Key Financial Terms

Glossary

Navigating the real estate market can be overwhelming, with a plethora of unfamiliar terms and phrases. We have created this guide to help you understand some of the most commonly used property jargons.

From the early stages of searching for a property, to signing the contract and completing the transaction, this guide will help you to understand the terms used by estate agents, conveyancers, and other professionals in the real estate industry. The guide is continually updated to reflect the latest changes in the industry and the terminologies used.

ABCDEFGHIJKLMNOPQRSTUVWXYZ

A

Accounts payable
a record of all unpaid short-term (less than 12 months) invoices, bills and other liabilities. Examples include invoices for goods or services, bills for utilities and tax payments due.
Accounts receivable
a record of all short-term accounts (less than 12 months) from customers you sell to but are yet to pay. These customers are called debtors and are generally invoiced by a business.
Accounts receivable finance
see Factoring.
Accrual accounting
an accounting system that records transactions at the time they occur, whether the payment occurs now or in the future.
Amortisation
the process of offsetting assets such as goodwill and intellectual property over a period of time. See also Depreciation.
Assets
things you own. These can be cash or something you can convert into cash such as property, vehicles, equipment and inventory.
Audit
a check by an auditor or tax official on your financial records to check that you account for everything correctly.

B

Bad debts
money that is unlikely to be paid in the near future.
Balance sheet
a snapshot of a business on a particular date. It lists all of your assets and liabilities and works out the net assets.
Balloon payment
a final lump sum payment due on a loan agreement. Loans with a larger final 'balloon payment' have lower regular repayments over the term of the loan.
Bank reconciliation
a cross-check that ensures the amounts in your cashbook match the relevant bank statements.
Bankrupt
an individual is bankrupt when they cannot pay their debts and aren't able to reach an agreement with their creditors.
Bankruptcy
a process where an individual is legally bankrupt and an appointed trustee manages their assets and financial affairs.
Benchmark
a set of conditions against which you can measure a product or business.
Benchmarking
the process of comparing your business to similar businesses in your industry.
Bill of sale
a legal document for the purchase of property or other assets that details the purchase, where it took place, and for how much.
Bookkeeping
the process of recording the financial transactions of a business.
Bootstrapping
where a business funds its growth purely through personal finances and revenue from the business.
Bottom line
see Net profit.
Break-even point
the exact point when a business's income equals its expenses.
Budget
a listing of planned revenue and expenditure for a given period.

C

Capital
wealth in the form of money or property owned by a business.
Capital cost
a one-off substantial purchase of physical items such as plant, equipment, building or land.
Capital gain
the amount gained when an asset sells above its original purchase price.
Capital growth
an increase in the value of an asset.
Cash
includes all money available on demand, including bank notes and coins, petty cash, certain cheques, and money in savings or debit accounts.
Cash accounting
an accounting system that records transactions at the time you actually receive money payment.
Cash book
a daily record of all cash, credit or cheque transactions received or paid out by a business.
Cash flow
the measure of actual cash flowing in and out of a business.
Cash incoming
money that is flowing into the business.
Cash outgoing
money that is flowing out of the business.
Chart of accounts
an index of the accounts a business will use to classify transactions. Each account represents a type of transaction such as asset, liability, owner's equity, income, and expense.
Chattel mortgage
similar to a hire-purchase agreement although the business owns the asset from the start. Chattel mortgages require regular ongoing payments and typically provide the option of reducing the payments through the use of a final 'balloon' payment.
Collateral
see Security.
Commercial bill
(also known as a bill of exchange) – a form of commercial loan on an interest only basis, or interest reducing basis. Commercial bills typically require some sort of security and suit short-term funding needs such as inventory.
Contingent liability
a liability where payment is made only if a particular event or circumstance occurs.
Cost of goods sold
the total direct costs of producing a good or delivering a service.
Credit
a lending term for when a customer purchases a good or service with an agreement to pay at a later date.
Creditor
a person or business that allows you to purchase a good or service with an agreement to pay at a later date. A creditor is also anyone who you owe money to, such as a lender or supplier.
Credit limit
a dollar amount that you cannot exceed on a credit card or the maximum lending amount offered for a loan.
Credit rating
a ranking applied to a person or business based on their credit history that represents their ability to repay a debt.
Credit history
a report detailing an individual's or business's past credit arrangements. A lender may seek a credit history when assessing a loan application.
Crowdfunding
a way of financing your business idea through donations of money from the public. This usually occurs online, through a crowdfunding website.
Current asset
an asset in cash or something you can convert into cash within 12 months.
Current liability
a liability that is due for payment within 12 months.

