Glossary · 340 terms

Finance recruiting and technical terms.

Plain-English definitions of the terms that come up in finance interviews and on the job, A to Z. Search for the one you half-remember, filter to the desk you are recruiting for, and follow a term through to the drill that practises it. No jargon for jargon's sake.

340 terms

A18

Absolute Priority RuleRestructuring: The principle that a senior class must be paid in full before a junior class receives anything in a reorganisation or liquidation. In a US Chapter 11 a plan can depart from it only if the senior class affected accepts the plan, which is why negotiated plans sometimes give a junior class a small distribution the rule alone would not.
AbsorptionReal Estate: The pace at which new space is let, as area or a share of the building each period. In a development model it turns an empty building at completion into a stabilised one, and it is among the most sensitive assumptions: slower absorption delays income, adds interest and pushes back the refinance.
Accretion / DilutionInvestment BankingWorked example: Whether an acquisition increases (accretive) or decreases (dilutive) the acquirer’s earnings per share. A standard merger-model output and a common technical interview topic. Practise it in Accretion / Dilution Animator
Accrual AccountingAccountingWorked example: Recognising revenue when earned and expenses when incurred, regardless of when cash moves. The foundation of GAAP/IFRS reporting, and the reason net income and cash flow diverge.
Active vs. PassiveAsset Management: Active managers pick securities to beat a benchmark; passive funds replicate an index at minimal cost. The multi-decade shift of flows from active to passive reshaped the economics of the entire asset management industry.
Add-On AcquisitionPrivate Equity: A smaller acquisition made by an existing portfolio company (the "platform") to expand scale, geography or capability — a buy-and-build strategy. Distinct from a standalone platform investment.
Adjusted BetaValuation: A regression beta pulled toward 1.0, most commonly by the Blume adjustment of two-thirds raw plus one-third market, on the empirical observation that betas mean-revert over time. It is a shrinkage estimator, not a theory. Important in practice: Bloomberg and most data providers report the ADJUSTED figure in the headline slot, so applying the adjustment again to a number you pulled from a screen shrinks it twice. Work through it interactively in the Beta Refresher lab at /labs/beta. Practise it in Beta Refresher
Adjusted Funds From Operations (AFFO)Real Estate: FFO moved closer to distributable cash: it deducts the recurring capital spending needed to keep the buildings let (maintenance capex, tenant improvements and leasing commissions) and straight-line rent recognised before it is received, and usually adds back share-based pay. There is no single standard definition, so it is compared across REITs with care. The dividend is judged against it.
Advance Subscription Agreement (ASA)Venture CapitalWorked example: The UK instrument that does the SAFE’s job: the investor pays now for shares issued at the next round, at a discount or a cap. Drafted so the money still qualifies for SEIS and EIS relief, which requires that it cannot be repaid, carries no interest, and converts within six months (HMRC’s longstop). A SAFE itself does not qualify, which is why the ASA exists. Practise it in Cap Table Builder
AlphaHedge FundWorked example: Investment return attributable to skill (stock selection, timing) rather than to broad market movement (beta). The core objective of active management.
Angel InvestorVenture Capital: An individual investing their own money in early-stage companies, typically in cheques from a few thousand to a few hundred thousand, and often before any fund would. Frequently former founders or operators. In the UK, angel money is shaped by SEIS and EIS relief, which is why so many first cheques arrive on an advance subscription agreement.
Anti-Dilution ProtectionVenture CapitalWorked example: A term that adjusts the price at which preferred stock converts into common if the company later sells shares at a lower price, so the earlier investor is compensated for a down round by receiving more common on conversion. Broad-based weighted average is the market standard; a full ratchet is the aggressive form. It protects against price, not against dilution as such.
ARR (Annual Recurring Revenue)Technology: The annualised value of a subscription company’s active contracts at a point in time: a stock, not a flow, moved each period by new business, expansion and churn. The number software companies are measured and valued on, distinct from revenue, which is ARR earned through the period. A quarter’s closing ARR is the next quarter’s opening, and every retention metric is an identity on that roll-forward.
Assessment Centre (AC)Recruiting: The UK final-round format: a half or full day combining a group case study, one or two competency interviews, and often a written exercise or presentation, run for a cohort of candidates at once. Distinct from the US Superday, which is usually back-to-back one-on-one interviews with no group component.
Assets Under Management Fee (Management Fee)Asset Management: The recurring fee (typically 0.5-2% annually) charged on managed assets regardless of performance — the stable revenue base of asset managers, versus performance fees which fluctuate.
Auction ProcessInvestment Banking: A structured sale process in which multiple prospective buyers bid for a company in staged rounds (first-round bids, management presentations, second-round/final bids), run by the sell-side advisor to maximise price and terms.
AUM (Assets Under Management)Hedge Fund: The total market value of the investments a fund manages on behalf of its clients, used as the standard measure of a fund’s size.
Availability PaymentProject Finance: A payment for an infrastructure asset being available for use, regardless of how much it is used. It is the North American name for what UK and European PPPs call the unitary charge, and it carries the same mechanics: indexation, and deductions for unavailability and poor performance.

B18

Basis Points (bps)Trading & MarketsWorked example: A unit equal to 1/100th of a percentage point (0.01%), used to express small differences in rates, yields and spreads precisely — e.g. "the spread widened 25 bps."
Behavioural Interview (PM)Product & Tech: An interview format testing how a candidate has handled real situations — leadership, conflict, ambiguity, failure — usually structured around the STAR method (Situation, Task, Action, Result).
BenchmarkAsset Management: The index a fund’s performance is measured against (S&P 500, MSCI World, a blended bond index). Alpha is return above the benchmark, adjusted for the risk taken.
BenchmarkingConsulting: Comparing a company’s costs, prices or performance against peers or against its own comparable units to find where it is out of line. It is how a cost reduction exercise finds a defensible target rather than an arbitrary percentage.
BetaValuation: A measure of a stock’s volatility relative to the broader market, used to estimate the cost of equity in a DCF via the Capital Asset Pricing Model (CAPM). Practise it in Beta Refresher
Beta (Portfolio)Hedge Fund: A portfolio’s sensitivity to overall market movements. A market-neutral fund targets a beta near zero; a directional long-biased fund runs positive net beta.
Bid-Ask SpreadTrading & MarketsWorked example: The difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask) for a security — a key measure of liquidity and an implicit trading cost.
Binary EventHealthcare: A single result that moves a company’s value to one of two levels, such as a trial readout or a regulatory decision. Before it, a biotech is worth the probability-weighted average of the two outcomes; after it, it is worth one of them, which is why its shares can double or halve in a morning.
BookbuildingInvestment Banking: The process by which underwriters collect institutional investor orders (price and size) for a securities offering, using the demand curve to set final pricing and allocation.
Borrowing BaseRestructuring: The collateral value an asset-based lender will lend against: an advance rate on eligible receivables (typically 80% to 85% of those inside 90 days) plus an advance rate on inventory, capped at the facility’s commitment. Availability is the base less what is drawn. As receivables age or shrink the base falls, and a base below the drawn balance forces a repayment whatever the cash position.
BottleneckConsulting: The step in a process that limits the throughput of the whole. Improving anything other than the bottleneck changes nothing, which is why an operations case is solved by locating it before evaluating any option.
Bottom-Up BetaValuation: A beta built from a peer set rather than a regression: unlever each listed comparable at its own capital structure and tax rate, take the median, then relever at your target structure. More precise than any single regression because averaging collapses the standard error, and it is the only route available for a private company, a pre-IPO business or a new division with no share price to regress. Work through it interactively in the Beta Refresher lab at /labs/beta. Practise it in Beta Refresher
Break FeeDeal Process: A fee payable if a signed deal fails in specified ways — a target break fee if the seller takes a better offer, or a reverse break fee if the buyer cannot close (often for financing or antitrust reasons).
Bridge LoanCorporate Finance: Short-term financing used to "bridge" a gap until permanent financing is arranged — commonly used by banks to guarantee deal financing before syndicating debt to the broader market.
Bridge RoundVenture Capital: A smaller financing, usually from existing investors and usually on a SAFE or a note, to extend a company’s runway to a milestone that would support a larger priced round. Benign when it is planned, and a warning when it is not: a bridge to nowhere is a phrase for a reason.
Bulge BracketInvestment BankingWorked example: The largest, full-service global investment banks (e.g. Goldman Sachs, Morgan Stanley, JPMorgan) offering the broadest range of products across geographies, as distinct from boutique or middle-market firms.
Burn Rate and RunwayVenture Capital: Burn is the cash a company loses each month; runway is cash in the bank divided by burn, the number of months before the money is gone. A company raises when it has twelve to eighteen months of runway left, because a round takes three to six months and the last months are when a founder has least leverage. The first two numbers a venture investor asks for.
Buy Ticket / Sell Ticket (Long / Short)Trading & Markets: Being long means owning exposure that profits if the price rises; being short means having sold borrowed exposure that profits if the price falls. The basic vocabulary of every markets seat.

