Finance is one of the important keys to the business. Before I took this course, I have experience in managing an architect company. The only thing that I knew is fixed cost, price, profit and loss. In my opinion, financial is the measurement of the status of the business by using income and outcome asset.
From the lesson, there are a lot of measurement that can define the status of business. Firstly, Profit & Loss is the principle structure of accounting. It start from total monthly sales deduct by the cost of sales and fixed cost. P&L can calculate the gross profit and net profit. Secondly, Product pricing is used to define retailer margin and product margin from the cost of the product. High volume of margin is the way to make high profit. Thirdly, before start selling product, Break-Even point is the sale amount that begins to make a profit. The point at which total cost and total revenue are equal. Therefore, Total profit at the break-even point is zero. Break-even point help business set the primary goal and define the feasibility of the business. Break-even point is depended on fixed cost and variable cost. Variable cost are costs which change as the quantity of product or service that a business produces changes. When production volume increase, the variable cost will increase. If the volume decrease, the variable cost will decrease too. Fixed cost remains the same even if no volume of production. If the company has a high fixed cost, the company will need high revenue to break-even point. When production increase, The fixed cost down. The price of production can be spread over the same amount of a fixed cost. Fourth, a photograph of the company is the balance sheet. It is a statement that contain asset, liabilities and capital of a business at a particular point in time. Also, balance sheet illustrates the balance of business net asset and shareholders’ equity. Fifth, The key financial ratio is the key to evaluate the situation of the business. The key financial ratio uses the Profit & Loss statement and the balance sheet to find the ratios. The good situation of the business statement can identify as gross profit more than 50%, profit margin before tax above 10%, equity more than debt, the net current asset more than current liabilities.