The Sunday Mail
Bottom Line: This is the total amount a business has earned or lost at the end of the month. The bottom line is the last financial figure on a ledger. The term can also be used in the context of a business’ earnings either increasing or decreasing.
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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.
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Liabilities: This includes any debt accrued by a business in the course of starting, growing and maintaining its operations, including bank loans, credit card debts, and monies owed to vendors and product manufacturers. Liabilities can be divided into two major types: current, which refers to immediate debts (e.g. money owed to suppliers), and long-term debt, which refers to liabilities (e.g. loans and accounts payable).
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Assets: 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.
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Time value of money: The time value of money is the concept that money on hand today is worth more than the same amount of money in the future, because the money you have today could be invested to earn interest and increase in value. Why is it important? Understanding that money today is worth more than the same amount in the future can help you evaluate investments that offer different potential rates of return.
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Asset allocation: Asset allocation means spreading investments over a variety of asset categories, such as equities, cash, bonds, etc. Why is it important? How you allocate your assets depends on a number of factors, including your risk tolerance and your desired return. Diversifying your investments among a variety of asset classes can help you manage volatility and investment risk. Asset allocation and diversification do not guarantee a profit or protect against investment loss.
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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.
