Financial Terms You Need to Know

In the field of business and marketing, there are so many people who are naturally talented in the area of entrepreneurship. Many of these natural entrepreneurs have seemingly built-in skills in communication or sales. But no matter how skillful a person is, one must be aware of the financial terms which are most commonly used in the market. So, here is a list of some of the most common financial terms you should know:

Assets

The term asset refers to any financial resource a business entity possesses. This could include anything from property ownership, inventory, office supplies, to eventhe furniture they have purchased. These assests count towards the total value or worth of the business that could be sold in the case of serious financial problems.

Liabilities

Liabilities refer to any debts or loans the business may have taken on during the operation of the business. Any amount of money the business may owe to another person, business, or entity is termed as a liability. Some examples would be a credit card debt or a business loan.

Expenses

Business expenses are the costs that are incurred every month by the business for their daily operations. This includes rent, legal costs, payroll, utilities, etc.

Cash Flow

The cash flow of a business is the amount of money that ‘flows’ or passes through the ‘hands’ of the business every month. This includes both income and expenses. The cash flow also helps in determining long-term solvency.

Bottom Line

The term bottom-line refers to the final amount after all the earnings and losses of the business have been calculated. In general, it is basically the last financial figure and depicts the earning of the business in terms of whether it has increased or decreased.

Financial Report

A financial report is a report that is used to depict all of the transactions and expenses that have taken place, representing the business’s account. It is usually created by potential investors using both internal and external sources of information.

Financial Statement

This is similar to the financial report but it contains a list of all the various kinds of finance-related activities that have taken place. The financial statement is considered to be relatively a more formal kind of document than the financial report.

Cash Flow Statement

As the name suggests, the term cash flow statement refers to a statement that depicts the amount of money that came into the business and left the business during a specific time frame.