Business finance terms, explained simply.
No jargon, no complexity. Just clear definitions of the terms every business owner should know.
Revenue
The total money your business earns from sales, services, or other income sources before any expenses are subtracted.
Expenses
The money your business spends on operations: stock, rent, salaries, transport, marketing, utilities, and other costs.
Profit (Net Profit)
What's left after you subtract all expenses from your revenue. If revenue is UGX 10M and expenses are UGX 6M, your net profit is UGX 4M.
Gross Profit
Revenue minus the direct cost of goods sold (COGS). Shows how much you're making on your products before overhead costs.
Cash Flow
The movement of money in and out of your business. Positive cash flow means more money coming in than going out.
P&L (Profit & Loss)
A summary of your revenue, costs, and expenses over a period of time. Shows whether your business is profitable.
Accounts Receivable
Money that customers owe you for products or services you've already delivered. Also called "pending payments."
Accounts Payable
Money you owe to suppliers, vendors, or creditors for products or services you've received.
Operating Expenses
Regular costs of running your business: rent, utilities, salaries, marketing, transport, office supplies.
COGS (Cost of Goods Sold)
The direct cost of producing or purchasing the products you sell. For a retailer: wholesale price of stock.
Margin
The percentage of revenue that becomes profit. If you sell for UGX 10K and it costs UGX 6K, your margin is 40%.
Burn Rate
How fast your business is spending money. If you spend UGX 5M/month, your burn rate is UGX 5M.
Runway
How long your business can survive at the current burn rate with available funds.
Break-Even Point
When your revenue equals your expenses. Below this, you're losing money. Above it, you're profitable.
Mobile Money
Digital payment services like MTN MoMo, Airtel Money, M-Pesa that allow you to send, receive, and store money on your phone.
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