Not all business owners or entrepreneurs come with a good financial knowledge. They start their business with roughly an idea of how it would go and it is mainly the ideas about the business and its growth that is filled in them. It is for this reason that every business has a financial advisor to help the owners in such critical financial terms and knowledge. That being said, it sometimes, in fact, every time and all time important and mandatory for a business owner to at least have a clean and clear idea and knowledge about few important basic financial terms which would help him in his business decisions too. Now here is a brief on what these terms and important concepts of finance are for every businessman.
- Balance sheet– this is a simple listing of all that a business has with it or has had in the whole financial year. This is a statement that is reviewed every now and then and mainly at the end of the year to come down at the profit numbers. It is a sheet with assets and liabilities of a firm in clear terms. This is considered an important report for a business because predictions about how the business would be in the next few months, the availability of funds for the business operations for the rest of the year, etc.. and such other important numbers for a business are derived from this.
- Cash flow– another very important concept. This is generally understood as the difference in the cash that comes in and the cash that goes out. Yes, of course, it is this in a broader sense, but a businessman is expected to be mindful of what he spends. He should make sure that all his expenses are matched with an income then and there to avoid any unexpected and unbearable losses.
- Business costs – the costs at which the deliveries are made to the customers keep changing abreast with the changes in the shipping charges, transport charges, and even economical changes. So it is important for a businessman to constantly have an eye for all these changes and he should be quick and swift enough to make necessary changes in the prices of his products based on all these so that he does not run his business on a loss.
- Fund capitalization – this is nothing but retaining some amount as a back up to cover up the loss or weak sales periods to keep the business decently going on an income scale.