Posts Tagged ‘money’

Overhead view of desk with newspaper and laptop

Entrepreneurs bring all sorts of skill-sets to their venture, such as the ability to sell, or to organize activity, or to raise funding. Some might have a business background, but others might need to learn the ways of business while on the job. Here are 14 terms you and every entrepreneur should know, because they involve central concepts that affect your business.

Accounts receivable:

Money owed to your business by clients. Typically, you invoice a client and receive payment some time later. An account is receivable until it is paid.

Assets:

Economic resources your business owns. Current assets are items like cash, receivables and inventory. Long-term assets include equipment, buildings, vehicles, furniture and patents. You utilize assets to generate income.

Capital:

These are the total resources available to your business, and is equal to your equity and debt. Working capital is equal to current assets minus current liabilities, and represents the resources available to run day-to-day operations.

Cash flow:

The movement of money into, through and out of your business. Inflows bring in money and include collections of sales revenues, tax refunds, and interest earned. Outflows are expenditures of cash and include payment of expenses and acquisition of assets.

Depreciation:

The decrease in the value of long-term assets due to the passage of time. Depreciation is a tax-deductible expense that spans a set number of years.

Equity:

Your ownership interest in your company. It is equal to your assets minus your liabilities. Equity is evidences by stock shares distributed to owners based on their percentage of ownership.

Expenses:

The costs of running your business, including rent, salaries, legal costs, advertising, taxes paid, and utilities. A good business tries to minimize expenses while not skimping on essentials.

Financial statements:

Highly structured reports that indicate your business’ financial condition. They include the balance sheet (a snapshot of assets, liabilities and equity), income statement (revenues and expenses for a given period), and cash flow statement (inflows and outflows for a given period).

Liabilities:

Debt owed by your business. Current liabilities are due within one year and include obligations to pay credit-card balances, invoices from suppliers, taxes due, and wages earned but not yet paid. Long-term liabilities include mortgages and loans that mature in more than one year.

Losses:

Negative net income, created when your costs exceed your revenues. If you have too many losses, the chances are that your business will fail unless you have other sources of funds.

Profits:

Also called net income or the bottom line, these are revenues minus costs for a given period. Profits can be drawn off by owners or accumulated in an account called retained earnings. You can use profits to expand your company.

Revenues:

Also called gross income and sales, this is the money you earn from operations. You direct your marketing and sales activities to generate revenues.

Valuation:

A number representing how much your business is worth. Valuation is important when you are seeking funding from investors.

You don’t need to be a financial expert to have a successful business, but knowing basic financial terms will help you communicate with other stakeholders. For those wanting to broaden their knowledge, the Internet is loaded with learning resources, and many colleges offer continuing education courses that might be useful.

This article originally appeared in IOU Financial.

 

This article was written by Robert Gloer from Business2Community and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

blank black image

Teaching Your Children About Money

Thursday, January 4th, 2018

Boy with glasses smilingDo you remember being in your teens and your early twenties? Were you low on funds due to unnecessary spending? Help your children learn the value of a dollar in their younger years to help them save later in life. By setting up an allowance, you can teach your children to budget, save and learn the difference between needs and wants.

Offer your children an allowance and let them buy anything they choose with that money for a limited time. Afterwards, talk with your children about what they could have gone without to save money and what was right for them to purchase.

Make a budget with your children. Talk with them about how much they’d like to put in their savings accounts from each allowance and how much they want for personal use. Since young children don’t need to spend money on necessary items, such as food and clothing, be sure to explain that as they get older, they may have to spend their money on many other things that they need. That’s why this is a wonderful time to start saving.

Help your children stick to their budgets, and keep emphasizing how important it is to save money for what they need rather than what they want.