salesperson’s variable compensation. Depending on their performance against the quota, a salesperson’s variable compensation is determined. Typically, performing above quota means higher variable compensation whereas performing below quota results in lower variable compensation.

Variance Analysis

Variance analysis is the process of identifying and examining the difference between expected business performance versus actual numbers. With a variance analysis companies can effectively analyze favorable or unfavorable business results.

Upsell ARR

Upsell ARR is ARR that is signed to an existing customer that results in an increase in a customer’s ARR and is driven by the customer using a new product or service. This often involves a customer using a new type of product or service that the company offers, which results in an increase in their ARR.

Trial Balance

Trial balance forms part of any company's bookkeeping exercise. This worksheet is a compilation of all ledger balances and further classification into debit and credit accounts. A trial balance is prepared periodically, commonly at the end of each reporting period.

Total Contract Value (TCV)

Total contract value or TCV is a crucial SaaS metric used to determine the amount of revenue that a contract will earn. It also considers recurring expenses like hiring costs, service charges, etc. SaaS companies can use this metric to estimate how much profit can be earned from a single contract.

Treasury or Cash Management System

CMS is a software solution that helps in managing a company’s cash across various different bank accounts and other types of liquid investments.

The Three Financial Statements

The three financial statements is made up of the Profit & Loss Statement (P&L), Balance Sheet (BS), and Cash Flow Statement (CFS). These three financial statements are interconnected and analyzing all three is equally important for any business.

Stock-based compensation

Stock-based compensation is used by companies to reward employees with stock options or equity ownership rights in the company. This helps in aligning the company's interests with that of the employees.

Shareholder Capital

Shareholder capital or share capital is the amount of money that a company’s shareholders invest in it for business use. Share capital is a major line item in financial reporting. Some companies may further break it down into different types of equity issued such as common stock and preferred stock.

Sales Pipeline

A company's sales pipeline represents its sales prospects and how far they are within the purchasing process. This gives an overview of a sales team's forecast and how far the actual sales are from the target. The sales pipeline is used to forecast the quantity and dollar value of deals that are expected to close in a given period.

Sales Cycle

A sales cycle is a strategically planned and repeatable sales process that allows sales teams to convert leads into customers. With a sales cycle in place, a company can be better placed for future decisions and easily trace where each lead is within the cycle. It can also help companies in adopting best practices to repeat their success or determine how to improve.

Profit & Loss Statement (P&L)

A profit and loss statement, also known as an Income statement, lists the company's income and expenses. P&L is a part of a company's Financial statements. It shows the amount of profit that a company may be making or the extent of losses it may be incurring. A profit and loss statement is generally finalized every month, quarter, or year.

Operating Margin

Operating margin is a ratio derived by comparing a company's operating income to its net sales revenue. The operating margin or operating profit margin tells how much operating income a company has generated per dollar of sales revenue.

Reactivation MRR

Reactivation MRR is how much monthly revenue a company earns from previously canceled or churned subscriptions that were reactivated during the month.

Rule of 40

The Rule of 40 states that the combined value of growth rate and profit margin of healthy Saas companies should be above 40%. Saas companies who are able to move above 40% are earning profits at a sustainable rate whereas companies under 40% may have cash flow difficulties or liquidity issues.

Revenue

Revenue is a company's earnings from regular business operations. It can be calculated as the sales price multiplied by units sold. Revenues are also known as a company's top line from which costs will be subtracted to arrive at net income.

Retained Earnings

Retained earnings are the portion of a company’s net earnings that isn’t distributed as dividends to shareholders. These can be used by the company to achieve further growth, expand its activities, buy new furniture, and equipment, or even hire additional resources.

Headcount Planning Process

The headcount planning process is undertaken by companies to ensure that their employees and overall organizational structure fit into the overall company goals, specifically within the assigned budget limits. This process helps in ensuring that a company has the right number of people, at the right cost, and the right skills to execute the organization's strategy.

Research & Development (R&D)

Research and development (R&D) are activities undertaken by companies for innovation and the introduction of new products or services. R&D is the first stage in any development process before new products/services are introduced to the market.

Renewal Rate

The renewal rate is also known as the customer renewal rate. It highlights the rate at which a business can further extend customer relationships. This is largely applicable to subscription or membership business structures. Expressed as a percentage, the renewal rate indicates a company’s growth prospects and its ability to derive long-term value for its clients.

Average Contract Length

Average contract length is the average timeline of a signed customer contract. Most startups prefer to price their products/services on a monthly basis. Short contract lengths are preferred by new businesses while longer contract lengths are common among SaaS businesses and those selling B2B products.

Operating Income

Operating Income or Earnings Before Interest & Tax (EBIT) is an important profit measurement tool that gives insight into a company's operating performance. It doesn’t include non-operating gains or losses, the impact of financial leverage, or tax expenses incurred by the business. It is calculated as Gross Profit less Operating Expenses.

Operating Expense

Costs that are directly related to a company’s commercial or operational activities are categorized as OPEX or operating expenses. These expenses are crucial for carrying out the company’s operations smoothly and profitably. Operating expenses are essential and mostly unavoidable for businesses.

New ARR

Annual Recurring Revenue that is earned for a new customer (i.e. a customer account that is newly opened with the company) is classified as New ARR.

Non-Operating Expense

A non-operating expense is a cost that does not directly arise from a company's core business operations. Non-operating expenses must be reported separately from operating expenses so that stakeholders get a clear view of the company's financial performance.

Net MRR Churn

Net MRR Churn or Net revenue churn is a SaaS metric that measures revenue lost due to cancellations and downgrades. It considers new revenue from existing customers, which may include upgrades or expansion revenue.

Net Profit Margin

Net profit margin or net margin is a metric that tells companies how much net income or profit they made as a percentage of total revenue. Net profit margin is expressed as a percentage and illustrates how much of every dollar in revenue earned translates into profit for a company.

