Financial Terms Explained

Financial terms are very difficult to understand, and most of the people don’t know all the financial terms that they have to agree with and their information about these financial terms is a must. The financial terms are used everyday in almost every working domain, no matter that is a national bank or a little business. Those financial terms could be very difficult to understand without some knowledge, and that’s why most of the people are looking for a dictionary or something like this, where they can find the explanation of some financial terms. Here are some of the most frequent financial terms and their definition:
Budget
The budget is an amount of money designed for some projects or acquisitions in a company. For example, the budget that needs to be invested for the modernisation of the offices. A budget is calculated after a plan is released. Also, budget is known as forecast.
 
Capital Ratio
The capital ratio represents the amount of capital (budget) that a company might have. This capital is required, because without it a company can go straight to insolvency. Usually, the capital ration is a must for the banks, because every bank needs funds for a good function. 
 
Net Profit
The net profit is different from a company to another. For an easier understanding, the net profit is the money that are remaining after all the costs, with the employees, fees to the state, and other things that needed to be purchased in the company, such as laptops, for example. The net profit is the income of the company. Also, sometimes the net profit can be negative, and if the net profit is frequently negative, then the company will run in insolvency.
Production Cost
This term is usually used in factories. The production cost represents the cost necessary for manufacturing an object. In the production cost is calculated the material and the labour. Also, to find out the cost of production per unit, you can calculate the material that needs to be utilized for manufacturing a unit, and also the labour or, you can calculate the whole budget for the production, and divide the budget at the number of units produced. 
 
Advertising
This is one of the best methods that a company can use to attract their customers. Also, the discount can be very helpful but not as much as the advertising. If the advertising if done with professionalism, the company will never lose profit and their services will be requested by more and more clients. These days, the best method to advertise a company is to use the online advertising, but the television advertising remains in the top. However, the television advertising is more expensive then the online advertising.
Those are 5 of the most frequently used financial terms and their definition. If you have a little knowledge in the financial domain, then you can very easily understand every financial term that you want or you need. It’s very important to know a few financial terms because you use and hear them everyday.

Author Bio: James is a free lancer writer of http://www.mybusinessloans.com.au/ and he loves to write for My Business Loans
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