Monday, 16 January 2017

Business Terms : cashflow, Breakeven, Tax

This section equips users with business terminologies which enhance their performance on the job.

It describes the movement of money into and out of a business account. Cash flow shows the liquidity of a business and their ability to settle debts. Most investors see the cash flow statement as the king because businesses with greater cash-inflows are perceived to be good for stockholders.

This is the point of safety for a business, at this point the business is not making a loss rather sales revenue can cover total fixed costs. Business needs to understand fixed costs relative to the profit earned by each additional unit produced and sold. Breakeven point is the point where profit is equals to zero.

Operating Profit
This is used to evaluate business efficiency, it is the profit made from business operations before deducing cost of interest and tax. It is otherwise known as earnings before interest and tax (EBIT). It is calculated by deducting gross profit from operating expenses, if the value of gross profit is greater than the value of operating expense then the business will have operating profit.

Bank Statement
This shows the company financial activity in a bank. It could be in printed format or sent electronically and it should state all inflows and outflows of cash with description. It lists deposit, interest, withdrawal, charges such as service charge, cost of transaction (COT), credit card maintenance fee etc. it is otherwise known as account statement.

Feasibility Study
This is the activity business owners undergo before commencing a project or plan. It is the assessment of how valuable a proposed plan is. This study tells business owner how profitable or unprofitable the outcomes of a project will be before investing a considerable amount of time and money into it.
It is a compulsory levy imposed on a business by state or federal government to fund various public expenditures. The amount payable is based on the net income companies obtain while exercising their business activities during a business year. Nigeria tax authorities charge 5%, 24% and 30% for sales, personal income and corporate taxes respectively.

Mark-up /ˈmärˌkəp/
An amount added to the cost price of a product in order to arrive at its selling price. The amount added is expected to cover overheads (such as administrative cost) and profit. This amount is reviewed as overhead increases to give the business reasonable profit.

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