We try to keep things jargon free but where
we do use technical words and phrases
we provide simple explanations here.
Technical:
Sets out the assets and liabilities of an enterprise after or including some of the adjustments that accountants make.
Jargon Free:
A balance sheet is a snapshot of an organisation’s financial/cash position at a single date in the year. It demonstrates whether a business is solvent or not, whether it is in a stronger cash position than in a previous year and about how much is invested in the business on a longer term basis. It can be used to help value a business but this process should include many factors not detailed in the balance sheet.
Technical:
Previously called the Profit and Loss Account but as the accounting rules have changed now includes more information
Jargon Free:
Explains the value of sales during the year, what the costs were of producing those sales and all of the running costs of the business. It tells the story over a period of time (normally 12 months but it can be for shorter periods too).
Technical:
Dividends are appropriations of profit, not an expense of the company.
Jargon Free:
A company pays dividends to its shareholders once it has worked out the year’s profit and after it has made allowances for tax. A shareholder is different from a director although they may be the same individual, simply wearing a different hat.
Technical:
Key Performance Indicators.
Jargon Free:
A Key Performance Indicator is simply a way of measuring important things in your business so that you can drive towards achieving your objectives. Those could be to reduce costs or increase sales in a particular area or improve efficiency. KPI’s may not be the same for every business.