Glossary of Accounting Terms

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Index of Accounting Terms - O

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Icon representing the costs of running a business
Operating Costs Related Terms: Operating Expenses, Overhead, Running Costs What are Operating Costs? The expenses a business incurs in its normal day-to-day operations, excluding direct costs of goods sold, interest, and taxes.
Operating Cycle icon representing the flow from inventory to cash collection in a business
Operating Cycle Related Terms: Cash Conversion Cycle (CCC), Inventory Period, Receivables Period, Working Capital Management, Financial Metrics, Business Efficiency How long does it take a business to convert inventory into cash? Understand the Operating Cycle, the average period required for a business to convert its inventory into cash flow from sales. This key metric, calculated as the sum of the inventory period and the accounts receivable period, is vital for assessing liquidity, operational efficiency, and managing working capital effectively.
Icon representing the expenses of normal business operations
Operating Expenses (OPEX) Related Terms: Overhead, SG&A (Selling, General & Administrative Expenses) What are Operating Expenses? The costs a business incurs to keep its regular operations running, including salaries, rent, utilities, and marketing.
Icon representing profit from core operations
Operating Income Related Terms: EBIT (Earnings Before Interest and Taxes), Operating Profit What is Operating Income? A measure of a company's profit from its core business operations, calculated as revenue less operating expenses.
Operating Leverage Icon representing cost structure impact on profit
Operating Leverage Related Terms: Fixed Costs, Contribution Margin, Break-Even Point, Cost Structure, Profitability What is Operating Leverage? Understand how this financial metric measures the sensitivity of a company's operating income to changes in sales, highlighting the impact of its fixed cost structure on profitability and risk.
Icon representing profit from regular business activities
Operating Profit Related Terms: EBIT (Earnings Before Interest and Taxes), Operating Income What is Operating Profit? The profit a company generates from its core operations, before accounting for interest expenses and income taxes.
Icon representing operational profitability percentage
Operating Profit Margin Related Terms: Profitability Ratios, Operating Income, EBIT Margin What is Operating Profit Margin? A measure of profitability that indicates how much profit a company makes from its core operations per dollar of sales.
Icon representing the initial purchase price of an asset
Original Cost Related Terms: Historical Cost, Acquisition Cost What is Original Cost? The initial amount paid to acquire an asset, used as the basis for accounting purposes like depreciation.
Icon representing indirect business operating expenses.
Overhead Costs Related Terms: Indirect Costs, Operating Expenses (some overlap), Burden What are Overhead Costs? Ongoing business expenses that support operations but are not directly linked to producing a specific product or service (e.g., rent, utilities, administrative salaries).

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