Finance teams at sponsor-backed companies answer to more people than most: a board, a fund, lenders and, at exit, a buyer's diligence team. Each audience brings its own vocabulary and its own deadline. The terms below cover the monthly reporting cycle, the metrics sponsors watch, the lender tests that sit in credit agreements and the diligence language that shows up when a company is bought or sold. Definitions vary by fund and by credit agreement, so where it matters we say so. For what operating partners expect each month, read /blog/pe-portfolio-reporting-monthly-pack.
Also called: portco
Definition. A company owned in whole or part by a private equity or venture capital fund.
In practice. A PE fund may hold 10 to 20 portcos, each with its own finance team, ERP and close calendar.
What a reviewer checks. The fund's reporting deadlines and formats are met by every portco, in the same shape.
Definition. A person at a PE firm who works with portfolio companies on operations, often including finance, systems and reporting.
In practice. Sets the standard reporting package, pushes for a faster close and leads finance system changes across the portfolio.
What a reviewer checks. Whether portcos report consistently enough to compare.
Definition. The first, usually larger, acquisition in a PE buy-and-build strategy, used as the base for adding further companies.
In practice. The platform's ERP and close process often become the template that add-ons migrate to.
What a reviewer checks. Whether the platform's finance function can absorb add-ons without slipping its close.
Also called: bolt-on
Definition. A smaller company bought by a platform company and combined with it.
In practice. Each add-on brings new entities, intercompany activity and a different chart of accounts to map.
What a reviewer checks. Opening balances, purchase accounting and the mapping of the add-on's accounts.
Also called: monthly pack · sponsor report
Definition. The financial and operating report a portfolio company sends its sponsor each month.
In practice. Income statement, balance sheet, cash flow, budget-to-actual, KPIs, EBITDA bridge, covenant calculation and commentary, often due by business day 10 to 15.
What a reviewer checks. The pack ties to the closed books, and commentary explains the variances that matter.
Also called: board deck
Definition. The materials sent to a company's board ahead of a meeting: financial results, forecast, key risks and decisions needed.
In practice. Usually quarterly, with figures drawn from the same close as the monthly pack.
What a reviewer checks. Every figure in the deck ties to the financial statements.
Definition. A chart or table that walks EBITDA from one period, or from budget, to another, showing each driver.
In practice. Budget $1.20M → volume +$0.14M → price +$0.05M → payroll −$0.09M → actual $1.30M.
What a reviewer checks. The steps add up exactly to the end figure.
Definition. Earnings before interest, taxes, depreciation and amortization. A common proxy for operating cash earnings.
In practice. Net income $0.6M + interest $0.3M + taxes $0.2M + D&A $0.4M = EBITDA $1.5M.
What a reviewer checks. Consistent definitions across periods; EBITDA is a non-GAAP measure.
Definition. EBITDA after adding back items considered one-off or non-operating, such as transaction costs, restructuring or owner expenses.
In practice. Covenants and valuations often use adjusted EBITDA, with the allowed add-backs defined in the credit agreement or deal documents.
What a reviewer checks. Each add-back is documented, allowed by the relevant definition and not recurring under another name.
Also called: QoE
Definition. A diligence report, usually prepared by an accounting firm for a buyer or seller, that tests how sustainable and accurately reported a company's earnings are.
In practice. A QoE adjusts reported EBITDA, analyzes net working capital and flags accounting issues before a deal closes.
What a reviewer checks. How many QoE adjustments trace back to weak close processes.
Also called: NWC peg · working capital target
Definition. The normal level of net working capital agreed in a purchase agreement. The price is adjusted up or down if actual working capital at closing differs.
In practice. Peg $4.0M, actual at closing $3.7M: the buyer pays $0.3M less, subject to the agreement's definitions.
What a reviewer checks. Monthly working capital history built from reconciled balances.
Definition. Meeting the financial tests set in a loan agreement, such as maximum leverage or minimum fixed-charge coverage, and reporting them to the lender.