Net Income

Net income is the amount a company makes after paying for costs, allowances, and taxes. It is what is left over after all expenses are covered, including salary, cost of goods sold, and taxes. For good financial health, a company must ensure that its net income is greater than its expenses.

Magic Number

For SaaS companies, the magic number is a metric used to measure sales efficiency. It tells companies how many dollars of revenue they generate for each dollar spent on new customer acquisition using sales and marketing.

Expansion MRR Rate

Expansion MRR rate is a SaaS metric that tells companies the rate at which their expansion monthly recurring revenue (MRR) is growing month over month. Expansion MRR is part of the monthly recurring revenue (MRR) that comes from additional revenue earned from existing customers. Simply put, expansion MRR does not consider revenue that may be earned from new customers.

Human Resource Information System (HRIS)

HRIS is a software system that helps companies to manage and process employee information. It also aids in managing the company's human resource policies and procedures. Some of the information contained in HRIS is employee salaries, bonuses, benefits, and more. It also helps in tracking aspects like titles, promotions, and vacation days.

Gross Revenue Retention (GRR)

Gross Revenue Retention (GRR) is a metric that shows the rate of recurring revenue that a company has managed to retain from existing customers within a defined period. This metric takes into account downgrades and cancellations but does not include any expansion revenue. GRR is expressed as a percentage and it is also known as Gross Renewal Rate.

Gross Margin

Gross Margin is the portion of revenue remaining after taking off the cost of goods sold (COGS) for the period. Since it only considers direct costs, gross margin tells a company how much profit it has remaining to cover its fixed costs and non-operating expenses.

General Ledger

A general ledger is part of any company's record-keeping system to store its financial data in the form of debit and credit transactions that are validated by a trial balance. Apart from recording every financial transaction during the operational life of a company, it holds account information required to prepare financial statements. The transaction data is generally classified by type of accounts within revenues, expenses, assets, liabilities, and owner equity.

Expense Adjustments (One-time expenses)

A one-time expense or expense adjustment is a non-recurring item on a company's income statement and does not form part of the ongoing business activities. Expense adjustments are made to get a clear view of a company's operating performance. Some one-time expense items, however, may hurt the company's earnings.

General & Administrative Expenses (G&A)

General and administrative (G&A) expenses come from a company's day-to-day operations and may not be directly associated with a particular department or function. Also known as operational overhead expenses. these impact the overall business.

SG&A (Selling, General, and Administrative Expenses)

Selling, general, and administrative expenses (SG&A) are part of a company's income statement. These include all administrative and general expenses apart from direct and indirect costs of sales. This expense line item covers most of the business's costs that are not directly related to the making/providing of the product/service. SG&A mostly represents the costs of managing the business and delivery of product/service.

Enterprise Resource Planning (ERP) System

ERP is a software commonly used by companies for business process management. This system helps in managing and integrating a company's financials, operations, supply chain, reporting, human resources, and various other business-related areas.

Expansion ARR

When the Annual Recurring Revenue from an existing customer increases, the proportionate rise is called expansion ARR. Common types of Expansion ARRs are 1) price expansion (ARR increased due to price rise) and 2) volume expansion (ARR increased as the customer uses more of a company’s product or service).

Equity

Equity is the ownership an individual or organization holds in a business. This could be in the form of stocks or property or even goods. The common types of equity are stockholder's equity, private equity, etc. Knowing, understanding, and monitoring equity can help businesses know their financial health.

Deferred Revenue

Deferred revenue or unearned revenue is the advance payment that a company receives for its products or services that are to be delivered or performed in the future. When a company receives prepayment for such products/services, it records the amount as deferred revenue under the liability of its balance sheet.

Debit

In accounting, a debit entry in balance sheet results in an increase in assets or a reduction in liabilities.

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

Earnings Before Interest, Taxes, Depreciation, and Amortization or EBITDA is one of the measures of determining profitability to net income. EBITDA is a company's cash profit from operations since it removes the non-cash depreciation and amortization, taxes, and debt costs from the calculation.

Downsell ARR

Downsell ARR is the value of ARR decreased from an existing client. Companies may resort to downselling by offering a less-priced or more affordable product/service to a customer who is hesitant to purchase otherwise.

Customer Relationship Management (CRM) System

Customer relationship management (CRM) is a technological system used for managing a company’s client relationships and interactions. It aids everyone in the business including sales, customer service, business development, recruiting, marketing, or any other line of business, in improving interactions and relationships as it allows companies to stay connected to clients to drive success. It also aids in streamlining a company's processes and enhancing profitability.

Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) is a crucial business metric used to estimate the amount that a business spends to acquire new customers.

Credit

In accounting, credit refers to a bookkeeping entry that results in a decrease in assets or an increase in liabilities and equity on the company's balance sheet. Credit can also be referred to as a contract agreement between a borrower (of money) to repay the lender at a later date, along with the interest applicable.

Customer Lifetime Value (CLV)

Customer lifetime value (CLV) is a metric to determine a company's total expected income from a client till the client account is active. The longer a client account stays active, the higher the customer's lifetime value from it. It is one of the metrics used to measure a company's growth.

Contribution Margin

The contribution margin is a company’s sales revenue minus variable costs. The balance is used to cover fixed costs (for instance rent), and after that is covered, any balance will be tagged as earnings. Contribution margin is mostly presented as a dollar number or a percentage.

Cost of Goods Sold (COGS)

The cost of goods sold (COGS) or cost of sales is the direct cost that a company incurs for producing goods that it plans to sell. This generally includes the cost of raw materials, labor costs, etc. However, it excludes indirect expenses, like sales force or distribution costs.

