Business Words That Start With N: Key Terms You Should Know

Understanding key business terms is essential for making informed financial decisions, whether in corporate management or personal finance. Many significant financial and accounting concepts begin with “N,” covering profitability, assets, and legal agreements.

This article breaks down essential business terms that start with “N” to clarify their significance.

Net Income

Net income is a company’s profit after deducting all expenses, including operating costs, taxes, interest, and depreciation. It appears at the bottom of an income statement, summarizing financial performance over a given period. Investors track this figure closely, as it reflects profitability and long-term viability.

A company determines net income by subtracting total expenses from total revenue. For example, if a business earns $500,000 and incurs $350,000 in expenses—including salaries, rent, and loan interest—its net income is $150,000. This figure directly impacts earnings per share (EPS), a key metric for publicly traded companies that influences stock prices and investor confidence.

Tax obligations significantly affect net income. In the U.S., the federal corporate tax rate is 21% as of 2024, with varying state taxes. Businesses can lower taxable income through deductions such as depreciation and research and development credits. Strategic tax planning helps companies minimize liabilities while staying compliant.

Net Worth

Net worth measures financial health by calculating the difference between assets and liabilities. For businesses, it is known as shareholders’ equity—representing the value remaining after debts are deducted. For individuals, it accounts for assets such as cash, investments, and real estate while subtracting liabilities like mortgages and loans.

A company’s net worth appears on its balance sheet. If a corporation has $5 million in assets—including cash, accounts receivable, and equipment—but owes $2 million, its net worth is $3 million. Investors and lenders use this figure to assess financial stability. A negative net worth suggests excessive debt or declining asset values, raising concerns about solvency.

For individuals, net worth influences financial planning and investment decisions. High-net-worth individuals (HNWIs), typically defined as those with at least $1 million in liquid assets, often receive specialized financial services. Those with negative net worth may need to focus on reducing debt and increasing assets to improve financial security.

Non-Current Assets

Non-current assets are long-term investments that provide economic benefits beyond a single operating cycle. Unlike cash or inventory, which turn over quickly, these assets remain on the balance sheet for years and support business operations. Examples include real estate, machinery, patents, and long-term investments in stocks or bonds.

Accounting standards require businesses to separate non-current assets from short-term holdings. Under U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), these assets are recorded at cost and may be subject to depreciation, amortization, or impairment. For example, a company that purchases manufacturing equipment for $500,000 will expense its value over its useful life. Intangible assets, such as trademarks or copyrights, are amortized unless they have indefinite lifespans, in which case they are tested annually for impairment.

Tax treatment of non-current assets affects financial planning. The U.S. tax code allows businesses to claim depreciation deductions under the Modified Accelerated Cost Recovery System (MACRS). In 2024, bonus depreciation rules allow 60% immediate expensing for qualifying property. Understanding these deductions helps businesses manage tax liabilities while complying with IRS regulations.

Negotiable Instruments

Negotiable instruments are legally enforceable documents that facilitate the transfer of money or credit. These include checks, promissory notes, and bills of exchange, which allow transactions while maintaining legal protections under the Uniform Commercial Code (UCC). To qualify as a negotiable instrument, a document must meet UCC Article 3 criteria, including an unconditional promise or order to pay a fixed sum on demand or at a set time.

Checks are the most common type, instructing a bank to pay a specified amount to a recipient. Post-dated checks pose risks if the drawer lacks sufficient funds when the check is presented. Promissory notes, often used in lending, establish a borrower’s obligation to repay a lender under agreed terms. Bills of exchange, widely used in international trade, allow exporters and importers to transact without immediate cash transfers, reducing credit risk by involving banks as intermediaries.

Non-Recurring Items

Financial statements sometimes include irregular gains or losses that do not reflect a company’s ongoing operations. These are classified as non-recurring items and may include asset write-downs, legal settlements, restructuring costs, or one-time gains from asset sales. Investors and analysts typically adjust financial models to exclude these figures for a clearer view of a company’s core profitability.

Regulatory bodies like the Securities and Exchange Commission (SEC) require publicly traded companies to disclose non-recurring items separately in financial reports to prevent misleading earnings representations. For example, if a company reports a $50 million profit but includes a $20 million one-time gain from selling a subsidiary, analysts may adjust net income to $30 million to reflect operational performance. Similarly, impairment charges—such as a $100 million write-down on obsolete equipment—can distort earnings, making it important to separate ongoing business results from temporary financial fluctuations.

Non-Disclosure Agreement

A non-disclosure agreement (NDA) is a legal contract that restricts the sharing of confidential business information. These agreements are commonly used in mergers and acquisitions, employment contracts, and business partnerships to protect trade secrets, proprietary technology, and financial details. Violating an NDA can result in legal consequences, including monetary damages or court injunctions.

NDAs generally fall into two categories: unilateral and mutual. A unilateral NDA is used when only one party discloses sensitive information, such as an employer sharing proprietary processes with an employee. A mutual NDA is signed when both parties exchange confidential data, such as during joint ventures or negotiations between potential business partners. Courts assess NDA enforceability based on factors like the specificity of protected information and the reasonableness of time restrictions. For example, a clause preventing an employee from discussing a company’s trade secrets indefinitely may be considered overly restrictive, whereas a two-year limitation is more likely to be upheld.