Definitions & Acronyms
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'S' Corp. (Also known as an "S" Corporation, or previously known as a Subchapter S Corporation). A firm legally organized as a "corporation" but taxed as if it were a "partnership".
Acceleration Clause Clause in a mortgage or security agreement giving the lender the right to call all sums owing him/her to be immediately due and payable upon the happening of a certain event; normally a default, or the transfer of ownership.
Acceptance The act of accepting an offer, which results in a binding contract.
Accounts Payable Liabilities created by purchases made on credit.
Accounts Receivable Claims against customers for credit sales.
Acknowledgment A declaration, by a person qualified by law to administer oaths, that the person signing a document or a deed is the person they claim to be.
Addendum A written instrument that adds something to a written contract.
Adjusted Annual Net The dollar figure obtained by adding the net income of a business to the owners salary (if any) and/or fringe benefits, and in rare instances, any one-time nonrecurring expense(s).
Affidavit A statement in writing, and sworn to before a Notary or other officer authorized to administer oaths.
Agency Listing Also known as an "Exclusive Agency Listing". A written instrument giving one agency the right to sell property for a specified time but reserving the right of the owner to sell the property himself/herself, to a buyer who was not introduced to the busine
Agent One acting under authority of a principal to do the principals business. The agent must use his or her best efforts and keep the principal fully informed of all material facts.
Agreement Of Sale (Purchase Offer) A written agreement whereby the purchaser agrees to buy certain property and/or assets, and the seller agrees to sell, upon the terms and conditions set forth therein. A meeting of the minds reflected in writing.
Allocation The process of assigning a portion of the total selling price to The process of assigning a portion of the total selling price to each category of assets being sold.
Amendment A written instrument that changes something previously agreed to.
Amortization The periodic expense of an amount paid for an intangible asset over a period of time. New businesses are able to amortize their start-up expenses over at least a 5-year period.
Amortization Schedule A tabular presentation of reduction of a debt.
Annual growth factor A percentage by which sales and cost of sales (COS) will increase over a one-year period.
Appraisal A valuation of property; the opinion of an expert as to the true value of real or personal property.
Appreciation A gain in value due to any cause.
Arbitration The submission of a disputed matter for resolution outside the normal judicial system. It is often speedier and less costly than courtroom procedures. An arbitration award can be enforced legally in court. If one or more parties cannot agree on a singl
Asset category The indication of whether an asset is either land, a building, equipment, or a start-up cost.
Asset life The number of year’s service expected from an asset.
Assignment A transfer in writing of an interest in property or other things of value from one person or entity to another.
Assumption Agreement An undertaking or adoption of a debt or obligation primarily resting upon another person or entity.
Attorney-In-Fact One who is appointed, in writing, to perform a specific act for and in place of another, i.e. signing documents for someone in their absence.
Audit An examination of a companys financial records and the accounting systems, controls, and records that produced them.
Bad debt expense The amount of credit sales deemed uncollectible.
Balance Sheet A report listing the balances of the assets, liabilities, and equity as of a specific date.
Balloon Payment While a balloon payment is usually the last payment in a balloon installment note, it could be any payment, which is at least twice as large as the smallest installment.
Bill Of Sale A written instrument transferring to a Buyer the title to and ownership of certain personal property.
Blue Sky That which has no physical existence but represents value, such as goodwill, business trade name, or reputation.
Bond A pledge to pay a sum of money in the event of failure to fulfill obligations; inflicting damage; or mishandling funds. Usually written by a company for a fee. Also known as a Surety Bond.
Book Value - Equipment, Fixtures, Or Other Assets The value of an asset as reflected on the Balance Sheet of the company. The Book Value would be arrived at by subtracting the depreciation to date from the original cost of the asset.
Breach Of Contract Failure of a party to a contract to perform any or all of his obligations under the contract.
Broker One who acts as an agent for another (his principal) when negotiating with third parties on behalf of a client.
Bulk Transfer Law Law regulating the sales of businesses for the purpose of protecting the interest of the business creditors.
Business Expense Money expended for any purpose or item in order to conduct business; i.e. rent, utilities, etc.
Business Trade Name Company name by which a certain business is known.
Business type The legal structure of the business. Types include Sole Proprietorship, Partnership, S Corporation, C Corporation, or Limited Liability Company.
Capital The fund of money available to an individual or a firm to conduct its business operation. Also known as working capital.
Capital Stock In the broadest sense this represents shares in the proprietary interest in the company. These shares are represented by stock certificates issued by the corporation to its shareholders.
Capital Surplus This is the amount paid in by shareholders over the par or legal value of each share.
Capitalization An evaluation method of determining the worth of a business or property by dividing a reasonable rate of return into the income stream. Also called the "cap rate", it is determined by applying a rate of return, which is considered reasonable for the risk
Cash Coins and currency, checks, money orders, credit card slips, and deposits in bank accounts.
