Finance & Accounting
Cash flow, statements, margins, valuation, and capital
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Profit Is Not Cash
Accounting profit and available cash differ because timing differs.
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Gross Margin
Gross margin shows what remains after direct delivery costs.
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Working Capital
Receivables, inventory, and payables determine cash tied in operations.
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Balance Sheet
A balance sheet connects assets, liabilities, and owners equity at a point in time.
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Return on Investment
ROI compares incremental benefit with resources committed.
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Opportunity Cost
Choosing one use of capital means giving up another.
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Fixed and Variable Behave Differently
Fixed costs stay flat as volume changes; variable costs move with each unit sold.
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Break-Even Is a Volume
Break-even is the number of units at which contribution covers fixed costs exactly.
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Depreciation Spreads a Cost
Depreciation allocates the cost of a long-lived asset across the years it is used, rather than the year it was bought.
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Runway Is a Countdown
Runway is cash divided by net monthly burn, expressed as the number of months before the money runs out.
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Two Ways to Count a Year
Accrual accounting records revenue when it is earned; cash accounting records it when the money moves.
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Debt Comes With Conditions
Loan agreements attach covenants — ratios and behaviours you must maintain — and breaching one can make the whole balance repayable.