Business
Balance Sheet
A balance sheet is 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; it includes the cost of the raw materials along with the direct labor and manufacturing costs used to produce the goods.
Earnings Before Interest and Taxes (EBIT):
Operating Income minus non-operating income and non-operating expenses; also 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 - interest payable on loans, bonds, lines of credit; it is 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:
A company legal structure that combines the 1) "limited liability" aspect of a corporation, whereby the owners are not personally liable for the company's debts or liabilities, with the 2) pass-through taxation of a partnership or sole proprietorship.
Net Income:
Gross Profit minus all Expenses, also called Net Profit, and often referred to as a company's "bottom line".
Non-Operating Expense:
Other expenses not directly tied to operating a business.
Operating Expenses:
The expenses directly associated with operating a business.
Operating Income:
Gross Profit minus Operating Expenses.
Profit:
The financial gain earned when the revenue generated from a business exceeds all the expenses associated with achieving that revenue, over a certain time period.
Profit and Loss (P&L) Statement (Income Statement):
A statement that reports revenues, expenses and income (or loss) for a time period in the past.
Profit Motive:
The incentive in a private enterprise system for people to risk capital to start a business in order to earn a profit in return.
Proforma:
An estimate/projection of future revenues, expenses, net income, and capital needed to fund the company’s operations.
Revenue:
Total sales for a company over a certain period of time, also called the "top line", measured by the total items sold multiplied by the amount the items sold for.
Does the profit motive lead to greed gone wild?
Companies that have solely focused on profit have gone out of business. So yes.
What was the Great Recession?
In 2008, the U.S. Economy began to unravel, and the financial meltdown immediately became a global economic crisis. A moment when the mortgage and the housing sector collapsed due to increasing interest rates leading to a worldwide economic crisis
Should companies only pursue profit?
If left unchecked and unregulated, the profit motive can lead to company failure, job losses, and economic downturns.
What are some benefits of the profit motive?
Profit motive has also been the source of some of the world's greatest innovations. it helped fuel many inventions and economic growth during the industrial-technological and digital revolutions
What profit is, and how it is calculated?
Profit means the financial gained earned when the revenue generated from a business exceeds all the expenses associated with achieving that revenue over a certain time period..
What about taxes?
Depending on the business type, for example, a corporation or an LLC, there might be one more expense… taxes. But for now we will assume Serena’s Candles is an LLC, which stands for Limited Liability Company, where all tax burdens fall or “pass-through” to the individual owners