Nine Financial Terms You Need to Know

Admin — Tue, 25 Aug 2009 09:57:13 +0000

Now that you have decided to venture into the world of business, you will need capital to start off your project. You also need to get accustomed to many financial terms which will help you deal with the various financial institutions.

• Financial Statements – There are many financial statements which are helpful for framing a Profit and Loss Statements and the Balance Sheet. They include Cash Flow, Break-Even Analysis, Financial Ratios Analysis and Sources and Uses of Working Capital.
• Debt or Equity Capital – You will need to define the type of capital you want for your business. A promissory note, loan, mortgage or any other legal document forms the basis of debt. If you obtain an ownership position, then it forms equity capital
• Rate of Return – earning a profit is the main motive behind most businesses. The rate of return is what the investors expect for investing in the business. It is important to know this before approaching a lender.
• Cash Flow – Cash flow is the coming in and going out of funds in the business. It is limited by time and is used to pay the expenses and meet the expectations of the lenders.
• Working Capital – This is the value of the total assets in cash after deducting the liabilities.
• Collateral – This is a property which is set up as a secondary mode of payment of a loan or any other financial agreement.
• Break-Even Analysis – This method portrays the profit making capability of a company keeping in view the risks involved. Expenses are divided into fixed costs (rent, salary, utilities, insurance) and variable costs (materials, labor, commissions). From these figures you can fix the cost of every unit to recover all expenses and make a considerable profit.
• Margin – This amount demonstrates the difference between the expenses made and the revenues earned. This can be expressed as a percentage. There can be a gross margin and a net margin.
• Leverage – The capability to get a larger sum of money than the value of the property or assets.

There are many more terms but these are the basic few.

Tags: cash flow, financial, financial terms

Dealing With Financial Problems

Admin — Mon, 24 Aug 2009 18:26:03 +0000

You often come across financial problems, especially when there is death of spouse, loss of job, divorce and also if you run into debt in your business. This can make you extremely insecure and depressed. It can in fact trigger a vicious cycle wherein poor money management decisions by you can leave you immersed in heavy debts. But there is absolutely no need to hit the panic button. You must remember that this is a common incident which happens to almost anybody in this world. You just need to muster the courage and will power to come out of it.

The first step is to accept your problem and seek financial guidance from your friends and most importantly your accountant and financial advisor. He will surely give you pointers on how to come out of the situation without offending the law. It will help to win the confidence of your creditors or their advisors. Never fail to inform them of your current financial status and the fact that you will be delaying their payment. You can even offer to pay back the total sum owned in installments. In most cases, your creditors will agree to get back a part of the money instead of resorting to legal action.

Most of your problems can be solved with a lot of patience. Goodwill matters a lot and can help you to tide over your difficulties. Don’t be threatened by your creditors because running into financial problems is a common occurrence. Always try to keep a written record of your dealings and also frame a worksheet to keep a record of your change in cash flow. Careful management can help you keep tabs on your financial status and avoid any problems. If you identify your impending troubles in time, then you will always be one step ahead of any threat to your business.

Tags: accountant, business, cash flow, financial, financial problems

Financial Planning For the Future » cash flow

Nine Financial Terms You Need to Know

Related posts

Dealing With Financial Problems

Related posts