Do you consider yourself as a serious entrepreneur? Here are 5 financial business terms you should know! 

Today, there are amazing business leaders and very successful entrepreneurs, but while startups and small businesses have their own amazing talents, we are often seen one common weakness among the business owners – lack of knowing and understanding basic financial business concepts. This greatly affects long-term financial plans and strategies, as well as, the competence to negotiate and determine basic cost structures within your business company.

There are people who are finance savvy and experienced and there are others who don’t even understand the basic terms. If if you are not responsible for the finances (if someone else is your finance executive) in your company, as a business owner it is your responsibility to know and understand the basic finance principles and how they can affect your company.

In order to help you, we’ve decided to come up with a list of 5 crucial financial business terms you should know if you consider yourself as a serious entrepreneur. By knowing and understanding these terms, you will ensure confidence in yourself, your team, and your investors.

  • Bottom Line – Net income and net earnings fall under the description – bottom line. “Bottom” is referring to a usual location of the number on the income statement of the company, both revenues (or top line) and costs.
  • Gross Margin – This is a percentage of total sales revenue that a business organization keeps after taking away the expense of producing the products or services.
  • Fixed and Variable Expenses – The fixed expense is an expense that doesn’t change with decrease or increase in the volume of products that are produced by the business. The variable expense is the opposite of the fixed cost and these vary according to the volume of products produced.
  • Leverage – This term can be explained in different ways. Financially speaking, this term is known as the amount of debt that can be utilized to finance the assets of your business. In other words, it is the amount of money you borrow to maintain and run your business.
  • Concentration – This is a percentage of how much business you are doing with a certain partner or a client. For instance, relying on one or more partners or clients to do business is a pure example of over-concentration.

Understand, learn, and memorize these words! You will need them!