C34

CAC PaybackTechnology: The months of gross margin a new customer takes to repay what it cost to acquire: customer acquisition cost (sales and marketing over new customers) divided by gross margin per customer per month. Under twelve months is efficient for most software businesses; over twenty-four needs a reason, usually that the customers are large and stay for a decade. It is the unit-level test of whether growth spending is an investment or a loss.
CalendarisationValuationWorked example: Restating a company’s figures onto a different year end so it can be compared with peers that close their books on another date. Each fiscal year is weighted by the number of months it contributes to the target period, and the weights sum to twelve. Without it, a comps table silently compares a 31 May year against a 31 December one and every multiple in the column is wrong. Practise it in Comps Explorer
Cap Rate (Capitalisation Rate)Real Estate: Stabilised net operating income divided by property value, or rearranged, the rate at which a property’s NOI is capitalised into a price. A market input read from comparable transactions, not an output of a model. $5m of NOI at 5.0% is $100m; at 6.0% it is $83m, which is why the cap rate sensitivity is the most material table in any real estate model.
Cap Table (Capitalisation Table)Venture CapitalWorked example: The register of who owns what in a company: every share, option, warrant and convertible instrument, with the fully diluted ownership each implies. It is the document a round is negotiated over, because every term that sounds like a price (pre-money, pool, cap) is really an instruction about how the next version of this table is drawn. Build one through a SAFE and a seed round at /labs/cap-table. Practise it in Cap Table Builder
CapExCorporate FinanceWorked example: Capital Expenditure — spending on physical assets (property, equipment, technology) intended to be used over multiple years, as distinct from operating expenses consumed within the current period. Practise it in Depreciation Waterfall
Capitalised vs Expensed CostsAccountingWorked example: The choice, for a cost that will benefit more than one period, between charging it to the income statement now (expensing) and recording it as an asset and charging it over its useful life (capitalising). Both routes put the whole cost through profit eventually; what differs is when, and which line it lands on. Capitalising lifts EBITDA and current profit, moves the cash to investing, and leaves an asset that has to earn its keep.
Carried Interest (Carry)Private EquityWorked example: The share of a PE fund’s profits (typically 20%) paid to the general partner as performance compensation, usually only after limited partners receive their capital back plus a preferred return (hurdle rate).
Carry TradeTrading & Markets: Earning the spread between a higher-yielding asset and a lower-cost funding source — classically borrowing a low-rate currency to buy a high-rate one. Profitable until the exchange rate moves against the position.
Case InterviewConsulting: A business problem worked through aloud with an interviewer, usually in 25 to 30 minutes, ending in a recommendation. It simulates a client engagement and is scored on structure, arithmetic, judgement and communication rather than on the conclusion.
Case Study (PE Interview)Private Equity: A timed exercise (typically 2-6 hours, sometimes take-home over 24-72 hours) in which a candidate builds an LBO model and investment recommendation on a real or disguised company, then presents it to the deal team.
Cash SweepCredit: The use of cash above a minimum balance to prepay debt, usually the term loan B, before it can be distributed. Credit agreements set the share through an excess cash flow sweep that often steps down as leverage falls; in a model it runs after interest, tax, scheduled amortisation and the revolver.
Cash-on-Cash ReturnReal Estate: A year’s cash flow after debt service divided by the equity invested. The simplest levered return, quoted year by year rather than over the hold, and the number a private investor in a property asks for first. It ignores the sale and the time value of money, which is what the levered IRR adds.
CatalystHedge Fund: A specific event expected to force the market to re-rate a security toward your target: an earnings inflection, capital allocation change, management turnover, regulatory decision or spin-off. A thesis without a catalyst risks being a value trap.
Cents on the DollarRestructuring: How distressed debt prices and recoveries are quoted: the amount paid, or recovered, per dollar of face value. A bond bought at 35 that recovers 60 has returned about 71% before the time it takes to get there and the costs of holding it.
CFADS (Cash Flow Available for Debt Service)Project Finance: The cash a project generates before anyone is paid: revenue less operating costs less tax, before interest and principal. The numerator of every coverage ratio and the line project debt is sculpted to. Whether the tax inside it is computed before or after interest decides whether the model is circular, which is why the convention is stated on the sheet.
Chapter 11Restructuring: The US court-supervised reorganisation process in which a debtor continues operating while restructuring its obligations under a plan voted on by creditor classes and confirmed by the court.
CIM (Confidential Information Memorandum)Investment BankingWorked example: A detailed document prepared by the sell-side advisor describing a company being sold — business overview, financials, market position, management — distributed to prospective buyers under a signed NDA.
Co-InvestmentBuyside Landscape: A direct investment by an LP alongside a fund in a specific deal, typically on reduced or zero fee/carry — attractive to LPs, and used by GPs to write larger equity cheques than the fund alone could.
Cohort GMV RetentionTechnology: A cohort of buyers’ spending in a later year as a share of its spending in the year it was acquired. It combines the share of buyers still active with how often they order, so it can exceed 100% while buyers leave, when the ones who stay order enough more.
Commercial Due DiligenceConsulting: A consulting firm’s assessment of a target’s market and competitive position for a buyer, usually a private equity fund working to a bid deadline. It tests whether the growth in the seller’s plan is deliverable.
Comparable Companies (Comps)ValuationWorked example: A relative valuation method that values a company using trading multiples of similar public companies, such as EV/EBITDA or P/E. Distinct from precedent transactions, which use multiples paid in past M&A deals. Practise it in Name That Multiple
Continuation VehicleBuyside Landscape: A new fund a GP raises to buy one or more assets from its own older fund, letting existing LPs cash out or roll over while the GP keeps managing the asset. The dominant GP-led secondary structure.
Contractual SubordinationRestructuring: An agreement that a class of debt will not be paid until a named senior class is paid in full. In a distribution the subordinated class’s pro rata share is turned over to the senior class until it is whole; creditors who are not party to the agreement, such as trade creditors, do not benefit.
Contribution MarginTechnology: What a sale or an order leaves after the costs that come with it: in a marketplace, net revenue less payment processing, refunds and support. It is quoted per order or as a share of GMV or revenue, and it is what must cover marketing and fixed costs before there is any profit.
Control PremiumValuation: The additional amount, above the current trading price, an acquirer pays to gain a controlling stake in a company — compensation for the ability to direct strategy, extract synergies and access cash flows directly.
Conversion DiscountVenture Capital: A percentage, typically 10 to 25%, off the next round’s price per share at which a SAFE or note converts. Where an instrument carries both a discount and a cap, it converts at whichever produces the lower price, so the discount only matters when the round prices below the cap. A discount without a cap gives the early investor no protection against a very high round price. Practise it in Cap Table Builder
Convertible NoteVenture CapitalWorked example: A loan that converts into shares at the next priced round instead of being repaid, usually at the lower of a discount to the round price and a price implied by a valuation cap. Unlike a SAFE it is debt: it accrues interest, has a maturity date, and ranks ahead of every share class if the company fails before it converts. The older instrument, still common outside the United States. Practise it in Cap Table Builder
Cost of DebtValuation: What the company would pay to borrow today, not what it is paying on debt raised years ago. Best read as the yield to maturity on its traded bonds; failing that, the risk-free rate plus a spread for its credit rating; failing that, a synthetic rating built from interest coverage. Enters the WACC after tax, because interest is deductible. Practise it in WACC Builder
Cost of EquityValuation: The return equity investors require for holding the shares rather than a risk-free asset. Usually built with CAPM: risk-free rate plus levered beta times the equity risk premium, with a country risk premium, size premium or company-specific premium added where the context demands. Always higher than the cost of debt, because equity sits last in the queue. Practise it in WACC Builder
Country Risk PremiumValuation: An addition to the equity risk premium for companies exposed to a riskier market. Commonly built from the sovereign default spread scaled by the relative volatility of that country’s equity market against its bonds. The judgement call is whether to apply it by country of listing or by where revenue is actually earned; revenue exposure is the better answer and the harder one to compute.
CovenantCorporate Finance: A condition written into a loan or bond agreement that restricts the borrower’s actions (e.g. maximum leverage, minimum interest coverage) to protect the lender. Breaching a covenant can trigger default even if payments are current. Practise it in Optimal Capital Structure
Coverage Group vs. Product GroupInvestment Banking: Coverage (industry) groups own client relationships in a sector (TMT, FIG, healthcare); product groups (M&A, leveraged finance, ECM/DCM) execute specific transaction types across sectors. Analysts’ experience differs meaningfully between the two.
Credit RatingCredit: An agency opinion on a borrower’s ability to meet its obligations, published by Moody’s, S&P Global and Fitch on scales that run from Aaa/AAA down to default. The investment-grade boundary sits at Baa3/BBB−, and it matters far beyond one notch of spread: many institutional mandates cannot hold sub-investment-grade paper at all, so crossing it changes who is allowed to lend to you.
Credit SpreadTrading & Markets: The extra yield a bond offers over a comparable risk-free benchmark (usually a government bond), compensating investors for credit and liquidity risk. Spreads widen when credit risk or market stress increases.

D28

Data RoomInvestment Banking: A secure (typically virtual) repository of a company’s financial, legal and operational documents, made available to prospective buyers during due diligence in an M&A process.
DCFValuationWorked example: Discounted Cash Flow. A valuation method that projects a company’s future free cash flows and discounts them to present value at the weighted average cost of capital, plus a terminal value for cash flows beyond the explicit forecast. Practise it in Reverse DCF
Deal SheetRecruiting: A one-page summary of transactions a candidate has worked on (deal name, role, size, status, one-line rationale), used to prepare crisp answers about live-deal experience in interviews.
Debt CapacityCredit: The most a borrower can borrow on the terms offered, set by whichever lender test binds first: a maximum multiple of EBITDA, a minimum interest cover at the loan’s rate, or the cash flow needed to repay a target share of the debt within its tenor. Lenders lend against the smallest of the three, and the gap between it and the debt proposed is the cushion.
Debt SculptingProject Finance: Shaping a loan’s repayment profile so that debt service in each period equals that period’s CFADS divided by the target DSCR, rather than following a flat amortisation. The loan is then the present value of the sculpted service at the loan rate. It repays more in strong periods and less in weak ones, holds coverage constant, and maximises how much can be borrowed against lumpy cash flows.
Debt Service Reserve Account (DSRA)Project Finance: A cash account held by a project company, usually equal to the next six months of debt service, funded at financial close and topped up from the cash waterfall before equity is paid. It gives lenders a cushion against a bad period without a default, and it is one reason equity in a project sees little cash in the early years.
Debt YieldReal Estate: Net operating income divided by the loan amount. The lender’s appraisal-independent test: it does not move when a valuer’s cap rate moves, so it catches an over-levered loan that loan-to-value would pass in a hot market. Commonly floored at 7% to 9%. One of the three constraints a real estate loan is sized to, with LTV and DSCR.
Debtor-in-Possession (DIP) FinancingRestructuring: New financing extended to a company in Chapter 11, typically with super-priority status over existing claims, to fund operations through the process.
Deferred RevenueAccountingWorked example: Cash received for goods or services not yet delivered, recorded as a liability until earned. Common in subscription businesses — a reason strong-growth software companies show cash collection ahead of recognised revenue. Practise it in Three-Statement Linker
Deferred Tax (DTA and DTL)AccountingWorked example: The tax consequence of a difference between a figure in the accounts and the same figure on the tax return. A deferred tax liability is tax that will be paid later on profit the accounts have already shown, most often because tax depreciation runs ahead of book depreciation. A deferred tax asset is tax that will be saved later, most often on losses carried forward. Neither is cash; both explain why the tax charge and the tax paid differ.
Deficiency ClaimRestructuring: The part of a secured creditor’s claim that its collateral does not cover. It is an unsecured claim and shares pro rata with the other unsecured creditors, so an undersecured lender recovers twice over: from its collateral and from the unsecured pool.
Delta (Options)Trading & MarketsWorked example: A measure of how much an option’s price is expected to change for a $1 move in the underlying security — also used loosely as an approximation of the option’s probability of expiring in the money. Practise it in Options Payoff Lab
Depreciation & Amortisation (D&A)AccountingWorked example: The systematic expensing of an asset’s cost over its useful life: depreciation for tangible assets, amortisation for intangibles. Non-cash, so it reduces reported profit without a cash outflow, which is why it is added back on the cash flow statement. US filings spell it amortization. Practise it in Depreciation Waterfall
Depreciation Tax ShieldValuationWorked example: The cash a business keeps because depreciation is deductible: the charge multiplied by the marginal tax rate. It is the reason a non-cash accounting entry still has a cash value, and it is why a DCF deducts D&A to reach taxed EBIT and then adds the charge back rather than ignoring it at both ends. Practise it in Depreciation Waterfall
DerivativesTrading & MarketsWorked example: Contracts whose value is derived from something else: an asset, a rate or an index. The four families are forwards, futures, swaps and options. They exist so a specific risk can be moved from somebody who does not want it to somebody who will take it for a price, and they differ mainly in who is obliged to do what. Practise it in Options Payoff Lab
Development SpreadReal Estate: Yield on cost less the cap rate at which the completed building would sell. It is the margin that pays for construction, leasing and market risk, and a thin one disappears with a small rise in costs or in cap rates, which is why developers and lenders look at it before anything else.
Diluted Shares OutstandingValuation: Basic shares plus the shares that in-the-money options, restricted stock, convertibles and warrants would create. Usually computed with the treasury stock method, which assumes option proceeds buy back shares at the market price. Use diluted, not basic, for market capitalisation: the claims exist whether or not they have been exercised yet. Practise it in Accretion / Dilution Animator
Dilution AdjustmentValuation: The increment between basic and diluted share count, representing the shares that would come into existence from options, RSUs, convertibles and warrants. Reported separately in a clean EV bridge so the reader can see how much of the equity value belongs to instruments that have not yet converted. Practise it in Accretion / Dilution Animator
Distressed DebtRestructuring: Debt trading at a deep discount because the market doubts full repayment. Distressed investors buy it to earn outsized yield on a recovery, or to convert it into control of the restructured company via the fulcrum.
Distribution Lock-UpProject Finance: The covenant that traps cash inside a project company when coverage falls below a threshold (commonly a DSCR of 1.10x to 1.20x, set above the default level). Distributions to equity stop, the cash accumulates in the project, and it is released only when the test passes again. A model that pays equity through a lock-up overstates the equity return.
Dividend YieldMarkets: Annual dividend per share divided by share price. A high yield can mean a generous payout or a falling share price, and telling those apart is the entire analysis. Read it alongside the payout ratio and free cash flow cover to see whether the dividend is actually funded.
Down RoundVenture Capital: A financing at a lower price per share than the previous round. It triggers anti-dilution adjustments for earlier investors, tends to bring harsher terms (higher multiples, participation, pay-to-play), and dilutes founders and employees twice: once by the new shares and again by the adjustment. Sometimes the right decision; never a neutral one.
Drag-Along and Tag-Along RightsVenture Capital: Two rights governing a sale of the company. Drag-along lets holders of a stated majority force the rest to sell on the same terms, so a minority cannot block an exit. Tag-along lets minority holders join a sale a majority has agreed, on the same terms, so they cannot be left behind. Both are standard and both are about control of the exit rather than money.
DrawdownAsset Management: The peak-to-trough decline in a portfolio’s value. Maximum drawdown is a key risk statistic, and recovering from one requires a proportionally larger gain (a 50% drawdown needs +100% to break even).
Dry PowderPrivate EquityWorked example: Capital that a PE fund has committed from its limited partners but has not yet deployed into deals. High dry powder levels are a commonly cited driver of valuation competition among sponsors.
DSCR (Debt Service Coverage Ratio)Project Finance: Cash available for debt service divided by the debt service due in the same period. The period test every project and property lender monitors: a covenant is set on it, distributions are locked up below a threshold of it, and project debt is sized so that it holds a target (1.30x to 1.45x for contracted assets) in every period. Reported as a minimum and an average across the loan; the minimum is the one that matters.
Due DiligenceDeal Process: The buyer’s structured investigation of a target across workstreams — commercial, financial, legal, tax, operational, technology — to validate the investment thesis and price before signing.
DurationTrading & Markets: A bond’s price sensitivity to interest-rate changes, expressed in years — a 5-duration bond loses roughly 5% of value per 100bps rise in rates. The first-order risk measure in fixed income.