Collections

Collections is the process by which a company gets paid for its product/service offerings. The collection process begins once the company issues an invoice to its customers or requests payment towards its product/services. It is completed when a customer actually pays the company for the invoice raised.

Cohort Analysis

Cohort analysis is a type of behavioral analytics that breaks down data sourced from avenues like e-commerce platforms or web applications into related groups for further analysis. These are called cohorts as they share common characteristics within a defined time span. Through this, cohort analysis measures user engagement over time and helps to know whether it is improving or only appearing to improve over time.

Cash Flow Statement (CFS)

A company's cash flow statement (CFS) is a financial statement summarizing its cash and cash equivalents (CCE) that come in and go out. It measures how well a company can manage its cash position, or simply, how well the company can generate cash to fund its operating expenses or repay its debt obligations. Apart from the balance sheet and the income statement, CFS is another important financial statement crucial to any business.

Churned ARR

Churned ARR is the Annual Recurring Revenue lost from a company's existing contracts that are no longer in effect. This could be due to reasons like non-renewal or cancellation of a contract within the contract period.

Chart of Accounts

A chart of accounts is a comprehensive list or an index of financial accounts included in a company's general ledger. It provides a bird's eye view of a company's business areas that spend or make money. The primary account categories included are revenues, expenses, assets, liabilities, and equity.

Booking

A booking occurs when a customer enters into a contract to use a company's product or service. It reflects the total amount a customer commits to giving to the company over a defined period. The booking stage occurs before any billing or service offering.

CAC-LTV Ratio

CAC is customer acquisition cost and LTV is the lifetime value per customer. The CAC:LTV ratio compares the cost of acquiring a customer versus the value that the customer will bring over their lifetime.

CAC Payback Period

CAC (customer acquisition cost) payback period is the time it takes a company to earn back the money it spent in acquiring a customer. The CAC payback period ultimately helps in determining how much cash the company will need in order to grow.

Budget Variance Analysis or Budget versus Actuals analysis (BvA)

Budget Variance Analysis, or BvA, is a process that involves comparing a company’s budget to actual results and investigating/interpreting the drivers of variance. Companies often perform detailed variance analysis periodically to allow managers to know the business's direction.

Budget Reforecast Process

The budget reforecasting process involves a holistic revision of an existing budget in case a significant deviation is expected in projected income or expenses. Companies opt for budget re-forecasting by observing year-to-date results and projections for the rest of the financial year.

Billing

Billing involves raising and sending invoices by businesses that will further request the customer to clear the dues by settling the invoices. Billings are when a company formally requests payment from a customer for services, and invoices are documents used for requesting settlement and record-keeping purposes.

Annual Contract Value (ACV)

Annual Contract Value (ACV) is the total revenue that a company fetches from a contract or client in a year. This metric is mostly used by SaaS companies since these generally have yearly or multi-year contracts with clients. ACV is also known as an annual average of total contract value (TCV). ACV calculations are based on recurring revenue from a single client or account. Therefore it normally doesn't include one-time fees.

Balance Sheet (BS)

A balance sheet is one of the three core financial statements of a company that reports its assets, liabilities, and shareholder equity. This information is used to evaluate the business since it gives a snapshot of the company's finances (what it owns and owes) as of the date of publication.

ASC 606

ASC 606 is the new revenue recognition standard for all businesses that enter into contracts with customers for the transfer of goods or services—public, private, and non-profit entities. Both private and public companies must ensure ASC 606 compliance. This standard is a joint effort of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). It lays out a framework for more consistent revenue recognition such that there are minimal variations adopted by businesses across industries while accounting for similar transactions.

Adjusted EBITDA

Adjusted EBITDA measures a company’s earnings before deducting interest expense, tax expense, depreciation & amortization expenses and also adjusting extraordinary and non-recurring expenses like legal fees, impairment of assets, gain/loss on the sale of a capital asset, etc.

Asset

An asset is a company's resource that carries economic value and can fetch a future benefit too. These are bought or created to boost a company's value or benefit its operations. Assets are reported on a company's balance sheet and can be classified as current, fixed, financial, or intangible.

ASC 605

As per FASB, ASC 605 talks about the revenue recognition method that companies must follow while validating their revenues. It has been replaced with ASC 606. As per ASC 605, the following four criteria were to be met for revenue recognition:a. Persuasive evidence of an arrangement existsb. Product/service delivery is completec. The seller’s final price for the buyer is fixed and determinabled. Collectibility is reasonably assured

Applicant Tracking System (ATS)

ATS is a software solution that can manage the entire hiring and recruitment process for a company. It helps speed up candidate management and significantly reduces the time to fill a position. ATS encompasses all parts of the recruitment activity, right from posting the job to offering the job.

Annual Recurring Revenue (ARR)

ARR is a subscription or contract-based metric that calculates the yearly revenue value for the life of the contract. Typically used to measure the health of subscription-based companies since this is the amount of revenue that a company expects to repeat annually.

Annual Budget Process

An annual budget process involves forecasting a company's income and expenditures for the next year and officially recording these details using budgeting software. Companies use the budget to track income and expenses in a detailed way for better operational decisions.

Accounts Payable or Payment System

Accounts payable or payment system is an automated system that is used by a company to pay its vendors and suppliers towards the purchase of goods and services. The end objective of this system is to ensure that the business pays the right amount it owes, and pays it on time and to the right vendors/suppliers.

Accounts Receivable or Billing System

Accounts receivable is the total amount of money that customers owe to a company for delivered goods or services. Accounts receivable or billing system is a software solution that allows a company to manage its revenue streams from various products/services. This automated system can help to create, issue, manage, and track incoming payments against customer invoices.

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Lead to customer (LTC) conversion rate

LTC conversion rate is a SaaS metric that allows companies to determine the number of users that are converting. It helps them understand the effectiveness of their marketing efforts.

