In order for a young person Entrepreneur to be successful with brilliant small business ideas, they should know the set of vocabulary. In fact, there are some certain business terms that apply to every business. Therefore, no matter the size or financial conditions.
If you are new to the business, you may hear a lot of words and phrases that are unfamiliar to you. To be seen, if you start your own company and run a business, you will often have to know the business terms. Even a few of which you need to navigate the complexities of different industries as well it improve your business skills.
Fortunately, you do not need an MBA to master major business concepts. This primer will run through basic business conditions in easy to understand ways. Therefore it is important to be aware of them and understand how they can affect your business.
Below the list of business, terms provide you with definitions of common words which is using in all aspect of the business. So talking to your finance, to small business loans or any other condition should be easier in the future.
Here are an A-Z some common use business terms and their brief definitions arranged in alphabetical order.
Accounts payable are bills to pay as part of the normal course of business. When businesses receive goods or services from a seller, they usually receive an invoice. As long as they do not pay a specified amount in the invoice, it enters in the balance sheet as part of “Accounts Payable”.
This word means the money given by others to your small business for the goods or services you have created. This account is label as assets because they represent a legal obligation for the customer to pay cash for their short-term debt.
Any resource used by the company in business operations – Assets are tangible and intangible objects that increase the value of a firm, benefit the firm’s operations, and it can be converted into cash.
Property lease or leased by the company is not shown on the balance sheet. Informally, relationships with employees, customers, and other individuals or companies can refer to as assets.
A plan for how a business makes money. It includes which customers it targets, how it generates revenue from those customers, what expenses are necessary for the company to run and make a profit.
When a company does not have any benefit nor does any damage, it is considering on the breakdown point. One dollar more and the company benefited; One dollar is low and the company shows damage.
This Sheet finally provides a financial document as a snapshot of business assets, Liabilities and owner’s equity at a given period of time. And of course, it’s essential information of any organization.
It is commonly referred to as the amount of money or you can say cash that invests in a company. Cash and daily selling products and services received from the operation are referred to as cash flows.
The definition of business finance and cash flow reflects the amount of operating cash that “flows” through the business and affects the liquidity of the business. The Cash Flow Report reflects activity for a specified period of time, usually an accounting period or a month.
Formally, cash flow is an assessment and understanding of coming out of cash into and flowing out of the venture in some period of time.
A contract is basically a compromise between the two parties, which makes both legal liabilities to perform a specific task. Each party is legally obliged to comply with the specified duties such as payment or delivery of goods.
A contract can use for various transactions, including the sale of land or goods, or the provision of services. They may either be verbal or written, although the courts prefer that the agreement be kept in writing.
Depreciation is an accounting and tax method which is used to estimate the loss of value of assets over time. When you depreciate assets, you can plan how much money is written each year, which gives you more control over your finances.
The Dividends is the earnings of the company and it refers to the money distributed to the owners of a business as a profit.
And is decide by the company board of directors and they approved by the shareholders through their voting rights. Dividends can be issued as cash payments, a share of stock though cash dividends are the most common.
Direct marketing is a sales method or you can say it a type of advertising campaign by which advertisers approach target customers directly with products or services using various direct marketing tools like direct mail marketing, brochures, telephone sales, etc.
Fortunately, this type of marketing is a great opportunity for business if used in the right way.
The expenses of a business are the total amount spent on supplies, equipment or other investments. There are mainly four categories of expenses
Generally, expenses are debited to a specific expense account and the normal balance of the expense account is a debit balance.
A fixed cost is an expense that does not change in the form of an increasing quantity of production or decreasing within a relevant limit. Therefore, in other words, fixed costs are locked until the operation remains within a certain size.
Often management uses to fixed costs to production and base budgets.
This business term commonly uses in all industries – Gross profit is the profit that a company deducts costs associated with the making and selling of its products after deducting costs or providing services. It may also go by sales profit or gross income
Hence, the gross profit formula is pretty straightforward:
Gross Profit = Sales – Cost of Goods Sold
This is the business terms which is using to describe six months into the financial year from July to the end of December.
