Glossary of Terms
A booking is the total value of an executed agreement. More simply stated, it is the total value of a sale.
A commercial process is how a given company defines measurable steps to interact and engage with its customers to communicate value to them. A commercial process cuts across all other processes like marketing motions, sales motions, or support motions. All companies have a commercial process, but few have defined one and streamlined it to meet customer expectations.
A commercial system is the full scope of the various people involved in the evaluation and realization of your organization’s economic value to your customers. A commercial system includes: market forces, the various people involved, how they are interconnected, motivations, and behaviors.
COST OF REVENUE
The Cost of Revenue is the total cost of manufacturing and delivering a product or service to consumers. Cost of Revenue information is found in a company's Income Statement and is designed to represent the direct costs associated with the goods and services the company provides. The service industry often favors using the Cost of Revenue metric because it is a more comprehensive account of the various costs associated with selling a good or service.
A company's earnings before interest, taxes, depreciation, and amortization is an accounting measure calculated using a company's earnings, before interest expenses, taxes, depreciation, and amortization are subtracted, as a proxy for a company's current operating profitability. In short, Earnings Before Interest, Taxes, Depreciation & Amortization.
Generally Accepted Accounting Principles (GAAP) refer to a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB). Internationally, the equivalent to GAAP in the United States is referred to as international financial reporting standards (IFRS).
General & ADMINISTRATIVE
General and Administrative expense (G&A) represents the costs your company incurs for legal, human resources, executive salaries, regulatory compliance, and some information technology spending. General and Administrative expenses are often accounted for in the SG&A on an Income Statement along with Sales and Marketing expenses.
Gross Margin is calculated by subtracting the total revenues from the Cost of Revenue (sometimes called Cost of Goods Sold). GAAP allows each company variance for how it accounts for these costs.
Business reporting is a standardized and regulated process whereby businesses provide transparency into how they are performing for investors. The Income statement is one of these reports and shows revenues coming in, the various expenses, and then different versions of margin (Gross, EBITA, and Net).
Market capitalization, commonly called market cap, is the market value of a publicly traded company's outstanding shares. Market capitalization is equal to the share price multiplied by the number of shares outstanding.
These are the categories of expenses companies incur for managing their overall company. Understanding these cost buckets is important to figuring out the impact of different departments and also areas to improve profitability.
In finance, period is the term used to define a common unit of time. The most common units include: day, week, month, quarter, or year. Periods are often used in analytics and forecasts so it important to make sure your data is well aligned or you cannot perform "apples to apples" comparisons.
Price to Earnings Ratio
The price-earnings ratio, also known as P/E ratio, P/E, or PER, is the ratio of a company's share price to the company's earnings per share. The ratio is used for valuing companies and to find out whether they are overvalued or undervalued.
Price to Sales Ratio
Price–sales ratio, P/S ratio, or PSR, is a valuation metric for stocks. It is calculated by dividing the company's market capitalization by the revenue in the most recent year; or, equivalently, by dividing the per-share stock price by the per-share revenue.
Research & Development (R&D)
R&D is an operating expense category. All of the costs involved in developing new products and services fall under this category. For simplicity, any expense incurred before a new release would likely be R&D, but fixes in order to satisfy an upset customer would be Cost of Sales.
An accounting term used to make sure the conditions of an agreement are met before the booking is accepted as revenue. These terms include: delivery, proper documentation, and terms. Source: SEC Definition of Reveue
Calculated by subtracting the previous period revenue from the current period revenue. Periods can be any unit of time as long as they are the same (month, quarter, etc.). We prefer to use year and annual period in our calculations.
Sales, General & administrative (SG&A)
Sales, General and Administrative costs or (SG&A) is simply the grouping of General & Administrative and Sales & Marketing costs into one category. It's very common for finance and investors to group these together. However, to effectively track the impact of Sales & Marketing efforts on the Income Statement and calculate the Commercial Ratio, we need to make sure General & Administrative costs are separated. This is important because not all companies report Sales & Marketing separately from General & Administrative.
Sales & Marketing EXPENSE
These costs are the sum totals of all marketing and or sales activities. This expense category includes: website content (not hosting and support costs for your product delivery), branding, advertising, promotions, demand generation, trade shows, digital marketing, collateral creation, marketing headcount, training, subscription services, sales travel, training, sales overlays, managers, BDRs, account executives, etc.
Value communication is the exchange of information (normally over time) between your company and your customers. Simply put, what a customer is willing to pay for something is directly proportional to perceived value of the offer. Value communication is the exchange required for customers to feel confident to move forward.