APR stands for Annual Percentage Rate and shows the true yearly cost of borrowing.
It includes the interest rate plus any fees, all rolled into one percentage. This makes it easier to compare different loans or credit cards and see which one actually costs more overall.
A balance sheet is a snapshot of a business’s finances at a specific point in time, usually at the end of its financial year.
It shows what the business owns, like cash or property, and what it owes, such as loans or unpaid bills. The difference between the two is the owner’s stake in the business. Lenders and owners use the balance sheet to judge how financially stable the business is and whether it can pay its debts.
A creditor is anyone or anything that you owe money to as a business.
This could be a bank that’s given a loan, a supplier that’s let you pay later, a credit card company, or even a friend who’s lent you cash. In all cases, the creditor expects to be paid back under agreed terms, sometimes with interest.
A debtor is a customer who owes the business money for work already done or goods already delivered.
This is money the business expects to receive, usually within the next 12 months. In simple terms, it’s the total of unpaid customer invoices and an important part of the cash the business is waiting to collect.
EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation) shows how much money a business makes from its trading, before taking into account its cost of funding (interest), how much it pays the government (tax), or accounting charges (depreciation and amortisation) that don’t impact the business' day to day operations.
In simple terms, it tells you whether the core business is actually making money from selling its products or services. Lenders and investors use it because it strips away things that vary from business to business and focuses on the underlying earning power of the company.
A Profit and Loss (P&L) statement shows how much money a business earned and how much it spent over a set period, typically their trading year.
If income is higher than costs, the business made a profit. If costs are higher, it made a loss. It’s one of the main reports used to see how the business is performing, work out tax, and make decisions about the future.