|
One thing for
sure, investment lingo is going to enter your daily life - and stay there. It's not
particularly difficult, but there is a lot of it and a fuzzy grasp of the concepts
will not do. After all, the talk is going to center on money, and the money is going
to center on your company.
Why It's Important
Far beyond merely sounding
as though you're in the know, your understanding of investment language links directly
to your daily operation. You're going to be creating and working with financial statements,
and your efforts are going to be measured by your numbers. If you postpone learning
this until someone wants to invest in your company, you're going to have to cram.
How It Works
Any profit-oriented business
has two basic financial objectives -- operating profitably and remaining solvent.
Your investors are going to want to chat with you about operating profit, for example
and for sure, so you should learn how to talk about:
1) balance sheet,
2) income statement, also referred to as profit and loss statement or P&L,
3) statement of retained earnings,
4) cash flow statement.
You also should understand how
the elements of each relate to the others. Eventually, you're also going to hear
investors talk about pools, dividends, liquidity preferences, bankruptcy, warrants,
pre-money valuation and post-money valuation, pre-money shares and post-money shares,
common and preferred stock, incentive and non-statutory stock options -- You get
the idea.
|