Customer Activation rate

Customer activation rate is a SaaS metric that tells companies the percentage of customers that convert from being newly acquired to a customer using the product/service. The activation rate is calculated by dividing the total number of users using the product/service by the total number of newly signed up users.

CLV:CAC

CLV:CAC is a SaaS metric that measures the total cost of acquiring a new customer against the revenue that a company earns from them till the time they are associated with the company.

Qualified Marketing Traffic

If a company is attracting visitors, it is an indication that its SEO strategies are going in the right direction. However, it must also check whether it is driving relevant traffic, or simply put, whether it is getting qualified marketing traffic. Qualified marketing traffic includes users who make purchases after entering a company's website. In other words, these users are not only visiting the website but are either getting converted into customers or are potential customers who are interested in using the company's product or service.

Debt Service Coverage Ratio

Debt Service Coverage Ratio or DSCR is a metric used to gauge how effectively a company is using its operating cash flows to pay its debt (interest and principal).This metric is commonly used in commercial lending transactions. It allows lenders to get a fair idea about the ability of a business to repay a loan on time. The higher the DSCR, the better chances of the business repaying the loan.

Average Revenue Per User

Average Revenue Per User or ARPU is a SaaS metric that tells businesses how much revenue they generated from each customer on average. ARPU can be calculated by dividing the net revenue generated by the total number of customers.

Lead Lifecycle

Lead lifecycle refers to how a SaaS company manages the lifespan of a lead (or potential customer) from the time they visit the website or sign up to eventually turning into a customer. It explains and gives insights into how a lead arrives, how they move in the sales funnel, and what the company does with the lead at each stage.

Visitor to lead (VTL) conversion rate

Visitor to lead conversion rate is a SaaS metric that tells companies how many visitors converted into possible leads or prospective customers. A low VTL means that the company's website is unable to drive qualified traffic.

Dunning

Dunning is a commonly used term in SaaS businesses that follow a recurring billing setup for all of their customers. During every billing cycle, many payment transactions may fail for reasons like blocked cards, declined cards, credit card expired, network related issues, etc. SaaS customers may not notice such payment failures. With Dunning, companies can identify such transaction failures as they happen and send automatic alerts to customers with timely and accurate information.

What-If Analysis

What-if analysis is commonly used in financial planning to evaluate possible outcomes of specific events, whether favorable or unfavorable to the company. This analysis can help in comparing different financial plans and coming up with alternatives to be used in case a business situation changes. Scenarios can be based on the likely business impacts. For instance, a sudden drop in demand, an unfavorable result of a pending legal matter, etc.

Value Driver Tree

A value driver tree defines the relationship between a company's financials and its major value driver areas through a graphical representation. It helps management easily identify the items that have the most impact on the company's overall value. It also allows them to easily track how any changes in those items can impact the company's value. It can also be used to identify a company's potential risks and opportunities.

Tax Shield

A tax shield is reducing taxable income through deductions that are permitted on certain expenses such as depreciation, interest payments, etc. It is calculated as deductible expense times the applicable tax rate.

Accounting Close

An accounting close involves the preparation of a company's financial statements for a period, for example, monthly, quarterly, or yearly. Under this process, all of the company's financial transactions for the period are recorded by calculations. The results are then summarized and recorded as financial statements. Accounting close is critical for businesses to ensure the financial statements accurately reflect the business performance for the period.

Normalized Contracts

Normalization of contracts is when SaaS companies try to make changes to disparate contracts so that they can be similar in some way.

Payment-In-Kind (PIK)

Payment-in-kind or PIK is a type of loan under which a borrower can make interest payments in non-cash forms. This loan format allows the borrower to repay without worrying about arranging for cash, specifically for the interest component. Such loans are common in leveraged buyout (LBO) deals. In PIK loans, a company can make interest payments by issuing fresh debt or stock options.

Overleveraged

Leverage involves using various financial tools and capital to boost a company's potential returns. Companies make use of leverage for financing their operations and boosting net profits. Companies often rely on debt financing to expand their business operations, which would not be possible by only using equity.When a company's debts are more than its equity, it is said to be overleveraged. An overleveraged condition may result in a company's inability to repay principal borrowings and interest and, in some cases, to pay for its operating expenses.

Impaired Asset

An impaired asset carries a market value that is less than its book value or the value that's listed on the company's balance sheet. The difference in value has to be accounted for and reflected as the asset’s new diminished value in the balance sheet.Impaired assets are generally long-term tangible assets. However, a company's accounts receivables and intangible assets may also become impaired.

Enterprise Value (EV)

Enterprise value (EV) is a company’s total value, generally defined by its financing. This metric takes into account the company’s current share price and the cost of repaying debt. Enterprise Value is calculated as, the value of equity + total debt + preferred stock + minority interest.

Financial Distress

Financial distress is a corporate finance term that refers to a situation where a company’s financial situation makes it difficult for them to pay their bills. This is especially applicable to loan repayments or paying creditor dues. If a company is going through severe or prolonged financial distress, there are chances it may go bankrupt.

Data Warehousing

Data warehousing or electronic storage involves the collection and storage of data for further use that can allow business management to get valuable insights. As part of this process, businesses gather and store large amounts of important data and information. It acts as an important input for business intelligence systems that work on further data analysis.

Contingent Liability

A contingent liability is a liability that could potentially become an actual liability. This is dependent on the occurrence of a future event. Companies record contingent liabilities by a journal entry, stating as part of a disclosure in their financial statements, or they may not record them at all.

Cost Per Acquisition

Cost Per Acquisition or CPA is a metric used by the marketing departments of companies to estimate the aggregate cost of acquiring a customer through a campaign. CPA helps companies measure their marketing success.

