We all need to get working at some point of time in our lives. This is necessary since we cannot always be a parasite living off others. Self-sufficiency is essential. Thus, for everyone who has just stepped into the field, it is very important to know and understand certain key financial terms. This will help you to not only understand what others around you are referring to but also decide which deals to indulge in and where to invest yourvaluable time, hard earned money and worthy intelligence.
Assets basically mean what the company owns. This may refer to the economic resources, ready products, any trademark or copyrights, or any likewise material. There are referred to as assets and they may be sold at times when the company is faced with any debt or huge loss. These contribute towards making the value of the firm.
This is a reference to the debts of the company. These debts may be incurred due to sudden loss, change in market trends, economic crisis, or also bank loans and sums owed to vendors. There are two main types of liabilities- immediate and long term.
Being next in line, cash flow denotes the movement of funds from one sector of the business to another. This is all within the company itself. This must be checked at the end of each month to know about the income earned and the expenses that were a part of the entire deal. A cash flow statement covers areas such as activities of operation, investment, finances and other related information.
By now you already know what a ledger is. Thus, the last figure which flashes on your ledger is the bottom line. This is the amount which your company has been able to keep or lose at the end of a month.
This is like an overview. It has all details regarding the earnings of a company as well as the amounts that it invested. This may be designed for internal use of the owners to keep easy track of work or for external use such as pitching in ideas to potential investors. Similar to this is the financial statement but that is considered to be a slightly more formal script.
A balance sheet is recognized as a document which gives an idea about the immediate status of the company’s economy at just a glance. This is a timely document. Certain points covered by the balance sheet include the money at hand at the present moment, expenditure and pending payments as well.
Capital is a very common term which is easy to understand. It refers to the finance that one has in his or her kitty right at the time of inception to invest or start a company. These may be in the forms of debts or borrowed funds and equity or shares with investors.
This implies that assets often end up having decreased value due to the time that is passed by since their first purchase. A deduction is what a company must file for in case it wishes to recover the cost of depreciation.