Our knowledge base consists out of three groups
The articles out of our knowledge base:
Did you know that the oldest financial overviews origionate from 1299? If double entry bookkeeping exsists for over 700 years in basically the same form you can rest ashure that it will not change fundamentally in the next 40. So learning to read financial overviews might well be the best investment in your knowledge. A short introduction into the three overviews we work with the Profit and Loss Statement, the Balance Sheet and the Cash Flow Statement. Start reading here!
Within finance we work with three overviews and during my years at high school I did not understand why the Balance Sheet has to be in balance. You ask your accountant that question and he states: "Because debit and credit must be equal." But that does not help you understand. Here is the answer: The company's belongings describe: "What do I have?", Financials call them the assets and "Whom does it belong", better known as the Equity and Liabilities. And because everything the frim has belongs to someone ....... the Balance Sheet is in balance! Read all about the Balance Sheet here!
The most used but also most misunderstood financial overview that exists. Why? Because most people do not distinguish between to use versus to pay and to generate versus to receive. The Profit and Loss Statement gives you an overview of that what you have realized minus that what you have used. Read all about the Profit and Loss Statement here!
Evaluating the performance of a company is often done by reviewing the Solvency, Liquidity and Profitability
- Solvency: How much is the company loaded with debt?
- Liquidity: Can I pay my invoices?
- Profitability: What return does the money in the company yield?
Financials consider major capital investments based on two fundamentals: Time and Risk. I want to invest in a project if I know that I will receive my money back soon and with certainty. To compare vastly different projects financials use three major investment metrics: The payback period which indicates how long it takes for the investment to repay itself. The Net Present Value which gives you the value of the project over the time money is invested with the accompanying risk profile applied to the discount factor and the Internal Rate of Return which specifies how much percent of value is created so you can assess if this is sufficient for the risk of the project. Read the article to understand how to decide on investments!
Test your knowledge quick and easy. Are you up for the challenge?
Would you like to receive my free book Financial Management unravelled?
Fill in the form below and mention the description "Book Financial Management Unravelled". You will receive the book and my article: "The eight most common financial mistakes by managers".
Top 100 Finance Terms
Would you like to receive them in Excel just will out above form and mention in the description "Top-100 Financial terms". The excel file consists out of short explanations and translations to German, Dutch, French, Spanish and Italian.