Top-down budgeting

Top-down budgeting, also known as budget allocation exercise, is part of any company’s financial planning process that focuses on establishing budgets before they are passed down to each department. Each department head will then be responsible to implement the departmental budget as per the allocations received.This form of budgeting begins with senior management creating a budget for the company as a whole. Resources are then allocated to each department as per overall objectives and targets.

Profitability Analysis

Profitability analysis is used by business leaders to identify various ways of optimizing company profitability across areas like products, projects, or plans. It involves a systematic analysis of profits generated from various revenue streams of the company.Profitability analysis is often a part of enterprise resource planning (ERP). Simply put, this process analyzes the costs and revenues of a company (or unit or product) to further determine whether the company as a whole or its units or products/services are profitable.

Zero-Based Budgeting (ZBB)

Zero-based budgeting is a budgeting method under which all expenses must be explained starting from zero for a new period against using the previous budget as a base and adjusting it for the new period.Zero-based budgeting (ZBB) helps companies align their expenses with larger strategic goals. This process involves building an annual budget from zero to verify whether each component is cost-effective, useful, and can result in better savings. This tool is commonly used by companies to easily identify and eliminate unwanted expenses, gain better control of spending, and focus on high-profit areas.

Variance Reporting

Variance reporting is part of a company's FP&A processes. It involves comparing planned financial performance with the actual financial performance of the company. Simply put, variance reporting is comparing and presenting what was expected to happen versus what actually happened. Variance reports are used by CFOs or company management to analyze variances between budgeted figures and actual performance. Variances can also be called budget variances and can be expressed as a percentage or a dollar value.

Margin Of Safety

Margin of safety is the difference between a company’s expected profitability and its break-even point. It is calculated as (current sales - breakeven point) / current sales.It highlights the risk of loss that a business may be exposed to as a result of any changes in sales. The calculation is especially useful when a company is likely to face a significant decline or elimination in sales, especially when a sales contract is about to end. By checking the minimum margin of safety, companies can take action for cutting down costs. If the margin of safety is high, it means the business won't be majorly impacted by sales variations.

Variable Costs

A variable cost is an expense incurred by a company that varies depending on the sales or production of the company. Variable costs can rise or fall depending on the production or sales volume of a company. For instance, such costs increase as production goes up and reduce as production falls.

Unallocated Costs

In accounting parlance, unallocated costs are those that are not specifically assigned to any business unit or account within the company. These commonly include marketing costs or research and development costs, or any such expense that cannot be specifically identified as coming from an account or unit.

Sensitivity Analysis

Sensitivity analysis is used as part of financial modelling. It is primarily used to study the impact of changes in different independent variables on a dependent variable, basis certain assumptions. It uses 'what if' questions to analyse how multiple sources of uncertainty can impact a company's performance forecast.

Profit Center

Profit center refers to a company's division that directly contributes to or is expected to contribute to the overall business bottom line. Each profit center is treated as a distinct, standalone business that is responsible for revenue generation. The profits and losses coming out of each profit center are separately calculated.

Fixed Cost

Fixed Cost is an expense incurred by a company that is not directly related to an increase or decrease in sales or production in the short term. Simply put, this type of cost is not dependent on the business activity. It is instead related to the period.

Overhead Costs

Overhead costs or operating expenses are expenses that are required to run a business and cannot be linked to producing a product or service. Simply put, these are expenses that a business has to incur to remain in business, irrespective of its success level.Overhead costs cover all such costs that are seen on a company’s income statement excluding costs that are directly linked to manufacturing/sales of the product/service. For instance, the rentals that a company pays towards a facility are an overhead cost since these are not directly related to the product/service sold by the company.

Cost Center

The term cost center is used to identify a business unit responsible for certain costs incurred by the company. A company's cost center performance is evaluated by comparing budgeted costs with actual costs. Companies commonly aggregate budgets into a cost pool and allocate them to cost centers depending on the costs actually incurred.

Full-Time Equivalent (FTE)

Full-Time Equivalent (FTE) is a metric that represents the total hours regularly worked by a company's full-time employee. It represents a unit that showcases the extent of involvement or work done by an employee. In simple terms, FTE is equal to the total work carried out by one full-time employee of a company.

Financial Consolidation

Financial consolidation is the process that combines the financial data of a company's subsidiaries and entities into a single financial statement. Since the parent company would control all of its subsidiaries, the assets, liabilities, income, expenses, equity, and cash flows of the parent company are combined with those of its subsidiaries. Such consolidated data is presented in a single financial statement to reflect the financial performance of a larger legal entity.

Business Intelligence

Business Intelligence or BI involves certain processes, technologies, and set-ups that transform raw data into valuable information that can allow businesses to take profitable actions. BI comes in the form of software and services that transform data into intelligence and actionable information.

Bottom-Up Budgeting

Bottom-up budgeting is when a company adds up the forecasted expenses of all the departments to create a total company-wide budget. This budgeting format is also known as participative budgeting, as each of the department heads helps in setting up the budget.

Business Drivers

Business drivers are the primary activities, personnel, and data inputs that drive a company's operational and financial growth. Business drivers can be a company's sales personnel, website traffic, unit sales, units produced, number of stores, etc. For any business to form a business strategy or establish a business model, the first step is to understand the main drivers of the business.

Sarbarnes-Oxley Act (SOX)

SOX of Sarbanes-Oxley Act is a U.S. federal law that is designed to protect investor interest by mandating reliable and accurate corporate disclosures. This Act came into existence after the Enron and WorldCom accounting scandals.

Service-Level Agreement (SLA)

A service-level agreement (SLA) is the documentation used by most technology companies to set expectations with the client/customer. This document describes various aspects of the product/ service to be delivered, contact points for end-user issues, effectiveness metrics, etc. Once an SLA is agreed upon, customers can know what to expect from the delivering company. It also covers details of remedies or penalties in case the service levels are not achieved.

