Category: Business

All You Need to Know About CEO, CFO, CIO, COO

All You Need to Know About CEO, CFO, CIO, COO

When we speak of CEO, CFO, CIO, COO and other acronyms, we refer to the main senior positions of a company that are part of the C-Level or C-Suite range . Although Spanish speakers have different names for these jobs, the acronyms from English are currently used. In this article we will define what they mean, what type of charges they are and what function they have.

What does a CEO do?

According to abbreviationfinder, the CEO, or Chief Executive Officer, is the person in charge of directing the organization, its head at the operational level, in Spanish it is the general director or executive director. As you know, it is one of the best known acronyms in the business world and due to its importance we have dedicated an exclusive article to it so that you can get a clear idea of ​​what a CEO is and what his functions are.

What functions does a COO have?

COO (Chief Operating Officer). Director of Operations, oversees how the company’s product creation and distribution system is working to ensure that all systems work well. Working as COO often serves as training for the position of CEO: it is a natural step, since the director of operations already understands the mission and objectives of the company and is the right hand of the executive director.

What does CMO mean? what is he in charge of?

CMO (Chief Marketing Officer). He is responsible for Marketing activities, which include sales management, product development, advertising, market research and customer service. His main concern is to maintain a stable relationship with end customers and communicate with all other departments to get involved in Marketing activities.

What is a CFO?

CFO (Chief Financial Officer). Financial Director, is in charge of the economic and financial planning of the company. He is the one who decides the investment, financing and risk with the aim of increasing the value of the company for its owners (whether they are shareholders or partners). He brings financial and accounting knowledge and, in general, an analytical view of the business. In many cases, the CFO is also the strategic advisor to the CEO.

What is a CISO?

the profileCISO – Chief Information Security Officer, is the executive responsible for the information and data security of an organization. While in the past the role was fairly narrowly defined in that regard, today this concept is often used interchangeably with chief security officer and vice president of security, indicating a broader role in the organization..

What is a CIO? what is he responsible for?

CIO (Chief Information Officer). Responsible for the company’s information technology systems at the process level and from the planning point of view. The CIO analyzes what benefits the company can derive from new technologies, identify which ones are of most interest to the company, and evaluate their performance. It focuses on improving the efficiency of internal processes in order to ensure effective communication and keep the organization running efficiently and productively.

What is a CTO and what does he do?

CTO (Chief Technology Officer). Technically responsible for the development and proper functioning of information systems from the point of view of execution. He is generally responsible for the engineering team and for implementing the technical strategy to improve the final product. Sometimes the positions of CTO and CIO can be confused, since in some companies they share tasks.

The key difference is that a CIO focuses on information systems (communication workflow), with the goal of increasing efficiency, while a CTO is responsible for technology strategy aimed at improving the end product.

What is a CCO and what is it responsible for?

CCO (Chief Communications Officer). He is in charge of managing corporate reputation, contacting the media and developing Branding strategies. He knows the media and has a good relationship with them so that the brand is visible and, whenever possible, associated with positive messages. The CCO must play a relevant role in its communication management so that the corporate image is good or, in other words, that the opinion of potential clients is favourable.

Other acronyms such as CGO, CRO, CXO, CDO

In the digital world you have to be vigilant because the work environment is becoming more international and is influenced by a predominant Anglo-Saxon world. That is why you need to know new professional profiles that did not even exist before and that have kept their Anglo-Saxon name, how to:

  • CGO – Chief Growth Officer
  • CXO – Chief Customer Experience Officer
  • CDO – Chief Digital Officer
  • CRO – Chief Remote Officer


Meaning of CFD

Meaning of CFD

According to abbreviationfinder, CFD stands for “Contract for Difference”. With a CFD, investors can make profits by speculating on price changes. Contracts for difference are particularly attractive because they are characterized by a high level of leverage. This means that even a low capital investment can bring high profits. However, leverage can also have a negative effect: If the price does not develop as hoped, investors can quickly lose large sums of money. Therefore, CFDs are not suitable for beginners, only for experienced investors.

  • With a CFD, investors and providers agree to swap money and base value at the beginning and end of the term of the CFD.
  • In order to be able to trade with CFDs, the trader must deposit a security deposit (“margin”).
  • CFDs work with a high leverage effect, which multiplies the margin and moves large sums in the market with little capital investment.
  • This mechanism makes CFD trading attractive, but it also carries a great deal of risk.

What exactly is a CFD?

CFDs belong to the category of derivative financial instruments and are highly speculative. Every CFD is a contract between two parties: the investor (or trader) and the provider (or market maker). You speculate on the price development of a certain base value and agree to exchange money and base value at the beginning and end of the term of the CFD. Various trading values ​​are used as the base value, for example stocks, commodities or currencies.

Trade CFDs

The investor can open a long position or a short position. In the case of a long position, he expects the price of the corresponding underlying asset to rise and buys it. At the end of the CFD he sells it again and in the best case makes the previously speculated profit. With a short position, the investor expects falling prices and sells the value in order to buy it back later at a lower price, which results in a profit if it is successful. Speculation is based on various indices.

CFDs are short-term speculative transactions that are often completed within a day. Accordingly, the prices are exposed to strong fluctuations, which increase the risk of loss. If you want to hold your position overnight, i.e. beyond the close of trading, you have to make compensatory payments. The amount of these payments results from the respective calculation basis, the holding period and the position size at the close of trading. The following applies to short positions: If the reference interest rate exceeds the discount, the investor receives a credit.

The transactions take place over-the-counter (OTC). Not every platform allows CFD trading. The broker comparison shows where CFDs can be traded .