E16

EarnoutDeal Process: Deferred, contingent purchase price paid only if the target hits agreed post-closing milestones (revenue, EBITDA). Bridges valuation gaps between buyer and seller, and is a notorious source of post-closing disputes.
EBITDAValuationWorked example: Earnings Before Interest, Taxes, Depreciation and Amortisation — a proxy for a company’s operating cash generation, widely used as the denominator in valuation multiples because it strips out capital-structure and accounting effects.
EBITDA CushionCredit: The share of EBITDA a borrower could lose before a covenant breaks, holding debt and its other inputs constant. A 25% cushion means EBITDA could fall by a quarter before the test fails. Lenders quote headroom this way because it compares leverage, interest cover and fixed charge tests on one scale.
ECM / DCMInvestment Banking: Equity Capital Markets and Debt Capital Markets — the divisions that structure and execute equity issuance (IPOs, follow-ons, blocks) and bond issuance respectively, sitting between coverage bankers and the trading floor.
EIS (Enterprise Investment Scheme)Venture CapitalWorked example: The UK tax relief that follows SEIS as a company grows: 30% income tax relief on up to £1m a year (£2m where the excess goes into knowledge-intensive companies), no capital gains tax after three years, deferral of gains reinvested, and loss relief. A company may raise £5m a year and £12m in total under it. The shares must be ordinary shares with no preferential rights, which shapes how UK angel rounds are drafted.
Elite BoutiqueInvestment BankingWorked example: An independent advisory firm (e.g. Evercore, Lazard, Centerview, Moelis) focused primarily on M&A and restructuring advisory without a balance sheet, often competing directly with bulge brackets on the largest deals.
EngagementConsulting: A single piece of consulting work, typically six to twelve weeks with a team of three to six, scoped around one question. The word is used where another industry would say project, and the scope is what the client has agreed to pay for.
Enterprise Value (EV)ValuationWorked example: The total value of a business to all capital providers: equity value plus net debt (and other claims like preferred and minority interest). EV is capital-structure neutral, which is why it pairs with metrics like EBITDA. Practise it in EV to Equity Bridge
Entry MultiplePrivate Equity: The EV/EBITDA (or similar) multiple paid to acquire a company at the start of an LBO. Combined with the exit multiple, it determines how much of the return comes from multiple expansion versus operational improvement. Practise it in Paper LBO Trainer
Equity MultipleReal Estate: Total cash returned to equity over the hold, including the sale, divided by the equity invested. A 2.0x multiple means every dollar came back twice. It says how much without saying how fast, which is why it is quoted alongside the IRR rather than instead of it. Practise it in Name That Multiple
Equity Risk PremiumValuation: The extra return investors demand for holding equities over a risk-free government bond. Two schools: the historical average of realised excess returns over a long window, and the implied premium backed out of the current index level and expected cash flows. They can differ by several percentage points, which moves a valuation enormously, so state which one you used and why.
Equity ValueValuationWorked example: The value attributable to shareholders, equal to share price times shares outstanding (market capitalisation), or enterprise value minus net debt and other non-equity claims. Practise it in EV to Equity Bridge
EV BridgeValuation: The walk from share price to enterprise value: diluted market capitalisation, plus debt, plus non-controlling interests, plus other debt-like items such as unfunded pensions and capitalised operating leases, less cash and financial assets. Getting the bridge right matters more than most valuation debates, because every multiple you compute sits on top of it.
Exchange OfferRestructuring: An out-of-court restructuring in which creditors voluntarily swap existing bonds for new securities — often with longer maturity, different coupon, or a haircut — to avoid a formal insolvency process.
ExclusivityDeal Process: A negotiated period during which a seller agrees to deal with one bidder only. Granting it is a major inflection in a sale process — the seller trades competitive tension for speed and certainty.
Exit MultiplePrivate Equity: The EV/EBITDA (or similar) multiple assumed or achieved when a PE-owned company is sold or taken public. Sponsors often assume exit at or below entry multiple to avoid relying on multiple expansion for returns. Practise it in Paper LBO Trainer

F14

Fairness OpinionInvestment Banking: A formal opinion, typically from an investment bank, stating whether the financial terms of a proposed transaction are fair to shareholders from a financial point of view — often a board-governance requirement in public M&A.
Family OfficeBuyside Landscape: A private investment firm managing a wealthy family’s capital. Increasingly active in direct deals, often with longer hold horizons and fewer fund-structure constraints than institutional PE.
Fit InterviewRecruiting: The behavioural portion of an interview, testing motivation, self-awareness and communication — "walk me through your resume," "why this firm," "tell me about a time you disagreed with a teammate" — as distinct from the technical portion.
Fixed Charge Coverage Ratio (FCCR)Credit: EBITDA less capex and cash taxes, divided by fixed charges, usually cash interest plus scheduled debt repayment. Credit agreements define it differently (some deduct distributions or add lease payments), so the definition in the document is the one that counts. Heavy scheduled amortisation, as on a term loan A, often makes it the tightest covenant.
Follow-On ReservesVenture Capital: Capital a fund holds back from initial investments to invest in later rounds of its existing portfolio, typically a third to a half of the fund. Reserves are how a fund exercises its pro rata rights, and how much to reserve, and for which companies, is one of the central portfolio decisions a partnership makes.
Football FieldValuation: A bar-chart summary showing the implied valuation range from each methodology used (DCF, comps, precedent transactions, 52-week trading range), presented side by side to triangulate a valuation view.
Founder DilutionVenture Capital: The fall in a founder’s ownership percentage as new shares are issued. Shares are never taken away; the denominator grows. A typical path runs from 100% at founding to 50 to 65% after seed, 35 to 50% after a Series A, and 15 to 25% by a Series C, which is why the question is never "how much did I give away" but "what is the smaller fraction now worth". Practise it in Cap Table Builder
Free Cash Flow (FCF)ValuationWorked example: Cash generated by a business after operating expenses and capital expenditures, available to be distributed to (or reinvested by) capital providers. The core input to a DCF valuation.
Fulcrum SecurityRestructuringWorked example: The security in the capital structure where the enterprise value "runs out" — the class that is partially recovered and typically converts into ownership of the reorganised company. Identifying the fulcrum is the core of distressed investing.
Full RatchetVenture Capital: The harshest form of anti-dilution protection: if a single share is later sold below the price the investor paid, the investor’s conversion price resets to that lower price in full, regardless of how many shares were sold. Rare in ordinary rounds, seen in distressed ones, and a term whose presence says something about the negotiation that produced it.
Full-Time Return OfferRecruiting: The full-time analyst or associate offer extended to a summer intern at the end of their programme, contingent on performance review. Most banks convert 70-95% of interns in a typical year; the ratio compresses sharply in weak hiring years.
Fund of FundsBuyside LandscapeWorked example: A vehicle that invests in a portfolio of other funds rather than directly in companies, offering LPs diversification and access at the cost of a second layer of fees.
Fund ReturnerVenture Capital: An investment whose proceeds alone repay the whole fund. For a $100m fund holding 10% of a company at exit, the company must sell for $1bn. The arithmetic is the reason a fund asks "can this be a fund returner" before it asks anything else, and why a business that can plausibly reach $100m of value is a fine company and a poor venture investment.
Funds From Operations (FFO)Real Estate: The standard earnings measure for REITs, as defined by NAREIT: net income plus depreciation and amortisation of real estate, less gains on the sale of property, with the same adjustments for joint ventures. It exists because depreciation on buildings that tend to hold their value makes net income understate what a REIT earns. REITs are quoted on price to FFO per share.

