Vital vocabulary

Review these definitions to understand some valuable business concepts.

The copy machine you bought increases what your business is worth. That makes it an asset.

The money you owe is called a liability.

The products, or merchandise, that you offer for sale to your customers is called inventory.

A manufacturer’s expense for materials they use to make products is called cost of goods sold.

Expenses that are the same amount every month, such as rent or equipment leases, are called fixed costs.

Expenses that may change from month to month, such as electricity or taxes, are variable costs.

The amount of monthly fixed and variable costs required to be open for business is known as overhead.

Marketing is everything a business does to both gain and keep customers.

The minimum amount of money a business must bring in to pay all expenses is its break-even point.

If your business has positive gain after paying all expenses, you earned a profit.

Tracking the money in your business is called “keeping the books,” accounting or bookkeeping.

All of your monthly bills and expenses are called your payables.

The money your customers owe you is called your receivables.

Money constantly moves in and out of a business This is known as cash flow.

To succeed in business:

  1. Keep your overhead as low as you can.
  2. Know your customers and put them first.
  3. Keep good records to make smarter decisions; you can’t manage what you don’t measure.

For more small business knowledge and skills, read the articles.

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