Important terms relating to contracts for difference

Investors who want to trade CFDs should know the following terms:

  • Margin: The margin is a security deposit that the trader deposits when opening a position. How big this has to be depends on the underlying asset being traded. The margin is tied to the respective position; The investor can invest the untied capital in further positions.
  • Leverage: By providing security, investors leverage their capital many times over. For example, if the margin is 1 percent and you bet 100 euros, you can move a capital of 10,000 euros.
  • Stop Loss: Traders set a stop loss limit at the point where their position should be automatically closed if the price should develop in the opposite direction to expectations.
  • Base value: The base values ​​are the actual trading values. These are, for example, indices, stocks, commodities or currencies.
  • Intraday trading: The investor opens his position at the beginning of the day and closes it again at the end of the day. So he carries out the CFD business within a day. This practice is common for short-term speculations.
  • Overnight position: If a trader holds his position beyond the respective close of trading, it becomes an overnight position. Compensation payments are due for this.
  • Diversification: In order to increase their chances of winning, investors often open several positions on different markets. In this way, you distribute your capital over several underlyings and a single loss is less significant.

Risks when trading CFDs

Trading Contracts for Difference is a very risky business. The high leverage can on the one hand bring high profits, but on the other hand lead to large losses. The available total capital is often smaller than the lost amount, which leads to a total loss. However, the account cannot be overdrawn and private investors are not obliged to make additional contributions after a decision by BaFin since August 10, 2017. That at least limits the incalculable risk of loss.

What happens in the event of a total loss?

If the loss exceeds the capital available on the CFD account, the bank usually arranges for a forced closing; that is, it closes all open positions of the investor. Before the deposited security deposit is used up, the bank also warns with an initial margin call when 80 percent of the credit has been used up. A second margin call follows at the 90 percent limit and at the same time announces the impending forced closing.

Other risks

Some of the other risks associated with CFD trading include:

  • Overnight risk: Investors cannot react immediately to price changes in positions held overnight.
  • Market price risk: Underlyings can change.
  • Liquidity risk: In the event of market disruptions and outside trading hours, investors cannot open or close positions.
  • Day trading risk: If a trader makes losses within a day and tries to compensate for them with even riskier new deals, the loss can multiply in the event of failure. The high level of trading activity can also lead to high transaction costs.
  • Bank or market maker insolvency.
  • Organizational and operational risks.

How can the risks be reduced?

The risks involved in trading Contracts for Difference are great and varied. However, through skilled risk management, investors can limit the risk of loss. Before opening new positions, they calculate the profit factor – using the value of the winning trades and the value of the losing trades as well as the average profit and average loss. If the profit factor is greater than 1, the trader can make money, so his plans are profitable. In addition, he should define an initial risk that he is maximally willing to take and set a stop loss accordingly.

A proven money management model is the “1 percent from the account” model. Investors choose a risk of 1 percent for each position. Another means that reduces the risk of loss and increases the chances of winning is diversification.


Meanings of SWOT Analysis Part II

Meanings of SWOT Analysis Part II

The individual points of the SWOT analysis

The usual way of creating a SWOT analysis begins with the two main parts, the company analysis as an internally-related part and the environmental analysis with external aspects. Both can be represented in a simple four-field matrix so that the individual points can be related to one another. From this connection, final deductions of suitable action strategies are possible.

Company analysis (internal)

As the name suggests, company analysis relates to the company itself. This is a self-observation to determine the internal factors, divided into strengths and weaknesses. These are to a certain extent the result of organizational processes, but also characteristics such as a good image. It should be noted that these are properties that we have produced ourselves. For example, a satisfied customer base of a green electricity producer may be a strength, but the generally good image of green electricity is definitely an (external) opportunity.

Environmental analysis (external)

Such external factors are in turn incorporated into the environmental analysis. This relates to the direct corporate environment, i.e. all external circumstances that are related to the company. The two characteristics to be analyzed here are opportunities and threats. It is important that these external conditions and / or changes are exogenously acting forces. This means that the company itself cannot influence this under any circumstances. Here it is important to keep an eye on those factors and to anticipate any changes. Once again, it is important to correctly differentiate between strengths and opportunities or weaknesses and risks. According to abbreviationfinder, SWOT stands for Strength, Weakness, Opportunity, and Thread.


The internal strengths of a company, an institution and so on are those things that it is good at, so to speak. In particular, strengths are revealed when comparing with competitors, i.e. when looking at the competition. Examples of this are aspects such as a favorable location, good product quality, high qualification of the employees or whether the company works with low fixed costs . For the analysis of an individual, aspects such as a fundamental, ambitious optimism, creativity or certain professional qualifications should be mentioned here.


The weaknesses are naturally the counterpart to the strengths. In this respect, they can also be filtered out particularly with a view to the competitive situation and the competition. Internal weaknesses, for example, an unfavorable location , deterioration in quality, too few employees or low financial strength are appropriate to the strengths . Certain dependencies may also be an individual weakness. For an individual, a lack of know-how, low resilience or low mobility must be listed accordingly.


The third point is to discuss the opportunities. The development in the respective market or in the environment is particularly important for a company, as it can be seen whether there is a change in customer behavior. In addition, trends can arise which influence the position of a company. New technological developments may also offer potential for profitable innovations, product improvements or the optimization of work processes. For example, this includes an expansion of the infrastructure, the broadband network (also for communication between employees) or positive demographic developments.

Threads (Risks)

Always important and a decisive point are ultimately the risks that arise from the outside. Such risks can ultimately have a negative impact on sales and, in the worst case, even lead to bankruptcy. It may be necessary to comply with legal changes or to enter into competition with new competitors who may even have settled in the immediate vicinity. In a sense, all opportunities in the opposite direction can pose a risk. This means that infrastructural or demographic developments also play a role here. Last but not least, one or the other risk can arise spontaneously, but all the more threatening – for example, the sudden lack of availability of a sales partner.


After creating the aforementioned matrix with the SWOT factors just listed, the next step is to combine the individual points. The internal and external points are combined in detail. In other words, there are four connections in total: strengths with opportunities, strengths with risks, weaknesses with opportunities, and weaknesses with risks.