G10

GAAP vs. Non-GAAPAccounting: GAAP (or IFRS) figures follow accounting standards; non-GAAP ("adjusted") figures exclude items management deems non-recurring or non-operating (stock-based compensation, restructuring). The gap between the two is a standard analyst scrutiny point.
GoodwillAccountingWorked example: The excess of an acquisition’s purchase price over the fair value of the target’s identifiable net assets. Under current US GAAP and IFRS it is tested annually for impairment rather than amortised.
GP Catch-UpReal Estate: The waterfall tier in which the sponsor receives all, or most, of the distributions until it has caught up to its promote share of the total profit distributed so far. It follows the preferred return and return of capital and precedes the ordinary split. The line first-time models omit, and the reason two waterfalls with the same headline terms can pay a sponsor very different amounts.
Gross ExposureHedge Fund: Long positions plus short positions as a percentage of capital, indicating total risk deployed (leverage) regardless of direction.
Gross MarginAccounting: Revenue less the cost of producing what was sold, as a share of revenue. It shows how much of each sale is left to pay for research, selling and overheads, and differences in it between product lines, such as equipment and consumables, often explain more about a business than its blended figure.
Gross Merchandise Value (GMV)Technology: The total value of goods or services sold through a marketplace before any deductions: orders times the average order value. It measures the scale of a platform, not its revenue, which is the share of GMV the marketplace keeps.
Gross-to-NetHealthcare: The discount between a drug’s list price and what the manufacturer actually receives, after rebates to payers and pharmacy benefit managers, discounts, chargebacks and co-pay assistance. Commonly 20% to 50% in the US and growing over a product’s life. A launch curve built on the gross price overstates revenue by exactly this margin.
Group Case StudyRecruiting: The assessment-centre exercise used at spring week and summer internship stage: 4-6 candidates are given a short brief — a company, a client situation, sometimes a live news injection, and typically 45-60 minutes to prepare a 10-minute recommendation to a panel, followed by Q&A. No modelling is required and no finance background is assumed. What is scored is behaviour in a group: whether you build on other people’s points, whether you keep time, whether you make sure everyone speaks. Dominating the group scores worse than saying less and structuring better.
Growth EquityBuyside LandscapeWorked example: Minority or control investments in fast-growing, usually profitable-or-near companies, between venture capital and buyouts — less leverage than an LBO, more traction than VC. Firms include General Atlantic, TA, Insight, Summit.
GuesstimateConsulting: An estimation question with no available data, answered by decomposing it into things you can approximate. In practice the same exercise as market sizing, under an older name.

H6

Hamada EquationValuation: The relationship linking levered and unlevered beta through capital structure: levered equals unlevered times one plus one-minus-tax times debt-to-equity. The mechanism behind the observation that adding debt does not lower the cost of capital as much as it first appears, because cheaper after-tax debt is offset by the higher beta it forces onto the equity. Work through it interactively in the Beta Refresher lab at /labs/beta.
Headhunter (PE Recruiting)Recruiting: A third-party recruiter (e.g. CPI, Amity, Henkel, SG Partners in the US; Sheffield Haworth, Compass in Europe) who manages the on-cycle and off-cycle private equity hiring process on behalf of funds, screening and forwarding candidates from investment banking analyst programmes.
HedgingTrading & Markets: Taking an offsetting position to reduce an unwanted risk — e.g. shorting index futures against a long stock book to strip out market beta, or an exporter selling currency forwards against future receivables.
High-Water MarkHedge Fund: The highest value a fund has previously reached; a manager only earns performance fees on gains above this level, preventing being paid twice for the same gains after a drawdown.
High-Yield BondCorporate FinanceWorked example: A bond rated below investment grade (below BBB-/Baa3), offering higher yield to compensate for greater credit risk. A common component of LBO financing alongside term loans.
Hypothesis-Led Problem SolvingConsulting: Starting from a provisional answer and testing it, rather than gathering everything and hoping a conclusion appears. It is how consulting teams work under a deadline, and it is what an interviewer is listening for when you say where you want to begin.

I13

Identifiable Intangible AssetsAccounting: Intangibles recognised at fair value when a company is bought, separately from goodwill, because they arise from a contract or could be sold on their own: customer relationships, developed technology, trade names, licences. A company that built them itself carries none of them on its balance sheet, so in an acquisition they are usually most of the write-up. Those with a finite life are amortised; an indefinite-lived trade name is tested for impairment instead.
ImpairmentAccounting: A write-down recorded when an asset’s carrying value exceeds its recoverable value. Goodwill impairments are closely watched as an admission that an acquisition underperformed the price paid.
ImplementationConsulting: Delivering a recommendation rather than making one: longer engagements, larger teams, lower day rates and different skills. It has grown relative to advisory work as clients push firms to stay for the outcome.
Implied Cap RateReal Estate: The cap rate a REIT’s share price is paying for its buildings: forward NOI divided by the market value of its equity plus net debt, less non-property assets. Compared with the cap rates buildings trade at privately, it says whether the listed portfolio is cheaper or dearer than the same buildings bought directly.
Implied Probability of SuccessHealthcare: The chance of a trial succeeding that a share price is paying for: where the price sits between the value per share on success and on failure. An investor compares it with their own estimate; the gap is the position. Failure is usually valued at no less than net cash, because investors expect a failed company to stop spending.
Inflation RateMacro: The rate at which the general price level rises, usually measured by CPI. Enters valuation twice: inside the nominal risk-free rate, and inside terminal growth, since nominal growth is roughly real growth plus inflation. Discounting nominal cash flows at a real rate, or the reverse, is a common and expensive error.
Installed BaseHealthcare: The number of a company’s systems in use at customers: placed, not yet retired. In medtech it is the stock that recurring revenue is earned on, so it is modelled as a roll-forward of shipments and retirements, and procedure volume is the average installed base times utilisation.
Interest Coverage RatioRestructuring: EBITDA (or EBIT) divided by interest expense — the standard measure of how comfortably a company services its debt. Coverage approaching 1x is a classic distress signal.
Interest During Construction (IDC)Project Finance: Interest accruing on debt drawn during the construction of an asset that has no revenue yet. It is capitalised into the project cost rather than expensed, funded from the financing plan alongside the capex, and is one of the reasons total project cost exceeds the construction budget. Computed on the opening drawn balance each period.
Inventory Step-UpAccounting: The write-up of an acquired company’s inventory from cost to fair value at the close of a deal. It passes through cost of sales as that stock is sold, usually within the first year, so it depresses the buyer’s gross margin for a quarter or two and is one of the adjustments analysts strip out of reported earnings after an acquisition.
IPOInvestment Banking: Initial Public Offering — a private company’s first sale of shares to public investors, run by underwriting banks who build the book of institutional demand and price the deal.
IRRPrivate EquityWorked example: Internal Rate of Return. The annualised return on an investment accounting for the timing of cash flows. PE funds target IRRs typically in the high teens to mid-twenties percent for buyouts.
Issue TreeConsulting: A problem broken into branches and sub-branches until each end point is something you can actually investigate. The profitability tree, splitting profit into revenue and cost and then into price, volume and cost lines, is the version that survives real use.

K2

Kill CriteriaHedge Fund: Pre-defined conditions under which an investor will exit a position because the original thesis has been invalidated, set before entry to remove emotion from the exit decision.
KISS (Keep It Simple Security)Venture Capital: An alternative to the SAFE published by 500 Startups in 2014, in a debt version that accrues interest and matures at 18 months and an equity version that does not. Both carry a cap, a discount and a most favoured nation clause. Far less used than the SAFE, and worth knowing mainly so a term sheet that names one is not a surprise.

L20

LBO (Leveraged Buyout)Private EquityWorked example: The acquisition of a company financed with a significant proportion of borrowed money (debt), with the target’s own cash flows used to service and repay that debt. The core private equity buyout structure. Practise it in Paper LBO Trainer
Lead InvestorVenture Capital: The investor who sets the terms of a round, writes the largest cheque, conducts the diligence and usually takes the board seat; the others follow on the lead’s terms. Finding a lead is the hard part of raising, because a lead is putting its judgement on the line while a follower is only putting in money.
League TablesInvestment Banking: Rankings of banks by deal volume or count in a product or region (announced M&A, ECM, DCM). A marketing staple in pitches, and famously massaged via credit rules and creative cut-offs.
Letter of Intent (LOI)Deal Process: A preliminary, mostly non-binding document in which a buyer sets out proposed price and key terms before confirmatory diligence and definitive documentation. In public M&A the equivalent stage is an indicative proposal.
Leverage ModelConsulting: The ratio of junior to senior staff in a professional services firm. High leverage means many juniors per partner, which drives profit per partner and also means most juniors cannot be promoted, which is the whole mechanism behind up-or-out.
Leverage Ratio (Debt/EBITDA)Private Equity: Total debt divided by EBITDA, used to measure how much borrowed capital is layered onto a company’s cash flow. Typical LBO entry leverage runs 4.5-6.0x EBITDA depending on the credit environment and sector. Practise it in Optimal Capital Structure
Leveraged Finance (LevFin)Investment Banking: The product group that structures and syndicates below-investment-grade debt — leveraged loans and high-yield bonds — primarily for LBOs, recapitalisations and acquisitive borrowers.
Levered BetaValuation: Also called equity beta. Business risk plus the extra risk that borrowing imposes on the equity. What you actually put into CAPM. Relever an unlevered beta at the capital structure of the company you are valuing, not the peer set’s, or the beta and the WACC weights disagree with each other. Work through it interactively in the Beta Refresher lab at /labs/beta. Practise it in Beta Refresher
Lifecycle CostsProject Finance: The cost of replacing an infrastructure asset’s components as they wear out over a concession: roofs, plant, lifts, surfaces. They are lumpy, falling in particular years, so PPP lenders usually require a lifecycle reserve funded steadily from cash flow, which stops a replacement year from breaking the debt service cover test.
Liquidation PreferenceVenture CapitalWorked example: The right of a preferred holder to receive a stated amount, usually one times the money invested, before the common shareholders receive anything in a sale or wind-up. A 1x non-participating preference is the market standard: the holder takes either the money back or their as-converted share, whichever is larger. Watch it decide at /labs/equity-instruments. Practise it in Exit Waterfall Lab
LiquidityTrading & Markets: How quickly and cheaply an asset can be traded in size without moving its price. Tight spreads and deep order books signal high liquidity; illiquidity is a return premium and a risk in stress.
LLCR (Loan Life Coverage Ratio)Project Finance: The present value of CFADS over the remaining life of the loan, discounted at the loan rate, divided by the debt outstanding. Where DSCR tests one period, LLCR asks whether the whole loan can be repaid from what remains; lenders typically want it above 1.4x. Its cousin PLCR extends the numerator to the end of the project life, crediting the tail after maturity.
Loan to Cost (LTC)Real Estate: A construction loan’s size as a share of a development’s total cost. The lender sets a maximum and the sponsor’s equity funds the rest, usually going in before the loan draws, so the lender’s money is the last into the scheme.
Loan-to-Value (LTV)Real Estate: The loan as a percentage of the property’s appraised value or purchase price, the first of the three constraints a real estate lender applies, commonly capped at 65% to 75% for stabilised commercial property. It is only as reliable as the valuation underneath it, which is why debt yield and coverage are tested alongside.
Long / Short (Equity)Hedge FundWorked example: A strategy that takes long positions (betting a security rises) in names expected to outperform and short positions (betting a security falls) in names expected to underperform, often to reduce net market exposure while expressing stock-specific views.
Loss Given Default (LGD)Credit: The share of a claim a lender loses if the borrower defaults: one minus the recovery rate. It depends on seniority, collateral and what the business is worth in distress, which is why it is estimated with a distribution of distressed value by priority rather than assumed.
Loss of Exclusivity (LOE)Healthcare: The year a drug’s patent and regulatory protection ends and generic or biosimilar competition arrives. Revenue typically falls to a fraction of its peak within a year or two for small molecules, more slowly for biologics. In a valuation it truncates the programme’s cash flows, and moving it by a year or two is one of the most sensitive changes a model can take.
LP / GPPrivate Equity: Limited Partner (the investor providing capital to a fund — pension funds, endowments, sovereign wealth funds) and General Partner (the private equity firm that manages the fund and makes investment decisions).
LTM (Last Twelve Months)ValuationWorked example: The most recent twelve months of trading, built by adding the latest interim period to the last full year and subtracting the same interim period a year earlier. Also called trailing twelve months. It is what a multiple is quoted on when the question is what the business has actually done, as opposed to what a broker expects it to do. Practise it in Comps Explorer
LTV to CACTechnology: Lifetime value over customer acquisition cost: the gross margin a customer contributes over its life against what it cost to win. Three times is the conventional floor for a healthy subscription business. The ratio is only as honest as the lifetime, and dividing margin by a very low churn rate produces a customer that lives for decades; a fixed horizon is the guard.

