understandig the working process in finance dacision making

May 28th, 2015
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Abilene Christian University
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Burn rate: Every company has a fixed amount of overhead costs that has to be paid every month, regardless of the level of sales activity. This burn rate is how much cash the firm goes through in a typical month for things like rent or mortgage for facilities; property taxes; all kinds of insurance (liability, workers compensation and property, for example); salaries and payroll taxes for employees; the marketing budget; royalty fees or other license agreement fees paid to partners; the printing or copying of mailings; telephones; IT infrastructure, including Internet connections and web hosting; research and product development; and bookkeeping/accounting and legal fees. Break-even sales activity is based on how much cash the company burns through every month.

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Basic finance terms that every entrepreneur should fully understand. They represent the core of understanding how business development works across all stages in the life of a venture1. Capitalization: This describes the way the company has funded its fixed assets. These assets include plant, warehousing and other facilities; equipment and machinery; trucks, delivery vans and other vehicles; long-term contracts; and telecommunications infrastructure. The "cap sheet" typically shows the long-term debt and the equity in the firm. The equity will include preferred stock, common stock and any paid-in capital from outside investors, as well as retained earnings from operations. The various ownership stakes in the company will be delineated, both by shares owned and the relative percentage those represent of the company's total.2. Depreciation: The fixed assets used in company operations have significant tax advantages for the company as well. Depreciation refers to the incremental value of a brand-new asset that is lost each year due to normal use in the company. Each year, equipment, buildings, machinery and vehicles lose some of their "newness" to technology advances, as well to everyday wear and tear from usage. Over time, the company is allowed to deduct that "annual loss in value" from its revenues (as if it is a cost), and this lowers the taxable income that must be reported when the company files its annual tax returns. For example, a $100,000 write-off on some equipme

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