Glossary

Sales Revenue

The total money your business receives from selling products or services. It is the starting point of any profit calculation — just what customers pay you, with no costs taken out yet.

Cost of Goods Sold (COGS)

The direct cost of making or delivering what you sell. Includes raw materials, parts, packaging, and direct labor that goes into each product or service.

Gross Profit

What is left after you subtract the direct cost of what you sold from your sales revenue. It shows how much your core business activity earns before running costs.

Gross Margin

Gross profit shown as a percentage of sales revenue. It tells you what share of each sale stays in your pocket after direct costs. Higher gross margin means more room to cover other costs.

Operating Expenses

The regular costs of keeping your business open: rent, utilities, salaries, marketing, insurance, software subscriptions, and similar ongoing expenses.

Net Profit

The actual profit left after all costs are subtracted — direct costs, operating expenses, taxes, and other costs. This is the real money your business made during the period.

Net Margin

Net profit shown as a percentage of sales revenue. It tells you how much of each dollar earned becomes real profit after everything is paid.

Fixed Costs

Costs that stay the same no matter how much you sell — rent, insurance, loan payments, subscriptions. You pay them even if sales are zero.

Variable Costs

Costs that increase as you sell more — materials, packaging, shipping per order, or any cost tied directly to each unit sold.

Contribution Margin

The amount each sale contributes toward covering your fixed costs, after variable costs are removed. It answers: how much does each sale help pay the bills that never go away?

Break-even Point

The level of sales where total revenue equals total costs. At this point you are not making a profit or a loss. Every sale above break-even adds to your profit.

Cash Flow

The actual money moving into and out of your business during a period. Cash flow is not the same as profit — a business can be profitable but still run out of cash if payments are delayed.

Opening Cash Balance

The amount of cash you have at the beginning of a period — usually the start of the month. It is your starting point for tracking cash movement.

Closing Cash Balance

The amount of cash you have at the end of a period after all cash in and cash out are accounted for. It shows whether you are in a stronger or weaker cash position.

ROI (Return on Investment)

A simple percentage showing how much you gained or expect to gain from an investment compared to how much you put in. Useful for deciding whether a purchase or project is worth it.

Payback Period

The time it takes for an investment to earn back its original cost through the extra profit it generates. Shorter payback usually means lower risk.

Business Health Score

A simple combined score based on several financial signals — profitability, cash position, and performance. It gives a quick snapshot of how your business is doing overall.