M16

MAC / MAE ClauseDeal Process: Material Adverse Change/Effect — a contractual provision letting a buyer walk away if the target suffers a sufficiently severe deterioration between signing and closing. Heavily negotiated and rarely successfully invoked.
Magic NumberTechnology: Net new ARR in a quarter divided by sales and marketing spend in the quarter before: how much annual recurring revenue each dollar of go-to-market spend produced. Above about 0.75 the engine is efficient enough to feed with more spend; below about 0.5 the company should fix its sales motion before it hires. The whole-engine cousin of CAC payback, which is per customer.
Maintenance CapExCorporate Finance: The part of capital expenditure needed only to keep the business running at its current capacity: replacing worn equipment, renewing systems, refitting sites. Everything above it is growth capex. The split is not disclosed, so it is estimated, most often by taking the depreciation charge as the floor and adjusting for asset inflation and for the capacity the company actually added. Practise it in Depreciation Waterfall
MandateInvestment Banking: A formal engagement in which a client retains an investment bank to advise on a specific transaction (M&A sale, capital raise, restructuring).
Marginal Tax RateValuation: The rate applied to the next unit of taxable profit, and the correct rate for the tax shield in a WACC and for taxing EBIT in unlevered free cash flow. Not the effective rate the accounts show, which reflects one-off items, loss carryforwards and the geographic mix of a particular year and will not persist.
Market MakerTrading & MarketsWorked example: A firm that continuously quotes both buy and sell prices for a security, providing liquidity to the market and earning the bid-ask spread in exchange for taking on inventory risk.
Market SizingConsulting: Estimating the size of a market from first principles, either top-down from a population or bottom-up from a unit. The answer is not checked against a source; what is assessed is whether the path is defensible and the arithmetic holds.
Maturity WallCredit: The amount of a borrower’s debt falling due year by year, and especially a concentration of it in a short window. Whatever is still owed at maturity must be refinanced at the leverage and rates the market accepts on that date, so refinancing risk is read from leverage at maturity rather than at close.
MECEConsulting: Mutually Exclusive, Collectively Exhaustive: the test a case structure has to pass. Branches must not overlap, so a fact belongs in one place, and must not leave a gap, so no possible cause is missed.
Merger ModelInvestment Banking: A financial model that combines an acquirer’s and target’s financial statements to assess whether a proposed M&A deal is accretive or dilutive to the acquirer’s earnings per share, and under what financing structure.
Mezzanine DebtCorporate Finance: A hybrid financing layer, subordinate to senior debt but senior to equity, often carrying an equity kicker (warrants). Used to fill a financing gap in a capital structure at a higher cost than senior debt.
Middle MarketInvestment BankingWorked example: Investment banks and PE funds focused on smaller transactions, typically sub-$1bn enterprise value, as distinct from bulge bracket and mega-fund activity.
Minority Interest (NCI)Accounting: The older name for non-controlling interest: the portion of a consolidated subsidiary the parent does not own. The standards renamed it in 2009, on the logic that a minority holder can still control and a majority holder can lack control. Bankers, deal documents and most interviewers still say minority interest. The treatment is unchanged either way: it is added in the enterprise value bridge, because consolidated results include 100% of the subsidiary while equity value carries only the parent’s share.
Modelling TestRecruitingWorked example: A timed technical exercise, usually 1-3 hours, in which a candidate builds a financial model (LBO, DCF, or merger model) from a data set or set of assumptions, under interview conditions with no internet access.
MoICPrivate EquityWorked example: Multiple on Invested Capital. The ratio of money returned to money invested (for example, 3.0x means you tripled your investment). A core PE returns metric alongside IRR.
Most Favoured Nation (MFN) ClauseVenture Capital: A term in a SAFE or note allowing the holder to adopt the terms of any later SAFE or note issued on better terms, before conversion. The uncapped, undiscounted SAFE that Y Combinator publishes carries one, so an investor who accepted no cap is protected if the company later grants one to somebody else.

N8

Negative Working CapitalCorporate FinanceWorked example: A business whose operating liabilities exceed its operating assets, so customers and suppliers fund it rather than the other way round. Subscription software, supermarkets and airlines are the standard examples. Growth releases cash instead of consuming it, which is a genuine competitive advantage and a serious risk on the way back down.
Net DebtValuationWorked example: Total debt less cash and cash equivalents, sometimes also less short-term financial assets. The version used for credit metrics often differs from the version used in the EV bridge, because credit analysts are stricter about which cash they will accept as genuinely available. Say which definition you are using. Practise it in EV to Equity Bridge
Net ExposureHedge Fund: Long positions minus short positions as a percentage of capital, indicating a fund’s directional bias to the market.
Net Operating Income (NOI)Real Estate: A property’s income before financing, capital expenditure and income tax: gross rent, less vacancy and credit loss, plus other income and recoveries, less operating expenses. Built lease by lease from the rent roll, it is the single figure that the cap rate values, the lender sizes against and the return analysis reads. It resembles EBITDA and is not EBITDA: it is one asset, excludes capex, and has no second metric to triangulate against.
Net Revenue Retention (NRR)Technology: What a cohort of customers is worth a year later as a share of what it was worth at the start: opening ARR plus expansion less churn, over opening ARR. Above 100% means existing customers grow faster than they leave, and the company would grow with no new sales at all. Read beside gross revenue retention, which excludes expansion and cannot exceed 100%; a strong net figure over a weak gross one is expansion papering over churn.
Networking CallRecruiting: A short informational conversation (15-30 minutes) with a banker or investor, used by candidates to learn about a firm and build a relationship ahead of applying. Distinct from a formal interview, but often just as consequential for referrals.
Non-Controlling Interest (NCI)AccountingWorked example: The portion of a consolidated subsidiary that the parent does not own; the current name in IFRS and US GAAP for what deal documents and interviewers still call minority interest. It is added in the EV bridge because the income statement consolidates one hundred per cent of that subsidiary’s EBITDA, so the enterprise value has to reflect the full claim on it for the multiple to be internally consistent.
Non-Participating PreferredVenture Capital: Preferred stock whose holder must choose at exit between the liquidation preference and converting to common for a pro rata share, and cannot have both. The choice flips where the pro rata share equals the preference: with a 1x preference on a 20% stake, at five times the money invested. Below that the holder is paid the same whatever the price, which founders call the dead zone. Practise it in Exit Waterfall Lab

O6

Off-cycle recruitingRecruitingWorked example: Continuous, role-by-role hiring common at middle-market funds, growth equity and across Europe. Roles open unpredictably and rarely appear on public job boards, so candidates must source proactively through headhunters and networks.
On-cycle recruitingRecruitingWorked example: The compressed, headhunter-coordinated process through which US megafunds and large PE funds hire incoming associates roughly 18 months before the start date. When it kicks off, processes can run from first call to signed offer in 24-72 hours.
Operating LeaseAccountingWorked example: A lease that under IFRS 16 and ASC 842 now sits on the balance sheet as a right-of-use asset and a lease liability. Whether to treat that liability as debt in the EV bridge is a live judgement: it is a contractual fixed obligation, but treating it as debt while leaving lease costs inside EBITDA double-counts. Pick one treatment, apply it to every company in the comp set, and say which you chose.
Option PoolVenture Capital: Shares set aside, usually 10 to 15% of the post-money fully diluted count, to be granted as options to employees hired after the round. Investors ask for it to be created before their money goes in, so that the dilution of the next eighteen months of hiring is borne by the existing holders and not by them. Size it from a hiring plan, not from a convention. Practise it in Cap Table Builder
Option Pool ShuffleVenture CapitalWorked example: The effect of putting the option pool in the pre-money: the headline valuation is agreed, then the pool is carved out of it before the price per share is set, so the founders are effectively valued at the headline less the pool. A $12m pre-money with a 10% post-money pool on a $15m post-money prices what existed before the round at $10.5m. See it move at /labs/cap-table. Practise it in Cap Table Builder
Order BookTrading & MarketsWorked example: The real-time list of buy and sell orders for a security at various price levels, showing the depth of supply and demand at each price.