In practice. A quarterly compliance certificate showing leverage of 3.8x against a 4.5x maximum, signed by the CFO.
What a reviewer checks. The calculation follows the agreement's definitions, which often differ from GAAP.
Definition. How far a company is from breaching a covenant, expressed in the metric itself or in EBITDA terms.
In practice. Debt $19.0M, adjusted EBITDA $5.0M, maximum leverage 4.5x: leverage is 3.8x, and EBITDA could fall to about $4.22M (a 15.6% drop) before breach.
What a reviewer checks. Headroom is tracked monthly, not just at test dates.
Also called: 13-week cash forecast · TWCF
Definition. A week-by-week, direct-method cash forecast for the next 13 weeks, built from receipts and payments rather than from accounting profit.
In practice. Starts from today's bank balance, adds collections from the AR aging and subtracts payroll, AP runs, rent and debt service, week by week.
What a reviewer checks. Last week's forecast against actual cash, line by line.
Also called: net burn
Definition. The net amount of cash a company uses in a period, usually a month.
In practice. Cash $8.4M on 30 Sept and $7.6M on 31 Oct, with no financing: net burn of $0.8M for October.
What a reviewer checks. Burn is measured from bank balances, excluding financing inflows.
Definition. How long a company can operate before running out of cash at its current burn.
In practice. $7.6M cash ÷ $0.8M monthly net burn = 9.5 months of runway.
What a reviewer checks. Whether runway uses a trailing average or a forecast, and which.
Also called: annual recurring revenue
Definition. The annualized value of active recurring subscription contracts at a point in time.
In practice. 120 customers at an average $2,500 a month = $3.6M ARR. One-time services are excluded.
What a reviewer checks. ARR reconciles to billing and to recognized revenue, with differences explained.
Also called: NRR · net dollar retention
Definition. Recurring revenue today from customers you had 12 months ago, divided by their recurring revenue then. It includes expansion, contraction and churn.
In practice. Cohort ARR $3.0M a year ago, $3.3M today = 110% NRR.
What a reviewer checks. The cohort and the definition stay the same between reports.
Definition. Net burn divided by net new ARR in the same period. It measures how much cash a company spends to add each dollar of ARR.
In practice. $2.4M net burn in a quarter ÷ $1.6M net new ARR = burn multiple of 1.5.
What a reviewer checks. Both inputs come from the same period and reconcile to the books.
Also called: fund admin
Definition. A firm that keeps a fund's books and handles investor accounting: capital calls, distributions, NAV and investor reporting.
In practice. Many PE and VC funds outsource fund accounting to an administrator, which often provides a SOC 1 report on its controls.
What a reviewer checks. Timeliness of NAV and investor statements, and reconciliation of fund cash.
Also called: drawdown
Definition. A fund's request for investors to send part of the capital they committed.
In practice. An LP with a $10M commitment receives a 10% call, due in 10 business days: $1.0M.
What a reviewer checks. Calls match commitments and are reconciled to cash received.
Also called: NAV
Definition. A fund's total assets minus its liabilities, usually reported quarterly to investors.
In practice. Portfolio investments at fair value plus cash, minus fees payable and other liabilities.
What a reviewer checks. How fair values were estimated and supported.
Definition. A business unit separated from its parent company, often bought by a PE fund, that needs its own financial statements and finance function.
In practice. Standing up a new close, chart of accounts and bank accounts while transition services wind down.
What a reviewer checks. Historical carve-out financials and allocations of shared costs.
Definition. A CFO who works part-time for several companies, usually on a retainer.
In practice. Common at VC-backed and lower-middle-market companies that need senior finance judgment but not a full-time hire.
What a reviewer checks. Who on the client side owns day-to-day close tasks between the CFO's check-ins.
Also called: CAS
Definition. A CPA firm's practice line that runs bookkeeping, close, reporting and advisory work for clients on an ongoing basis.
In practice. A CAS team may close books for 30 to 100 clients a month on a shared calendar.
What a reviewer checks. Whether every client gets the same close steps and evidence, whoever on the team does the work.