From these relationships to one another, suitable measures, actions and strategies can be developed that correspond as closely as possible to the objective of the analysis. To a certain extent, these actions can be summarized as expanding (strengths-opportunities), safeguarding (strengths-risks), catching up (weaknesses-opportunities) and avoiding (weaknesses-risks).

SO (Strengths & Opportunities)

The combination of strengths and opportunities is about determining which strengths of a company or similar can contribute to realizing opportunities. Which positive factors can be used here in order to benefit as much as possible from the opportunities that arise? In particular, expansion strategies are aimed at researching and realizing export and investment potential.

ST (Strengths & Threads)

The strengths and risks connection on the other hand ideally enables protection against emerging or general (economic, cultural, political etc.) threats. The strategies developed from this are accordingly aligned in such a way that they effectively use internal strengths to cushion, offset or even completely ward off environmental hazards, i.e. ultimately to counter these external circumstances for the benefit of the company.

WHERE (Weaknesses & Opportunities)

The combination of weaknesses and opportunities is less about the use or benefits of internal factors, but more logically about reducing those negative characteristics. In other words, in relation to favorable circumstances that arise, it is necessary to develop strategies and measures that reduce or eliminate the respective weaknesses as far as possible. When it comes to catching-up strategies, the consideration of whether weaknesses can even become strengths plays a central role.

WT (Weaknesses & Threads)

Ultimately, the most difficult and most drastic combination is that between existing, internal weaknesses and emerging, external risks. Above all, it is imperative to reduce weak points and negative factors in order not to let them develop into risks. Thus, more than any other, security strategies need to be developed selectively and applied accordingly. It is important to analyze exactly in which weak company aspects occurring risks would weigh particularly heavily.


For the elaboration of all mentioned parts of the analysis and the representation of the SWOT factors, a graphic representation has always proven itself. As mentioned, the simplest and yet effective option for this is a corresponding matrix with four fields for the respective SWOT points. A continuation of this simple representation includes the strategies. This shows optimally how the internal and external aspects can be combined with one another and which strategy results from each one.

Areas of application of the SWOT analysis

In spite of all the ease of use, the question of practical application naturally arises. When is a SWOT analysis suitable? In fact, there are numerous areas in which such data collection and analysis makes sense.

First and foremost, there is a simple way of examining the location of an entire institution or individual products, processes or other objects. With the help of the SWOT analysis, it is possible to assess the competitiveness and assess the effectiveness, efficiency and profitability of business areas, product lines and so on.

In connection with this, the analysis process also functions as part of the evaluation of customer opinions and public perception, either in relation to individual objects or an entire company. The SWOT analysis is therefore particularly useful in marketing and should ideally be part of an overall concept. Finally, the advantage of a well-developed SWOT matrix is ​​that it can be used flexibly.

In addition, it provides a reliable method for developing a business plan, a basic business strategy or the (re) alignment of a company. In this respect, a SWOT analysis is also suitable for start-ups and self-employed entrepreneurs. Furthermore, the usefulness of such an analysis should be mentioned again when it comes to individual career planning.

How is a swot analysis created?

The preparatory work for the actual SWOT analysis first of all represents the basic objective. In fact, an effective analysis only succeeds if the respective data is related to a clearly defined goal. The mere increase in sales, for example, is a rather vague goal, while the increase in sales for a certain product allows more depth in the analysis as a target.

In order to then create a SWOT analysis, a whole team should work together at best. This ensures that all factors are perceived from different perspectives and thus determined as correctly as possible. It is useful to work with questions and to target the individual SWOT factors. For example:

  • What can the company do better than a competitor / the competition? (Strengthen)
  • Where does the company’s good image come from? (Strengths or opportunities)
  • Which areas did you notice again and again due to problems? (Weaknesses)
  • Why do other companies get the contract? (Weaknesses or risks)
  • Which trends are affecting the company now or in the future? (Opportunities or risks)
  • Which cultural / political developments are foreseeable? (Opportunities or risks)

Evaluation of the SWOT analysis

Following the complete analysis of all factors, the combination of the matching points takes place as an evaluation, as mentioned. This evaluation finally results in the strategies that support the objectives set in advance. Once those strategies have been implemented and implemented, there is finally a need for control. The corresponding key figures are then used, as already described.

SWOT Analysis 2

Meanings of EBIT

Meanings of EBIT

EBIT is earnings before interest and taxes . This means that the operating result is presented independently of the amount of taxes and the forms of financing used, so that a company can evaluate itself in an international comparison.


“Earnings before interest and taxes” , or EBIT for short via abbreviationfinder, is also referred to as the operating result of a company. This is a key figure from business administration , with the help of which the profit that a company has achieved in a certain period of time can be read.

The amount of taxes and interest charged on loans vary in different countries. Therefore, after deducting these costs, the result of the respective company is no longer suitable for an international comparison. The operating result, however, is not influenced by such factors. It is therefore useful for evaluating a company, for example.

EBIT calculation

EBIT is calculated using either the total or cost of sales method. Both methods serve the profit and loss account of a company and offer the possibility of determining the EBIT as a subtotal.

In the total cost  method, you compare the sales in a period with the total expenses incurred in the same period. In the cost of sales method , however, the sales of a period are compared with the direct production costs for these sales.

When comparing the EBIT of two or more companies, it is not just a matter of looking at the key figure itself. In addition, you should make sure that it was determined using the same method in all cases. Roughly speaking, the total cost method is a variant that is more commonly used in the German-speaking area. The cost of sales method, on the other hand, is more likely to be used in the Anglo-Saxon region and for companies that are listed on the stock exchange or are internationally active.

A simple formula for calculating EBIT:

Net income
+ tax expense
– tax income
+ interest expense or other financial expenses
– interest income or other financial income Earnings

What does the EBIT figure say?

EBIT is a key figure for the operating result . All expenses that you cannot assign to the actual activity of the company are filtered out for the calculation. Extraordinary expenses and income are also not taken into account.

Interest and taxes are ignored in the calculation, as they do not relate directly to the result of the operating business. This is how the company’s operating result is presented.

