Bookmark this: key finance terms explained

By on
Bookmark this: key finance terms explained

Here's a handy link to save for later reference - an explanation of key business terms like gross profit vs net profit.

Depending on your line of business you might know a camshaft from a con rod, an Acalypha from an Acanthus, or a GUI from a GPU, but do you know the difference between gross profit and net profit?

While you're starting a business and getting your head around financial terminology, it might be worth bookmarking this glossary of key financial terms at the Federal Government's business.gov.au site.

For example, here is the explanation of gross profit vs net profit,from the business.gov.au site:
"Gross profit vs net profit

The difference between your gross profit and net profit can easily be seen on your profit and loss statement. Your gross profit is your sales minus your cost of goods sold, but does not factor in your business operating expenses. Net profit is a truer indication of your profit, as it factors in both your cost of goods sold and your operating expenses.

For example: For the month of May, Jeff has sold 30 products at $15 each. Each product costs him $10 to produce and his overall operating costs for the month are $80. Jeff’s Gross and Net Profits for the month are as follows:

Sales $450
minus Cost of goods sold $300
= Gross Profit $150
minus Operating costs $80
= Net Profit $70"

Other handy content at business.gov.au includes basic financial analysis to test the health of your business (eg, the quick ratio as a measure of liquidity) and a framework for considering whether you should seek external financing for particular business purposes, and if so, what type (eg, overdraft, loan, or factoring).

You can find a list of the financial topics on the site here.

Other material provided by business.gov.au covers a variety of aspects of running a business, such as taxation, importing and exporting, employing people, and taxation. The site even offers some free apps, including one for developing a business plan.

Copyright © BIT (Business IT). All rights reserved.
Tags:

Most Read Articles

You must be a registered member of Business IT to post a comment.
| Register

Poll

How long has your business been operating?
Up to 2 years
2-5 years
5-10 years
More than 10 years
View poll archive

Log In

Username / Email:
Password:
  |  Forgot your password?