Cash Flow The term “cash flow” refers to a variety of concepts, but its most common meaning in financial literature is the same as “funds derived from operations.” The concept of cash flow can be used effectively as one of the major factors in judging the ability t
Cash plan A report listing the cash the business will generate from sales and use for expenses. It also shows how much cash is left over or how much additional cash the business needs.
Cash sales The portion of sales paid for with cash.
Chattel Personal property, such as household goods, stock or equipment, inventory, furniture, and vehicles.
Closing Statement An accounting of funds made to the Seller and Buyer separately, at the completion of every transaction. Closing statements are usually prepared by the escrow agent.
Co-Ownership Ownership by two or more persons. (also, see Partnership)
Collateral Securities or other property pledged by a borrower to secure repayment of a loan.
Common Stock Ownership in a corporation resulting from investment. Common stockholder rights usually include a right to vote, share in dividends, purchases additional shares, and share in cash if the corporation is liquidated.
Community Property Property owned in common or together by husband and wife.
Competitive advantage A distinct characteristic that makes your product or service more appealing than your competitors.
Compound Interest Interest computed on both principal and accumulated interest.
Consideration Something of value which induces a person to enter into a contract. The promise to do something must be in exchange for some act or thing of value, which is the consideration. This is a necessary element in a contract.
Consultants Paid professionals that perform a certain job function for your business. Consultants can include attorneys, accountants, and advertising/marketing agencies.
Contingencies Possible future happenings that will affect the rights or obligations of contracting parties.
Contingent Depending upon the occurrence of some uncertain future events.
Contract A voluntary and lawful agreement between two or more parties to do, or not to do, something.
Conveyance A transfer of title.
Cost Of Goods Sold The price paid for the merchandise that has been sold by a business. Beginning inventory plus net purchases minus ending inventory equal the cost of goods sold.
Cost of sales (COS) The cost of a product or service sold to customers.
Covenant A promise.
Covenant-Not-To-Compete An agreement made part of a purchase contract, in which the seller promises not to enter into a similar or competing business for a specified period of time, within a designated area.
Credit Sales The portion of sales sold on credit terms.
Credit terms The arrangements agreed upon by the buyer and seller as to when payments for products and services are to be made.
Creditor A person to whom a debt is owed by another person who is called the debtor.
Current Assets Assets which are either cash, will turn into cash, or will be used up within one year.
Current Liabilities Debts the business must pay within one year.
Current market value What someone is willing to pay you for an item should you choose to sell it today.
Customer profile A written description of your customers. Usual methods for developing customer profiles include demographics, geographics, and psychographics.
DBA Doing business as. Usually used where individuals or others are operating a business under an assumed designation; i.e., "John Hall and Henry Smith dba Paradise Caterers", or, "ABC, Inc. dba Paradise Caterers".
Debt Service The total payment of principal and interest on loans.
Demographics A means of separating customers into groups by factors such as age, gender, income, or education.
Depreciation The reduction in value of an asset over its useful life. The Balance Sheet shows the accumulative amount of depreciation (decline in value) that has taken place to date since the acquisition of the asset. The depreciation amount for the current period i
Directors Those who are elected by the stockholders to manage the affairs of a corporation.
Distributions Amounts paid to, or withdrawn by, the owners of a Sole Proprietorship, Partnership, S Corporation, or Limited Liability Company.
Dividends Distributions of money by a corporation to its stockholders.
Double taxation Owners of C Corporations pay income taxes on the Business’s net income as well as on dividends received from the corporation.
Duress Unlawful constraint exercised upon a person whereby he is forced to do some act against his will.
Earnest Money A sum of money given to bind an agreement or an offer.
Employee benefits Expenses for employees in addition to salaries and wages. Employee benefits include retirement plans, health plans, dental or vision plans, life insurance plans, paid vacations, holidays, or sick leave.
Encumbrance A claim, lien, charge or liability attached to and binding upon real or personal property. An encumbrance generally diminishes the net value of the property in the hands of the owner, and yet does not necessarily deprive him of the title thereto or use t
Equipment/ Fixtures All fixed assets other than land and buildings of a business enterprise.
Equity The investment in the business by the owner(s).
Escrow An arrangement by which a deed, or any other instrument or property (sometimes a sum of money) is entrusted to a third person (called the escrowee or escrow agent) to be delivered by him to one party or the other, upon the fulfillment of conditions stated
Exclusive Agency Listing Also known as an "Agency Listing". A written instrument giving one agency the right to sell property for a specified time but reserving the right of the owner to sell the property himself without the payment of a commission to the agency.
Exclusive Listing (Exclusive Right to Sell) Owner gives one Broker or Agent the authority to sell his business. The Broker or Agent receives commission no matter who sells the business.
Execute To complete, to make, to perform, to do, to follow through; to execute a contract; to make a contract, including especially signing, sealing and delivery.
Expense A cost resulting from the operation of the business.
Expense forecast An estimate of the business’s future costs.
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