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EBITDA Unpacked: Understanding This Important Financial Performance Indicator

To keep a close eye on the financial health of your small business in Missouri, it is wise to pay attention to a number of performance indicators. One highly important measurement to watch is known as EBITDA, which stands for earnings before interest, taxes, depreciation and amortization. This figure can help you better understand the long term earnings potential of your small business. You must know how to calculate and use the EBITDA, plus avoid its potential pitfalls, to benefit from direct access to this important information. Term Breakdown Understanding the figures used to calculate EBITDA reports can help you utilize these metrics to ensure the success of your small business. Earnings

Learning About Operating Leverage – And How It Helps Your Business

Operating leverage is your company’s buffer against judgement and calculation mistakes, including errors in sales forecasts. Your operating leverage figures directly relate to your fixed and variable expenses, sales numbers and profit margins. Keeping an eye on your leverage calculations help you maximize revenues and minimize risk factors as you focus on improving your small business operations. Learn all you can about this important figure to protect your small business through all growth stages. Factors When effectively calculated, your operating leverage will reflect your sales figures, profit margins and expense ratios. If your company has more fixed expenses than variable costs, you ma

Debt vs Equity as sources of capital for my small to medium sized business

To begin your journey as a small to medium sized business owner, you may need to secure $3,000 to $30,000 in starting capital. As you establish your company, you will need to have these funds available for your initial expenses, including product development and employee acquisition. If you do not have the assets available to cover these costs, you may need to source your seed money from debt or equity based funding options. Understanding the similarities and differences between these two options can help you choose the best one for your company. Debt Funding To obtain funding through debt acquisition, you will need to take a loan or line of credit from an established lender and commit to pa

The difference between a gross margin and a contribution margin

You can gauge the success of your company operations, and facilitate continued growth, by generating monthly or quarterly profit and loss statements. Two key metrics revealed in a comprehensive profit and loss statement are gross margin and contribution margin figures. Since these two metrics each provide very different information about your small business operations, you must understand how to calculate and utilize these figures to ensure the financial standing of your company. Read on to learn more about the differences between gross margin and contribution margin calculations. Gross Margin Basics Gross margin figures represent the gross profit of your net sales over the course of the mea

Accounting Basics: Income Statement, Balance Sheet and Statement of Cash Flows

Your financial statements provide all of the performance metrics you need to successfully improve your small business operations. When you optimize your operations, you give your company a solid chance of continued profit growth through the years. To generate and utilize the performance reports you need, you must understand the finer nuances of the three most important financial documents, the income statement, balance sheet and statement of cash flows. Once you have a working knowledge of these accounting basics, you can forge ahead with your company growth strategies to improve the success of your small business in Missouri. Income Statement An income statement, or profit and loss statemen

Understanding The Difference Between Profit and Cash Flow

To keep your small business running through the years, you must generate a profit and maximize your monthly cash flow numbers. Although these terms are related, their overall impact on your business operations varies considerably. As you work toward stability and growth in the business world, it pays to completely grasp the differences between profit and cash flow – and their individual impact on your operations in Missouri. Profit Elements The total price of your products minus fixed and variable expenses is the total net profit you make off each sale. As your sales totals increase, your profits rise in tandem, though no actual cash has changed hands yet. As a result, on their own, net prof

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