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Layman's Terms (continued)

Earnings before interest, expense and taxes. This is equivalent to operating income.

Fixed assets
Tangible property used in the operation of a business.

Fixed costs
Costs that remain the same regardless of the amount of product a company makes and sells.

Income statement
Shows the financial results of a company's operations for a given period, usually a year or quarter. It begins with sales during the period and subtracts all expenses incurred during the period to show how much money the business earned after expenses.

Loss leader
A product on which a manufacturer or, more commonly, a retailer does not make a profit, but carries the product to attract customers.

Operating income
The amount earned by a company on sales after deducting the direct expenses of making the product and the expenses of selling it, and all other aspects of running the business itself.

Program Evaluation and Review Technique (PERT)
A project-management system that allows you to make an optimistic, pessimistic and "best guess" estimate of the time it will take to complete a project.

Retained earnings
Any income not distributed as dividends is classified

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as retained earnings and reinvested into the company.

Working capital
Measures the company's ability to pay its current obligations. Working capital equals current assets minus current liabilities.

This was first published in July 2007

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