Finance is especially important to understand, yet so difficult to learn. Finance runs business. Finance can help you balance short term and long term goals. Learning about finance young can help you peruse a career in the business side of work. So without further to add, here are the top 10 financial terms. By mastering these basic finance terms, you can not only gain a more holistic view of your business, but also analyze the performance of your specific team and understand the value and impact of your work on the company.
1. Amortization is a method of spreading an intangible assets cost over the course of its useful life. Intangible assets are non-physical assets that are essential to a company, such as a trademark, patent, copyright or franchise agreement.
2. Assets: Assets are items you own that can provide future benefit to your business, such as cash, inventory, real estate, office equipment or accounts receivable, which are payments due to a company by its customers.
3. Asset Allocation: Asset allocation refers to how you choose to spread your money across different investment types, also known as asset classes. These include
Balance Sheet: A balance sheet is an important financial statement that communicates an organization’s worth, or “book value.” The balance sheet includes a tally of the organization’s assets, liabilities and shareholders’ equity for a given reporting period.
Capital Gain: A capital gain is an increase in the value of an asset or investment above the price you initially paid for it. If you sell the asset for less than the original purchase price, that would be considered a capital loss.
4. Capital Market: This is a market where buyers and sellers engage in the trade of financial assets, including stocks and bonds. Capital markets feature several participants, including
Cash Flow: Cash flow refers to the net balance of cash moving in and out of a business at a specific point in time. Cash flow is commonly broken into three categories
Cash Flow Statement: A cash flow statement is a financial statement prepared to provide a detailed analysis of what happened to a company’s cash during a given period of time. This document shows how the business generated and spent its cash by including an overview of cash flows from operating, investing, and financing activities during the reporting period.
5.Compound Interest: This refers to “interest on interest.” Rather, when you’re investing or saving, compound interest is earned on the amount you deposited, plus any interest you’ve accumulated over time. While it can grow your savings, it can also increase your debt; compound interest is charged on the initial amount you were loaned, as well as the expenses added to your outstanding balance over time.
6. Depreciation: Depreciation represents the decrease in an asset’s value. It’s a term commonly used in accounting and shows how much of an asset’s value a business has used over a period of time.