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5 Economic Concepts You Need to Know if You are Setting Up a Company

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Economic Concepts

Setting up a business is not easy, nor is it easy to maintain it. Not only do you have to have a team, but you also have to face a day-to-day challenge filled with numerous challenges that require you to always be up to date and on the ball to lead your company to a promising and prosperous future.

One of the essential bases for achieving this is undoubtedly the economic aspect. Within this, several concepts and terms are essential and must be known first hand. We have compiled the most influential ones today.

Fundamental economic and business concepts for a modern business

To know the essential concepts for modern business, we have decided to use the dictionary offered by Economipedia. The site as an economic web portal is dedicated to educating people on economic and financial matters and has a complete glossary from which we have extracted the key terms, the most important economic terms for modern companies.You can visit Economipedia to learn more terms.

Liquidation balance sheet

The liquidation balance sheet is an accounting balance sheet that draws up and shows a list of all the assets that make up a company’s net assets. In other words, it is the final result obtained when all the liabilities of the company in question have been settled. It is the actual, or net, amount remaining to the business and its most accurate value.

Generally, it is used to give the appropriate value to a company given its liquidation. The latter is important, as the Capital Companies Act dictates that a company cannot be liquidated until its obligations and debts have been satisfied, which, at the balance sheet level, leads to precisely this liquidation balance. However, although it is an essential term that should always be borne in mind, it should only be put into practice when the intention is to proceed with the closure of the business.

ICO Lines

The ICO Lines or ICO Credits are financing channels opened by the Official Credit Institute. This lending institution id state owned, and its functions include funding investment projects and meeting the liquidity needs of Spanish businesses. They are focused on offering businesses an option to increase their liquidity for large-scale investments, although sometimes they are used for the sole purpose of ensuring the company’s survival.

The advantages of using ICO lines as a business lie in the fact that they are credits that guarantee solvency and seriousness because the State backs them. In other words, they have a really high level of reliability. These loans are mainly aimed at SMEs and the self-employed, although they also have a lot to offer start-ups. They are ideal for attending to invoices, payments and other needs derived from the greater or lesser availability of liquidity.

Competitive advantage

Competitive advantage is the characteristic, or set of characteristics, that sets a company apart from the rest and gives it a certain superiority over the competition. It can really be summarised as any attribute of a business that makes it more competitive within its sector. It is, without a doubt, one of the keys for any company that is established in a sector with a lot of competition.

As for the attributes that determine competitive advantage, the truth is that there are many. One can point to having a highly qualified workforce, having an excellent geographical location, or even having easier access to the resources necessary for the development of the activity or the production of the product. Even having a better networking presence can be a competitive advantage.

ROI (Return on Investment)

The Return on Investment or ROI is the indicator with which you can evaluate to what extent an investment you have made is profitable or not. It is certainly easy to calculate, as it only requires taking into account the profit and relating it to the investment. Profit, on the other hand, is easily calculated by subtracting the income from the investment made.

In this way, the benefits are divided by the investment to obtain the ROI. The truth is that, although it is so simple to calculate, it turns out to be an essential tool for any business, helping them to correctly assess whether they have made the right decision when implementing certain projects based on this factor.

Cryptocurrencies

Cryptocurrencies have been gaining importance at an enormous pace in recent years. Cryptocurrencies are a new form of money, virtual currencies that are usually based on blockchain technology and which, in the last decade, are beginning to become a method of payment to be used in all kinds of businesses. Its maximum and clearest exponent is Bitcoin.

There are many types of cryptocurrencies available in the market today but most companies that approach them end up valuing the use of Bitcoin or Ethereum, their best representatives. Even if cryptocurrencies are money that fluctuates, their implementation as a payment method brings more consumers closer and, above all, is a clear commitment to innovation.

 

We are a team of writers passionate about innovation and entrepreneur lifestyle. We are devoted to providing you the best insight into innovation trends and startups.

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