Business and finance — C2

At B2 you owned profit, revenue, market share, and the basic balance-sheet vocabulary. At C1 you added valuation thinking, margins, and unit economics. At C2 you cross into the rooms where capital is deployed at scale: the buyout fund, the venture syndicate, the audit committee, the underwriter’s desk. You can parse a Wall Street Journal feature on a take-private deal, a Bloomberg tear-down of a SPAC unwinding, a Financial Times analysis of fiduciary breach litigation, and an Information primer on a Series E round structured with a participation cap — without translation drag and without misreading the legal subtext.

The vocabulary in this lesson lives at the seam of finance, law, and accounting. It is the working language of MBAs and JDs in M&A, restructuring, and capital markets practices; it is also the press shorthand of Andrew Ross Sorkin’s DealBook, Matt Levine’s Money Stuff, Reuters Breakingviews, and FT Alphaville. A C2 speaker reads these without help.

A pragmatic note: at this register, vocabulary is precise and slips are noticed. Calling a leveraged buyout a takeover is sloppy; calling private equity the same thing as venture capital is wrong; calling a covenant breach a contract violation signals you have read business news without quite understanding it. The terms below are not synonyms for each other.

Capital structure — the layers that finance a company

A modern company’s capital stack is a tiered hierarchy of claims. Each layer has its own vocabulary, risk profile, and return expectations.

• equity — ownership; the residual claim after debt is paid; the layer that absorbs first loss and captures upside
• common stock / common equity — the ordinary share class
• preferred stock / preferred equity — a senior class with priority on dividends and liquidation
• liquidation preference — preferred holders get their money back (often 1x) before common
• participating preferred — preferred holders get their preference and share in common upside
• non-participating preferred — preferred holders choose preference or convert to common
• convertible preferred — preferred that converts to common on a trigger
• dilution / dilutive — ownership shrinking as new shares are issued
• anti-dilution protection — preferred-holder protection against down-round dilution
  • full ratchet — aggressive: strike price resets to the lower price
  • weighted average — milder: averages new and old
• the cap table / the captable — the spreadsheet of who owns what, fully diluted

Debt instruments

• senior debt — top of the capital stack on the debt side; gets paid first in bankruptcy
• senior secured / secured debt — backed by collateral
• unsecured debt — no collateral; lower in the stack
• first lien vs second lien — order of claim against collateral
• revolver / revolving credit facility — flexible borrowing line
• term loan / TLA / TLB — fixed-amount loans with different amortization
• investment-grade vs high-yield / junk — credit-rating tiers
• the spread — yield over a risk-free benchmark
• covenant — a contractual restriction; financial covenant (e.g., a leverage cap), operating covenant (e.g., no new debt)
• maintenance covenant vs incurrence covenant — tested continuously vs only when taking action
• covenant-lite / cov-lite — loose loan terms; common in frothy markets
• a covenant breach / tripping a covenant — violating the terms
• technical default — a covenant breach without missing a payment
• payment default — actually missing principal or interest
• acceleration — lender demands immediate full repayment
• forbearance — lender’s temporary agreement not to enforce
• restructuring / workout — renegotiating distressed debt
• DIP financing (debtor-in-possession) — bankruptcy-era loans
• bonds, notes, debentures — debt securities of various flavors
• mezzanine debt / mezz — subordinated debt with equity features; sits between senior debt and equity
• PIK (payment in kind) — interest paid in additional notes rather than cash

Private equity — the LBO machine

Private equity (PE) is the asset class that buys companies, restructures them, and sells them at a profit. Its vocabulary is its own subdialect.

• PE / private equity — the asset class
• fund / vintage — the pool of capital; the vintage year is when fundraising closed
• GP (general partner) — the PE firm that manages the fund
• LP (limited partner) — the institutional investors (pensions, endowments, sovereign wealth) who provide capital
• commitment / commitments — capital the LPs have promised
• dry powder — uninvested committed capital
• drawdown / capital call — when the GP calls capital from LPs to fund a deal
• distribution — when the GP returns capital to LPs after exits
• management fee — typically 1.5%-2% of committed capital annually
• carried interest / carry / the 20 — the GP’s profit share (typically 20% over a hurdle)
• hurdle rate / preferred return — minimum return LPs receive before carry kicks in (typically 8%)
• catch-up — mechanism letting GP catch up to 20% after the hurdle
• waterfall — the distribution sequence (return of capital → preferred return → catch-up → carry)
• clawback — LP right to reclaim overpaid carry
• the J-curve — the early-years pattern of negative returns followed by positive

