Business Literacy Institute Financial Intelligence

YouTube
LinkedIn
Facebook
  • Financial Concepts
  • What We Offer
    • Products & Services
    • Live Training
    • Online Financial Training
    • Financial Intelligence Books & Comics
      • Book Excerpts
      • Comic Excerpts
    • Training Topics
      • Income Statement
      • Balance Sheet
      • Cash Flow Statement
      • Cash versus Profit
      • Financial Ratios
      • Return on Investment (ROI)
      • Advanced Topics
    • Financial Intelligence Test
    • Project Management for Profit Training
    • Webinars
    • Money Maps
    • Keynotes
  • Harvard
  • Blog
  • About
    • BLI Team
    • Articles
    • Our Clients
    • Testimonials
    • Interviews
    • Contact
You are here: Home » Financial Concepts » Don’t Let the Language Confuse You

Don’t Let the Language Confuse You

Finance and accounting has its own language, as does any field. But finance and accounting have seemed to add a twist by using several words or phrases that mean the same thing. The end result is that non financial folks tend to get confused or overwhelmed, and may even give up trying to understand what is being said by their CFO or shared in a meeting.

First, let’s look at sales. Another term for sales is revenue. Both of those terms mean the same thing. Some companies do have specific definitions for each (for example, sales might be the “gross” amount, and then “revenue” might take into account any discounts given), but they represent customers’ promise to pay for products and services provided.

The most confusing term when it comes to revenue, however, is when it is called income. Using the term income to mean revenue is wrong. Income is the bottom line, that is, how much is left over from revenue after expenses have been subtracted.

Now, let’s look at the term profit. The terms profit, income and earnings all mean the same thing. There are various forms of profit (or you could say, various forms of income or earnings) – gross profit, operating profit and net profit. Each simply has more expenses subtracted from revenue to get to that profit number. Confusion can arise when you look at your income statement, because the terms used for the various profit categories might be gross profit, operating income and net earnings (when they could just as easily have said gross profit, operating profit and net profit). You just need to remember that profit, income and earnings all mean the same thing, and the important term is either gross, operating or net.

Finally, the name of the report where you’ll find revenue, expenses, and profit is the income statement. Here we have lots of names – profit and loss statement, P&L statement, statement of operations, operating statement, statement of earnings or earnings statement. Sometimes the word “consolidated” is in front of these phrases. Just remember, these are all the same report – the report that gives you the revenue, expenses and profit of a company. We’ve seen some companies that mix and match the terms, depending on the part of the organization.

 

Look up another Financial Concept:

A  B  C  D  E  F  G  H  I  L  M  N  O  P  Q  R  S  T  V  W 

Look up another Financial Concept:

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Enroll in Online Financial Training today, it’s only $99

Enroll in the Training Now!

Looking for training on the income statement, balance sheet, and statement of cash flows? At some point managers need to understand the statements and how you affect the numbers. Learn more about financial ratios and how they help you understand financial statements.

Our online training provides access to the premier financial statements training taught by Joe Knight. Learn finance in a fun and clear way that's easy and painless.

Find out more

Business Finance Training

Learn the basics of the financial statements and the story your numbers tell. BLI offers:

Live Training

Ask questions and participate in discussions as our trainers teach you how to read and understand your financial statements and financial position.

Online Training

Learn at your own pace and go through the financial statements and ratios. Take the quizzes to see how you learned.

Log in to your online training account

We wrote the book on Finance!

Financial Intelligence Books

Financial Intelligence takes you through all the financial statements and financial jargon giving you the confidence to understand what it all means and why it matters.

Do you understand finance? Take our test

Are you smarter than the average manager? Take our nationally validated test to see how much you really know. See how you compare to your boss and co-workers.

Contact BLI

E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Call: (818) 591-5955

Copyright © 2023 Business Literacy Institute · Log in to your online training account