EBIT margin

You don’t take interest and taxes into account when calculating EBIT. Therefore, it is also possible to compare companies from several countries in this way. The results from the balance sheet are often falsified by various tax or interest rates, but this is not a problem with EBIT.

The so-called EBIT margin , which you can calculate as follows:

100 * EBIT / sales = EBIT margin in percent

It indicates how high the operating result was in relation to the company’s annual turnover . In short, a higher value means that a company is operating particularly economically. However, you should note that the value can differ significantly from industry to industry. Comparisons across different industries should therefore not be based on this margin.

The general rule of thumb is that a company with a margin of less than three percent is considered not very profitable or even vulnerable to crises. On the other hand, there is high profitability if the value is more than 15 percent.


Meanings of ROI

Meanings of ROI

The ROI is a business key figure for the return of a company. It is measured by the percentage ratio of capital employed and profit achieved and can be used to assess an investment, the performance of a branch of business or the entire company.

Short for ROI by abbreviationfinder, return on investment is a key figure calculated from the return on sales and capital turnover, from which the relationship between the capital invested and the profit achieved results. It can also be viewed as the profit target of a company or an individual business area, since it expresses the amount of the expected return flow of capital from an investment.

The ROI thus serves as a benchmark for the performance of companies or certain areas of the company in a certain period of time. Its development goes back to the American engineer Donaldson Brown, who defined it in 1919 while working for the chemical company Du Pont de Nemours. It is considered the key figure of the so-called Du Pont scheme. This oldest and most well-known key figure system, with which balance sheet analyzes can be created from several such figures and entrepreneurial decisions can be controlled, was also developed by the eponymous group. In the Du Pont scheme, the ROI is defined as the multiplication of return on sales and capital turnover.

The calculation of the ROI makes sense if it can be assumed that an investment will pay for itself within its expected useful life. In the IT sector, this useful life is set very low at around three years; it can be significantly longer for buildings and production facilities.

Calculate return on investment – ROI formula

To calculate the ROI, the total capital of a company, which is made up of equity and debt , is always used . However, according to a modernized variant of the ROI, individual investments can also be calculated. The prerequisite for this is that the returns from the individual investment are already known.

The ROI formula explains: This is behind the key figures for the calculation

Return on sales

The return on sales (also: Return of Sales (ROS) or net return on sales) is understood to be the relationship between profit and sales within an accounting period. It can be used to read what the percentage profit of a company is in relation to a certain turnover. For example, if the return on sales is 10%, this means that ten cents of profit were made for every euro wagered. If the return on sales increases, this is an indication of increased productivity, a falling ROS, on the other hand, means less productivity and thus increasing costs. The ROS can be calculated using the formula:

Return on sales = (profit / net sales) x 100

Capital turnover:

The capital turnover indicates the ratio of equity or total capital employed to sales. The reference values ​​for calculating the capital turnover are the average total capital and the sales revenue within a business period. By determining the capital turnover, it is possible to determine how much turnover was achieved with a certain amount of capital in a certain period. The formula for calculating the capital turnover is:

Capital turnover = net sales / total capital (or invested capital)

An example of calculating the ROI

A company is investing 50,000 euros in advertising in order to acquire new customers. For this measure, the company achieved a turnover of 60,000 euros.

The capital employed is therefore 50,000 euros, the generated sales 60,000 euros and the profit thus 10,000 euros (sales – costs = profit). Now just insert into the formula:

Return on Investment (ROI)

= Return on sales x capital turnover

= (Profit / sales) x (sales / invested capital)

= (10,000 / 60,000 x 100) x (60,000 / 50,000)

Return on Investment (ROI) = 2 = 20%

The calculated return on investment is therefore 2 or 20%, which means that with every euro invested, a profit of € 0.20 (and € 1.20 sales) was generated.

Analysis and interpretation of the ROI

For a correct analysis of the ROI, it is important to note that only monetary and internal company factors are recorded by it. Influences that have to do with the market situation, image values, customer satisfaction, risks and competitors as well as time factors are not included. For this reason, the return on investment should never be used as the only analysis tool for evaluating company performance.

As can be seen from the formula, the ROI is characterized by two important company-specific key figures and can therefore:

  • have the same result in different combinations,
  • be increased if the return on sales (profit: sales) decreases but the capital turnover (sales: capital) increases,
  • The independent analysis of return on sales and capital turnover are carefully examined for changes and their causes.

The results of the ROI calculation in percent can be compared with profit targets: A return on investment of 7.5 means that a certain amount of capital has brought in a return of 7.5%. Such a value can be quite satisfactory for traditional companies, whereas growth sectors will aim for values ​​between 15 and 25%.

What are the advantages of calculating the return on investment?

Even if the informative value of the ROI is limited by the mentioned limiting factors, there are some undeniable advantages. The ROI provides important data for:

  • the analysis and comparison of individual company areas and investment objects,
  • the determination and consideration of the overall performance of a company for a past period,
  • the planning and control of future investments

The importance of ROI in marketing

In marketing, the return on investment is particularly important in order to be able to plan in advance and finally evaluate the efficiency of an advertising campaign from a financial point of view. For this purpose, two units of measurement are used that are directly related to the ROI.

ROMI (Return on Marketing Investment, also: RoMI):

The ROMI measures – just like the ROI – the relationship between capital employed and profit achieved. However, it only relates to the marketing sub-area. For the calculation, the entire effort for a marketing measure, such as product costs, marketplace costs and pricing, is included. The formula for calculating the ROMI is:

ROMI = (net sales – product costs – advertising costs) / advertising costs

ROAS (Return on Advertising Spend):

The ROAS represents the profitability of an advertising measure. Among other things, it is used to implement measures that increase the quality of the measure and / or reduce the costs if the results of a campaign are negative.
The ROAS is calculated using the formula:

ROAS = (net profit / advertising costs) x 100


Meanings of SME

Meanings of SME

Over the years, after the Second World War, Germany has become the world export champion . Today the country is one of the undisputed industrial nations. Our country also owes this to its SMEs , because they represent the strong backbone of the German economy. You can find out what you need to know about SMEs in the following article.