Deal vocabulary

• LBO (leveraged buyout) — buying a company using significant debt
• MBO (management buyout) — LBO led by the existing management team
• take-private — buying a public company and delisting it
• club deal — multiple PE firms partnering on a buyout
• add-on / bolt-on / tuck-in acquisition — a smaller acquisition added to a platform
• platform company — the initial PE acquisition designed to acquire add-ons
• roll-up — building scale by acquiring many small competitors
• sponsor — the PE firm leading a deal
• the auction process / a controlled auction — competitive sale run by an investment bank
• the sell-side vs the buy-side — advising the seller vs the buyer
• letter of intent (LOI) / term sheet / MOU (memorandum of understanding) — non-binding outlines of a deal
• definitive agreement — the binding contract
• stalking horse — an initial bid that sets a floor in bankruptcy auctions
• no-shop clause — the seller agrees not to shop the deal during exclusivity
• go-shop period — limited window where the seller may solicit superior bids
• MAC clause / MAE clause (material adverse change / effect) — buyer’s escape hatch if business deteriorates
• break fee / breakup fee / termination fee — penalty for walking away
• reverse termination fee — buyer pays seller for backing out

A typical DealBook sentence: The sponsor wrapped a $4.2B take-private with$2.8B of TLB and $1.2B of equity from the latest-vintage fund; a stapled financing package was offered to potential buyers in next year’s expected exit.

Venture capital — the asymmetric-upside machine

Venture capital invests early-stage equity in high-growth startups. Its vocabulary partly overlaps with PE but has distinct features.

• VC / venture capital — the asset class
• early-stage vs growth-stage vs late-stage — investment maturity
• seed / Series A / B / C / D / E / F / G — rounds; the alphabet grows with the company
• pre-seed — the round before seed; often friends-and-family or angel
• angel investor / angel — individual investor at earliest stages
• lead investor / lead — the VC setting terms and writing the largest check
• syndicate — group of investors in a round
• co-investor — investor alongside the lead
• pro-rata rights — right to maintain ownership percentage in future rounds
• super pro-rata — right to expand ownership beyond proportion
• board seat / board observer — governance rights
• information rights — right to financial reporting
• drag-along right — majority can force minority to sell
• tag-along right / co-sale — minority can join majority’s sale
• right of first refusal (ROFR) — right to match an outside offer
• down round — financing at lower valuation than prior round
• up round / flat round
• bridge round — interim financing between major rounds
• SAFE (Simple Agreement for Future Equity) — Y Combinator’s instrument; converts to equity at next priced round
• convertible note — debt that converts to equity at next round
• cap / valuation cap — maximum valuation at which a SAFE/note converts
• discount — conversion at a percentage discount to the next round
• the cliff / founder vesting — founders typically vest equity over 4 years
• secondary / a secondary — sale of existing shares (founder or employee liquidity), as opposed to primary issuance of new shares
• tender offer — structured secondary purchase
• down-round protection — anti-dilution provisions
• liquidation preference stack — the cumulative preferences across rounds; can render common stock nearly worthless in modest exits

Exits

• IPO (initial public offering) — going public on a stock exchange
• direct listing — listing without raising new capital or underwriting
• SPAC (special purpose acquisition company) — a publicly-listed shell that acquires a private company; the 2020-2021 boom is largely deflated
• de-SPAC — the merger that takes the private company public
• PIPE (Private Investment in Public Equity) — accompanying institutional investment in a SPAC deal
• M&A exit / strategic acquisition — sale to an operating buyer
• acquihire — acquisition primarily for the team, not the product

Valuation methods and metrics

• DCF (discounted cash flow) — projecting cash flows and discounting to present
• WACC (weighted average cost of capital) — the blended discount rate
• terminal value — value beyond the explicit projection period
• multiples / comps (comparable-company analysis) — trading at 15x earnings
• EBITDA multiple — EV/EBITDA, the workhorse of buyout valuation
• revenue multiple — common for unprofitable growth companies; trading at 10x ARR
• rule of 40 — software-company benchmark: growth rate + EBITDA margin should exceed 40
• ARR (annual recurring revenue) / MRR (monthly recurring revenue) — SaaS metrics
• NRR / net revenue retention — % of revenue retained from existing customers, including expansion
• GRR / gross revenue retention — % retained excluding expansion
• CAC (customer acquisition cost) / LTV (lifetime value) / CAC payback
• gross margin / operating margin / EBITDA margin / net margin
• the Magic Number — SaaS efficiency metric (new ARR / sales & marketing spend)
• enterprise value (EV) — equity + debt − cash; the value of the operating business
• equity value / market cap — value of equity alone
• net debt — debt minus cash
• comparable transactions / precedent transactions — looking at multiples paid in past deals
• fairness opinion — investment-bank opinion on price adequacy, used to insulate boards from fiduciary claims

