Money Speaks - Bankers Jargon! Doesn" t Anyone Speak English?
Have you ever sat there listening to your banker go on and on in a language you don\'t quite understand. Do you find they are speaking in acronyms and encrypted messages? Do you sometimes just want to shout..... Speak my language!
Bankers often speak in a language that seems foreign to you because they assume you understand what they are talking about.
The most favourite of all jargon is the infamous debt to equity comment. You just don\'t understand why they get so worked up about it. You are probably thinking \"So what if my debt to equity is 4 to 1. Why should I care?\"
In simple terms, debt to equity explains the financial health of the company. For example; suppose your company has a debt to equity ratio of 4 to 1. To a banker, that means there is $4.00 in debt compared to $1.00 invested in the company. In other words, your lenders own more of your company than you do. So, if you were asked to lend money to your company at this type of ratio, would you?
What this tells the lender is your company has too much debt which can cause a shortage of cash flow to pay debts due to loan and interest payments ultimately causing financial strain on the company operations.
If you know your debt to equity ratio is high, here are a few things you can do:
1. Reduce your debt through the sale of unused or non-productive assets.
2. Examine your inventory, does it have dust on it and not selling. Be creative in disposing of excess inventory.
3. Are you buying more inventory than you need? If so, review your purchasing process and make changes.
5. Have you stretched your payables and are they growing. If so, get working on those receivables and collect the money owing to pay down your payables.
6. Lastly, inject personal money into the company or bring on a partner with cash.
If you don\'t reduce your debt load, it will eventually create a cash crunch in the business which will hamper growth and create some sleepless nights.
"One of the keys to effective communication and dispute resolution is understanding ourselves and how we think and also understanding how others are wired as well. Each of us has personality styles that are unique to ourselves - however there are also patterns as well. When you understand the differing personality styles and their blends - you begin to see people as they are with more understanding! For more information on understanding personality styles please contact Mandie at [email protected]"
Bankers often speak in a language that seems foreign to you because they assume you understand what they are talking about.
The most favourite of all jargon is the infamous debt to equity comment. You just don\'t understand why they get so worked up about it. You are probably thinking \"So what if my debt to equity is 4 to 1. Why should I care?\"
In simple terms, debt to equity explains the financial health of the company. For example; suppose your company has a debt to equity ratio of 4 to 1. To a banker, that means there is $4.00 in debt compared to $1.00 invested in the company. In other words, your lenders own more of your company than you do. So, if you were asked to lend money to your company at this type of ratio, would you?
What this tells the lender is your company has too much debt which can cause a shortage of cash flow to pay debts due to loan and interest payments ultimately causing financial strain on the company operations.
If you know your debt to equity ratio is high, here are a few things you can do:
1. Reduce your debt through the sale of unused or non-productive assets.
2. Examine your inventory, does it have dust on it and not selling. Be creative in disposing of excess inventory.
3. Are you buying more inventory than you need? If so, review your purchasing process and make changes.
5. Have you stretched your payables and are they growing. If so, get working on those receivables and collect the money owing to pay down your payables.
6. Lastly, inject personal money into the company or bring on a partner with cash.
If you don\'t reduce your debt load, it will eventually create a cash crunch in the business which will hamper growth and create some sleepless nights.
"One of the keys to effective communication and dispute resolution is understanding ourselves and how we think and also understanding how others are wired as well. Each of us has personality styles that are unique to ourselves - however there are also patterns as well. When you understand the differing personality styles and their blends - you begin to see people as they are with more understanding! For more information on understanding personality styles please contact Mandie at [email protected]"
