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Accounts Payable |
Monies owed to another organization for puchases made on credit. |
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Accounts Receivable |
Monies owned to another organization for purchases made on credit. |
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After-tax income |
Net income after taxes have been deducted. |
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Amortization |
The elimination of a liability, or debt, through regular payments over a given time. |
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Angel Investor |
Investor's that prefer to invest in early-stage companies. |
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Assets |
Any item of value that can be converted to cash. |
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Balance Sheet |
A summary of a company's financial situation at a specific point in time. A balance sheet is divided into three sections: assets, liabilities, and equity |
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Before-tax income |
Income before taxes have been deducted. |
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Break-Even Analysis |
A calculation that determines the volume of sales required to earn a profit. Assumptions regarding pricing, variable costs, and fixed costs must be provided. |
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Break-Even Point |
At this volume of sales, the company's total revenue equals its total costs. |
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Burn Rate |
The amount of cash required to sustain a companies operations for a period of time. This figure is usually used by companies that are experiencing negative cashflows. |
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Business Model |
An explaination of how a company's functions will collaborate to deliver products and services to customers. |
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Business Plan |
A plan that explains the past, present, and future of a company. |
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Calendar Year |
January 1 through December 31. |
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Capital Expenditures |
Money spent to purchase or upgrade assets of a company; can include buildings, machinery, tools, etc. |
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Capital Investment |
Expenditure made to purchase a capital asset. |
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Cash Flow |
The net increase or decrease in cash from one period to the next. |
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CEO |
Chief Executive Officer |
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CFA |
Chartered Financial Analyst |
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CFO |
Chief Financial Officer |
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Cost of Capital |
The rate of return required by providers of capital. Providers of capital include banks and investors. |
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Credit |
An agreement in which a borrower receives something of value immediately and agrees to repay the lender at a specified, later date. |
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Credit Risk |
The potential that a borrower will fail to repay any principal or interest in the specified time period. |
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Current Assets |
Cash, cash equivalents, accounts receivable, inventory, marketable securities, and other assets that can be converted to cash in a short period of time. |
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Current Liabilities |
Accounts payable and other debts that are due within the year. |
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Days Payable |
The average time a company takes to pay vendors. |
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Days Receivable |
The average time a customer takes to pay for purchases. |
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Debt |
A liability owed to another person required to be paid by a specified date. |
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Demand |
The desire of a market to purchase goods or services at the current price. |
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Depreciation |
The expensing of an asset over a specified period of time. |
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Discounted Cash Flow (DCF) Analysis |
The process of reducing the value of future cash flows to their present value. |
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Disposable Income |
Income leftover to an individual, after taxes, which is available for spending or saving. |
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Earnings Before Interest and Taxes (EBIT) |
Same as operating income. |
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Entrepreneur |
An individual who starts his/her own business. |
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Fiscal Year |
A period of 365 days (366 in leap years), not necessarily starting on January 1. |
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Fixed Cost |
A cost independent of production numbers. |
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Free Cash Flow |
The increase in cash from one period to the next. |
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Gross Income |
Revenue minus the cost of goods sold. |
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Gross Margin |
Equal to gross income divided by net sales, expressed as a percentage. |
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Inflation |
The overall upward movement of the cost of goods and services. |
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Interest |
The fee charged by the lender for the use of borrowed money. |
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Inventory |
Raw materials, partially finished good, and finished goods that have not been sold. |
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Investment |
The allocation of capital with the expectation of it appreciating over time. |
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Just-in-time |
An inventory management strategy in which raw materials and components are delivered from the supplier as they are needed. |
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Labor |
Work of any type. |
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Lender |
Any entity that loans funds to another entity. |
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Liability |
A financial obligation. |
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Logistics |
The management of the flow of goods and information through a company and its supply chain. |
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Marginal Cost |
The cost of manufacturing one additional unit. |
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Market |
A arena where buyers and seller are brought together to exchange goods and services. |
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Marketable Securities |
Securities that can be quickly and easily converted to cash. |
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Market Price |
The last reported sale price or the current bid/ask price. |
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Market Research |
An analysis of information about consumers, market niches, and marketing programs within the targeted market. |
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Market Share |
The percentage a company's sales relative to the sales of entire market. |
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Maturity |
The due date for a payment of a debt. |
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Niche |
A targetable portion of the market. |
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Net Present Value (NPV) |
The current value of future cash flows minus the initial investment. |
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Net Sales |
Gross sales less any discounts or returns. |
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Net Worth |
Equal to the total assets minus total liabilities of an company. |
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Operating Income |
Same as EBIT, a financial measure of a company's earnings from operations equal to earnings before deductions of interest payments and taxes. |
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Opportunity Cost |
The cost of passing up an investment of the next best choice when making a decision. |
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Price |
The amount the purchaser or a product pays. |
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Principal |
The amount of capital borrowed or loaned that remains unpaid. |
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Profit |
The capital gain on an investment after expenses. |
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Raw Materials |
Goods required by a manufacturer to produce a finished product. |
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Return on Investment (ROI) |
The annual change in the value of an investment. |
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Revenue |
Another name for sales. Equals Price * Volume. |
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Risk |
The potential for less-than-expected returns. |
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Shrinkage |
Inventory lost due to theft, damage, or accounting errors. |
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Supply |
The amount of a product or service available within the market. |
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Supply Chain |
The network of entities involved in the production and sale of a product. |
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Total Cost |
Equals total fixed costs plus total variable costs. |
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Valuation |
A process of finding the value of a company. |
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Variable Cost |
A cost dependent on the volume of production. |
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Vendors |
A company that supplies products or services to another company. |
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Venture Capital |
Private investment made in small to mid-size businesses that have high growth potential. |
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Working Capital |
Equals current assets minus current liabilities. |