D

Debit
in double-entry bookkeeping, a debit is an entry made on the left-hand side of a journal or ledger representing an asset or expense.
Debt
any amount that you owe including bills, loan repayments and income tax.
Debt consolidation
the process of combining several loans or other debts into one for the purposes of obtaining a lower interest rate or reducing fees.
Debt finance
money provided by an external lender, such as a bank or building society.
Debtor
a person or business that owes you money.
Debtors finance
see Factoring.
Default
a failure to pay a loan or other debt obligation.
Depreciation
the process of offsetting an asset over a period of time. You can depreciate an asset to spread the cost of the asset over its useful life.
Disbursements
money that a business spends.
Discount
a reduction applied to a full priced good or service. See also Mark down.
Double-entry bookkeeping
a bookkeeping method that records each transaction in 2 accounts, both as a debit and a credit.
Drawings
personal expenses paid for from a business account.
Drip pricing
when one price is presented at the beginning of an online shopping experience and incremental fees are added gradually as you progress.

E

Employee share schemes
where you give your employees the opportunity to buy shares in your company.
Encumbered
an encumbered asset is one that is currently put forward as security or collateral for a loan.
Equity
the value of ownership interest in the business, calculated by deducting liabilities from assets. See also Owner's equity.
Equity finance
money provided to a business in exchange for part ownership of the business.
Excise duty
an indirect tax levied on certain types of goods produced or manufactured in Australia including petrol, alcohol, tobacco and coal.

F

Facility
an arrangement such as an account offered by a financial institution to a business (such as a bank account, a short-term loan or overdraft).
Factoring
(also known as debtor's finance and accounts receivable finance) – when a factor company buys a business's outstanding invoices at a discount.
Finance
money used to fund a business or high value purchase.
Financial year
a 12-month period typically from 1 July to 30 June.
Financial statement
a summary of a business's financial position for a given period. Financial statements can include a profit and loss, balance sheet and cash flow statement.
Fixed asset
a physical asset used in the running of a business.
Fixed cost
a cost that is not part of producing a good or service.
Fixed interest rate
when the interest rate of a loan remains the same for the term of the loan or an agreed timeframe.
Float
when a private company offers shares in the company to the public for the first time. See Initial public offering.
Forecast
a list of future financial transactions. Forecasts help to plan a more accurate budget.
Fringe benefits
non-monetary benefits, such as company cars and mobile phones, included as part of a salary package.
Fully drawn advance
a long term loan with the option to fix the interest rate for a period. These loans are usually secured and can help fund a new business or equipment.

G

Goodwill
an intangible asset that represents the value of a business's reputation.
Gross income
the total money earned by a business before you deduct expenses.
Gross profit
(also known as net sales) – the difference between sales and the direct cost of making the sales.
Guarantor
a person who promises to pay a loan in the event the borrower cannot meet the repayments. The guarantor is legally responsible for the debt.

H

Hire-purchase
a type of contract where you purchase a good through an initial deposit. You then rent it and pay the balance off in instalments plus interest charges.

I

Initial public offering (IPO)
when a company first offers shares on the stock market to sell them to the general public. Also known as floating on the stock market.
Insolvent
a business or company is insolvent when they cannot pay their debts as and when they are due.
Intangible assets
non-physical assets with no fixed value, such as goodwill and intellectual property rights.
Interest
the cost of borrowing money on a loan or earned on an interest-bearing account.
Interest rate
a percentage used to calculate the cost of borrowing money or the amount you will earn.
Inventory
a list of goods or materials a business is holding for sale.
Investment
the purchase of an asset for the purpose of earning money such as shares or property.
Invoice
a document to a customer to request payment for a good or service received.
Invoice finance
finance based on the strength of a business's accounts receivable. Similar to factoring, except that the invoices remain with the business.

J

J-Curve
illustrates the internal rate of return (IRR) of a fund or investment over time. It is typical in a private equity fund that during its first one or two years, the fund will show a negative return due to start-up costs.

K

Key performance indicator (KPI)
a type of performance measurement on the efficiency or effectiveness of activities in achieving purposes.
Kangaroo bond
a bond issued by a foreign company or body in Australian dollars. Also known as a Matilda Bond.

L

Liability
any financial expense or amount owed.
Line of credit
an agreement allowing a borrower to withdraw money from an account up to an approved limit.
Liquidate
to quickly sell all the assets of a company and convert them into cash.
Liquidation
the process of winding up an insolvent company.
Liquidity
how quickly you can convert assets into cash.
Loan
a finance agreement where a business borrows money and pays it back in instalments (plus interest) within a specified period of time.
Loan to value ratio (LVR)
your loan amount shown as a percentage of the market value of the property or asset that you purchase.