P36

Paper LBOPrivate EquityWorked example: A simplified leveraged buyout analysis done by hand, without Excel, usually in under ten minutes. Used in PE interviews to test whether a candidate understands LBO mechanics (entry, leverage, growth, debt paydown, exit) well enough to estimate returns quickly. Practise it in Paper LBO Trainer
Pari PassuCredit: Ranking equally. Claims that are pari passu share any recovery pro rata to their size, so value is divided in proportion rather than in order.
Participating PreferredVenture CapitalWorked example: Preferred stock whose holder takes the liquidation preference and then also shares pro rata in what remains, as if converted. Called double-dipping by founders, it is usually softened with a cap, commonly two to three times the money invested, above which the holder converts instead. Uncapped participation appears in down markets and rescue rounds and is a signal in itself. Practise it in Exit Waterfall Lab
Pay-to-PlayVenture Capital: A provision under which a preferred holder who does not invest their pro rata share in a later round loses some of their preferred rights, typically by conversion to common. It appears in down rounds and recapitalisations to force existing investors to support the company or step aside, and it is one of the few terms that punishes an investor rather than a founder.
Peak SalesHealthcare: The highest annual net revenue a drug is forecast to reach, usually several years after launch once penetration has ramped and before exclusivity is lost. Built from patients times price: the addressable population, the share diagnosed and treated, peak penetration, and a net price after the gross-to-net discount. The number every biotech pitch quotes, and the one most worth rebuilding from its parts.
Pension LiabilityAccountingWorked example: The shortfall on a defined benefit scheme, being the obligation less plan assets. Treated as a debt-like item in the EV bridge, usually net of the tax relief available on future contributions. Can dominate the bridge for older industrials with legacy schemes, and is highly sensitive to the discount rate used to value the obligation.
Performance DeductionsProject Finance: Reductions in a PPP unitary charge when part of the asset is unavailable or a service falls short of its standard. The project company passes most of them down to the subcontractor responsible, usually up to a cap set as a share of that subcontractor’s fee, and bears the rest, which is the performance risk its equity is paid for.
Personal Experience InterviewConsulting: A structured behavioural interview that spends twenty to thirty minutes on one story, drilling into what you said, how people reacted and what you would change. It breaks rehearsed answers quickly, which is the point of it.
PIK InterestPrivate Equity: Payment-In-Kind interest. Interest that accrues and compounds onto the principal rather than being paid in cash. Common in LBO capital structures and a frequent source of confusion because it does not hit cash flow but increases the debt balance.
Pitch BookInvestment Banking: A presentation prepared by an investment bank for a client or prospective client, typically covering market context, valuation analysis and strategic recommendations, used to win or advance a mandate.
Position SizingHedge Fund: The process of deciding how much capital to allocate to an investment idea, typically weighted by conviction, expected risk/reward and portfolio-level risk constraints.
Post-Money SAFEVenture Capital: The 2018 form of the SAFE, in which the valuation cap is a post-money figure and each SAFE holder’s stake is therefore fixed at its amount divided by its cap, measured before the new priced round. Stacking a second post-money SAFE dilutes the founders and not the first SAFE, which is the reverse of the original pre-money form and the reason founders should count what a stack of SAFEs has promised before signing another. Practise it in Cap Table Builder
Post-Money ValuationVenture CapitalWorked example: The pre-money valuation plus the money raised in the round. The investor’s stake is the cheque divided by this number, so it is the figure a fund actually underwrites to: a $5m cheque at a $25m post-money is 20%, whatever the pre-money was called. Post-money SAFE caps are quoted on the same basis for the same reason. Practise it in Cap Table Builder
Power Law (Venture Returns)Venture Capital: The distribution of outcomes in a venture portfolio: most investments return less than the money invested, a few return it several times over, and one or two return more than everything else combined. It is why a fund underwrites every investment to the chance of an outlier rather than to a base case, and why a good venture investor is wrong most of the time by design.
Pre-Money ValuationVenture CapitalWorked example: What the investor and the company agree the business is worth immediately before the new money goes in. Divided by the fully diluted share count it is struck over, it gives the price per share for the round, which is why the fight is over what that count includes: the converting notes, and above all the option pool. Practise it in Cap Table Builder
Precedent TransactionsValuationWorked example: A relative valuation method using the multiples paid in comparable historical M&A deals. Typically produces higher implied values than trading comps because it includes a control premium.
Preferred Return (Hurdle Rate)Private Equity: The minimum annual return (commonly 8%) that a PE fund must deliver to its limited partners before the general partner starts collecting carried interest.
Preferred Stock (Venture)Venture Capital: The share class a venture investor buys in a priced round. It carries the same economic upside as common stock through the right to convert, plus rights the common does not have: a liquidation preference, anti-dilution protection, protective provisions over major decisions, and usually a board seat. Each round is a separate series (Seed, A, B) with its own terms. Practise it in Exit Waterfall Lab
Priced RoundVenture Capital: A financing in which shares are sold at an agreed price per share, as opposed to a SAFE or a convertible note, which defer the price to a later round. The seed round is usually the first priced round, and it is the moment every earlier instrument converts and the cap table becomes a list of share counts rather than promises. Practise it in Cap Table Builder
Prime BrokerageHedge Fund: Services provided by an investment bank to hedge funds — financing, securities lending for shorts, trade execution and clearing — that support a fund’s trading operations.
Private CreditBuyside Landscape: Non-bank direct lending to companies — unitranche, senior secured, mezzanine — by funds rather than banks. Grew rapidly as banks retreated from leveraged lending; now a primary financing source for mid-market LBOs.
Pro FormaAccounting: Figures restated as if something had already happened: an acquisition completed at the start of the year, a disposal excluded, a refinancing in place. Legitimate when the adjustment is disclosed and consistently applied, and the standard place for a management team to flatter a number when it is not.
Pro Rata Ownership TargetVenture Capital: The stake a fund aims to hold in a company at entry, usually 10 to 20% for a lead at seed or Series A, chosen so that a single large exit can return the fund. It drives the cheque size and the valuation a fund can accept: a $50m fund that needs 15% of a company to matter cannot lead a round at a $100m post-money.
Pro Rata RightsVenture Capital: The right to invest in future rounds in proportion to an existing stake, so an investor can maintain their percentage as the company raises more money. For a seed fund it is the term that decides whether an early winner keeps compounding in the portfolio or is diluted out of it, and post-money SAFEs grant it only by a separate side letter.
Probability of Technical and Regulatory Success (PTRS)Healthcare: The chance that a drug in development reaches the market: the product of the probabilities of passing each remaining stage (Phase 1, Phase 2, Phase 3, regulatory approval). Base rates by phase are published and adjusted for the therapeutic area and the data so far. In an rNPV the current stage’s costs are not weighted by it, because they are being spent regardless; everything after the current stage is.
Product Manager (PM, Tech)Product & Tech: The role responsible for defining what a product team builds and why — translating user needs and business goals into a prioritised roadmap, working across engineering, design and data.
Product Sense InterviewProduct & Tech: A PM interview format testing a candidate’s judgement on product design and prioritisation — e.g. "design a feature for X" or "how would you improve Y" — evaluated on structure, user empathy and trade-off reasoning, not a single correct answer.
Profit on CostReal Estate: The value of a completed development less its total cost, as a share of the total cost. It measures the development margin without regard to timing, which makes it simpler than an IRR and a common first test of whether a scheme is worth pursuing.
Promote (Real Estate)Real Estate: The sponsor’s share of profits above its pro rata ownership, paid through the equity waterfall once investors have received their preferred return and capital. The real estate name for carried interest. The catch-up tier brings the sponsor to its promote share of all profit distributed before the ordinary split resumes; a waterfall without it understates the promote in every scenario above the hurdle.
Protective ProvisionsVenture Capital: Decisions the company may not take without the consent of the preferred holders: issuing senior stock, selling the company, changing the charter, taking on debt above a limit, changing the board size. They are the practical form of investor control in a minority position, and the list grows with each round unless someone negotiates it down.
Public Sector Comparator (PSC)Project Finance: The authority’s estimate of what an asset would cost to build, run and maintain if it delivered it publicly, including an adjustment for the construction and operating risks it would retain, discounted at the public sector rate. It is the benchmark a PPP’s payments are compared with in the value-for-money test.
Public-Private Partnership (PPP)Project Finance: A long-term contract under which a private company designs, builds, finances and operates or maintains a public asset, typically for twenty to thirty years, and is paid either by the authority for the asset being available or by users through tolls or fares. The private side carries the construction and performance risk, financed largely with non-recourse project debt. The UK called the model PFI; North America calls it P3.
Pull-ThroughHealthcare: The recurring revenue each installed system generates after it is placed: the instruments, reagents or accessories consumed in each procedure, plus service. It is usually quoted per system a year, and its trend shows whether a company is growing by placing systems or by using them more.
Purchase Price Allocation (PPA)AccountingWorked example: The exercise after an acquisition closes of spreading the price paid across the identifiable assets and liabilities acquired, written up to fair value, with anything left over booked as goodwill. It decides how much of the price becomes amortising intangibles and how much sits on the balance sheet untouched, so it drives reported earnings for years afterwards. Practise it in Accretion / Dilution Animator
PymetricsRecruiting: A game-based behavioural assessment — roughly a dozen short cognitive and behavioural tasks over 20-25 minutes — used by several banks (J.P. Morgan among them) as an early screen. It measures traits such as risk appetite, attention and effort under uncertainty rather than finance knowledge, and there is no way to revise for it beyond doing the practice round properly and not rushing.
Pyramid PrincipleConsulting: The convention of leading with the conclusion and then supporting it, rather than building to an answer. It is why a consulting recommendation opens with what to do, and why a memo that buries the point in paragraph four gets skimmed.

Q2

QSBS (Qualified Small Business Stock)Venture CapitalWorked example: The US tax relief on founder and early investor shares: under Section 1202, gain on stock in a qualifying C corporation held for more than five years is excluded from federal tax up to a cap of the greater of $10m or ten times the cost basis, raised to $15m with shorter tiered holding periods for stock issued after July 2025. The closest American cousin to SEIS and EIS, applied at exit rather than at entry.
Quality of Earnings (QoE)Deal Process: A diligence report, usually by an accounting firm, that tests how sustainable and cash-backed a target’s reported EBITDA is — normalising one-offs, owner costs and aggressive recognition. Central to price negotiations in private deals.

R16

Raw BetaValuation: The unmodified slope from regressing a stock’s returns against an index. Meaningless without saying which index and over what window: the same company can print a defensive beta against one benchmark and a cyclical one against another, purely because the index compositions differ. A single regression beta also carries a wide standard error, which is the argument for building one bottom-up instead. Work through it interactively in the Beta Refresher lab at /labs/beta. Practise it in Beta Refresher
Razor-and-Blade ModelHealthcare: A business that places equipment at a low margin, or none, and earns its profit on the consumables used with it. Surgical systems, diagnostic analysers and printers work this way. The value lies in the installed base and how heavily it is used, not in the equipment sales, which is why investors pay more for the recurring revenue.
Real Estate Investment Trust (REIT)Real Estate: A company that owns, and usually operates, income-producing real estate and pays no corporate tax on the income it distributes, provided it distributes most of it (in the US, at least 90% of taxable income) and meets tests on its assets and income. Because it pays out most of what it earns, it grows by raising new debt and equity, and it is valued on FFO, AFFO and net asset value rather than on earnings.
Real GDP GrowthMacro: Growth in economic output after stripping out inflation. Sets the ceiling for what any single company can grow at in perpetuity, which is why the forecast rate plus forecast inflation is the practical cap on a terminal growth assumption.
Recapitalisation (Recap)Private Equity: A transaction that restructures a company’s capital structure — commonly a dividend recap, where a portfolio company raises new debt to pay a dividend to its PE owners without a sale, returning capital early.
Recovery WaterfallRestructuring: The order in which value is distributed in a restructuring or liquidation: secured creditors, then unsecured, then subordinated, then preferred, then equity — each class paid in full before the next receives anything (absolute priority).
REIT Net Asset Value (NAV)Real Estate: What a REIT would be worth if its buildings were sold one by one: forward net operating income capitalised at private-market cap rates, plus other assets, less net debt, usually per share. A share price above NAV means new equity buys more property than it costs, which lets the REIT grow by issuing shares; a price below NAV means the reverse.
Rent RollReal Estate: The schedule of every lease in a property: tenant, area, current rent, escalations, expiry, options and the market rent at expiry. The revenue build of a real estate model is done lease by lease from it, and vacancy in a good model is an event at each expiry, with downtime and re-letting costs, rather than a flat percentage.
RestructuringRestructuring: The renegotiation or reorganisation of a distressed company’s capital structure — out of court (consensual amendments, exchanges) or in court (Chapter 11 in the US, administration or schemes/plans in the UK) — to restore solvency.
Revenue Run RateCorporate Finance: A recent period of revenue annualised, most often the latest quarter multiplied by four or the latest month by twelve. Useful for a business that has just changed shape and misleading for one with any seasonality, which is why the honest version always names the period it annualises.
Revolving Credit Facility (Revolver)Corporate FinanceWorked example: A flexible line of credit a company can draw down and repay as needed, used to manage short-term liquidity and working-capital swings. Practise it in Optimal Capital Structure
Right of First Refusal (ROFR)Venture Capital: The right of the company, and then usually the investors, to buy shares a holder proposes to sell to a third party, on the same terms, before the sale goes ahead. Combined with a co-sale right it controls who may join the cap table through secondary sales, which is why founders selling some of their own shares need the investors’ consent in practice.
Risk-Free RateValuation: The return on an asset assumed to carry no default risk, in practice a long-dated government bond in the SAME currency as the cash flows being discounted. Ten-year is the convention. Discounting euro cash flows at a US Treasury yield is simply the wrong number. Where the sovereign itself carries default risk, strip that spread out before using the yield.
rNPV (Risk-Adjusted Net Present Value)Healthcare: The net present value of a drug programme’s cash flows after each year’s flow has been weighted by the probability that the programme reaches that point. The standard valuation for a development-stage biotech, applied programme by programme and summed. The gap between a programme’s unrisked NPV and its rNPV is the value that is still probability, which is why a trial readout moves a share price more than any change in the discount rate.
RoadshowInvestment Banking: The series of management-investor meetings ahead of an offering (or during a sale process) in which the company presents its story to prospective buyers of the securities.
Rolling DeadlineRecruiting: An application window that is assessed and filled as applications arrive rather than at a single closing date, so places can run out weeks before the advertised deadline. Standard practice for UK spring weeks and most internship programmes. The practical consequence: an identical application submitted in week one and week six of the same window is not the same application.

