Every occupation has its own terminology. Business person also use some special terminology during their day to day activity. Here in this article I am briefing you the top 6 Business terminology you must have to know for efficient business communication.
1. Sunk Cost
Sunk cost is past expenditures that already been paid and cannot be retrieved.
Example: Company have decided to use MS SQL and they procured the license from Microsoft and paid bill (Which is not refundable). After One month their IT consultant strongly recommended to go with Oracle instate of MS SQL. Now company has nothing to do for MS SQL license but Doller have been paid. It is called Sunk Cost.
2. Operating Expenses
Operating expenses is the regular expenses which need to be spend for run a business. Salary, Wages, administrative, marketing and research expenses etc. are example of Operating expenses. Bank Interest, Deprecation, Tax Etc. are excluded from operating expenses.
Manufacturing company produce Finished Goods for End user. For production they need different raw material, packing material etc. All these are (Finished Goods, Raw material, packing material). Some goods need more than one day for production. In this case semi-finished/Unfinished products found on Production floor. It is called Work in Progress (WIP). This is also Inventory.
Trading companies buy product from other manufacturing company or any other channel. Until they sale those products, all stock is also called Inventory.
4. Income Statement
Income statement is one of the important financial report which reflate Profit/Loss for the organization. It is also called Profit and Loss statement.
It shows sales (Income), cost of sales (COGS), gross margin, operating expenses, and profits or losses.
If the result show positive, it is Profit otherwise it is loss.
5. Gross Margin
If we deduct Cost of Goods sold from Sales revenue, it is Gross margin. Sometime it expressed by unit. Deference between unit sale and unit cost of goods sold is Gross margin per unit.
6. Fixed Cost
There are some expenses that not defer by number of production. For example You rent a ware house to store your finished goods (Laptop bag) worth $12000/month. It has capacity 10000 pieces of Laptop bag and your maximum production capacity per month is 10000 pieces. If u keep 120 , you have to pay $12000/month and if you keep 88000 pieces, still you have to pay the same amount. So in short time you have to pay the same amount. It is fixed cost. So the cost which is not related with number of production in short time is called Fixed Cost.