In the field of finance, there are some common financial terms. It is very useful for us to avoid or reduce the basic mistakes in improving the finance. Some financial terms are Accounts receivable (AR), Capital Assets or Fixed Assets, Current assets, Cashflow, Depreciation, Net worth, Pro Forma Statements, Sales forecast, Sunk cost Past expenditures, and Variance.
Accounts receivable are monies owed. These amounts are usually the result of the sale of assets or for services you have provided. Capital (or fixed) assets are those assets such as land, buildings, or equipment acquired to carry on the business of a company long-term. In financial records capital assets are conventionally expressed as the value of the asset minus depreciation. While, Current assets are items such as cash, inventory, and accounts receivable that are currently cash or are expected to be turned into cash within the short-term.
Cashflow is the movement of money into and out of your business that determines your business’ solvency. Then, depreciation is an estimation of the loss of value of assets over time. Cars for example, tend to rapidly depreciate following purchase. And Net worth is the same as assets minus liabilities, and the same as total equity. Other term assets include securities, business equipment, etc.
Pro Forma Statements is financial statements that project the results of future business operations. Sales forecast means the sales an organization expects to achieve in a particular period of time. Sunk cost Past expenditures typically are considered irrelevant to future decisions. The last is Variance. It’s a calculation of the difference between plan and actual results, used by analysts to manage and track the impact of planning and budgeting.