S34

SAFE (Simple Agreement for Future Equity)Venture CapitalWorked example: A contract under which an investor pays a company now and receives shares at the next priced round, at a price set by a valuation cap, a discount, or both. It is not debt: no interest, no maturity, no repayment. Published by Y Combinator in 2013 and rewritten on a post-money basis in 2018, it is the default instrument for pre-seed and seed money in the United States. The closest UK equivalent is the advance subscription agreement. Practise it in Cap Table Builder
Sales & Trading (S&T)Trading & Markets: The division that intermediates markets for institutional clients: sales covers investor relationships, traders make markets and manage the firm’s resulting risk. Distinct career track from IB with its own interview style (markets knowledge, mental maths, probability).
Same-Store NOIReal Estate: Net operating income from the properties a REIT owned throughout both periods being compared, which removes the effect of acquisitions, disposals and developments. Its growth is the organic growth of the portfolio, the figure REIT investors watch most closely each quarter.
Second LienCredit: Secured debt whose claim on the collateral ranks behind the first lien under an intercreditor agreement. It recovers from collateral only after the first lien is paid in full, and any shortfall becomes an unsecured deficiency claim alongside the notes and trade creditors.
SecondariesBuyside Landscape: The market for buying and selling existing private-fund stakes (LP-led) or for GPs moving assets into continuation vehicles (GP-led). Provides liquidity in an otherwise illiquid asset class; one of the fastest-growing corners of private markets.
Seed RoundVenture Capital: The first institutional round, usually the first priced round, raised to get from a product to evidence that people want it. Sizes and valuations move with the cycle; the constant is what the money is for. Before it sits pre-seed, often raised on SAFEs from angels; after it sits a Series A, which is raised on evidence the seed money produced.
SEIS (Seed Enterprise Investment Scheme)Venture CapitalWorked example: The UK tax relief for individuals investing in very early companies: 50% of the amount invested off income tax, no capital gains tax on the shares after three years, and loss relief if the company fails. Since April 2023 a company may raise £250,000 under it and an investor may put in £200,000 a year. It is the reason the first cheque into a British startup is usually an angel’s, and the reason that cheque is structured the way it is.
Sell-Side / Buy-SideInvestment BankingWorked example: Sell-side refers to firms that advise companies raising capital or selling assets (banks); buy-side refers to firms that invest capital (PE funds, hedge funds, asset managers). A single M&A deal typically has a sell-side advisor and a buy-side advisor.
Seniority (Liquidation Stack)Venture Capital: The order in which preferred series are paid when the exit cannot cover every preference. Standard, or stacked, seniority pays the latest round first and each earlier round after it. Pari passu pays all preferred classes together, pro rata to what each is owed. Which one a Series A term sheet asks for is the seed investor’s problem, and they know it. Practise it in Exit Waterfall Lab
Series AVenture Capital: The round raised once a company can show repeatable demand: revenue growth, retention, a sales motion that works. It is led by a venture fund taking a meaningful stake and a board seat, and its term sheet sets most of the preferred rights that later rounds inherit. Later letters (B, C, D) follow the same structure at larger sizes and later stages.
Sharpe RatioAsset Management: Excess return over the risk-free rate divided by volatility — the standard measure of risk-adjusted performance. A Sharpe above 1 over long periods is considered strong for most strategies.
Short InterestHedge Fund: The percentage of a company’s outstanding shares currently sold short. High short interest can indicate a crowded short and raises the risk of a short squeeze.
Short SqueezeHedge Fund: A rapid price increase driven by short sellers being forced to buy back (cover) their positions to limit losses, which itself pushes the price higher — a key risk in crowded short positions.
Signing vs. ClosingDeal Process: Signing is when the definitive agreement is executed; closing is when ownership and money actually transfer, after conditions (regulatory approvals, financing) are satisfied. The gap can run from days to a year-plus.
Size PremiumValuation: An addition to the cost of equity for smaller companies, on the argument that they carry risks a beta measured against a large-cap index does not capture. Decile figures are published and widely used in valuation practice. The counter-argument, which you should know, is that the effect largely disappeared after the early 1980s and that adding one often double-counts risk already in the beta.
SOFRMarkets: Secured Overnight Financing Rate. The benchmark overnight rate for US dollar borrowing collateralised by Treasuries, published by the New York Fed and calculated from actual transaction volume. It replaced US dollar LIBOR, which was submission-based and therefore manipulable. Floating-rate loans are now typically quoted as SOFR plus a margin, so it sets the cash cost of debt on most leveraged structures.
Sources and UsesDeal Process: The two columns that balance any transaction: where the money comes from (new debt by tranche, sponsor equity, rolled equity, cash on the balance sheet) and where it goes (the purchase price, refinanced debt, fees, minimum cash, reserves). Sources must equal uses in every period of a construction budget and at closing of any deal; equity is usually the balancing figure.
Sovereign Wealth Fund (SWF)Buyside LandscapeWorked example: A state-owned investment fund (e.g. GIC, ADIA, PIF, Temasek, Norway’s GPFG). Major LPs in private funds and, increasingly, direct and co-investors in large deals.
SPA (Sale & Purchase Agreement)Deal Process: The definitive contract for a private M&A transaction, covering price, adjustments (working capital, net debt), warranties, indemnities and closing conditions.
SponsorPrivate Equity: Industry shorthand for a private equity firm in its capacity as the buyer/owner of a portfolio company (e.g. "sponsor-backed," "sponsor-to-sponsor deal").
Spring WeekRecruiting: A one-week insight programme run in March or April by UK and European banks for first-year students on a three-year degree, or second-years on a four-year course. It is the earliest formal entry point into banking and the primary feeder into Summer Internship offers at most bulge brackets — which is why winning one compresses the recruiting funnel by roughly two years.
StabilisationReal Estate: The point at which a new or repositioned building reaches the occupancy and income it is expected to hold. Permanent loans and valuations are priced on stabilised net operating income, so a development is usually refinanced once it stabilises rather than before.
Step-Up in Tax BasisAccounting: An increase in the tax value of acquired assets to the price paid for them. It happens in an asset purchase, and in some share purchases by election (in the US, under section 338(h)(10) or 336(e)). The buyer can then deduct the write-ups and goodwill over their tax lives, which saves cash tax, and no deferred tax liability arises on the write-ups. The seller usually pays more tax on an asset sale, so the step-up is worth agreeing to only when the buyer’s saving exceeds the seller’s cost.
Stock PitchHedge FundWorked example: A structured presentation of an investment idea — thesis, catalyst, valuation, risk/reward, and risks — used in hedge fund interviews and internally to argue for a position.
Stock-Based Compensation (SBC)AccountingWorked example: Equity granted to employees as pay. Non-cash, so it is added back in the cash flow statement, which is why some companies headline an adjusted EBITDA that excludes it. That treatment is contested for good reason: SBC is a real cost that dilutes existing shareholders, and excluding it while using a diluted share count is having it both ways.
Story (Interview)Recruiting: A candidate’s concise, coherent narrative connecting their background, motivations and career choices, used to answer "walk me through your resume" and "why banking/PE." A strong story is specific and causally linked, not a list of accomplishments.
Straight-Line RentReal Estate: Rent recognised evenly over a lease’s term in the accounts, even when the cash rent steps up each year or starts after a rent-free period. In the early years reported rent exceeds the cash received, so AFFO deducts the difference to get back to cash.
Stub PeriodValuation: The part-year between a valuation date and the next financial year end, discounted separately in a DCF so the cash flows are not pushed a full year out. The related habit is mid-year discounting, which assumes cash arrives evenly through the year rather than all on the last day. Practise it in Comps Explorer
Sum-of-the-Parts (SOTP)Valuation: Valuing a company as the sum of separately valued pieces: business segments each on their own multiple, or in biotech each pipeline programme at its rNPV, less unallocated corporate costs, plus net cash, divided by the diluted share count. Used where one multiple would misprice a mix of businesses at different stages or margins, and read for which part carries the value.
Summer InternshipRecruiting: A 8-10 week (US) or 6-10 week (UK/Europe) placement, typically for penultimate-year students, that functions as the primary pipeline into full-time analyst offers. Most bulge-bracket and top PE full-time hiring runs almost entirely through converting summer interns.
SuperdayRecruitingWorked example: The final round of interviews, typically four to six back-to-back sessions with analysts, associates, VPs and MDs in a single day. Tests technicals, fit and stamina.
SyndicationInvestment Banking: Distributing a large loan or bond across many institutional investors rather than one lender holding it all. Underwriting banks take the initial commitment risk, then sell it down.
SynergiesInvestment BankingWorked example: Cost savings or revenue gains expected from combining two companies in an M&A deal — cost synergies (eliminating duplicate functions) are typically more reliably modelled than revenue synergies.
Synthetic Credit RatingValuation: A credit rating estimated from financial ratios, most commonly interest coverage (EBIT divided by interest expense), when a company is unrated or has no liquid traded debt. Read the rating off a coverage ladder, then add that rating’s spread to the risk-free rate to get a cost of debt. The standard route for private companies. Cross-check it against what the company most recently actually borrowed at.