SMEs – European Commission definition

SMEs are defined more precisely by the European Commission in EU Recommendation 2003/361 . The basis for this are defined orders of magnitude. According to Abbreviationfinder, SME stands for small and medium-sized companies , which are divided into the number of their employees and the turnover or their balance sheet total .

Good to know:

In the EU, SMEs are also known as SME . This abbreviation comes from English and means small and medium-sized enterprises . This definition is important because it is crucial for access to finance , but also for access to EU support programs. These are specifically geared towards SMEs and their definition.

Definition of micro-business

A micro enterprise is very often called a micro enterprise . It is a company that employs less than 10 people and

  • generates a turnover of less than two million euros per year or
  • has a balance sheet total of less than two million euros.

In most cases, the owner of a very small business pursues the goal of feeding or providing for themselves and their families with this business.

Definition of small businesses

According to the definition of the European Commission, small companies have fewer than 50 employees and

  • have a turnover of less than 10 million euros or
  • a balance sheet total of less than 10 million euros.

Definition of medium-sized companies

A medium-sized company is a company that has fewer than 250 employees and

  • the turnover at a maximum of 50 million euros or
  • total assets of a maximum of 43 million euros.

Criteria for classifying SMEs

Micro, small and medium-sized businesses

In the EU there have been threshold values ​​or criteria since 01.01.2005 according to which an SME is classified. This classification is already evident from the definitions above. Seen at a glance, these criteria are as follows.

These thresholds are valid for all sole proprietorships . If it is a company that functions as part of a group, to have it both number of employees and turnover or find total assets of the whole group into account.

How do I calculate my number of employees?

The size of a company (up to 10 employees, more than 10 up to 50 employees and more than 50 employees) always refer to full-time employees in the DGUV according to regulation 2 . This means that when calculating the number of employees , you have to convert all your employees , including part-time employees, into full-time employees .


To do this, proceed as follows: All employees who do not work more than 20 hours per week must be multiplied by the factor 0.5 . If someone works for you for a maximum of 30 hours per week , you have to use the factor 0.75 as a basis for the calculation .


You are an entrepreneur and you have 13 employees . These are made up as follows:

Type of employee calculation
4 full-time employees 4x factor 1 = 4.0
7 employees part-time until 8 p.m. 7x factor 0.5 = 3.5
2 MA part-time up to 30 / h 2x factor 0.75 = 1.5
Number of employees converted to full-time 9.0

That would mean that you would have 9 employees in your company and you would therefore fall into the category of small businesses .

Definition of annual sales

The annual turnover is understood as the total turnover of all services sold in a year . The annual turnover, also called revenue , is calculated from the sales volume and the sales price .

Definition of annual balance sheet total

The annual balance sheet total is understood to mean the total of fixed and current assets on the assets side of a company and the total of equity and debt capital on the liabilities side at the end of a financial year.

Definition of company types

In addition to the size classification of SMEs, the different types of companies are also precisely defined.

Independent company

Companies that do not hold any shares or voting rights in a company are referred to as independent companies . This must not exceed a share of 25 percent . There are exceptions , however , if this threshold is 25 percent or more.

  • Government venture capital companies, universities or research institutes without the purpose of profit tracking, venture capital companies
  • Institutional trading investors (including development funds)
  • Local authorities that are autonomous and that have an annual budget of less than 10 million euros and fewer than 5,000 inhabitants


These are companies that must meet at least one of the following requirements:

  • The company is required to prepare consolidated annual financial statements .
  • The company holds the majority of voting rights by shareholders or members of another company.
  • The majority of employees from administration, management or from the supervisory body of another company can be appointed or dismissed by the relevant company.
  • The company is entitled to exercise control over another affiliated company through a concluded contract or through clauses in the articles of association .

These points also apply when there is a reversal in the relationships between the companies .

Partner company

A partner company is a company which, together with one or more other companies or alone, holds from 25 percent to a maximum of 50 percent of the capital or voting rights in another company . The same limit values ​​also apply to shares held.

KfW templates and calculation sheets for SMEs

A KfW calculation scheme forms the basis for calculating the threshold values . This is available to every SME. You can find out what needs to be considered for the individual types of company mentioned above in the KfW information sheet on the definition of SMEs.


Advantages and problems of SMEs

As with a large company, there are also advantages and disadvantages in the area of ​​SMEs , which we will discuss below:

Benefits of being an SME

  • An SME has flat hierarchies and structures in its organization. This gives you short decision-making paths and creates a high degree of flexibility and stability
  • There is a great proximity to the stakeholders . The customer contact is very close and also within the company the cooperation is personal .
  • Due to the proximity to the owner family in an SME, there is in most cases a long-term orientation for such companies .
  • Continuous innovations are created by selected and motivated employees.

Even if SMEs are also seen as job engines and great training companies, there are also challenges here:

Difficulties that SMEs pose

  • The resources in the areas of finance and human resources are very scarce . It is not uncommon for dual functions to occur.
  • Strategic knowledge and methods are very important for corporate success. However, SMEs very often lack the necessary knowledge here.

Examples of companies from SMEs

Type of business Check criteria SME: yes or no?
Painting company; 17 employees; Turnover per year 45,000 euros; independent company → Number of employees
→ Annual balance sheet total → Annual
→ Company type
SME small business
Auto repair shop; 10 employees (including 3 part-time with 20 hours a week); Turnover per year 39,000 euros; independent company Small and medium-sized enterprises
Manufacturer in office furniture; 310 employees; Annual balance sheet total of 58 million euros; Partner companies with a stake in a supplier company of more than 30% Not an SME
Meaning of Stock Exchange

Meaning of Stock Exchange

Stock exchanges look back on a long tradition. The oldest stock exchange was founded in 1409 in Bruges, Belgium. The first German stock exchanges are the Augsburg Stock Exchange and the Nuremberg Stock Exchange, founded in 1540. The Frankfurt Stock Exchange, today the most important stock exchange in Germany and also one of the most important stock exchanges worldwide, was founded in 1585. Exchanges are not only used for trading in securities, but also for organized trading in almost all products. In addition to stock exchanges, there are also special exchanges for raw materials, foreign exchange and in London even a wine exchange, the Liv-ex. For example, CO2 certificates are traded on the European Energy Exchange (EEX) based in Leipzig.