Rolling Forecast

A rolling forecast is based on historical data and used by companies as part of their financial models to predict their future performance over a continuous period. While static budgets forecast a specific period in the future, a rolling forecast has to be constantly updated to reflect changes.

Record to Report (R2R)

Record to report (R2R) is an account and finance process that is used by businesses to gather, process, and present accurate financial data. This process gives strategic, financial, and operational insight into the business performance that further helps management and stakeholders take informed decisions.

Mergers and Acquisitions (M&A)

Mergers and acquisitions (M&A) are transactions between two companies that decide to combine in some form to create a single entity.In an acquisition, a larger company generally acquires a smaller one to absorb the business for further expansion. M&A deals may be hostile or friendly, depending on the target company's management approval.

Internal Controls

Internal controls are activities that a company performs over its normal operations with the objective to minimize errors, safeguard assets and ensure the smooth flow of operations as per regulations where applicable. Internal controls are crucial for businesses to mitigate any risk arising from a company's day-to-day operations. These also help in ensuring consistency in maintaining reliable financial records.

Financial Modeling

Financial modeling is used by companies to estimate the financial performance of an investment or a project or a business segment. For the evaluation, this process considers various appropriate factors such as growth and risk assumptions and their potential impact. It is used to get a clear and concise picture of all the variables considered in financial forecasting.

Intangible Asset

Intangible assets are assets that do not have a physical presence and cannot be felt or touched but they add value to a business. Intangible assets are often long-term as they can be used for more than a year. These can be divided into two broad categories: intellectual property and goodwill.Intellectual property can be for a trademark, patent, and licensing agreements. When a company holds intellectual property rights for any of these, another cannot copy it.Goodwill can include various factors that influence a brand’s value. Some examples include the reputation of the business, customer base, strategies, etc.

Financial Management System (FMS)

FMS or financial management system is a software and a list of processes that help a company easily manage its income, expenses, and assets. This system/process helps companies in carrying out daily financial operations. Financial management systems also help in maximizing profits and ensuring long-term sustainability.

Financial Risk Assessment

A financial risk assessment is a financial evaluation that measures the probability of a financial asset losing its value. This assessment focuses on deep diving into a company's financial readiness. It also considers other areas of a company that impacts its financial stability. The assessment helps in the timely identification of beneficial areas and those that are not, such that, necessary corrections can be made.

Financial Close

Financial close is part of every company's financial process that involves verification and adjustment of account balances at the time that an accounting cycle comes to an end (mostly quarter ending or year ending). This process helps in generating financial reports that give insight into the company's financial position for the period. These reports are used by investors, stakeholders, creditors, and even regulatory authorities to check on the company's financial health.

External Audit

The external audit is a process (or a legal requirement for a certain type of company) under which an independent body checks and validates a company's financial statements. An external audit is carried out by an independent firm with no connection to the company. These audits carry out similar checks that form part of an internal audit, with the intention of gauging the financial health of a company.

Environmental, Social and Governance (ESG)

ESG or Environmental, Social, and Governance refers to certain standards that a company may have adopted to be socially conscious while taking up any new projects or making new investments. A lot of investors are interested in only such companies that may be following these standards.Environmental factors are related to the measures that the company takes to safeguard the environment. Social factors look at how the company manages its relationships with clients, employees, communities, etc. Governance factors talk about the company's leadership, executive pay, internal controls, audits, and shareholder rights.

Dollar-Cost Averaging (DCA)

Dollar-cost averaging (DCA) is an investment strategy that helps in minimizing the impact of volatility on the performance of a financial asset or instrument. Under this strategy, the investment is spread out through smaller sums invested at regular intervals until the total capital is exhausted.Since financial instruments may come with the risk of volatility, DCA helps in minimizing this risk by aiming to lower the average cost of investing.

Cost Management

Cost management is a financial process that involves controlling and managing a company's financial resources by specifically focusing on the company's costs. With effective cost management strategies, a business can have better cost control and achiever higher profitability.

Business Model

A business model is a broad outline designed and used by companies to know how they can make money. It tells four key things:1. Product or service that the company will sell2. How the product/service will be sold3. Expenses that the company will incur4. How will the company achieve profitability

Cost of Capital

Cost of capital is the minimum profit or return that a company must earn before it can generate value. A company's finance department is responsible for estimating the cost of capital while determining the financial risk and viability of an investment.Companies use cost of capital to know how much money a new business stream can generate to offset the costs involve and further achieve profits. This concept is also used to gauge the potential risk that future business decisions may bring.

Capital Structure

Capital structure comprises debt and equity employed by a business. It states the specific amount of these components that a company uses to finance its assets and fund its operations. A company's capital structure is expressed through these ratios: debt-to-equity or debt-to-capital.Companies use their debt and equity capital structure to fund day-to-day operations, acquisitions, investments, etc. There is always a tradeoff between these two components and finance managers help in balancing the two to ensure an optimal capital structure.

Capital Allocation

Capital allocation is a financial process in which companies choose the most efficient investment strategy that will make the most of the available financial resources. The end objective of any capital allocation strategy is to maximize shareholder equity.

Accrual Accounting

Accrual accounting is an integration of two key accounting principles: 1. the revenue recognition principle and2. the matching principle The revenue recognition principle mandates revenues to be recognized as they are earned or realized. As per the matching principle, expenses are to be recognized in the same period as the revenue that is generated from them. Accrual accounting helps in clearing the relationship between revenue and expense and offers a better insight into a company's profitability. This format of accounting allows companies to have a clearer picture of their asset and liability position as well. Therefore, accrual accounting is the only method permitted as per General Accepted Accounting Principles (GAAP). The Securities and Exchange Commission (SEC) also requires publicly traded companies to follow this principle for their accounting practices.

