Finance Terms & Definitions

Average Order Value (AOV) is the mean dollar amount spent each time a customer places an order, calculated by dividing total revenue by the number of orders.

Carrying cost is the total expense of storing unsold inventory, including warehousing, insurance, depreciation, and the opportunity cost of tied-up capital.

Cart abandonment rate is the percentage of online shopping carts that are created but never completed as purchases, indicating lost revenue opportunities at the checkout stage.

Cost of Goods Sold (COGS) is the total direct cost incurred to produce or purchase the products a business sells during a specific period, including materials, labor, and freight.

Fill rate is the percentage of customer orders or order lines that are fulfilled completely from available stock on the first shipment, without backorders or delays.

A shipping and trade term that specifies the point at which ownership and liability for goods transfer from seller to buyer, most commonly used as FOB Origin or FOB Destination.

Gross margin is the percentage of revenue remaining after subtracting the cost of goods sold, representing how much profit a business retains from each dollar of sales before operating expenses.

Inventory turnover measures how many times a company sells and replaces its stock during a period, indicating how efficiently inventory is managed.

The accounting method used to assign a monetary value to unsold inventory, which directly affects cost of goods sold, gross profit, and tax liability on financial statements.

Landed cost is the total price of a product once delivered to the buyer, including the original price, transportation, customs, taxes, insurance, and handling fees.

The average revenue generated from each customer order, calculated by dividing total revenue by the number of orders over a given period.

The average shipping expense incurred to fulfill each customer order, including carrier fees, packaging materials, and handling labor.

The complete cost of a system or solution over its entire lifecycle, including purchase price, implementation, training, maintenance, and operational expenses.

The revenue and costs associated with a single unit of product or a single customer transaction, revealing whether each sale is profitable.

The difference between current assets and current liabilities, representing the liquid funds available to finance day-to-day operations including inventory purchases.