Business

Balance Sheet

A financial statement that marks a company's financial situation at a moment in time, showing all assets, liabilities and owners’ equity.

Capital

Money used to make an investment, produce a product, fund operations, and generate income.

Cost of Goods Sold

The cost a company pays for the goods it sells, including the cost of raw materials, direct labor, and manufacturing costs.

Earnings Before Interest and Taxes (EBIT)

Operating Income minus non-operating income and expenses; it can also be calculated as Net Income plus Interest and Taxes.

Gross Profit

Calculated as Revenue minus Cost of Goods Sold.

Income

All money received from doing business, including sales revenue and other income.

Interest Expense

Money spent to pay for borrowed money, calculated as the interest rate times the outstanding principal amount of the debt.

Inventory

Any products that have been purchased or produced with the intent to sell to customers but haven’t yet been sold.

Limited Liability Company (LLC)

A legal structure that combines limited liability for owners with the pass-through taxation of a partnership or sole proprietorship.

Net Income

Gross Profit minus all Expenses; also called Net Profit, often referred to as the company's 'bottom line'.

Non-Operating Expense

Expenses not directly tied to operating a business.

Operating Expenses

Expenses directly associated with operating a business.

Operating Income

Gross Profit minus Operating Expenses.

Profit

The financial gain earned when revenue generated exceeds all associated expenses over a certain time period.

Profit and Loss (P&L) Statement

A statement that reports revenues, expenses, and income (or loss) for a specific past time period.

Profit Motive

The incentive for individuals to risk capital to start a business in order to earn a profit.

Proforma

An estimate or projection of future revenues, expenses, net income, and capital needed for operations.

Revenue

Total sales for a company over a certain period, often called the 'top line', calculated by items sold multiplied by their selling price.