Hoping to build a career in FP&A - These are the terms you should know

Here are some common FP&A terms, categorized for your convenience:

Financial Statements:

P&L (Profit and Loss Statement): Shows a company's revenue, expenses, and net income over a period.Balance Sheet: Shows a company's assets, liabilities, and shareholders' equity at a specific point in time.Cash Flow Statement: Shows a company's cash inflows and outflows from operating, investing, and financing activities.

Planning and Budgeting:

Annual Operating Plan (AOP): A detailed plan for the upcoming year, outlining revenue, expenses, and profitability targets.Zero-Based Budgeting (ZBB): A budgeting method where all expenses are justified from scratch every year.Rolling Forecast: A continuously updated forecast of future financial performance, typically extending 12-18 months ahead.

Performance Management:

Key Performance Indicators (KPIs): Measurable indicators used to track progress towards strategic goals.Return on Investment (ROI): A measure of the profitability of an investment.Variance Analysis: Explains the difference between actual and budgeted performance.

Cost Management:

Direct Costs: Costs that can be directly attributed to a particular product or service.Indirect Costs: Costs that are not directly attributed to a particular product or service, but are necessary for the business to operate.Cost Driver: A factor that causes changes in costs.

Financial Modeling:

Discounted Cash Flow (DCF): A valuation method that uses present value to assess the worth of an investment.Sensitivity Analysis: Analyzes how changes in key assumptions affect financial results.Monte Carlo Simulation: Uses random sampling to analyze uncertainty in financial models.