Basic Terms For HR Professionals

HR professionals play a vital role in every company. There are lots of financial terms the company deals with. There are some basic financial terms which HR professionals should have knowledge about. They are-

1. Accruals: Expenses which incurred but still not paid during the current accounting period, e.g.: electric bill.

2. Allocation: To split expenses into different categories in a systematic manner. E.g.: rents are charged to departmental unit on the basis of square feet.

3. Amortize expenses: Depreciation on assets such as land, building, furniture etc., show that how much they have used and for how many years.

4. Direct and in direct expenses: Expenses which directly relate to the manufacture of product e.g.: cost of a paper which is used to make a book. Expenses which are indirectly related to manufacture process like machinery used in the production process.

5. Earnings per share: The most important financial term is to watch the financial performance means net income divided by the number of share outstanding. Because stock prices goes down with fall in earning per share.

6. Fixed assets, gross margin and profit: Fixed assets are the assets which cannot be converted into cash like building, tools, machinery, equipments etc. Gross margin is the ratio that measures gross profit related to sales revenue in terms of percentage. Gross profit is the amount left after calculating all direct expenses.

7. Operating expenses: Expenses that occurs in running the business like rents, salaries, marketing cost etc as well as many expenses which are not directly related to the business.

8. Productivity measures: Sales-per-employee and net-income-per employee, link to the revenue and profit information and provides the details of sales and income produce by the employees.

9. Return on investment: It is calculated in ratio by measuring cash return from an investment relative to its cost.

10. Sunk cost: Investment which has been made earlier should not be included in current decision. Such cost not included in calculating the profit for current year.

11. Time value of money: Dollar you have today can get more revenue than a dollar received in future, i.e., you can invest them and earn revenue.

12. Variable costs: The costs which keeps on changing like cost related to sales such as sales commission and cost of material.

So, attention, all HR professionals. Keep in mind these terms. They can be really helpful.