Apr 29, 2018
Small business owners should have an understanding of financial terms, as they are the nuts and bolts of a business operation. If you have an accountant or are handling your own financials, knowing these financial terms will help you understand how well your business is functioning. Here are a few terms small business owners should be familiar with;
P and L – This is a statement, usually completed every month, will give you an understanding of how your business is running.
Balance Sheet – This is an indication of your businesses assets and liabilities. This statement will provide valuable information for decision-making.
Assets – These are items such as cash, real estate, land, equipment, tools, computers, and furniture.
Liabilities – These are loans outstanding and monthly bills your business owns.
Equity – This is the money you and any other owners have invested in the business.
Bottom Line – This is the net income or earnings that a company makes for the month.
Markup – This is the additional price added to the cost price.
Gross Margin – This is the difference between total sales revenues and total cost of goods sold. It can be stated on a per-unit basis, in dollars or as a percentage.
Gross Profit – This figure is your “Cost of sales” minus your costs directly associated with sales, such as materials, labor, and delivery.
Net Profit – This is your profit after costs such as overhead, materials, wages have been deducted.