T15

Take RateTechnology: The share of GMV a marketplace keeps as revenue. The headline is the commission charged to sellers; the net take rate deducts the incentives paid to buyers to win orders. It is the first number used to compare marketplaces, and a change in it is either pricing power or a change in incentives.
TeaserInvestment Banking: A short, anonymised one- or two-page summary of a company for sale, circulated to a broad list of prospective buyers before the full CIM, to gauge interest without revealing the target’s identity.
Tenant Improvements and Leasing Commissions (TI/LC)Real Estate: The costs of letting space. Tenant improvements are the landlord’s contribution to fitting out a tenant’s space; leasing commissions are paid to the brokers on a signed lease. Both are spent as space is let, and they belong in a development budget and in an acquisition’s capital plan.
Term Loan (TLA / TLB)Corporate Finance: A fixed-amount loan with a set repayment schedule. Term Loan A (TLA) is typically bank-held with faster amortisation; Term Loan B (TLB) is institutional-investor-held, common in LBO financing, with minimal amortisation and a bullet repayment at maturity. Practise it in Optimal Capital Structure
Term SheetVenture CapitalWorked example: The short, mostly non-binding document in which an investor sets out the terms of a proposed round: valuation, amount, the option pool, the liquidation preference, anti-dilution, board composition, protective provisions and the rest. The economics and the control terms both live here, and a founder who reads only the valuation line has read the least important sentence on it.
Terminal Growth RateValuation: The perpetual growth rate applied after the explicit forecast in a DCF. It cannot exceed long-run nominal GDP growth, because a company growing faster than the economy forever eventually becomes the economy. In practice: forecast real GDP growth plus forecast inflation is the ceiling to argue against. A terminal value that is more than about three-quarters of enterprise value is a sign the assumptions need re-examining.
Terminal ValueValuationWorked example: The value of a business beyond the explicit forecast period in a DCF, estimated either via a perpetuity growth rate or an exit multiple. Often represents the majority of total implied enterprise value — a common point of scrutiny. Practise it in Reverse DCF
The Three Financial StatementsAccountingWorked example: The income statement (performance over a period), balance sheet (financial position at a point in time) and cash flow statement (cash movements over a period). "Walk me through how they link" is among the most common interview questions in finance.
ThesisHedge Fund: The core investment argument for a position: what the market is missing, why, and what catalyst will force the market to re-rate the security — the foundation every stock pitch is built on.
Total Debt to CapitalisationCredit: Total debt divided by total debt plus equity. The leverage ratio that sets the weights in a WACC. Distinct from total debt to market capitalisation, which divides by equity alone and therefore reads higher; both get quoted, so check which one you are looking at before comparing across sources.
Tracking ErrorAsset Management: The volatility of a portfolio’s return differences from its benchmark — a measure of how actively a fund deviates. Low tracking error with high fees is the classic "closet indexing" criticism.
Treasury Stock MethodAccountingWorked example: The standard way to count dilution from in-the-money options: assume exercise, then assume the proceeds repurchase shares at the current price, so only the net new shares increase the diluted count.
Treasury YieldMarkets: The return on US government debt at a given maturity. The three-month bill is the standard short-rate proxy; the ten-year note is the conventional risk-free rate for equity valuation. The gap between short and long maturities is the yield curve, and its shape is read as a signal about growth and policy expectations.
Two and Twenty (2 and 20)Hedge Fund: A common hedge fund fee structure: a 2% annual management fee on assets under management, plus a 20% performance fee on profits above the high-water mark.
Two-Sided MarketplaceTechnology: A platform that brings buyers and sellers together and earns a share of what passes between them, without owning what is sold. More sellers attract more buyers and the reverse, which is the network effect; the model is judged on GMV, take rate, contribution per order and buyer cohorts.

U6

Unitary ChargeProject Finance: The single periodic payment a public authority makes to a PPP project company for an asset being available and meeting its performance standards. Part of it is usually indexed to inflation and part fixed, and it is reduced by deductions when the asset falls short. It is what a bidding consortium bids: the lowest charge that still gives its equity the return it requires.
UnitrancheBuyside Landscape: A single-tranche loan blending senior and junior risk into one instrument at a blended rate, provided by private credit funds. Simplifies mid-market LBO capital structures versus separate senior/mezzanine layers.
Unlevered BetaValuation: Also called asset beta. The risk of the underlying business with the effect of financial leverage stripped out, so two companies in the same industry with different debt loads become comparable. Obtained with the Hamada relationship: unlevered equals levered divided by one plus one-minus-tax times debt-to-equity. Work through it interactively in the Beta Refresher lab at /labs/beta. Practise it in Beta Refresher
Up-or-OutConsulting: The convention that failing to be promoted within a window means leaving the firm. In practice most firms handle it as a supported transition over months, because a former consultant inside a client organisation is worth more than a resentful leaver.
Useful Economic LifeAccountingWorked example: The number of years a company expects to get economic benefit from an asset, and therefore the period over which it depreciates or amortises the cost. It is an estimate the company makes and discloses by asset class in the PP&E note, not a rule, which is why two identical businesses can report different operating profit on identical assets. Practise it in Depreciation Waterfall
UtilisationConsulting: The share of a consultant’s time billed to a client. It is measured, it shapes staffing decisions, and it is why being on the right project matters more than performing well on the wrong one.

V13

Valuation CapVenture CapitalWorked example: The highest valuation at which a SAFE or convertible note will convert. If the next round prices the company above the cap, the early investor converts as if the round had been at the cap and so receives more shares per dollar than the new money. It is the early investor’s reward for pricing risk before there was a price, and the closest thing a SAFE has to a valuation. Practise it in Cap Table Builder
Value Creation PlanConsulting: The set of measurable initiatives an owner intends to execute after buying a business, with owners and dates attached. Written before completion, because the window for making changes without resistance is short.
Value for Money (VfM)Project Finance: The test a public authority applies before procuring an asset through a PPP: whether the present value of the payments it would make is lower than the cost of delivering the asset itself, once the risks it would keep in public delivery are priced. A PPP can cost more to finance and still be value for money if the risk it transfers is worth more than the extra cost.
Value-Based PricingConsulting: Setting a price from the economic benefit a product delivers relative to the customer’s next best alternative, rather than from cost or competitor prices. It is the approach that produces the interesting answer in a pricing case and the one candidates most often omit.
VaR (Value at Risk)Trading & Markets: A statistical estimate of the maximum loss a portfolio should suffer over a horizon at a confidence level (e.g. 95% one-day VaR of $10m). The standard, and much-criticised, desk risk metric.
Variant perceptionHedge Fund: The difference between what the market believes about a security and what you believe. It is the core of any investable idea: a view identical to consensus, however well-argued, gives a portfolio manager no reason to act.
VCT (Venture Capital Trust)Venture Capital: A listed fund that invests in qualifying small UK companies and passes tax relief to its own shareholders: 30% income tax relief on up to £200,000 a year, tax-free dividends, and no capital gains tax, provided the shares are held five years. A retail route into venture that funds a good share of UK Series A and B rounds, with rules that constrain what the trust may buy.
Venture CapitalBuyside Landscape: Early-stage minority investing in high-growth companies, underwritten on a power-law basis: most investments fail or tread water, and a few outliers return the fund.
Venture DebtVenture Capital: A loan to a venture-backed company, typically from a specialist lender or bank, sized against the last equity round rather than against cash flow, and usually carrying warrants. It extends runway without pricing a round, and it ranks ahead of every share class if things go wrong, which is the whole of its risk. Practise it in Exit Waterfall Lab
Vesting and CliffVenture Capital: The schedule on which founders and employees earn their shares or options: commonly four years, with a one-year cliff before any of it vests and monthly thereafter. Investors insist founders re-vest at a priced round so a departing co-founder does not leave with a quarter of the company. Acceleration on a sale, single or double trigger, is the term to read closely.
Vintage YearPrivate Equity: The year a PE fund makes its first investment (or holds its first close), used to compare fund performance against peers that deployed capital in similar market conditions.
Volatility (Implied vs. Realised)Trading & MarketsWorked example: Realised volatility is measured from returns that have already happened. Implied volatility is backed out of a traded option price. One is arithmetic on history, usually an annualised standard deviation over a stated window; the other is what has to be assumed about future movement to explain what somebody is paying today, which is why the two can disagree on a day the share has not moved.
VWAPMarkets: Volume-Weighted Average Price. The average traded price over a period, weighted by volume at each price. Used in the EV bridge and in deal terms as a more robust reference than a single closing price, because it is far harder to move with a small trade near the close.

W5

WACCValuation: Weighted Average Cost of Capital: the blended return a company must earn to satisfy everyone funding it, and the discount rate for unlevered free cash flow in a DCF. Practise it in WACC Builder
WACC (Weighted Average Cost of Capital)ValuationWorked example: The blended return a company must earn to satisfy everyone funding it: the cost of equity weighted by equity market value, plus the after-tax cost of debt weighted by debt market value. It is the discount rate for unlevered free cash flow in a DCF, because those cash flows belong to debt and equity holders together. Use market values for the weights, never book. Practise it in WACC Builder
Weighted Average Anti-DilutionVenture Capital: The standard form of anti-dilution protection. The conversion price is reduced in proportion to how much cheap stock was sold and how much of the company it represented: new price = old price × (A + B) ÷ (A + C), where A is the shares outstanding before the round, B the shares the new money would have bought at the old price, and C the shares it actually bought. Broad-based counts options in A; narrow-based does not, and bites harder.
Working CapitalCorporate FinanceWorked example: The capital tied up in a business’s short-term operating cycle: receivables plus inventory, minus payables. Changes in working capital are a key adjustment between EBITDA and free cash flow.
Working Capital AdjustmentDeal Process: A purchase-price mechanism truing up for the difference between actual working capital delivered at closing and a negotiated normal level — preventing sellers from stripping cash out of the business via receivables and payables timing.

Y2

Yield CurveTrading & MarketsWorked example: A plot of interest rates across different maturities for similarly-rated debt (typically government bonds). An inverted yield curve (short-term rates above long-term) has historically preceded recessions. Practise it in the Curve Lab
Yield on CostReal Estate: Stabilised net operating income divided by the total cost of a development: land, construction, fees, leasing costs and capitalised interest. It is the development’s equivalent of a cap rate, what the money spent will earn once the building is let, and it is compared with the cap rate the finished building would sell at.

#2

13-Week Cash FlowRestructuring: The weekly liquidity forecast a stressed company runs and its creditors read: receipts from a collections curve, disbursements by nature and due date, the revolver inside its borrowing base, and every week’s liquidity against the covenant. Thirteen weeks is a quarter at the frequency cash actually moves. It answers the only question that matters before a default: on which Friday does the money run out, and by how much.
409A ValuationVenture Capital: An independent appraisal of the fair market value of a US company’s common stock, required by the tax code before options are granted so that the strike price is not treated as below-market compensation. It is deliberately lower than the preferred price the last round paid, because common lacks the preferred’s rights, and the gap is what makes options worth granting.

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