Top Important Terms for Small Business Owners

Do you know the lingo?

  • Accounts Payable: The amount of money a business owes to suppliers or creditors for goods and services received but not yet paid for. i.e. you are sent an invoice for services and have a period of time to make payment.


  • Balance Sheet: Balance Sheet is a financial statement. It provides insights into the financial condition of your business.  The statement shows assets, liabilities and equity.  Both accounts payable and accounts receivable balances are included in this statement.


  • EBITDA: This stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA is an effective measure used by business owners to better understand the business operating performance.



  • Accounts Receivable: The amount of money clients (customers) owes your business for goods or services delivered. You most likely issued an invoice and are waiting for payment.


  • Depreciation: Depreciation is key to reducing the tax burden on a business. Depreciation is a bookkeeping method used to spread out the cost of a physical asset (equipment, property) over a specific time. This allows a business to decrease the value of the item over time.


  • Liabilities: The financial obligations of your business are liabilities. Simply, obligations that the business owes to others (creditors, suppliers, banks). Liabilities include loans, mortgages, and business credit card debt.


  • Asset: cash, accounts receivable, equipment, etc.


  • Cash Flow Statement: Cash is King. Cash will always be King. It is important for a business owner to use a Cash Flow Statement to track the amount of cash and cash equivalents running through their business. Cash flow is important to a company’s financial strength. Understanding your business Cash Flow Statement is essential for success.


  • Fixed Asset: A tangible asset, like property or equipment, that can be used as collateral.


  • Liquidity: How quickly and easily assets can be converted into cash without significant loss in value.


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