7 Most Confusing Terms in Finance

Preparing for a finance role or interview can be challenging, especially with the complex terms that often appear. This guide breaks down seven essential finance concepts to help you navigate confidently.

Firstly, EBITDA vs. Net Income explains the difference between operational performance (EBITDA) and total profitability after expenses (Net Income). Next, liquidity and solvency assess short-term and long-term financial stability, respectively. CAPEX and OPEX highlight capital investments versus day-to-day operational costs.

Understanding ROI and ROE is vital for profitability analysis, while Depreciation and Amortization cover cost allocation for tangible and intangible assets. Market Capitalization and Enterprise Value offer methods for company valuation. Lastly, annuities and perpetuities represent payment structures with specific or infinite durations, respectively.

With these fundamentals clarified, you’re better prepared to excel in finance.

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