TOP 10 MOST

MISUSED
TERMS
IN
FINANCE
AND
ACCOUNTING
https://www.linkedin.com/in/oanalabes/
 1. Principle vs. Principal
2. Gross Margin vs. Gross Profit
3. Gross Margin vs. Contribution Margin
4. Investments vs. Depreciating Assets
5. Interest paid vs. Interest Earned
6. Tax Deferred vs. Tax Free
7. Median vs. Mean
8. Nominal vs. Effective Interest Rates
9. Insure vs. Ensure
10. Risk Adverse vs. Risk Averse

https://www.linkedin.com/in/oanalabes/
 1. Principle vs. Principal

Principle = fundamental truth or

proposition that serves as the foundation
for a system of belief or behavior or for a
chain of reasoning.

Principal = a sum of money lent or

invested, on which interest is paid.

https://www.linkedin.com/in/oanalabes/
2. Gross Margin vs. Gross Profit

Gross margin is the difference between

revenue and cost of goods sold (COGS),
divided by revenue.

Gross Profit is the amount of revenue

that remains after subtracting the direct
costs of providing a product or service.

https://www.linkedin.com/in/oanalabes/
3. Gross Margin vs. Contribution Margin

Gross (Profit) Margin is the percentage

of revenue that exceeds the cost of
goods sold (COGS).

Contribution Margin is the sales price of

a product or service, less all its individual
variable costs.

https://www.linkedin.com/in/oanalabes/
4. Investments vs. Depreciating Assets

Investment is the dedication of money to

purchase an asset whose value is
expected to increase over a period of
time.

Depreciating assets are those whose

economic value dereases with use over
time.

https://www.linkedin.com/in/oanalabes/
5. Interest paid vs. Interest Earned

Interest paid is the monetary charge for

the privilege of borrowing money.

Interest earned is income generated

from lending out money to others.

https://www.linkedin.com/in/oanalabes/
6. Tax Deferred vs. Tax Free

Tax deferred refers to instances where a

taxpayer can delay paying taxes to
some future period.

Tax Free refers to certain types of goods

and financial securities that are not
taxed.

https://www.linkedin.com/in/oanalabes/
7. Median vs. Mean

Median is the middle number in a sorted,

ascending or descending list of numbers,
and which can often be more descriptive
of that data set than the mean/average.

Mean refers to the average of a set of

values.

https://www.linkedin.com/in/oanalabes/
8. Nominal vs. Effective Interest Rates

Nominal interest rate is the interest rate

typically quoted on an investment or
loan, and which is unadjusted for the
effect of compounding.

Effective interest rate is the true interest

rate on an investment or loan because it
takes into account the effect of
compounding.

https://www.linkedin.com/in/oanalabes/
9. Insure vs. Ensure

Insure is to arrange for compensation in

the event of damage to or loss of
property, or injury to or death of
someone, in exchange for regular
advance payments to a company or
government agency.

Ensure is to make certain that something

shall occur or be the case.

https://www.linkedin.com/in/oanalabes/
10. Risk Adverse vs. Risk Averse

Risk Adverse doesn't exist in English.

Adverse means unfavorable, opposing

one's interests, or acting in a contrary
direction

Risk Averse is the investor who chooses

capital preservation over the potential
for a higher-than-average return.

https://www.linkedin.com/in/oanalabes/
 Read other insightful posts:
(download and click on the title)

How to prepare a Cash Budget

Mega Finance Compilation -

177 Pages with my Best Posts

5 Emotional Intelligence Competencies for

Financial Performance

https://www.linkedin.com/in/oanalabes/
 Click to +Follow for more insights on

finance, cash flow, and business.

Please Comment, Like and Share .

Ring the bell at the top of my profile

to get notified of new posts.

https://www.linkedin.com/in/oanalabes/
The Financing Advisory Firm for Growing Businesses