The need for close cooperation of HR and finance is one of the hottest issues in contemporary corporate management. Today's HR professionals should at least know the meaning of basic financial terms, but better they should be aware of how to use the terms in practice. Hrpeople.monster.com summarized 18 basic financial terms that every HR professional should know. We now bring some of them, you can read the original article with closer descriptions below (the "Source" link).
Cost-benefit analysis - The so-called CBA is a method of comparing the benefits of a new investment or business opportunity to the costs of the investment at a certain time frame.
Direct and indirect costs - Direct costs can be assigned to individual products (eg. the costs of producing one bottle by a company specialized in producing bottles). Indirect costs cannot be assigned to individual products (eg. the cost of operating machines used to produce multiple products).
Operating costs - Operating costs include the costs of running a business - salaries, sales and marketing costs and other costs that are not directly related to the production.
Sunk costs - Sunk costs are past costs that cannot affect current decisions and therefore should not be taken into account when calculating current or future profitability of an initiative.
Variable costs - Unlike the so-called fixed costs, variable costs depend on the number of products produced or services provided. These include material costs or salespeople's commissions.
Productivity measures - Indicators such as sales-per-employee, net-income-per-employee etc. provide a picture of labor productivity as well as technical equipment productivity.
Return on investment - The so-called ROI is the ratio of profit or loss from an investment relative to the amount of money invested
If you feel lot in the fundamentals that include terms such as costs, profit, sales, margins etc., try to pay lunch to someone from your financial or accounting department in exchange for a brief explanation.
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