“Bad terminology is the enemy of good thinking” – Warren Buffet. This beautiful thought puts stress on understanding & digesting the vital business terminologies for an entrepreneur. As an entrepreneur we must have the in-depth clarity on imperative business definitions or jargons; below mentioned are some of the most frequently used and significant terms in simpler form.
- EBITDA means Earnings Before Interest, Taxes, Depreciation, and Amortization – that means when you sell a product or service then there are certain costs or overheads affect the revenue which are precisely called EBITDA. Any revenue has to be large enough to take care any interest raised on capital, any government liability and applicable taxes, depreciation of all assets and paying the compliances or revenue. If your EBITDA is positive then you tend to make profits.
- CAQ refers to the computer-aided quality which is basically a software for the quality management (more commonly known as QMS); its main functionality is to support manufacturers for maintaining the steady process and product quality since design stage to production stage (“design to delivery”).
- Top-line word indicates the income, revenue or actual sales happened during defined time period or tenure. This indicative figure is very important to predict the market situation, define & decide the further strategies and taking key decisions. As an entrepreneur this is the most important figure for us to keep in-front of the eyes.
- Bottom-line term refers to actual money left on our hand after deducting all the fix and variable costs, expenses, salaries and all other compliances from the income/revenues; the positive bottom-line means we are making profits and the reverse is a loss making situation. Bottom-line is equally important to be looked after as much as top-line.
- Balance-sheet is a financial document of a company – we can say it is a financial health report card of an organization. This document includes the various important elements like assets, liabilities and equities of any organization. We can also define it as “Equity = Assets – Liabilities”
- Assets are the important and crucial resources which helps generating cash-flow in the company; they are the supporting factors which helps an entrepreneur to yield return on investments, generate more revenues, expand or diversify the business, etc. Some of the examples of assets are land, infrastructure, people, equipment, machineries, stocks, hard-cash, etc.
- Liability is exactly the opposite phenomenon of the assets; they are the responsibilities in simpler terms for a business or an entrepreneur. They are like debts on company, payables to channel partners or any financial obligations on an enterprise.
- Equity simply means the subtraction of liabilities from the assets; if this is a positive number then company is profitable and if it is negative number then it is loss making company. In wider terms equity also refers to the shareholders’ share or an amount of ownership of an entrepreneur over an organization.
There are many more terms and jargons for an entrepreneur to understand; we may discuss them may be in the next blog.
