Here are but just a few concepts all serious entrepreneurs know. If you want to attract an angel investor you might want to incorporate these concepts in your business language.
Net earnings and net income both fall under the “bottom line” description. You may hear people talk about “affecting the bottom line” of the company and this is simply any action that may increase or decrease the company’s net earnings, or overall profit.
Gross margin is expressed as a percentage and represents the percent of total sales revenue that a company keeps after subtracting the cost of producing its goods or services. The higher the percentage, the more the company keeps on each dollar of sales (that will eventually go toward paying its other costs and obligations).
Equity versus Debt:
The “equity versus debt” comparison may seem silly to some, but you would be surprised at how many people I have come across who have no idea what either really means. Equity is simply money obtained from investors in exchange for ownership of a company, while debt comes in the form of loans from banks that must be repaid over time.
Leverage can be interpreted a couple different ways. In the financial world, leverage is most commonly known as the amount of debt that can be used to finance your business’ assets. In simple terms, the amount of money you borrowed to run your business.
Concentration is simply the measure (usually a percentage) of how much business you are doing with a specific client or partner. Relying on one or a couple of clients and partners to do business is a prime example of over-concentration. This is a losing strategy for any business because if something goes wrong with those limited relationships your business will be in serious trouble. Focus on keeping low concentrations for your accounts and investors will be impressed.