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The biggest myth of all is that finance is an exact language.
I am a developer for Income/Outcome board game business simulation which is used for development business acumen and finance literacy. Specifically we use the the game to create the context for applying the financial planning and analysis tools we are presenting. One of the key lessons we offer is that you should always ask ‘What do you mean by that?’:
I have seen the word Revenues as the top line of the Income Statement – i.e. the sales revenues. I have also seen it used at the bottom of the Income Statement – i.e. the profit revenues.
Margin has two possible meanings… sometimes it means the raw result, sometimes it means the raw result as a percentage of sales.
One of my favorite confusions is costs vs expenses… many people use the terms interchangeably and use other descriptors to separate the kinds of cost or expense (e.g. direct vs indirect, fixed vs variable). But I am now finding companies who use the term ‘cost’ for a line item that occurs above the Gross Profit line, and the term ‘expense’ for a line item that occurs below the Gross Profit line. In at least one case, these are called ‘direct cost’ and ‘direct expense’; so while they sound like the same thing, they are very different in nature.
Regarding the budget, you also need to look at the line-by-line variance… sometimes you get to the ‘right result’ but by a different path than you projected.Reply
Could not agree more! Accountants tend to trade on these myths, Finance for Non Finance Managers can also be fun, engaging and interactive – in fact if its enduring learning you are after then these are a must!!Reply