Due diligence — the inspection regime

• due diligence / DD / the diligence process — pre-deal inspection
• commercial DD — market and competitive analysis
• financial DD — quality of earnings, working capital, accounting
• legal DD — contracts, litigation, IP, employment
• tax DD — tax exposures, structuring
• environmental DD — Phase I/II environmental site assessments
• operational DD / tech DD — operations and technology stack
• HR DD — workforce, comp, benefits, exposure
• regulatory DD — agency oversight risk
• QoE (quality of earnings) — an audit-style review of EBITDA adjustments
• adjusted EBITDA / pro forma EBITDA — normalized for one-offs
• add-backs — items added back to EBITDA (sometimes contentious)
• the data room / the virtual data room (VDR) — secure repository of diligence documents
• clean team — small group with access to competitively sensitive data
• representations and warranties (reps and warranties / R&W) — seller’s contractual promises about the business
• R&W insurance — insurance covering reps-and-warranties breaches; now standard in PE
• indemnification / escrow / holdback — mechanisms for post-closing claims
• closing conditions / conditions precedent / CPs — what must be true for the deal to close
• regulatory approval / HSR clearance (Hart-Scott-Rodino antitrust review)
• CFIUS review — national-security review of foreign investment in US businesses
• closing / close — the deal completion event
• sign and close — simultaneous signing and closing
• signed but not closed — interim period subject to conditions

Audit, GAAP/IFRS, and accounting truths

• audit — independent examination of financial statements
• the Big Four — Deloitte, EY, KPMG, PwC
• audit opinion — unqualified (clean), qualified (with caveats), adverse (statements are misleading), or disclaimer (auditor couldn’t render an opinion)
• going-concern opinion / going-concern doubt — auditor flags ability to continue operations
• internal controls / ICFR (internal control over financial reporting)
• material weakness / significant deficiency — control failures of decreasing severity
• SOX (Sarbanes-Oxley Act of 2002) — public-company governance and controls
• PCAOB (Public Company Accounting Oversight Board) — audit-of-the-auditors regulator
• restatement — formal correction of previously issued financial statements
• earnings management — euphemism for using accounting flexibility to massage results
• cookie-jar reserves — pre-creating reserves to release in lean periods
• channel stuffing — pushing inventory to customers to inflate sales near quarter-end
• revenue recognition / rev-rec — when revenue may be booked; major source of restatements
• ASC 606 / IFRS 15 — modern revenue-recognition standards
• GAAP (Generally Accepted Accounting Principles) — US accounting standards (set by FASB)
• IFRS (International Financial Reporting Standards) — international standards (set by IASB)
• non-GAAP measures — adjusted figures companies report alongside GAAP; useful but contested
• the 10-K / 10-Q / 8-K — annual, quarterly, current-event SEC filings
• MD&A (Management’s Discussion and Analysis) — narrative section of filings
• risk factors — disclosures of what could go wrong
• forward-looking statements — projections, protected by safe-harbor language

Fiduciary duty and governance

• fiduciary duty — legal duty owed by a person in a position of trust
• duty of care — duty to be informed and diligent
• duty of loyalty — duty to put the principal’s interests first
• duty of candor / duty of disclosure — duty to share material information
• the business judgment rule — judicial deference to good-faith board decisions
• enhanced scrutiny / Revlon duties — heightened standard in change-of-control transactions
• entire fairness — strictest standard, applied when conflicts exist
• independence — director without disqualifying ties
• conflict of interest / disqualifying conflict
• interested transaction / related-party transaction
• derivative suit — shareholder lawsuit on behalf of the company
• direct claim — shareholder claim for personal harm
• D&O insurance (directors and officers) — covers personal liability
• the special committee — independent directors formed to evaluate conflicted transactions
• fairness opinion — provides cover but does not substitute for board judgment