Accounting Reconciliation

Account reconciliation is part of every business's financial activities, typically performed towards the end of an accounting period. This process helps ensure that the general ledger balances are accurate and complete. As part of the account reconciliation activity, the financial team compares the company's general ledger balances under each account to various independent systems, supporting documentation, and sometimes third-party data. This helps substantiate the balance as per the general ledger.

Willingness to Pay (WTP)

Willingness to pay or WTP is the maximum amount or price that a customer may be willing to pay for a company's product or service offering. This metric is represented in a dollar figure or as a price range. This metric helps companies understand that potential customers are always willing to pay less than the decided price.WTP can be calculated as = the maximum price a customer is willing to pay/ product or service price

Volume Discounting

Volume discount pricing is a strategy adopted by many companies to generate bulk sales through discounted prices. This pricing model helps companies to encourage customers to make more purchases of the same offering. It results in a win-win for the buyer and seller. While the selling company can easily reduce its inventory and generate more sales, the buyer can get quantity discounts and thereby short-term cost reduction.

Customer Health Score

A customer health score is a SaaS customer retention metric that helps companies gauge whether a customer may stick with the company's brand or leave for other brands. This metric is used by business account managers and customer service teams since they can quickly determine if a customer may churn and how likely the churn is.

Website Conversion Rate

Website conversion is achieved when a user completes a desired action on a company's website, for instance, making a purchase or entering contact details through a form. Business websites are designed to generate user conversions that lead to sales/revenue. There are two types of website conversions:1. Micro Conversions: A conversion that gets the business a step closer to the end goal. For instance, users subscribing to a newsletter.2. Macro Conversions: This occurs when a business achieves an end goal like making a final sale or enrolling a customer for paid subscription.Website conversion rate is a metric that measures website conversions and offers quantitative insights to businesses.

Value-based Pricing

Value-based pricing is a pricing strategy used by companies to price their products/services. This strategy involves adjusting of price as per its perceived value instead of going by its historical price. Companies mostly use value-based pricing strategies to boost revenues through price increases, especially when the company does not want to significantly raise its volumes.

Total Debt-to-Asset Ratio

Total debt-to-assets ratio is a financial indicator that shows how much of a company's ownership is in the hands of its creditors versus how much ownership is with its shareholders. It is one of three important ratios used to measure a company's debt capability.This ratio gives insight into a company’s capacity to repay its current debt and its capability to raise funds from fresh debt if needed. With additional debt, a company may be better off in dealing with a market downturn or it can be financially capable of grabbing new opportunities as they arise.

Total Debt-to-Equity Ratio

One finance rule that applies to every company is to spend as per the availability of funds and borrow as per the payback affordability. A company’s debt-to-equity ratio is a metric that checks the extent to which it can afford to repay debt. The debt-to-equity ratio is calculated by dividing total debt by shareholders’ equity. If the D/E ratio is higher, it means potential difficulty in covering liabilities as the company’s debt is significantly high relative to its assets.

Time to Value (TTV)

Time to value, or TTV, is a critical metric that estimates the time taken for a company's new customers to derive value from the product or service. Any new users would expect to get 'on-time' value delivery from a product/service they are paying for. In SaaS businesses, TTV can be the real difference between the company and its competitors. A business must deliver value on time to retain its customers to competitors.

Customer Engagement Score

Customer engagement score or engagement score is a SaaS metric that gives insight into customer engagement and free trial prospects. Companies can use this metric to predict churn and identify potential upselling opportunities.

Scenario Planning

Scenario planning is an exercise that companies carry out under which certain assumptions are made about future performance and changes in a business environment.This exercise involves identifying some uncertainties and various “realities” that may arise in the future course of business.

Sales Qualified Leads (SQL)

For a business, a sales-qualified lead (SQL) is a prospective customer who has moved up the sales pipeline and shows higher potential of conversion to active customer. Such leads/customers are first marketing-qualified leads who eventually progress to being sales-accepted leads.

Sales Growth Rate

Sales growth rate is a metric that highlights a company’s ability to earn revenue via sales over a given period. This rate is commonly used by companies to measure internal successes and failures. It is also used by investors to gauge a company's overall standing.

Return on Investment (ROI)

Return on investment (ROI) is a financial ratio used by companies and investors to compare the returns that a potential investment/project will earn versus its cost. ROI is measured as net income from investment divided by the cost of investment. The higher the ROI, the larger the benefit for an investor or company.

Return on Ad Spend (ROAS)

Return on Ad Spend (ROAS) is a commonly used marketing metric that helps to estimate the total amount of revenue generated per dollar of digital advertising spend. This metric is commonly used to check the efficiency of paid media campaigns. ROAS is similar to Return on Investment (ROI). However, while ROI can be used to check the efficiency of any investment, ROAS is primarily used to estimate paid media spend efficiency.

Order to Cash

Order to Cash or O2C or OTC is the business process that covers the entire scope of an order processing system from start to finish. It covers the entire process right from receiving the order to payment and final entry in accounting systems.

Net Present Value (NPV)

Net Present Value (NPV) is a financial metric. It is the difference between the present value (PV) of a stream of cash inflows and outflows expected from a project in the future.This concept is widely used to estimate the profitability of a potential project or investment and thereby acts as a guide for investing decisions.

Marketing Qualified Leads (MQL)

An MQL or marketing-qualified lead is a customer lead that the marketing team of a company may find more likely to turn into a customer as compared to other leads. Some of the criteria that marketing teams may use to tag an MQL include, visit to web pages, downloading of content offers, CTAs clicked, and interaction on social posts.

Legacy pricing

Legacy pricing in SaaS businesses refers to retaining old pricing plans for existing customers of a company. New pricing plans will be applicable only to new customers. Legacy pricing allows a company's existing customers to continue paying the same price for a product/service although the company's new customers have to follow new pricing. This pricing model is followed by many SaaS subscription-based companies.

