Let’s Talk Money Lingo.

Hey there, business owners! Ever felt like financial jargon is like a foreign language? You’re not alone. I’ve met loads of business owners who get tangled up in money talk. So, let’s break it down and make it as easy as pie.

  1. Sales = Revenue: Think of this as the ‘top line’. It’s the cash you get from your awesome customers. Whether you call it sales or revenue, it’s the same thing.
  2. Profits = Earnings = Income: This is the ‘bottom line’. Imagine you’ve got a cake (that’s your revenue). After everyone’s had a slice (those are your costs and expenses), whatever’s left is your profit. Yum!
  3. Costs vs. Expenses: Costs are like the ingredients for a burger – the meat, lettuce, and buns. Expenses? They’re everything else – the rent for your burger joint, the ads you put out, and the salary for your cool staff.
  4. Expenditures: This is when you actually hand over cash to someone. Bought some burger buns? That’s an expenditure.
  5. Orders vs. Shipments = Sales: Orders are like promises from customers. They want something, but you haven’t given it to them yet. Once you ship out the goods, that’s when it becomes a sale. So, shipments and sales? Same thing.
  6. Solvency vs. Profitability: Solvency is having enough cash in your pocket to pay off your bills. Profitability? It’s making sure you earn more than you spend. Here’s a curveball: You can be making a profit but still be short on cash to pay your bills. Crazy, right?

There you have it! A quick crash course on financial terms. Hope this clears things up and makes money talk a tad bit easier for you. Remember, it’s all about understanding the game to play it better!

Marek Niedzwiedz, CEO @ aeXea Capital; Turnaround-Shogun™

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