Essential Financial Terms for Beginners

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Assets are valuable resources owned by individuals or businesses, adding monetary value. They can be tangible (physical) or intangible (not physical).


Liabilities are debts owed to others, such as bank loans and creditor dues. They can be short-term or long-term, requiring repayment with interest.

Financial Statements:

Financial statements provide a snapshot of a company's past and current financial condition, essential for business owners, investors, and individuals to understand. They offer insights into a company's financial situation at a glance.


Capital is vital for running any business. Partners or directors may provide initial capital, but as business grows, additional funds from external sources become necessary. Whether for routine activities, procurement, asset purchases, salaries, or other expenses, capital is crucial for meeting various business needs.

Cash Flow Statement :

Shows money in and out of business. Answers: How much cash generated and used? Tracks cash from operations, investments, and financing. Crucial for understanding company finances, especially for investors.

Compound Interest:

A powerful concept for multiplying earnings over time. It means earning interest on both the principal and previously earned interest. This leads to exponential growth of returns over the years.