Running a business is not an easy task for a startup. You have to be very good in financial terms to run your business. How can you increase your business if you do not have count on the profit margin? It ill actually give your business a new hike and you can find a better solution. If you want to make a mark in the business world, then you should always know these following financial terms so that you excel in your small business and financial plans:
- Assets- Assets are the items that your business own like stocks, furniture, office building, cash and accounts.
- Liabilities- Liabilities are the items for which company is responsible to pay like payroll, vendor invoice, bank lonas and lease amount.
- Capital- Capital means the amount that is invested in the business and it is like stock, ownership money and all types of retained earnings.
- Sales- When both the parties exchange goods and money, then it is called sales. Sales actually drives your business i.e. more the sale of the goods, the more is the money margin.
- Expenses- The money that you need to spend to survive your business like monthly rent, payroll, accounting, taxes, interest rate and marketing. It is an important part of any kind of business.
- COGS- It means Costs of Goods Sold which is related to your business like labor cost, raw material that is needed when needed during the time of the creation of the product and even the price of the finished goods.
- Gross Margin- It is the total margin of money i.e. direct cost with the total revenue within the quarter part in a year.
- Profit margin- Profit margin is the present condition of your business that you have earned yearly. It is calculated after the business owner minus the total receipt.
- Burn rate- It is the term used when you calculate the money that you need to run the business each month. It is very essential to know this burn rate on a monthly basis so you can accordingly take all the steps after that.
- Breakeven Analysis- To check the revenue model you use this term to check when the sales revenue matches with business expenses. For a small business, break even takes 12 to 18 months.
All the above ten financial terms are very important at different stage of business. All these terms are commonly used in the financial world and business people should know all the terms in a better manner and use them in a practical way so that everyone related to your business becomes smart to handle Balance sheet, Profit and Loss account, and cash flow statement by the stipulated time every month. Check the financial health of your personal business so that you can keep your business alive and you can easily run the business if you plan properly. After all, it is your business and you need to think good for it.
