Key Business Concepts and Terms for Professionals
What is Gross Income (Profit)?
Gross income (or gross profit) is the total revenue a company earns from sales minus the direct costs of producing the goods or services sold (Cost of Goods Sold).
Common Expense Accounts of a Company
- Salaries and wages
- Rent or lease expenses
- Utilities (electricity, water, etc.)
- Office supplies
- Insurance
Accounts Payable and Accounts Receivable
Accounts Payable (AP): The amount a company owes to suppliers for goods and services purchased with credit.
Accounts Receivable (AR): Money owed to a company by its clients or customers who have promised to pay for the products at a later date.
Assets of a Company: Examples
Assets are resources owned by a company that have economic value. Examples include:
- Current assets: Cash, accounts receivable, inventory
- Fixed assets: Buildings, land, machinery
- Intangible assets: Patents, trademarks, goodwill
What is the Cost of Goods Sold (COGS)?
The Cost of Goods Sold (COGS) is the amount of money a firm spent to buy or produce the products it sold during the period to which the income statement applies.
What is Net Income?
Net income is the total profit (or loss) after all expenses, including taxes, have been deducted from revenue; also called net earnings.
Main Functions of Management
- Planning – Setting goals and determining the steps to achieve them.
- Organizing – Allocating resources and assigning tasks.
- Leading – Motivating and guiding employees to meet objectives.
- Controlling – Monitoring performance and making adjustments to ensure goals are met.
Equivalent Terms for “Revenue”
- Sales
- Income
- Turnover
- Earnings
Transfer and Promotion
Transfer: A move to another job within a company at essentially the same level and wage.
Promotion: An advancement to a higher-level job with increased authority, responsibility, and pay.
What is Job Analysis?
Job analysis is the process of identifying and documenting the duties, responsibilities, skills, and qualifications required for a specific job.
What is Orientation?
Orientation is the process of introducing new employees to the company’s culture, policies, and procedures, helping them settle into their roles.
What are Separations and Why Do They Occur?
Separations refer to employees leaving a company. They occur due to:
- Resignations: Voluntary departure by the employee.
- Layoffs: Employer-initiated due to economic reasons.
- Termination: Dismissal due to performance issues or misconduct.
- Retirement: Employee leaving after reaching retirement age.
What is Turnover, and What Industries Have High Turnover?
Turnover is the rate at which employees leave a company and are replaced. Industries with the highest turnover rates include:
- Retail
- Hospitality
- Healthcare
- Call centers
Accounting
Accounting is the recording, measurement, and interpretation of financial information.
Budget
A budget is an internal financial plan that forecasts expenses and income over a set period of time.
Cash Flow
Cash flow is the movement of money through an organization on a daily, weekly, monthly, or yearly basis.
Current Assets
Current assets are assets that are used or converted into cash within the course of a calendar year; also called short-term assets.
Current Liabilities
Current liabilities are a firm’s financial obligations to short-term creditors, which must be repaid within one year.
Managerial Accounting
Managerial accounting is the internal use of accounting statements by managers in planning and directing the organization’s activities.
Private Accountants
Private accountants are accountants employed by large corporations, government agencies, and other organizations to prepare and analyze their financial statements.
Benefits
Benefits are non-financial forms of compensation provided to employees, such as pension plans, health insurance, paid vacation and holidays, and the like.
Commission
Commission is an incentive system that pays a fixed amount or a percentage of the employee’s sales.
Conciliation
Conciliation is a method of outside resolution of labor and management differences in which a third party is brought in to keep the two sides talking.
Job Specification
A job specification is a description of the qualifications necessary for a specific job, in terms of education, experience, and personal and physical characteristics.
Profit Sharing
Profit sharing is a form of compensation whereby a percentage of company profits is distributed to the employees whose work helped to generate them.
Wages
Wages are financial rewards based on the number of hours the employee works or the level of output achieved.
Administrative Managers
Administrative managers are responsible for managing an organization’s administrative staff and operations.
Financial Managers
Financial managers are responsible for managing an organization’s financial resources and planning for its financial future.