19 Financial Terms You Need To Know

19 Financial Terms You Need To Know

When it comes to finance, you need to be a yoda-esque grand master of playing by the rules before you can even consider breaking them.
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Finance. Those are for the number-crunching clowns with low morals and high salaries. Right? WRONG!. Time to wake up, shape up and step up. Time to become a spreadsheet superstar.
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If you are going to change the world, you need to get up close and personal with this key terms.
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ASSETS
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The stuff your business owns. From cash to computers, from rolling stock to real estate. These are things that get stripped quicker than a five-dollar hooker if you mess up.
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BALANCE SHEET
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A snapshot of your business. It will list all your assets and liabilities to help you work out your net assets. The higher your net assets, the stronger the underlying business. The lower you net assets, the herder the fall.
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BANK RECONCILIATION
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Like all conciliation this is a real bitch. Unfortunately it’s a necessary evil, a vitally important cross-check that ensures your accounts match the reality of your bank account. So when you say you’re worth $5m you actually are.
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BREAK-EVEN POINT
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The exact point when what’s coming in equals what’s going out. The sooner you get to this point the better, otherwise it’s open season on your ass.(This is nothing to do with Point Breaks, which is a shit film with Keanue Reeves.)
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CASH
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This is your liquid assets, all the money you can have, when you need it. Always remember cash is king, so treat it with respect.
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CREDITOR
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Anyone who you owe money to. Suppliers, landlords, bookmakers, the Taxman and Abba tribute act you booked for the birthday party or congratulation farewell party.
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DEBTOR
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A person or business that owes you money. Be all over your debtors like a cheap suit and try to secure payments at warp speed. Slow payers can screw your cash flow and ultimately you.
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GROSS MARGIN
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No, not that kind of gross. Gross margin is net sales less the cost of goods sold. The gross margin tells you the amount that your business earns from the sale of its products or services, before the deduction of any selling and administrative costs. Capisce?
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GROSS PROFIT
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If you were paying attention at the gross margin bit, this should be easy. Gross profit is the difference between sales and the direct cost of making the sales. No, this isn’t all profit, so don’t order MERCEDES or BMW just yet. Or Never.
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LIABILITY
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A financial obligation or an amount owed to a company or individual. Also can be ex-partner with an expensive lawyer or an out-of-control sales person.
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NET PROFIT
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Unfortunately not actually a net full of cash. Total gross profit minus all the business expenses. This profit exists on paper. Once realized it is the stuff you can spend or reinvest. I recommend the latter.
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OVERHEADS
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What you have to pay out to run a business. All the fixed costs like rent, marketing, utilities and administrative costs. Begging, bootlegging, borrowing and bartering help to keep these costs down. Never get in over your head on overheads.
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OVERTRADING
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Another ‘over’ word, only this mother is a little more deadly. This happens when a business expands its operation too quickly, selling more stuff than its underlying resources can support – essentially running out of cash. Ego Vobis Valedico. Sayonara. Bye-bye. Kirim Salam.
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PROFIT
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The crack cocaine of business world. Pure unadulterated profit – the total revenue a business earns minus the total expenses. Enjoy.
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PROFIT AND LOSS STATEMENT
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AKA an income statement, AKA P&L, AKA management accounts.
A financial statement listing sales and expenses and used to work out the gross and net profit of a business. Here another statement – if you’re in a loss bit, you need to up your game. And quickly.
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REVENUE
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AKA Turnover.
The amount earn before expenses, tax and other deductions are taken out. Keep that revenue stream flowing and row away from the rocks.
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STOCK
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This one is easy pizzy. The actual products or materials a business currently has on hand. Too much stock and you’re screwed, too little and you’re screwed. It’s a high-wire act.
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VARIABLE COST
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A cost that changes depending on the number of goods produced or the demand for the product/service. This bad boy can go up or down like a yo-yo.
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WORKING CAPITAL
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The cash available for business for day to day expenses. Remember, every ringgit you spend is another ringgit you need to earn, so work that capital hard, like your life depends on it – your business’s life certainly does.
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DIGEST, LEARN, APPLY & KICK SOME ASS.
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Feel free to share this post, copy and post it back own your own post to look like you made it. I don’t care if you credit to me or not, but the most important things is this knowledge, this terms, our people should know before they do the marketing or caring about their customer.
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i got this terms from the books call Business for Punks-James Watt.
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You can’t build a successful business without making some monumentally stellar decisions. And you can’t make monumentally stellar decisions without properly evaluating your options. And – you guessed it – you can’t properly evaluate your options without fully understanding the financial implications of those option.
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DIGEST, LEARN, APPLY & KICK SOME ASS.

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