10 Finance Terms Every Entrepreneur Should Know

Know Your Numbers, Grow Your Business

Entrepreneurs do not need to become accountants, but understanding basic finance can make better decisions much easier. From cash flow and margins to runway and break-even, these terms can help founders understand whether their business is actually healthy.

Revenue

Revenue is the money a business earns from selling products or services before expenses are deducted. It tells you how much the business is generating from its core activities. Rising revenue can indicate growth, but it does not automatically mean the company is profitable.

Gross Profit

Gross profit shows how much money remains after the direct costs of producing goods or delivering services are deducted from revenue. It helps entrepreneurs understand the economics of their products. A stronger gross profit can provide more room to cover operating expenses and invest in growth.

Net Profit

Net profit is what remains after a business accounts for its expenses, interest, taxes and other costs. It is often called the bottom line. A company can generate impressive revenue while still losing money, which makes net profit an important measure of overall financial performance.

Cash Flow

Cash flow tracks money moving into and out of a business. Positive cash flow means more cash is coming in than going out during a period. A profitable company can still face trouble if customers pay late or expenses have to be covered before revenue arrives.

Burn Rate

Burn rate shows how quickly a business is using its available cash, particularly when it is operating at a loss. Entrepreneurs often track monthly burn carefully. A high burn rate can shorten the time a startup has to reach profitability or secure additional funding.

Runway

Runway estimates how long a business can continue operating before it runs out of cash. It is closely linked to the company's cash balance and burn rate. Longer runway gives founders more time to improve revenue, reduce expenses, reach break-even or raise additional capital.

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