Business Finance Overview

The difference between revenue generated and total business costs during a specific period of time.

Money flowing in and out of a business, including sales, expenses, investments, and loans.

The ability of a business to generate profits, indicating its financial health and operational efficiency.

Profits earned by public sector organizations, such as public corporations, that can be reinvested back into services like education and healthcare.

Profits earned by social enterprises that are used to fund their social objectives, such as improving community services or tackling environmental issues.

The process of predicting how much money will flow into and out of a business over a certain period.

Money coming into the business, such as sales revenue.

Money flowing out of the business, such as payments for expenses, inventory, salaries.

The difference between cash inflows and cash outflows over a period.

The amount of cash a business has available at the beginning of a period.

The amount of cash a business has available at the end of a period.

A short summary of the key findings of the cash flow forecast.

A financial tool that allows a business to borrow money from its bank up to a pre-determined limit.

The money a business has available to fund its day-to-day operations.

Short-term financial obligations, typically repayable within a year or on demand.

Assets that can be easily converted into cash within one year.

The process of managing the flow of money in and out of a business.

Reducing the time period customers have to pay for goods or services.

Extending the time period suppliers have to be paid.

Delaying the purchase of new equipment to save cash.

A financial statement that shows the financial structure of a business at a specific point in time. It identifies a business's assets and liabilities, and details the capital (equity) used to fund its operations.

Items owned by a business. They are assets that are expected to be used for a long period, typically more than one year.

Amounts of money owed by a business, often called debts. They are obligations that the business needs to repay in the future.

Liabilities that are not due for repayment within the next 12 months. They include long-term loans, bonds, and deferred revenue.

The difference between a business's assets and liabilities. It represents the owners' stake in the business.

The total of a business's assets minus its liabilities. It represents the net worth of the business.

Another name for the Statement of Financial Position. It emphasizes the balance between a business's assets and liabilities, where net assets equal total equity.

The ability of a business to pay back its short-term debts, like suppliers.

A percentage calculation that shows how much of the sales revenue becomes gross profit.

The money earned from sales after subtracting the direct costs of producing the goods sold.

Costs directly involved in producing a product or service, such as raw materials and labor.

Increasing sales revenue or decreasing direct costs can improve the gross profit margin.

Investors, directors, managers, employees, and suppliers all have an interest in the profitability of a business.

Increasing the selling price of a product or service, while keeping costs the same, leads to a larger profit margin. This is because the difference between the price and the cost of production is greater.

Offering premium products can increase profit per item sold if customers are willing to pay more for higher quality or unique features.

Price tactics are strategies used to encourage customers to buy more or buy more frequently. These include offers like "buy one get one half-price" which can double the number of items purchased.

Increasing marketing efforts can reach a wider audience, attract new customers, and potentially boost sales volume.

Reducing variable costs, like raw materials, can increase profitability. This can be done by negotiating better supplier prices, buying in bulk, or finding cheaper alternatives.

The gross profit margin measures how much of a company's sales revenue is left after accounting for the direct costs of producing the goods sold.

The net profit margin is the percentage of sales revenue that is converted into profit after accounting for both direct and indirect costs (overheads).

Improving the net profit margin can be achieved by increasing the gross profit margin (raising prices, lowering direct costs) or by reducing overhead costs (staffing, premises, utilities).