Contracted Monthly Recurring Revenue (CMRR)

Contracted or Committed Monthly Recurring Revenue (CMRR) is a SaaS metric that considers the total monthly recurring revenue (MRR) via new bookings, churn, and downgrades/upgrades. CMRR also considers fees such as one-time installations.

Customer Satisfaction Score (CSAT)

Customer Satisfaction Score or CSAT score is a metric used to gauge customer satisfaction or how happy they are with a product/service. It can also be used to measure the satisfcation of customers after a customer support interaction.

Corporate Performance Management (CPM)

Corporate Performance Management (CPM) is a business process that adopts an integrated approach toward business planning and forecasting across areas like finance, marketing, HR, and operations. The mechanism interlinks the strategies of an organization with its plans and ensures appropriate execution. This helps organizations to achieve smoother and faster success.

Cost-Per-Hire (CPH)

Cost-per-hire or CPH is an important hiring and recruiting metric used by companies. CPH is the total cost of hiring new employees. This includes the cost of the entire recruitment process, travel costs, equipment costs, and administrative costs towards interviewing, background checks, etc. CPH is one of the most widely used HR metrics to check the effectiveness of the company's recruiting process.

Financial Planning and Analysis (FP&A)

Financial planning and analysis (FP&A) is part of business activities that can enhance a company’s business decisions and help in improving its financial health. With an FP&A set-up, a company's finance team can make use of financial, operational, and external data to combine and analyze it. This helps in gaining in-depth insights for better future plans and profitable decision-making.

Compound Average Growth Rate (CAGR)

Compound Annual Growth Rate (CAGR) is the yearly growth of an investment measured for a given period. It tells how much earnings were generated on an investment every year within a given period. This metric is used to accurately estimate investment returns over time.

Churn

Churn is the rate at which customers opt out of their recurring revenue subscriptions. SaaS companies use this metric to gauge the rate of cancellations during a period or over a period.

Cash Outflows

Cash outflow is the opposite of cash inflow. It is the net cash that has gone out of a business towards various payments made during a period.

Cash Inflows

Cash inflow is the money that goes into a business, whether from sales, investments, or even financing. If a business's cash inflow is greater than its outflow, it is considered healthy.

Cash Conversion Cycle (CCC)

The Cash Conversion Cycle or CCC estimates the approximate number of days that a company will take to convert inventory into cash once it has made a sale to a customer.

Capital expenditures (CAPEX)

Capex is short for capital expenditure. Capex is the investment that a company makes into any long-term assets that will facilitate its growth. Capex is generally a significant outflow of funds for most companies and it can have a major impact on the free cash flows.

Amortization

Amortization is an accounting concept that is used by companies to reduce the book value of a borrowing over a set period. Amortization focuses on distributing or spreading out loan repayments over a period. Amortization helps in reducing a company's taxable income during the entire lifespan of an asset.

Burn Rate

The burn rate is a SaaS financial metric used to measure the money spent by a company every month before it generates sufficient revenue to pay its operational expenses. Simply put, it is the rate at which a company uses its cash reserves while making losses before it starts earning a positive cash flow.

Year over Year Growth (YoY Growth)

Year-over-year growth (YoY growth) is a form of comparison used while measuring a company's financial performance. It uses numbers from current period to compare against the same month of the previous year. This measurement tool can offer better insights than a month-to-month comparison since it eliminates seasonal anomalies.Businesses commonly use quarter, annual or monthly figures for YoY growth rate checks.

SaaS Bookings

SaaS bookings represent the amount of money that the business can expect to come in. It reflects the demand for the company's product/service and the overall market response. Although this is an annual number, bookings can be measured for more or less than a year. While making the bookings, a company can collect the payments at the start of the contract. Thus, it is recorded as a liability or deferred revenue. This is because the company is obligated to provide the product/service. Alternatively, the revenue can be recognized through the period of the contract.

Year to Date (YTD)

YTD is short for "year to date". In finance, YTD is the period starting from the first day of the current year up to now, excluding the present date. To gauge and compare business performance, companies use YTD financials to compare against the previous YTD or the YTD performance of peers.

Quarter to Date (QTD)

QTD is short for “quarter to date.” It refers to the period starting from the first day of the current quarter until now. QTD is used to compare business performance across quarters, either prior quarter or the same quarter of the previous year. Note - In financial context, a quarter means a three-month period during a fiscal year.

Daily Active Users

Daily active users is a SaaS metric that is used by businesses to know how many unique users used the company's product or service every day. This metric is also used by businesses to know the success rate of their product or service since it indicates the value that daily engaged users derive from the same.

Month to Date (MTD)

MTD is short for “month to date.” It refers to the period starting from the current month's beginning till the most recent date. It does not factor in today’s date as it may not be complete yet. MTD is used in financial context to give information on a certain business activity for a certain time period.

Customer Churn Rate

Customer churn rate or attrition rate is the rate at which a company loses its customers in a given period. In businesses with subscription models, churn rate means the number of subscribers who cancel or choose not to renew their subscriptions. A higher customer churn rate, correlates with more customers stopping business with the company, while a lower churn rate correlates with more customers that the business is able to retain.

Cash on Hand

Cash on hand is the cash that a business can easily access at any time after paying for its expenses. This could include assets that are easy to liquidate under 90 days. It does not cover funds that the business cannot spend or use.

Earnings Per Share (EPS)

Earnings per share (EPS) is a metric used to estimate how much money a company makes for each of its stocks. It gives insight into the company’s profitability by reflecting the amount of money that it makes for every share of its stock. It is calculated by dividing the company’s net profit by its total stock. Higher EPS is a sign that the company is more profitable.