10 Financial terminologies to know

How many financial market terms are you aware of? What are the most important things to keep in mind while knowing about the different forms of vital terminologies which are associated with business as well as financial industry? How much knowledge as part of financial education is important in order to be successful in your personal finance along with your business venture? The team at Credit health Care will help you with teaching about the many common terms which are needed to deal with financial issues on a daily basis.

Introduction:

Now, we will be discussing about the terms which all business owners must know in details. Do note that, the entrepreneurs go into business with a variety of built-in skills. Some are natural salespeople, while others have the ability to come up with ideas that sell themselves. But while there may be a handful of entrepreneurs who are truly financially savvy, the majority cringe at the thought of preparing financial statements and managing their books. The different terms which are mentioned in this post and proper explanation for the terminologies are also given in this article. They are namely stock options, term life insurance, cash flow, taxes, expenses, valuation, capital investment, financial report, asset allocation and also compound interest.

10 Financial terminologies to know

What are the problems that you generally face while dealing with you finances? What are the most difficult terms that you consider to know more about in the field of business and financial services? What are the major preparations that are necessary to be taken in order to be successful in your financial endeavors along with business ventures? I have less knowledge about financial matters and want to learn more, soc can you guys help me to learn about the most important financial terms which will be hugely beneficial for me in my daily financial activities. In order to know the solutions, read the blogpost till the end.

Stock Options

For the first option, we are going to talk about the different stocks options which are available for you to buy in the stock market. Also, stock options can be offered by companies as management incentives. Along with that, these options give you the right to buy your employer’s stock at a pre-set price within a specified time period.

Also, it is very important for stock buyers to note that, if a manager helps boost the value of the company’s stock above the price of his or her option, the manager can buy the stock at the lower price and pocket the gain if they sell. However, all shareholders benefit from the increased value of the stock. We already discuss about the reasons to invest in stock markets.ย 

Term Life Insurance

The term life insurance provides coverage over a set period, generally anywhere from five to thirty years. If you die within the set term, your beneficiaries receive a payout. If you do not, the policy expires with no value. Also, the policy owner can decide to renew coverage after the term is over and can cancel at any time without penalty.

In addition to that, for that very reason, you do not have a time frame for selling the stocks and you can hold the stock for as long as you want or sell the stocks right after buying the stock. However, it is vital for you to read the market and withdraw stocks when you will be having maximum returns.

Cash Flow

Your cash flow is the overall movement of funds through your business each month, including income and expenses. Businesses track general cash flow to determine long-term solvency. A business cash flow can be determined by comparing its available cash balance at the beginning and end of a specified period.

In addition to that, the business expenses are the costs the company incurs each month in order to operate, including rent, utilities, legal costs, employee salaries, contractor pay, and marketing and advertising costs. To remain financially solid, businesses are often encouraged to keep expenses as low as possible.

Taxes

It is important for you to know that taxes are mandatory financial charges, or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund various public expenditures. Along with that, do remember taxes consist of direct or indirect taxes and may be paid in money or as its labor form.

In addition to that, you also need to be aware of the fact that, there are various types of taxes which are there. The different forms of taxes which you may need to pay are payroll tax, federal income tax, local income tax, value-added tax, unemployment tax, sales tax and also foreign tax. You may also like to read our post regarding the Ways Small Business Owners can save on taxes.ย 

Expenses

The expenses are one of the vital things that you need to make sure is within your budget limits. The budgeting mistakes can be very much hard to cope with. Your main aim should always to minimize your expenses and never go out-of-budget for any time of the year and also at the end of the financial year.

In addition to that, in order to balance a balance sheet which helps to monitor and expenses and earnings from your business. Also, for the proper maintaining of your accounts, it is vital for all small and big business owners to take assistance from experienced as well as accountants from the industry.

Valuation

When a business seeks funding from investors, those investors want to know the overall worth of that business. This is accomplished through a valuation, which is an estimate of the overall worth of the business. Also, by maintaining oversight of operations through financial reports and budget maintenance, a business can increase its chances of success.

In addition to that, you also need to be very sure that all the business owner does not have to be a financial expert to be successful. However, it is important to know the basic financial terms that will come up in conversations with colleagues, potential clients and investors.

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Capital Investment

Do note that, in business finance terms, the money a business has in its accounts, assets and investments is known as capital. In financial matters, there are two major types of capital which includes debt and equity. Along with that, business assets decrease in value due to the time that has passed since it was purchased.

Also, it is vital for you to keep in mind that, the accounts receivable is the amount a business is owed by its clients. Usually the client is notified by invoice of the amount owed, and if not paid, the debt is legally enforceable. On a business balance sheet, accounts receivable is often logged as an asset.

Financial Report

It is important for you to note that, financial report is a comprehensive account of a businessโ€™ transactions and expenses, created to give a business oversight of its financial matters. Along with that, a financial report may be prepared for internal use or external sources, such as potential investors.

In addition to that, a cash flow statement shows the money that entered and exited a business during a specific period of time. It generally covers four main categories: operating activities, investing activities, financing activities and supplemental information and many much more.

Asset Allocation

These are the economic resources a business has, including the products it has in inventory, the office furniture and supplies purchased for use, and any trademarks or copyrights it owns. These assets count toward the value of a business, since they could be sold if the business experienced difficult times.

In addition to that, the liabilities can be divided into two major types: current, which refers to immediate debts consisting of money owed to suppliers, and long-term debt, which refers to liabilities which includes loans and accounts payable.

Compound Interest

It is vital for you to understand the different interest rates that are important for all the people who are dealing with finances to have complete knowledge about. Moreover, if you are opting for loans, there are many types of interest rates that, you gave to deal with simple as well as compound interest rates.

In addition to that, compound interest is interest on the amount of money you have deposited or borrowed. When you are investing or saving, compound interest is earned on the amount you deposited, plus any interest that you have accumulated over time. However, when you are borrowing, compound interest is charged on the original amount you were loaned.

Things to Remember:

So now, all of these terminologies will help those who want to gain more education in their financial knowledge. Do note that, these terms may come up in meetings with potential investors, partners and clients, so itโ€™s important to be aware of them and to understand how they might affect your business. In order to get a better understanding of what you read, the article briefly explore the terms you commonly encounter in market related news. In an earlier blog, we have mentioned in detail about the most important reasons that you should always keep in mind about the advantages that you can gain by investment in stocks. Do read the article till the end before coming back to this section to know more about financial benefits that you can enjoy. Thus, the time has arrived for the wannabe investors to tryout the things which are mentioned in the article above. Also, do not forget to share your valuable feedback on the same without any fail!

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