What are revenues?

Revenues are inflows earned from your customers. The key factor to understanding revenues is understanding that you must earn them.  To earn a revenue, you must provide whatever service or product it is that you provide to your customers.  For example, if you sell yoga equipment through an e-commerce site, then you will earn revenues as […]
Continue reading…

 

Do more with less

Perhaps the most powerful aspect of e-commerce is the ability of web entrepreneurs to create major business using almost no assets. Consider one of the great retailers of yesteryear: Sears Roebuck. To generate tremendous sales, Sears built a chain of department stores across the country, printed a fat catalog every year, and then mailed it […]
Continue reading…

 

Step costs explained

To run a business, you must understand how your business’s costs behave.  A fixed cost is any cost that will remain the same, regardless of changes in your sales volume.  Variable costs are costs that change with sales volume.  The greater your sales, the greater your variable costs. Step costs change only at certain intervals.  For […]
Continue reading…

 

The income statement explained

The income statement is a financial statement that measures a company’s profitability.  It is sometimes called: Statement of income Statement of earnings Statement of operations Profit and loss statement The basic formula for the income statement is: Revenues – expenses = net income Income statements are usually prepared using the accrual basis.  The largest expense […]
Continue reading…

 

Managing inventory productively

From Wikimedia Commons One of the most challenging aspects of running a business is managing inventory in a productive way. First of all, what is inventory?  These are the products that you have purchased which you plan to resell to customers. One new-wave approach to inventory management is “made-to-order.”  This means that you produce products […]
Continue reading…

 

What are audited financial statements and why?

Suppose that your child got to write their own report card. At the end of the semester, the child figures out their grades, writes them down, and then mails them to their parents.  How would the parent know that the grades were free of bias or error? Such is the issue with financial statements.  Reported […]
Continue reading…