AmE-specific vs international vocabulary

Collocations

• raise / close / wrap up / oversubscribe a round
• lead / co-lead / participate in a round
• sign / negotiate / paper / paper up a term sheet
• walk / break / bust a deal
• trip a covenant / breach a covenant / waive a covenant
• draw / fund / call capital
• return capital / return invested capital / distribute proceeds
• mark up / mark down a portfolio company
• price / re-price / mark-to-market an asset
• stress-test assumptions, a model, a scenario
• sandbag numbers (deliberately understate to ensure beating)
• kitchen-sink a quarter
• paper over losses
• adjudicate / arbitrate / litigate a dispute
• opine on / weigh in on a fairness question

Phrases and locutions

• the writing on the wall — visible signs of distress
• the canary in the coal mine — early indicator
• the elephant in the room — unacknowledged issue
• a hockey-stick chart — sharp inflection upward
• shoot the moon — go for max outcome
• double down — increase commitment
• leave money on the table — settle for less than achievable
• catch a falling knife — buy something that keeps dropping
• trying to time the market / don’t fight the Fed
• a frothy market / a melt-up / a meltdown
• a bezzle (Galbraith) — undetected fraud during a boom; the period before discovery
• risk-on / risk-off environment
• dry powder — undeployed capital
• a tape bomb — sudden market-moving news
• the bid-ask spread — gap between buyer and seller prices
• the print — the recorded transaction
• at the close / on the open / in the after-hours

Common Russian-speaker mistakes

1. Stocks meaning inventory or supplies (calque of запасы). In US financial English stocks = equities (the stock market, blue-chip stocks). Inventory is inventory, stock on hand, inventory levels. Our stocks are low in a corporate context means our share price is low, not we are running out of product.
2. Capital meaning the principal city when context is financial. Fine in geographic context (the capital of France); confusing in business writing because capital in business means money/equity invested (raise capital, capital structure, capital expenditure). Be aware of the homonym.
3. Credit for any loan. In AmE credit is broader (credit history, credit score, credit card, line of credit, credit risk); a specific loan is a loan (mortgage loan, auto loan, business loan) or note or facility. I took a credit from the bank sounds awkward; I took out a loan is natural.
4. Income and revenue used interchangeably. AmE distinguishes sharply: revenue = the top line (total sales); income = a specific net figure (operating income, net income). Apple’s revenue grew 8% is correct; Apple’s income grew 8% is ambiguous (which income?). At C2 use the right one.
5. Earn for the company. People earn; companies more commonly post, report, or generate earnings. The company earned $1B* is acceptable but slightly off in financial-press register; *the company reported$1B in net income / posted earnings of $1B is more native. Earnings as a noun applied to companies is fine; the verb feels personal.
6. Profit as a single concept. AmE distinguishes multiple profit measures: gross profit (revenue − cost of goods sold), operating profit / operating income (gross profit − operating expenses), net profit / net income (after taxes and interest), EBITDA (earnings before interest, taxes, depreciation, amortization). Saying profit without qualification in financial-press register marks the writer as imprecise.
7. Tender used loosely. In AmE financial English tender offer is a specific structured share purchase (often a takeover device). The Russian тендер (procurement competition) is RFP (request for proposal), RFQ (request for quotation), bid process, or auction process in AmE. Saying we won the tender in a US corporate context sounds odd; we won the bid or we won the RFP is right.

Summary

• The capital stack ranks claims: senior secured debt → senior unsecured → mezzanine → preferred equity → common equity; covenants (cov-lite, maintenance, incurrence) govern lender protection.
• PE vocabulary covers GP/LP economics (carry, hurdle, waterfall, clawback), deal types (LBO, MBO, take-private, add-on), and exit choreography.
• VC vocabulary spans rounds (pre-seed through Series G), preferences (participating, anti-dilution), and instruments (SAFE, convertible notes, valuation caps).
• Valuation methods (DCF, multiples, comps, precedents) and metrics (Rule of 40, ARR/NRR, CAC payback) define the language of pricing.
• Due diligence regimes (commercial, financial, legal, tax, QoE, R&W insurance) structure how deals are inspected and risk-allocated.
• Audit and accounting vocabulary (GAAP/IFRS, audit opinions, going-concern doubt, ASC 606, restatements) governs financial reporting credibility.
• Fiduciary duty (care, loyalty, candor) shapes board behavior through the business judgment rule and Revlon duties.
• Russian false friends are pervasive: stocks for inventory, capital for city, credit for loan, income for revenue, tender for RFP.

Next theme: Politics and society — C2 — separation of powers, judicial review, originalism vs living constitution, executive privilege, the architectures of liberalism, conservatism, libertarianism, and populism.