  • Exchanges serve to trade a commodity – be it a commodity, stocks or bonds – in a regulated market environment.
  • The aim of exchange trading is not only the transaction itself, but also the creation of transparency with regard to pricing.
  • Trading on the stock exchanges in Germany is controlled by the Bafin.

How the stock exchange works

Exchanges serve to trade a commodity – be it a commodity, stocks or bonds – in a regulated market environment. The value results from supply and demand. The emphasis here is on the term “regulated market environment”, as the exchange, in contrast to a classic marketplace, follows certain rules for trading. In order for a share to be traded on the stock exchange, the company must meet certain requirements that are regulated in the German Stock Exchange Act (BörsG). According to abbreviationfinder, SX stands for Stock Exchange.

The aim of exchange trading is not only the transaction itself, but also the creation of transparency with regard to pricing. Floor trading, the physical presence of stock brokers in the trading room, was completely replaced in Frankfurt by XETRA trading, computer trading, in 2011.

Stock exchanges in Germany

Trading on the stock exchanges in Germany is controlled by the Bafin. In addition to the Frankfurt Stock Exchange, there are also several regional stock exchanges in Germany. After the closure of the Bremen Stock Exchange, these are still the following marketplaces:

  • Berlin Stock Exchange
  • Düsseldorf Stock Exchange
  • Joint Börsen AG Hamburg-Hanover (including the Hanseatic Stock Exchange as part of BÖAG Börsen AG)
  • Munich Stock Exchange
  • European Energy Exchange, Leipzig
  • Stuttgart Stock Exchange: The Stuttgart Stock Exchange offers investors the opportunity to trade shares in open-ended investment funds. Under certain circumstances, this can be cheaper than purchasing with a front-end load.
  • Tradegate Exchange, Berlin: Tradegate Exchange was the first exchange for fully electronic off-exchange securities trading. Over-the-counter trading enables buyers and sellers to come into direct contact with one another.

The stock market indices

When investors think of the term stock exchange, they primarily think of trading in stocks. The most important indices are therefore also the stock indices. In Germany these are the DAX 30, the M-DAX and the S-DAX. The DAX 30 is made up of the 30 largest German companies, the M-DAX from the next 50 largest companies in the ranking. In the S-DAX, in turn, the following 50 companies belonging to the M-DAX, so-called small caps or smaller public limited companies, are listed. The TecDAX comprises 30 of the 50 largest technology companies.

Indices generally reflect investors’ expectations of a country’s future economic performance. In the US, the best-known indices are the S&P 500 and the Dow Jones Industrial. On the Paris stock exchange, the CAC 40 reflects the performance of the 40 largest companies in France, in Great Britain the FTSE 100 performs this task. The Eurostox 50 indexes the performance of the 50 largest companies within the euro zone.

The trade

Exchange trading cannot be done by every investor himself, but requires the involvement of an official stockbroker. The purchase order for a security is forwarded via the custodian bank and processed in the now fully electronic trading system XETRA. The broker, in turn, virtually brings buyers and sellers of a share together, provided they both have the same asking price. In addition to the brokerage fee for the bank, there is also a commission for the broker when trading securities.

The five most important stock market events

  • On October 28, 1929, the New York Stock Exchange collapsed: the Great Depression had hit the stock exchanges. It was not “Black Friday”, as is often reported today, on October 25 of this year the Dow Jones Industrial Index even rose again.
  • In 1997 the bubble of artificially high foreign exchange rates in emerging markets in Asia. The devaluation of Bath in Thailand was the trigger. The prices on the Hong Kong stock exchange fell by 40 percent.
  • Technology stocks had soared up to March 2000 that ended in a bubble. When the dotcom bubble burst, investors lost over 200 billion euros.
  • Due to the financial crisis, prices slipped massively in 2008. Individual stocks were repeatedly suspended from trading, and the Moscow Stock Exchange kept closing its doors for a few days.
  • In the spring of 2014, the DAX 30 reached its all-time high of over 10,000 points for the first time – proof that the stock market keeps going up in the end.


Meaning of Balance Sheet

Meaning of Balance Sheet

A company’s balance sheet provides information about the origin and use of a company’s capital. The assets, the assets, and the capital, the liabilities, are compared. A profit and loss account is the basis for creating a balance sheet. The balance sheet is a company analysis set for a specific date, while the profit and loss account documents the business success for a specific period. Double-entry bookkeeping is a prerequisite for preparing a balance sheet.

  • The balance sheet provides a legally binding overview of the company’s assets and the business activities carried out in the past financial year.
  • The preparation of a balance sheet is based on the requirements of the German Commercial Code (HGB).
  • The balance sheet is broken down into assets and liabilities.
  • At the end of the day, the balance sheet must be balanced, i.e. on each side, assets and liabilities, the bottom line is the same number.

The tasks of the balance sheet

Short for BS by abbreviationfinder, a balance sheet fulfills different functions. On the one hand, it is used for documentation. It provides a legally binding overview of the company’s assets and the business activities carried out in the past financial year. The equity account provides information about the profit or loss of a company and thus offers options for comparison with previous accounting periods. The detailed list of profits and losses is based on the profit and loss account drawn up beforehand. Last but not least, a balance sheet also contains an information function.

