Financial concepts for entrepreneurial people

Here are some useful financial concepts for entrepreneurs:

Asset

An asset is a possession that does not generate expenses, but rather brings you income. For example, a property that you rent or an investment that gives you dividends.

Passive

A liability is the opposite of an asset. It is a debt or an expense that you must pay.

Risk and risk management

Risk is the possibility of something going wrong with your finances. Risk management is the process of identifying, evaluating and controlling risks.

Expected value

The expected value is the average result of an investment or a project. It is calculated by multiplying the probability of each outcome by its value and adding the outcomes.

Opportunity cost

The opportunity cost is the value of the best option that you did not choose. For example, if you choose to invest in project A instead of project B, the opportunity cost is the benefit you could have gotten from project B.

sunk cost

Sunk cost is money you've already spent and can't get back.

Leverage

Leverage refers to the amount of debt you have compared to your equity. If you have a lot of leverage, it means you have a lot of debt compared to your equity.

cash flow

The cash flow It is the money that enters and leaves your company. It is important to have a cash flow positive to make sure your business has enough money to pay its expenses and grow.

creditors

Creditors are people or companies to whom you owe money. It is important to have a good relationship with your creditors to ensure that you can obtain credit in the future.

working capital

Working capital is the money you need to finance your daily operations. It is important to have enough working capital to ensure that your business can continue to operate.

financial cushion

A financial cushion is an amount of money that you keep in case of an emergency. It is important to have a financial cushion to ensure that your business can survive if something goes wrong.

Trading account

The operating account is a financial report that shows the income and expenses of your company during a certain period. It is important to review the trading account regularly to ensure that your business is making money.

goodwill

Goodwill is the additional value your business has due to its reputation, brand name, and other intangible factors. Goodwill is important to consider when valuing your company.

Working capital

Working capital is the amount of money you have available to finance your daily operations after paying your fixed expenses. It is important to have enough working capital to ensure that your business can continue to operate.