FINANCE FOR NON-FINANCE

PROFESSIONALS ABDUL KHALIQ

Including Smart questions to WHAT WE MEAN…

WHEN WE SAY…
ask your Finance counterpart!
Assets are what a company owns or Assets are like the things you own. For
ASSET vs LIABILITY
controls and can be used to generate instance, your car, your house, or the
future economic benefits. Examples money in your bank account. These are
include cash, inventory, and buildings. valuable things.

Liabilities are what a company owes to Liabilities are like your debts or what
others. This includes loans, accounts you owe, such as a mortgage on your
payable, and accrued expenses. house or a loan you need to repay.

Question to Ask: "Can you share insights into how our current asset allocation
supports our growth and how our liabilities affect our financial stability?"

BALANCE SHEET vs A balance sheet provides a snapshot of
a company's financial position at a
INCOME STATEMENT
specific point in time, showing its
assets, liabilities, and equity.
An income statement shows a
company's revenues and expenses over
a period, indicating its profitability.
A balance sheet is like a snapshot of
your finances today. It shows what you
have (assets) and what you owe
(liabilities).
An income statement is like a video of
your finances over a period. It shows
how much you made (revenue) and
how much you spent (expenses).

Question to Ask: “How can our balance sheet and income statement insights
collaborate to drive our financial decisions more effectively?”

Equity is a broad financial term
EQUITY vs SHAREHOLDER’S
referring to ownership or an ownership
EQUITY interest in a company.
Shareholder's equity is a specific type
representing the residual interest in a
company’s assets after deducting
liabilities. It's often called "owner's
equity."
Equity is like the value of your house. If
your house is worth $300,000, that's
your equity in it.
Shareholder's equity is like a
company's net worth. If a company's
assets are worth $1 million and owe
$200,000, its shareholder's equity is
$800,000.

Question to Ask: "What strategies can we employ to increase both our equity and
shareholder's equity, ensuring a brighter financial canvas for our company?"

ACCRUAL vs CASH Accrual accounting records

transactions when they occur,
regardless of when the money received.
Revenues and expenses are recorded in
the period in which they are incurred.
Cash accounting records transactions
only when cash is received or paid out.
It doesn't consider AP or AR.
Accrual accounting is like counting the
money you'll get for a job you did, even
if you haven't been paid yet.
Cash accounting is like only counting
the money in your pocket right now.

Question to Ask: "In which areas of our financial reporting should we consider
transitioning from the cash accounting to the telescope of accrual accounting?"

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FINANCE FOR NON-FINANCE
PROFESSIONALS ABDUL KHALIQ

Including Smart questions to WHAT WE MEAN…

WHEN WE SAY…
ask your Finance counterpart!
Cash flow represents the movement of
CASH FLOW vs PROFIT
cash in and out of a business over a
specific period, reflecting the liquidity
and operational stability of the entity.
Profit, a net income or earnings, is the
financial gain derived from subtracting
all expenses from total revenue.
Cash flow is like counting the money
that comes in and goes out of your
wallet. Your wallet might still be empty
if you spent it all.
Profit is like looking at your lemonade
sales and subtracting all the costs. If
you made $100 but spent $90 on
lemons and cups your profit is $10.

Question to Ask: "How can we maintain a healthy cash flow while ensuring that our
profit pulse remains strong and steady?"

Revenue is the total income generated
REVENUE vs PROFIT
by a company from its primary
operations, such as selling products or
providing services.
Profit (or net income) is what remains
after deducting all expenses from
revenue. It represents the company's
actual earnings.
Revenue is the money you get from
your job or selling things. If you sell
lemonade for $10, your revenue is $10.
Profit is what you have left after you
subtract all your costs. If it cost you $4
to make the lemonade, your profit is
$6.

Question to Ask: "How can we optimize our operations to increase revenue streams
while ensuring that we maximize our profit reservoir?"

