The portion of the total profits of the company that the owners have reinvested in the business during its entire history is called retained earnings. The retained earnings on the company’s balance sheet is the cumulative net income that the company has achieved throughout its entire history minus the cash dividends that the company has paid to its

A going concern is a business that is self-sustaining with predictable revenue streams, reasonable expenses, and adequate cash levels to pay its bills. Building such a business must be the goal of every small business owner/manager.

As a manager of a small business, you probably don’t have brand equity. Don’t worry; just know what it is so if you do see it, listed usually on the Balance Sheet of a publicly traded company, you’ll know what it means.

net margin Net revenue minus both direct variable expenses (COGS) and indirect variable expenses (operating costs) per unit.

The best managers take on fixed expenses when the marketplace has already voted for their products by purchasing them. Let net revenue and gross margin drive the right level of expenses, not the other way around. This is the Holy Grail of small business management.

It’s absolutely essential to know the unit cost for every product the company sells. This is the direct cost of materials and labor required to create a saleable product whether that product has been sold or not. Unit cost is the same as COGS for product that has been sold and shipped out the door.

What’s the moral of the story? One very large client can rattle your gross margin, cash flow, and profits to the core. Don’t try to get the one big client and think life will be easier. It rarely works that way, especially when a business is small. The business takes on a lot more risk when it sells to large clients. It’s also harder to control

One last word on current liabilities: If the business employs full-time or part-time staff, there may be an additional line on the Balance Sheet called salaries payable. It’s money that’s been earned by the employees but not paid yet by the business. Just know what it is and if it pops up sometime, you’ll understand it.

forecasted demand The amount of a product or service that you predict customers are going to buy. G going concern A well-run, self-sustaining business that isn’t under threat of bankruptcy; it has predictable revenue streams, reasonable expenses, and adequate cash levels to pay its bills now and in the foreseeable future. good will An asset that