Why Understand Finance?

 

Finances affect the activity and status of every business, because for the business to work, the money must be taken from somewhere and spend the other things needed.If we increase our production by 10%, how it will have reflected it on the side of our revenues and costs. Also 10%?

  • How to we determine best investment from many possible, ensuring the best business development. Which one has the best benefit for us?
  • Are we able to set correctly discount prices for our important customers?
  • Do we have set our prices as should be?  How well do we use our assets (people, offices, technology,...)?
  • How long does it take to collect money that customers owe us?
  • Which of our products and regions earn the highest profit? Which ones generate poor profits?
  • How much of our money comes from the owners, how many comes from the sale and how many from the other sources?

Each company (including the smallest ones) creates its own accounting documentation, budget and production/sales plan for the next period.  If you understand these documents well, you can put yourselves the right questions about how to continue your business, and at the same time you will be able to take the right decisions for your business, your division, department, or even a work team.  

It is very important to understand a special financial language, which from the beginning may not be well understood. Often different terms that are used in the finance can mean the same thing (sales and revenues or profit and earnings).  If you don 't know what these terms mean, check out the financial glossary on this site.

 

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