20 KEY BUSINESS TERMS EVERY PROFESSIONAL SHOULD KNOW
BUSINESS TERMS EVERY PROFESSIONAL SHOULD KNOW:
As one starts a business or in business or doing the job in the business department
of any organization, he/she should know the 20 key business terms because,
knowing that will help you to understand all the legal processes, all the required
processes and execute them properly, these terms are also frequently asked in
the job interviews.
1) BALANCE SHEET
The balance sheet documents a company’s financial health at specific points in time, usually at the end of the quarter or fiscal year. The balance sheet includes assets, liabilities, and equity and follows the accounting equation:
Assets = liabilities + equity.
The left side leaves you with what you own, whereas the right side shows what you owe. Your asset values should equal those of your liabilities and equity.
Assets are resources that businesses control, in which the owner expects assets to generate future cash flow. Examples include inventory, equipment, and land.
Liabilities are debts, usually sums of money, that a business owes to another entity. Examples include expenses payable to suppliers, accounts payable, and business loans.
Revenue refers to the income generated from a business’s operations and activities. One way to calculate revenue is by multiplying the price of an item by the quantity sold.
Shareholders’ equity (SE) tells you a company’s net value if liquidating assets and paying off debts. To calculate shareholders’ equity, subtract total liabilities from assets:
Shareholders’ equity = total assets−total liabilities
6) INCOME STATEMENT
The income statement shows the business’s performance during a period, such as throughout the quarter or year. Focusing on revenue and expenses, the income statement depicts a company’s profit or loss.
Expense refers to money spent on utilities, salaries, raw materials, and other items that a company incurs operating the business.
Also known as “net income” or the “bottom line”, your profit shows the difference between what a business earns and spends. Calculate profit earned by subtracting total expenses from total revenue.
Profit = total revenue – total expenses
9) CASH FLOW STATEMENT
A cash flow statement measures the cash generated (inflow) or used (outflow) by a company in a given period. Classify cash flow under operating, investing, or financing activities.
10) NET LOSS
Using the profit equation, you can calculate a business’s net loss, or when total expenses exceed total revenue and the difference is negative.
11) PROFIT MARGIN
Three types of profit margins are gross profit, net profit, and operating profit margin. Calculate your profit margins by dividing profit by revenue. Profit margins show a company’s growth potential and answer how much each dollar of sale generates into profit.
Profit margin = (profit / revenue) x 100%
Note: more revenue does not always translate to higher margins and more profit kept from sales
12) GROSS MARGIN
Gross margin is the amount of money you have after deducting the cost of making or buying goods from the selling price.
Gross margin= net sales-cost of goods sold
13) NET SALES
Net sales is a sales figure which is equal to gross revenue less returns, discounts, and allowances.
14. RETURN ON INVESTMENT (ROI)
Return on Investment (ROI) is a ratio measuring performance efficiency relative to how much a company spent on investments. Calculate ROI by dividing net profit by the investment cost.
ROI = (net profit/investment cost) x 100%
15) CASH FLOW
Cash flow is a measure of the amount of cash generated (or lost) through a business’s operations. It’s different than net profit, as net profit includes non-cash expenses (such as depreciation), and excludes some uses of cash (such as capital expenditures for new equipment, or repayment of outstanding debt).
16) NET PROFIT
Net profit is the amount of money that exceeds the company’s cogs, operating and other expenses, investments, and taxes
Earnings before interest, taxes, depreciation, and amortization (EBITDA) is a widely used measure of core corporate profitability,
Ebitda is calculated by adding interest, tax, depreciation, and amortization expenses to net income.
18) BUSINESS TO BUSINESS (B2B)
B2B transactions take place when a company sells goods or services to another company.
19) BUSINESS TO CONSUMER (B2C)
B2C transactions occur when a company sells goods or services to end users.
CRM is customer relationship management which every business is needed to maintain the proper relationship with customers and create the
strong exit barrier.
As always I tried to cover every essential related to the topics, to create a better learning experience.