+630-776-4867
tiffany.hackworth@dreamerenroute.com
0
Login
No apps configured. Please contact your administrator.

Login with your site account

No apps configured. Please contact your administrator.


6   +   4   =  

Lost your password?

Dreamer En Route Dreamer En Route
  • Home
  • Personal Development
    • Personal Skills
    • Interpersonal Skills
    • Leadership Skills
    • Presentation Skills
  • Creative Corner
    • Blog
    • Podcast
    • Speak Your Truth Open Mic
  • About
    • Contact
  • My Account
  • Home
  • Personal Development
    • Personal Skills
    • Interpersonal Skills
    • Leadership Skills
    • Presentation Skills
  • Creative Corner
    • Blog
    • Podcast
    • Speak Your Truth Open Mic
  • About
    • Contact
  • My Account
  • Home
  • Business
  • Key Business Terms Defined for Small Business Owners or Aspiring Entrepreneurs

Business

24 Apr

Key Business Terms Defined for Small Business Owners or Aspiring Entrepreneurs

  • By DREAMER EN ROUTE
  • 1 comment

Many aspiring entrepreneurs experience setbacks in their pursuit of business ownership because while they may be well versed and talented in their specific craft, they are not so versed and informed on the business side in order to maintain and sustain a thriving business. Below you will find key business terms defined. Most of these terms are accounting terms used to create the financial books (balance sheet, income statement and cash flow statement) for your business. Accurate and timely financial statements are critical in order to monitor the financial health of your business. They are also needed to secure financing for your business. The more informed you are about how to manage the day-to-day operations of a business, the better positioned you will be to grow and sustain your business.

Accounts Payable

Accounts payable is the money you owe vendors for services rendered. For example, if you are a clothing designer you may have relationships with fabric providers. If the fabric company supplies you with inventory prior to receiving actual payment, you will carry an accounts payable on your book of records. This keeps tracks of the liabilities (bills) that you owe others. Typically, you should try to keep accounts payable under 90 days, but this may vary depending upon the type of industry you operate within. When searching for bank financing, bankers will sometimes look very carefully at businesses that carry accounts payable beyond 30-90 days.

Assets

Assets refers to your business’ cumulative financial holdings. These are usually classified as current assets (can be liquidated fairly quickly but typically less than a year), or fixed assets (assets that will take longer than a year to liquidate). Current, or short-term assets include cash, marketable securities, accounts receivable or inventory. Fixed, or long-term assets, include equipment, building or land. Although not necessarily a fixed assets, long-term assets may also include some long-term investments.

Liabilities

Liabilities are debts your business owes another person or entity . Like assets, liabilities are categorized as current or long-term. Current, or short-term liabilities include accounts payable (defined above) and current maturities of long-term debt. Other short-term liabilities may include payroll to employees. Long-term liabilities, on the other hand, include business loans that have maturities greater than one year. Many business loans are considered long-term liabilities. You could also have short and/or long-term tax liabilities, franchise fees, etc. Typically you want more assets than you have liabilities. This shows potential creditors that you have the financial wherewithal to weather ups and downs within your business. Entrepreneurs that have a higher risk of failure places a high level of liabilities (debt) on their balance sheet. What in the banking world is terms as “leveraged.” Higher leveraged borrowers have a more challenging time securing business loans because they do not have the assets (collateral) to secure the risk of the debt.

Revenue

Revenue (sales) refers to the income you get from from your business activities, measured monthly, quarterly, and annually. You can calculate revenue by multiplying the per-unit cost of goods or services sold by the quantity of units sold during each specific time frame. Revenue is usually shown on the income statement. Businesses need to generate a sufficient level of revenue over their expenses (discussed below) to receive a profit. If expenses outpace revenue generation, the business will lose money and eventually fold due to cash flow and liquidity issues.

Expenses

Expenses includes recurring and/or one-time costs that are required to do business. Cost of goods sold (the price needed to create your product), rent, utilities, insurance, payroll are all categorized as expenses. These are all examples of expenses—money you spend to operate your business. To maintain a sustainable business, you want to ensure your expenses do not outpace your revenue. Revenue and expenses are noted on the Income Statement.

Net Profit

Also known as your “bottom line.” Net profit represents total revenues less total expenses. This figure is especially important at tax time. This is because you pay taxes as a percentage of net profit.

Net Loss

If your total expenses exceed your total revenues, you have a net loss. The risk of a net loss is one of many strong reasons to keep company costs under control.

Profit Margin

This basic business term measures how much profit you keep relative to total sales. There are three types of profit margins: gross, operating and net. Calculate these by dividing the profit (revenue minus costs) by the revenue.

Cash Flow

Cash flow is the movement of money in and out of your business. You want there to be a higher flow of income into the business than there is an outflow of expenses from the business. This is called a positive cash flow.

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to email this to a friend (Opens in new window)
  • Share:
DREAMER EN ROUTE
Northwestern University B.S., Communication Studies 13 years of Commercial Banking and Investment Banking experience with the country’s Primier Financial Institutions, underwriting corporate and commercial business loans. Developed a Sales Training Program (in partnership with Richardson)and provided sales training to an $8 Billion Banks’s entire sales force. Managed the Commercial Training Department at an $8 Billion Bank, responsible for developing the entire Credit Team. Humble servant of God.

You may also like

A Truly Shocking Reason To Adopt Meditation

  • January 20, 2016
  • by DREAMER EN ROUTE
  • in Business
Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry's standard...
Relaxing after work
January 20, 2016
SEO from Media
October 18, 2015
86 Amazing Facts About The Human Brain
July 22, 2015

    Comments

  1. Jemarrio
    April 24, 2019

    Thanks Queen for the info. I appreciate it

    Reply

Leave a Reply Cancel reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Categories

  • Blog
  • Business
  • Design – Branding
  • Uncategorized
  • Video

Recent Posts

10 Toes Down, Head Up
26Jan,2021
Candace Owens: George Floyd Video
25Jun,2020
Let God and Dream
10Feb,2020

Tags

Brokenness christianity Coaching confidence Course Designer God healing Jesus love ministry SEO ThimPress WordPress

Instagram Slider

No images found!
Try some other hashtag or username

Get in touch

+630-776-4867

tiffany.hackworth@dreamerenroute.com

Chicago, IL

Useful Links

  • About Dreamer En Route
  • FAQs
  • Contact
  • Clients
  • News
  • Success Stories
  • Shop
  • Privacy policy

Social Links

  • Facebook
  • Twitter
  • Instagram

Newsletters

Subscribe to get updates right in your inbox. We promise to not send you spam.

  • Home
  • About
  • Entrepreneurs
  • Events
  • Contact
loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.