15 Common Business Terms and What They Mean
The below list represents 15 common business terms that leaders often categorize as accounting terminology. Crestcom thinks of these, not just as accounting terms, but as business terms, each of which influences any company. As a leader, do you understand the impact that each one of these concepts has on your business?
- Asset: Assets are tangible and intangible items that increase the value of a firm, benefit the firm’s operation, and can be converted to cash.
- Business Acumen: The ability to understand how your business operates and makes money, and to proactively anticipate, navigate, and leverage trends impacting your business.
- Business Driver: Drives and creates the value of a business; a component affecting company performance such as customer service, product offering, etc.
- Capital Growth: The amount an asset has increased in value over a period of time.
- Cash Generation: The money that a company has available, after other costs associated with the business have been paid.
- Cost of Goods Sold: The costs of producing the product sold by a company, including but not limited to material costs used to make the product.
- Customer Service: Aligning products and service with customer satisfaction; ongoing client relationships that are maintained to continue key revenue.
- Expense: The cost of doing business; any costs associated with generating or creating revenue.
- External Factors: Those factors outside of a business that have an economic impact on the business, such as the environment, technology, people, regulations, etc.
- Gross Profit: The amount of profit generated after the cost of goods sold is deducted from revenue; tells how efficiently a company is turning revenue into profit.
- Net Income: Total amount of revenue remaining after the deduction of expenses from gross revenue during a defined accounting period.
- Operating Expenses: Costs of operating a business, including salaries, travel, rent, utilities, research, etc; and excluding financing costs and taxes
- Operating Income: Operating income is the profit from core business activities; what is left after the cost of goods sold and operating expenses are deducted from revenues before subtracting additional expenses such as interest and taxes.
- Return on Investment (ROI): The measurement of how much revenue is generated as it relates to the amount of money invested, calculated by return on investment divided by cost of the investment.
- Revenue: Revenue is the income generated from sales associated with the operation of an organization, prior to deducting cost or expenses.