M

Margin
the difference between the selling price of a good or service and the profit.
Margin call
when the value of a property or asset falls below a certain loan to value ratio (LVR).
Mark down
a discount applied to a product during a promotion or sale.
Mark up
the amount added to the cost price of goods to help determine a selling price.
Maturity date
when a loan's term ends and all outstanding principal and interest payments are due.

N

Net assets
(also known as net worth, owner's equity or shareholder's equity) – the total assets minus total liabilities.
Net income
the total money earned by a business after tax and other deductions.
Net profit
(also known as the bottom line) – the total gross profit minus all business expenses.
Net worth
see Net assets.

O

Overdraft facility
a finance arrangement where a lender allows a business to withdraw more than the balance of an account.
Overdrawn account
a credit account that has exceeded its credit limit or a bank account that has had more than the remaining balance withdrawn.
Overheads
the fixed costs associated with operating a business such as rent, marketing, utilities and administrative costs.
Owner's equity
see Net assets.

P

Personal property
covers any property someone can own, except for land, buildings and fixtures.
Personal Property Security Register (PPSR)
a single national register of security interests in personal property.
Petty cash
cash for small miscellaneous purchases such as postage.
Plant and equipment
a group of fixed assets used in the operation of a business such as furniture, machinery, fit-out, vehicles, computers and tools.
Principal
the original loan amount borrowed or the remainder of the original borrowed amount that is still owing (excluding the interest portion).
Profit
the total revenue a business earns minus the total expenses.
Profit and loss statement
(also known as an income statement) – a financial statement listing sales and expenses.
Profit margin
see Margin.
Projection
see Forecast.

Q

Quant
a specialist usually working in portfolio management or bond research who develops systems that map past movements in financial markets.
Quartile
investment surveys rank investment managers according to performance. Managers in the top quarter are said to be 'top quartile performers'.

R

R&D
stands for 'research and development'. Businesses conduct research and development to innovate and create new products.
Receipts
a document given to a customer to confirm payment and to confirm the sale of a good or service.
Record keeping
the process of keeping or recording information that explains certain business transactions.
Refinance
when a new loan helps to pay off an existing one.
Rent to buy
a finance arrangement where you purchase something through an initial deposit and then 'lease' it while paying it off.
Repossess
the process of a bank or other lender taking ownership of property/assets for the purpose of paying off a loan in default.
Retention of title
a clause in contracts where a buyer may receive property, but doesn't take legal ownership until the full price is paid.
Return on investment (ROI)
a calculation that works out how efficient a business is at generating profit from the original equity.
Revenue
(also known as turnover) – the amount earned before expenses, tax and other deductions.

S

Single-entry bookkeeping
a bookkeeping method within a cash accounting system that records one side of each transaction.
Scam
a deliberate and targeted deception to obtain money or information unlawfully.
Security
(also known as collateral) – property or assets that a lender can take ownership of when repayment of a loan does not occur.
Shareholder's equity
see Net assets.
SMSF
stands for self-managed superannuation fund. An SMSF is a way of saving for your retirement where you are responsible for managing compliance.
Stock
the actual goods or materials a business currently has on hand.
Stocktaking
a regular process involving a physical count of merchandise and supplies held by a business.
Superannuation
money set aside for retirement that must go into a complying superannuation fund.

T

Tax invoice
an invoice required for the supply of goods or services over a certain price. You need a valid tax invoice when claiming GST credits.
Turnover
see Revenue.

U

Unbankable money
money that has been received and cannot be deposited in banks (for example, foreign currency coinage).
Underlying cash balance
a cash measure that shows whether the Government has to borrow from financial markets to cover its activities.
Underfunded superannuation scheme
a scheme where the employer does not pay contributions to a superannuation fund but instead contributes when the employee's benefit is paid.

V

Variable interest rate
when the interest rate of a loan changes with market conditions for the duration of the loan.
Variable cost
a cost that changes depending on the number of goods produced or the demand for the products or service.
Venture capital
an investment in a start-up business that has excellent growth prospects but does not have access to capital markets.

W

Waiver
a special concession granted to an individual or body that extinguishes a debt or other amount owing.
Warranty
a promise whereby one party provides certain assurances to another party, often relating to asset and sales agreements.
Weighting
the percentage or proportion of a portfolio invested in each asset class.
Write downs
a decrease in the market value of an investment established by a valuation.

Y

Yield
a measure of return on an investment expressed as a percentage (calculated by dividing the income from an asset by its current capital value).
Free Strategy Consultation

Ready to Talk Strategy?

Book a free consultation with our expert team and take the first step towards building your property portfolio.

Book Your Strategy Call Call 1300 627 537
info@maplegroup.com.auMelbourne, Australia
No Obligation
Complimentary Analysis
Expert Guidance