Question

Explain basic financial terminology, example owner's capital, cost of sales, profit margin, capital and operational budget, taxation……...

Answer 1

Owners capital or capital in any business is the investment or contribution of the owner in his business.

Cost of Sales: Also known as cost of goods sold, it is all the direct cost associated with production of goods that is later sold by the company. It is equal to cost of purchase+ direct expenses (labour+other expenses involving production like fuel, )+opening stock or inventory-closing stock or inventory.

Profit Margin:It is a very crucial factor in determining growth of any company. It is a percentage of net profit over revenue. It shows the change in annual profit of the firm with annual turnover. A business analyst thus focusses on profit margin trends of the company rather than just net profit.

Capital budget: Allocation of resources of the company if decisions for acquiring fixed assets such as plant and machinery or a new building which requires large fund and is a long term investment for the company.

Operational Budget: Operational budget is the budget allocated for carrying out daily operational expenditure or carrying out daily production activities in the company.

Taxation: Taxation is the mandatory process of levying charges at pre determined rates mainly by goverment authorities as a major source of public welfare expenditures.