A recent article, 13 Finance Terms You Should Know as a Business Owner by Robert Gloer says that you don’t need to be a financial expert to have a successful business, but you should be familiar with some basic financial terms that affect your business.
Here are 8 basic financial terms that you should know to understand your business.
1. Assets
These are the economic resources your business owns such as, cash, supplies, receivables (e.g. accounts receivable- money owed to your business by clients), furniture and fixtures, machineries and equipment, inventory. These are used to generate revenue.
2. Liabilities
These are payables or financial obligations of your business such as credit-card balances, invoices from suppliers, taxes due, mortgages and loans.
3. Capital
This is equal to your equity and debt — the total resources available to your business.
4. Equity
It is your ownership interest in your company. It is equal to your assets minus your liabilities.
5. Revenues
This is the money you earn from operations (sales activities) also called as sales and gross income.
6. Expenses
The costs of running your business, including rent (e.g. meeting rooms rental, executive suites rental) salaries and wages, legal costs, advertising, taxes paid, and utilities.
7. Financial statements
Financial reports that indicate the financial condition and position of your business.
- Balance sheet is a statement of assets, liabilities and equity as of a given period.
- Income statement (Profit and Loss Statement) –revenues and expenses for a given period.
- Cash flow statement — The movement/flow of money into, through and out of your business.
8. Valuation
A figure or number representing your business worth—valuation is vital when you are seeking funding from investors.
Conclusion
These are the basic financial terms to help you communicate with other stakeholders. If you’re looking for workplace solutions for your business in Philadelphia to reduce your expenses, YourOffice offers you a wide choice of office and workspace solutions: flexible office space Philadelphia, team office space Philadelphia and virtual office packages. You’ll have access to a complete array of office support and concierge services as well as state-of-the-art business technology.
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