Accounting requirements according to the Commercial Code

A balance sheet cannot be drawn up at the company’s reasonable discretion, but is based on the requirements of the German Commercial Code (HGB). The HGB also regulates which companies are required to be accounted for. This generally includes all corporations as well as sole proprietorships and tradespeople with an annual turnover of more than 500,000 euros or a profit of 50,000 euros. If these numbers are exceeded for the first time, the tax office will request the balance sheet. As long as the claim is outstanding, the conventional profit and loss account can be continued. Freelancers are generally exempt from accounting.

The structure of the balance sheet

Section 266 of the German Commercial Code clearly stipulates how a balance sheet must be structured. The breakdown is made into assets (use of funds) and liabilities (source of funds).


  • Fixed assets, divided into intangible assets, property, plant and equipment and financial assets
  • Current assets, divided into inventories, receivables and securities
  • Prepaid expenses (existing but not yet due receivables)
  • Deferred tax assets (future tax benefits)
  • Difference from asset offsetting
  • Deficit not backed by equity


  • Equity, divided into subscribed capital, capital reserve, retained earnings, profit or loss carried forward, net income or net loss for the year and net loss for the year not covered by equity
  • Provisions, divided into provisions for pensions, taxes and other provisions
  • liabilities
  • Prepaid expenses (existing but not yet due liabilities)
  • Deferred tax liabilities (future tax charges)

At the end of the day, the balance sheet must be balanced, i.e. on each side, assets and liabilities, the bottom line is the same number at the end. The shortfall not covered by equity arises when the losses in the reporting period are so high that they exceed equity. Bank balance sheets deviate from the presentation of a normal trade balance sheet and are almost mirror-inverted in the division of the asset and liability positions. A company’s financial assets on the assets side represent liabilities on the liabilities side of a bank. The internationalization of companies has led to an international approach to the structure of the balance sheet according to the International Financial Reporting Standards (IFRS), which deviates from the national requirements for preparing a balance sheet .

Basis of accounting

A balance sheet is based on the “principles of proper bookkeeping”, which in turn are regulated in the HGB. In the end, a balance sheet follows two principles. On the one hand, it is based on the “balance sheet truth” and on the other hand on the “balance sheet clarity”. Truthfulness of the balance sheet means that all business transactions are properly recorded in accordance with the accounting guidelines. The principle of balance sheet clarity states that business transactions and the resulting documentation must be booked in such a way that they are clearly visible and traceable. All facts that are known between two reference dates must be taken into account in the balance sheet.

Delayed business transactions

If a company accounts as of 31.12. one year, it may well happen that the receipt of a service and its payment do not take place in the same year. A classic example is the telephone bill. Calls made in December will not be billed until January. Against this background, balance sheets are rarely drawn up in January, but only two to three months after the balance sheet date. Services that have already been performed on the other side but have not yet been paid for must also be assessed. Nevertheless, the companies have to submit their balance sheets promptly. This fact means that balance sheets are not always one hundred percent clear.


Meaning of Asset Management

Meaning of Asset Management

The aim of asset management (short for AM by abbreviationfinder) is to further increase existing assets – and to do so as efficiently and with as little risk as possible. The English word “asset” means “fixed assets”. Asset managers look after private as well as corporate assets and try to increase them through various forms of investment. As a rule, investments are made in funds. This requires extensive know-how and skillful risk management. Traditionally, the financial services of asset management are primarily used by investors with larger capital assets (from 50,000 euros). Small investors, on the other hand, have little chance of finding a private asset manager.

  • The decisive advantage of serious asset management lies in the know-how advantage of asset managers over private individuals and companies.
  • While pure investment or investment advisors only take on an advisory role, asset managers usually also make investment decisions.
  • As part of asset management, the assets of private investors and business customers are usually invested in funds.

What does asset management bring?

The decisive advantage of serious asset management lies in the know-how advantage of asset managers over private individuals and companies. Thanks to their market knowledge, asset managers can make long-term, profitable investment decisions even in rapidly changing markets. You have a good overview and – in contrast to private investors, who often tend to make impulsive decisions – are able to make long-term prudent decisions.

These tasks are carried out by asset managers

While pure investment or investment advisors only take on an advisory role, asset managers usually also make investment decisions. They relieve companies and private investors from a whole range of tasks. The classic range of tasks in asset management includes the following points in particular:

  • Information and advice:Asset managers initially have an advisory role. They inform their customers about lucrative investment opportunities.
  • Individual strategy development:Asset managers work out an individual investment strategy together with clients. This is essential because every customer has their own needs. In particular, the investor’s willingness to take risks and personal goals determine the investment strategy.
  • Market observation:Market observation or market analysis is a central component of asset management. The respective managers not only have to have in-depth economic knowledge, but also know current market developments and identify trends as early as possible.
  • Review of investment options:Asset managers review investment products either individually or using statistical methods. In this way, they determine the investment options that best suit the wishes and needs of customers – be it stocks, real estate or life insurance.
  • Diversification and risk management:The aim of asset management is to generate the highest possible return on the assets invested at a comparatively low risk. Risk management is therefore one of the fundamental tasks of asset management. There are a number of methods available to asset managers to limit the risk of an investment. In addition to assessing the security and profitability of certain investment products on the basis of one’s own know-how, diversification plays a decisive role in risk management. Diversifying means: The assets to be invested are distributed across several promising forms of investment. This makes the investment strategy less susceptible to crises and leaves room to counteract possible wrong decisions.

The role of funds in asset management

As part of asset management, the assets of private investors and business customers are usually invested in funds. A fund is nothing more than a collection of different stocks, real estate or bonds that are financed with the capital of various investors.

Anyone who participates in a fund with equity becomes a co-owner and may receive a dividend distribution. If you invest in a package of shares – in contrast to buying shares in a single company – the risk is automatically diversified. A fund always consists of a bundle of securities. If the securities of some companies do not perform as expected, this can be offset by the positive development of others. However, one hundred percent investment security cannot be guaranteed even with funds.

In principle, a distinction is made between mutual funds and special funds. While special funds are aimed at companies, banks and the like, public funds can be used by all investors.

