Words and explanations

Explanations It is important to highlight that these explanations are based on my experience from beeing interested in financials for several years, they are not necessarily correct. I take no responsibility for the correctness in these definitions. If you find a fault in any of them, please let me know.

For the examples below, we imagine a car-sales company that at the beginning of the year have no inventory (no cars) but that during the first year buys car for 800$ and sells it for 1000$ the year after.

Income statement - this is the place where the results of the business is shown, not to be confused with cash flows, see below. There would be no results to show in the first year for the example business described above, but a negative cash flow. In the year after, there would be a positive result of 200$ (if no other costs arise) and a positive cash flow (1000$).

Balance sheet - the balance sheet describes the financial liabilities, equity and assets that are held within the company. While the income statement is a summary of the results for a period of time, the balance sheet shows the current situation (on a specific day). Lets say that the car in the example above was bought soley with equity (shareholder money and not loans), the equity listed on one side of the balance sheet would amount to 800$ with an asset (current asset) on the other side beeing the car itself, also amounting to 800$.

Cash flow - the cash flow analysis shows exactly what it says, the actual flow of cash. It is sometimes confused with the income statement, but does actually not take into consideration if you make money on a certain product or service, just what inflow or outflow of cash there has been during a certain period of time.

Turnover - this represents the top line of the income statement from which all costs are subtracted. It tells us the value of all services and/or products sold during a certain period. 

EBITDA/EBIT/EBT/Earnings or result - E = earnings, B = before, I = interest, T = tax, D = demortization, A = amortization. These shortened expressions indicate on which lever we are talking about the results. Earnings, or net result, is the final form of results having taken into consideration all costs, but on top of that it is sometimes more relevant to discuss results before taxes have been withdrawn for example.

Dividend - The dividend is the money made chosen to be given to the shareholders. Normally, all money made is not transfered to the shareholders as that would hinder further growth and investments. In other words, it is usually possible to determine the growth ambitions/possibilities of a company based on the level of dividends paid.