With effective communication playing a key role in business success, learning basic business jargon will help improve your overall understanding and spur business growth. Whether owning a company or starting in their career, every business professional can benefit from understanding certain vital concepts. Here are some business terms you should know to help you be better prepared and knowledgeable.
1. Cash Flow
Cash flow tells you how money is being spent and coming into your business. A cash flow statement charts the amount you have and how it fluctuates over time.
With this information, you can easily determine if your business has enough money to fund its expenses. Cash flows often present a valuable measure of profitability and can be used to predict a business’s long-term financial outlook.
Understanding cash flow helps forecast how much money you will have at a particular time and when big expenses should be paid.
Voice over Internet Protocol (VoIP) is a way to make and receive calls without any traditional phone service infrastructure. So, what does VoIP mean?
VoIP refers to a modern-day telephony system that allows voice and multimedia data transmissions over broadband internet. It is an internet-based service that mainly features high definition voice calling, web conferencing capability, and team messaging, among other many functionalities.
VoIP services pose a valuable feature for businesses that do a lot of international calls or complex conference calls. It also saves your business from paying hefty international phone service bills.
Equity is the amount of money a person has invested in a company. If your company has multiple investors or owners, they may all have varying equity levels in the company.
Equity is calculated by subtracting your total liabilities from your total assets. The difference often represents the total value of your business.
Liabilities here refer to the money your business owes, like payroll or a business loan, whereas assets refer to any valuable entity that the business owns or controls. Understanding this will help you monitor your business health effectively and drive growth.
Return on investment (ROI) tells you how much you gained or lost based on how much you invested in a certain aspect of your business. For example, if you spent money on a new project management platform that boosted your company’s productivity and profitability, your ROI would be the difference between what you earned in profit and what you spent on the platform.
It is a popular financial metric that measures how much businesses make on every investment in proportion to its costs. This knowledge will help you project how much of a financial influence certain expenses will have on your business, allowing you to make smart decisions based on ROI.
5. Net Profit
Net profit refers to the amount you earn after expenses. For example, your store could make a lot of money in a month, but you will first have to deduct payroll costs, rent, bills, and inventory costs before you can truly understand how much money you made in net profit.
Your net profit mainly refers to your company’s true profitability and tells you if your expenses are too high or could go up higher.
It often reflects the financial health of your business and is usually stated in the last line of an income statement. Knowing how to measure net profit and understanding its effects on other business aspects can help improve your overall business management skills.
Become More Knowledgeable
With effective communication as the primary factor influencing business success, learning some common business terms can help clear up ambiguity in your business. Understanding these terminologies will free you from pretending to know what you are doing when you do not. Instead, improve your business acumen with an understanding of these business terms.