Understanding financial terminology is essential for anyone looking to succeed in the world of business, especially for English learners. Whether you’re preparing for a business meeting, studying for an exam, or looking to improve your professional language skills, mastering key financial terms like “Return on Investment (ROI)” and “Net Income” can make a big difference. In this article, we’ll explore 8 essential financial terms in business English, complete with definitions and practical examples to help you use them confidently in real-world situations.

1. Return on Investment (ROI)

Definition: A measure of the profitability of an investment, calculated as a percentage of the original investment.

• Example 1: The company’s return on investment increased by 5% this year.
• Example 2: Before launching the new project, we calculated the ROI to ensure it was worth the investment.

2. Capital

Definition: Wealth in the form of money or other assets used to invest in a business or project.

• Example 1: The company raised additional capital to expand its operations.
• Example 2: Entrepreneurs often seek venture capital to fund their startups.

3. Net Income

Definition: The total profit of a company after all expenses, taxes, and other deductions are subtracted from total revenue.

• Example 1: The company’s net income for the quarter was $1 million.
• Example 2: After deducting all expenses, the net income showed a significant improvement.

4. Gross Margin

Definition: The difference between revenue and the cost of goods sold (COGS), expressed as a percentage of revenue.

• Example 1: The company improved its gross margin by reducing production costs.
• Example 2: Our gross margin dropped this quarter due to an increase in raw material prices.

5. Liabilities

Definition: Financial obligations or debts that a company owes to others, including loans, accounts payable, and mortgages.

• Example 1: The company’s liabilities include a $10 million bank loan.
• Example 2: Reducing liabilities is essential for improving the company’s financial health.

6. Depreciation

Definition: The gradual reduction in the value of an asset over time due to wear and tear, age, or obsolescence.

• Example 1: The depreciation of the company’s equipment will be accounted for over five years.
• Example 2: The depreciation of assets must be recorded annually to reflect their true value.

7. Break-even Point

Definition: The point at which total revenue equals total costs, resulting in no profit or loss.

• Example 1: The business expects to reach the break-even point within six months.
• Example 2: We must increase sales to reach the break-even point faster and start making profits.

8. Interest Rate

Definition: The percentage charged on borrowed money (such as loans) or earned on invested money.

• Example 1: The interest rate on the company’s loan is 3.5% per year.
• Example 2: When applying for a business loan, always compare interest rates from different banks.