British listed companies should produce profit figures in half the financial year, i.e. six months in their financial year.
A home loan is a loan, where there is a contract between the borrower and the lender, which allows anyone to borrow money to buy homes, apartments or other residential properties.
And along with that, the home loan payment is usually done in the months or years. Buying a home is the biggest financial decision that most people have to make.
Income statements are a financial sheet that shows a business profit and loss over a period of time usually a month or a year. This income statement looks at the business’s revenues and expenses through all its activities.
An interest rate is the percentage of principal that charge by the lender for the use of his money.
The principal is the amount of money borrowing, as a result, the bank will be able to deposit money on deposits. Then they are borrowing that money back from you.
In real estate, the joint tenancy is a special form of ownership of two or more persons of the same property is known persons as joint tenants. This type of ownership creates the right to live, which means that when one of an owner dies, other owners absorb the interest.
A bank account in the name of two or more accounts owners who equally share its balance. Usually, each holder can operate the account individually. If a holder dies then whatever amount is in that position, he goes to him and he remains the holder of that account.
In general, is an obligation for someone else who depends on you. Liabilities are defined as the company’s legal financial debts or obligations that arise during business operations.
It settled over time, through the transfer of financial benefits including money, goods or services. It can record on the right side of the balance sheet, payable accounts, mortgages, deferred revenues, and earned expenses.
Generally, marketing refers to the set of planned activities that undertake by the company to promote their products and service.
Marketing that includes advertising, selling or delivering products to the customer or other company.
National insurance is a tax system in the united kingdom pay by workers and employers for the benefits of the state. NI is calculating on the basis of your gross pay. If you earn more then $200 a week you pay high tax to the government. Or if earn more then that then you have to pay an additional 1%.
Costs of operating a business, including administrative, salaries, research, travel, etc and excluding financing costs and taxes. Therefore, it is necessary for a company to conduct business.
A portfolio is the complete array of offerings of an organization, including all products and services.
Any loan instrument is made up of three parts – principal, interest, and fees. It is a business finance keyword and it is the principal amount that borrows or the outstanding amount to pay less interest. It uses to calculate total interest and fees.
It is the amount which is collecting for the goods or services sale before any cost deducted. It includes discounts for any credits or returned goods.
Originally this business terms referred to the profit that a company was making, divided by the investment required. Its uses to the efficiency of an investment or compare the efficiency of a number of different investments.
To calculate ROI, the return (or return) of the investment is divided by the investment cost. The result expressing as a percentage or ratio.
Return of investment formula:
Return Of Investment = Current Value of Investment – Cost of Investment / Cost of Investment
The stock market is where a trader buys and sells shares of a company on a public exchange. These financial activities are conducting through institutionalized formal exchanges.
A market where many buyers and sellers meet, negotiate and do transactions. It works through a network of exchanges – Companies list their stocks on the stock exchange so that money can be raising often to increase their business and investors can buy those shares.
Trial balance is a bookkeeping or accounting worksheet that lists the balances in each of an organization’s general ledger accounts. The main purpose of creating a trial balance is to ensure that entries in a company’s bookkeeping system are mathematically correct or not. This error mainly occurred in the double-entry accounting system.
Generally, the trial balance test compares total debit balances to total credit balances.
These are costs which vary with the volume of sales and are the opposite of Fixed Costs. Variable costs increase with more sales.
The best is the physical costs of goods sold, direct costs, such as materials, production costs, product purchased for resale. Variable cost concept is an important risk factor for a company.
The VAT is a tax that pays to the government on most of the goods and services in all countries. Therefore VAT at 17.5% is normally including in the rate of goods or services that you buy. Even some goods do not attract VAT.
Some items are zero-rated, including food, books, newsletters and magazines, children’s clothing and appliances for people with disabilities. On the other hand some goods such as children car seats and domestic fuel or power – you pay a reduced rate of 5 %.
You can serve and manage your business most effectively by becoming familiar with these Business terms which use in business finance. And see how it will affect your business’s financial health. So, be prepare to face the financial challenges that go along with a small business owner.