Gross margin is the percentage of
GROSS vs NET MARGIN
revenue left after deducting the cost of
goods sold (COGS). It shows the
profitability of a company's operations.
Net margin is the percentage of
revenue left after deducting all
expenses, including COGS, operating
expenses, interest, and taxes.
Gross margin is if you sell lemonade for
$10 and the lemons and sugar cost you
$2, your gross margin is $8 (80%).
Net margin is subtracting expenses, like
paying for a table and advertising. After
all those expenses, you might have $4
left from your $10 sales, so your net
margin is $4 (40%).

Question to Ask: "How can we cultivate our gross margin and trim our expenses to
reap a more bountiful net margin harvest?"

Fixed costs, also known as overhead or
FIXED vs VARIABLE COST
indirect costs, are expenses that remain
constant regardless of the level of
production or sales.
Variable costs, sometimes referred to
as direct costs, are expenses that
fluctuate in direct proportion to
changes in production or sales volume
Fixed costs are like the bills you must
pay monthly, such as rent or mortgage.
They stay the same no matter how
much you use.
Variable costs are like expenses that
change depending on how much you
use, such as groceries or utility bills.

Questions to Ask: “How can we strike the right balance between Fixed Costs and
Variable Costs to optimize our cost structure?”

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FINANCE FOR NON-FINANCE
PROFESSIONALS ABDUL KHALIQ

Including Smart questions to WHAT WE MEAN…

WHEN WE SAY…
ask your Finance counterpart!
Depreciation is the systematic
DEPRECIATION vs AMORTIZATION
allocation of the cost of tangible assets
over their useful lives, reflecting the
gradual reduction in the asset's value.
Amortization is the process of
spreading the cost of intangible assets,
such as patents or trademarks, over
their expected useful periods
Depreciation so, if your blender was
worth $100 last year and now due to
wear and tear it's only worth $90, it has
depreciated by $10.
Amortization is like spreading out the
cost of something valuable for your
stand, like a fancy sign over a few years
instead of paying for it all at once.

Question to Ask: "How can we apply the principles of depreciation and amortization
to our long-term assets to ensure their value appreciates over time?"

CAPEX represents significant CapEx is like buying something that will

CAPEX vs OPEX
investments made in acquiring or
upgrading its long-term assets, such as
property, plant, and equipment.
OPEX is the ongoing day-to-day
expenses incurred by a business to
maintain its regular operations and
generate revenue.
benefit your lemonade stand for a long
time, like a new lemon squeezer. It's a
one-time expense.
OpEx is like the daily expenses of
running your lemonade stand, like
buying lemons and cups. These are
regular, ongoing costs.

Question to Ask: “How can we strategically balance our CAPEX and OPEX to ensure a
solid foundation while maintaining the day-to-day efficiency of our operations?"

Equity financing refers to the method
EQUITY vs DEBT FINANCING
of raising capital for a business by
selling ownership shares or equity
stakes in the company to investors.
Debt financing involves procuring funds
for a business by taking on debt
through loans, bonds, or other financial
instruments.
Equity financing is like getting money
for your lemonade stand by selling a
part of the business to investors. They
become co-owners and share profits.
Debt financing is like borrowing money
to expand your lemonade stand. You
have to pay back the loan with interest
but keep full ownership.

Question to Ask: “How should we strategically choose between Equity Financing and
Debt Financing to balance ownership control and financial obligations?”

ROI vs ROA ROI is the profitability of an investment
by measuring the ratio of net profit
generated from that investment to the
initial cost of the investment.
ROA, is a financial ratio that evaluates a
company's ability to generate earnings
from its total assets.
ROI If you invested $100 on the stand
and earned $150, your ROI would be
50%.
ROA if your lemonade stand's assets
are worth $1,000, and it makes $200 in
profit, your ROA would be 20%.

Question to Ask: “How can we leverage ROI to assess the success of individual
investments and ROA to optimize our overall asset utilization?”

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