Business can be a dirty business. And the language of business can be hard to understand. For beginners in the field (or the more analog of the bunch), business acronyms old and new can confuse and ultimately disappoint if not correctly understood. The more market-savvy professionals already know some of these standard shortened phrases, and business glossaries abound. But if the initial jargon has got you down, just KISS (keep it simple, stupid), and check out these nine business acronyms that you need to know.
The Generally Accepted Accounting Principles, or GAAP, are the set of rules that govern financial accounting in businesses. Bookkeepers use them, CPAs use them, and executives are familiar with them. Several on- and offline resources serve as references and reminders of this important framework; a simple search can help you fall into the GAAP. What You Thought It Meant: Giant Awesome Animatronic Porcupine.
IPO stands for Initial Public Offering, and is the first sale of a private stock to the public. Most recently, the mass media has been concerned with the Facebook IPO. IPOs are often seen as “coming out” parties for up-and-coming powerful conglomerates, and often the success of the IPO predicts success in the short-term future.What You Thought It Meant: International Pun Olympiad, which is just what it sounds like — but, sadly, doesn’t exist … yet.
An NDA, or Non-Disclosure Agreement, is an essential business acronym that often takes many forms. It is also known clandestinely as a secrecy agreement, and can also be called a CDA (a confidential disclosure agreement), a CA (confidentiality agreement), or a PIA (proprietary information agreement). These agreements can be one-sided, two-sided, or among a cadre of companies and resources. The most important thing you need to know if you’ve signed one is when and for what purpose you’re bound to keep your mouth shut. What You Thought It Meant: National Demonarchy Alliance. A demonarchy is defined as a political system governed by a demon. Maybe double-check that contract.
Net Operating Profit After Tax, or NOPAT, is a performance measure that reveals a company’s after-tax profit. NOPAT does not equal net income. Assuming no debt, these are the organization’s potential cash earnings, or economic profits. What You Thought It Meant: National Organization of Paltripolitan American Teens. Paltripolitan is a rare English word used as a derisive term for a city dweller. The non-acronymable equivalent of this concept would be, “damn punk kids.”
If you’re not a fan of GAAP, this one’s for you. EBITDA, or Earnings Before Interest, Taxes, Depreciation, and Amortization, is a metric of measurement of cash earnings that is generally non-GAAP. EBITDA is often used in loans covenants. This valuation rubric ignores both cost of capital and degradation of long-term assets, prompting Warren Buffett to mock the metric at a Berkshire Hathaway Annual Meeting in 2002, saying, “People who use EBITDA are either trying to con you or they’re conning themselves.” What You Thought It Meant: Everyone Brings Ice, Tequila, Dom, and Alizé: the perfect BYO Party for the rapper on a budget.
Also known as the Rate of Return (ROR), ROI stands for Return on Investment. Marketing, accounts receivables, and inventory all affect a company’s ROI. If you don’t know what this stands for and what it means for your company, you’re probably not a decision maker in your company. On the other hand, if you’re obsessed with your ROI, you’re probably an entrepreneur that’s using other people’s money. Either way, it’s a good acronym to have at the forefront of the mind, as it can be helpful even to consider other life aspects this way — return on time investment, return on emotional investment, and the like. What You Thought It Meant: Radicals of Isengard. This is the business world, people — not your WoW guild.
Key Performance Indicators, or KPI, are essential to know for a burgeoning business. This term refers to the health of a business, and how well it is achieving its strategic objectives. KPIs can be defined broadly or specifically, and both are an essential thing to know. What You Thought It Meant: Key Party Indicator — and if you didn’t already, you probably don’t want to know.
A problem-solving process, IDEA — the overachieving business world cousin of driver’s ed acronym IPDE (Identify, Predict, Decide, Execute) — stands for Identify, Define, Execute, Augment. These four steps are a great way to problem-solve and improve performance in one or many areas of your business. Another form of this acronym is IDEAL: Identify, Define, Explore, Action, Lookback. What You Thought It Meant: Intergalactic Drug Enforcement Agency. Watch out, junkie aliens. You’re next.
This acronym deals with two components regarding the methods by which products or services are measured: quality assurance and quality control. QA/QC can be an editing process, an aftermarket testing mechanism, or a means to ensure inventory confidence. If your business deals with any type of product, tangible or not, developing QA/QC is vitally important to the longevity and health of any enterprise. What You Thought It Meant: Quickly Acting Quixotic Cows. Unless you’re an oddly specific dairy farmer concerned with the more romantically idealistic and ill-fated of your herd, you may want to QA/QC your use of acronyms.
This article was first posted on Business Insurance.