Every industry or every world has a set of terms used to describe or explain a certain entity or concept that is unique to that world. These set of terms could also be called a Register. So, the business world also has its own register, a set of terms that define business concepts and different actions in the business world. You will notice that sometimes when you listen to business news, you may find it hard to understand what some of the words used mean. This article is dedicated to enlightening its readers on the important terms in the business world that must be known. If you want to have a smooth business journey, especially if you never attended any business school, you will need to know the meaning of these five terms.
Assets – Assets are valuable resources that a business of person owns, derives benefits from and generates income from. It includes products, office appliances (including furniture), trademarks and supplies, copyrights owned by the business etc., that contribute to the general value of the business as a whole. Assets can be sold to raise money when there are financial difficulties in the business.
Liabilities – Liabilities include various debts, claims against the assets of a business or legal obligations of the business due to transactions or purchases from the past. They may be debts that a business owner is in due to loans he or she took to start up his business or maintain/sustain the business. They may be owed to suppliers of raw materials or vendors of materials needed in the business. They are usually in two categories: current liabilities and long-term debts. As the name already connotes, current liabilities are immediate debts, while long term debts are debts owed over a long period (They are usually huge loans paid in installments).
Expenses – The expenses in a business is basically the running cost. This is the money a business spends in running and maintaining the business over a period of time. It could be monitored monthly or weekly, depending on the management and accounting department of the company. The expenses of any business will include payments for utilities, rent, staff salaries or wages, legal costs, advertising costs, marketing costs, etc. It is generally advised that business owners keep the numbers in their expenses as low as possible.
Cash Flow – This is the general and overall movement of money in your business. It is the monitored analysis of how funds go out of your business and how they come into it, with emphasis on how much. Basically, it is the evaluation of your expenses and your income. The cash flow is mostly calculated through the comparison of the amount of money available at the start and at the end of a specific period of time.
Bottom Line – This is basically the end of a month’s financial statement, whether loss or profit. It is always the last financial figure on a ledger used to determine if the business’ income is reducing or increasing.
These five terms are very important in the business world, such that if you do not know them, you may be easily cheated in the business world.