Serious asset management: independence and transparency

Serious asset management is characterized by independence. Ideally, an asset manager is not tied to specific products, but rather chooses investments based solely on the client’s needs. Commissions or other remuneration should also not be paid when brokering certain funds. Bank asset managers should at least have access to the entire product range of the respective institution.

Regardless of whether the services of an independent asset manager or the asset manager of a bank are used: Asset management should be characterized by transparency. This means that potential returns and risks are discussed openly. In addition, any costs and administration fees should be conveyed transparently.


Meaning of ETF

Meaning of ETF

According to abbreviationfinder, ETF is the abbreviation for “Exchange Traded Fund”. Accordingly, ETFs are not traded through the investment companies that set up the respective funds, but on the stock exchange. The price of ETFs is based solely on supply and demand, i.e. purchases and sales on the stock exchange. The fund company’s issuing surcharge does not apply. The support is not provided by fund managers, but by market makers. Their task is to determine the buying and selling prices, which are published continuously during the trading day. Therefore, the development of the ETFs is very transparent.

  • The majority of exchange-traded funds are offered as index funds, which is why both terms are often used synonymously.
  • In most cases, ETFs are based on stock indices due to their large number.
  • One of the great advantages of ETFs over other fund investments is the flexibility of stock exchange trading.
  • The risk of an exchange traded fund depends on the type of fund and the underlying indices.

Participation in index developments

The majority of exchange-traded funds are offered as index funds, which is why both terms are often used synonymously. Index funds are passively managed, which means that they track the development of a specific underlying index. Actively managed ETFs that invest the fund capital in constantly changing, successful values ​​in order to optimize returns and beat indices are extremely rare.

In most cases, ETFs are based on stock indices due to their large number. The best-known share index in Germany that a listed fund can use for orientation is the German share index DAX. This index summarizes the securities of the 30 stock corporations with the highest turnover in Germany. But there is also the possibility of replicating real estate, money market or other indices.

Indices shown

In principle, an ETF can track any index. Depending on the type, they differ for example:

  • Market-wide indices with stocks from all industries and regions (e.g. the MSCI All Country World Index, which takes industrialized and developing countries and small and large companies into account)
  • Region indices with values ​​from individual economic regions (for example the MSCI Europe Index, which only includes European stocks, or the MSCI Emerging Markets Index, which only includes stocks from developing countries)
  • Sector indices that only show the development in a certain branch of the economy (for example the Euro Stoxx Telecommunications Index)
  • Strategy indices that focus on specific industries, growth rates, or time-based data

Advantages of ETFs

One of the great advantages of ETFs over other fund investments is the flexibility of stock exchange trading. The listed funds can be quickly liquidated on the stock exchange, so that investors have access to the sales proceeds after just a few days.

Save fees

Since passively managed ETFs follow changes in the indices, active management that constantly monitors the market and reacts to market changes with new investment strategies is not required. Fund managers don’t have to be paid. The costs are limited to the exchange fee and the total expense ratio charged to the fund and are significantly lower than when purchasing actively managed fund units. This means that passively managed ETFs are also of interest to private investors.

Disadvantages compared to active funds

A disadvantage of passively managed ETFs compared to actively managed funds is that the return is firmly linked to the performance of the underlying index. Ultimately, you aim to map the base index as precisely as possible. Active funds, on the other hand, aim to outperform their benchmark. To achieve this, fund managers change the composition of the fund and fill it with the strongest values ​​if possible. In practice, however, it is seldom possible to permanently outperform the index.

Risks and selection of ETFs

The risk of an exchange traded fund depends on the type of fund and the underlying indices. Safe investments include ETFs that fully track a market-wide index. These funds are characterized by a large diversification of the fund capital. The strength of the index also influences the safety of ETFs. Nevertheless, a risk of loss in stock exchange transactions cannot be ruled out. Before investing in exchange-traded funds, it is worth comparing the offers.


Meaning of Working Capital

Meaning of Working Capital

Working capital is defined as the ability of a company to carry out its activities normally in the short term. This can be calculated as the assets left over in relation to the short-term liabilities.

According to abbreviationfinder, working capital is useful to establish the equity balance of each business organization. It is a fundamental tool when carrying out an internal analysis of the firm, since it shows a very close link with the daily operations that take place in it.

Specifically, we can establish that all working capital is sustained or formed from the union of several fundamental elements. Among them, those that give it meaning and form, are negotiable securities, inventory, cash and finally what is called accounts receivable.

It is also important to highlight the fact that the main source of working capital is the sales made to customers. Meanwhile, we can determine that the fundamental use that is given to said capital is to undertake the disbursements of what is the cost of the goods that have been sold and also to face the different expenses that the operations that entail. have been rushed.

However, among other uses are also the reduction of debt, the purchase of non-current assets or the repurchase of outstanding capital shares.

When current assets exceed current liabilities, you are facing positive working capital. This means that the company has more liquid assets than debts with immediate maturity.

In the other sense, negative working capital reflects an equity imbalance, which does not necessarily represent that the company is bankrupt or that it has suspended its payments.

Negative working capital implies a need to increase current assets. This can be done through the sale of part of the fixed or non-current assets, to obtain the available asset. Other possibilities are to carry out capital increases or incur long-term debt.

In addition to all the above, it is important to also emphasize that there are two other types of working capital that are delimited based on time. Thus, first of all, we would have to refer to what is known as permanent working capital. This is defined as the set or quantity of current assets that are needed to cover in the long term what are the minimum needs.

And then secondly, we have temporary working capital. In this case, it can be determined that it is the amount of these current assets that is changing and modifying based on the requirements or needs of a seasonal nature that take place.

Among the sources of working capital, we can mention normal operations, the sale of bonds payable, the profit on the sale of negotiable securities, the contributions of funds from the owners, the sale of fixed assets, the refund of the tax. on income and bank loans.

It should be noted that the working capital should allow the firm to face any type of emergency or loss without going bankrupt.

Working Capital