Your Business GLOSSARY

Accounting - the recording, classifying, summarizing and interpreting in a significant manner and in terms of money, transactions and events of a financial character

Accounts Payable - trade accounts of businesses representing obligations to pay for goods and services received

Accounts Receivable - trade accounts of businesses representing moneys due for goods sold or services rendered evidenced by notes, statements, invoices or other written evidence of a present obligation

Accrual Accounting - a method of reporting income when earned and expenses when incurred, as opposed to reporting income when received and expenses when paid

Accrual Method - reporting income when it is earned, though one may receive payment in a later year and deducting expenses in the tax year they are incurred, whether or not they are paid in the same year

Accrued Interest - the interest that has accumulated since the last interest payment up to, but not including, the settlement date and that is added to the contract price of a bond transaction

Acquisition - (1) the acquiring of supplies or services by the federal government with appropriated funds through purchase or lease; (2) taking ownership of another business

Advertising - the process of attracting public attention to a product or business through paid announcements in the print, broadcast, or electronic media

Affiliates - business concerns, organizations, or individuals that control each other or are controlled by a third party; control may include shared management or ownership, common use of facilities, equipment, and employees, or family interest

Agent - (1) an individual or firm that effects securities transactions for the accounts of others; (2) a person licensed by a state as a life insurance agent; (3) a securities salesperson who represents a broker-dealer or issuer when selling or trying to sell securities

Amortization - (1) the paying off of debt in regular installments over a period of time; (2) the ratable deduction of certain capitalized expenditures over a specified period of time

Appreciation - the increase in value of an asset

Assets - 1) cash, property, and other resources owned by a firm; 2)something that puts money in your pocket

Assumptions - the act of assuming/undertaking another's debts or obligations

Auction - a public sale of goods to the highest bidder

Authorized Stock - the number of shares of stock that a corporation is permitted to issue

Balance Sheet - a report of a corporation's financial condition at a specific time

Bank Reconciliation - making sure the bank statement, checkbook, and books (ledger, journal, etc.) all agree

Bankruptcy - a condition in which a business cannot meet its debt obligations and petitions a federal district court for either reorganization of its debts or liquidation of its assets

Barter - direct exchange of merchandise and/or services between businesses.

Best And Final Offer - for negotiated procurements, a contractor's final offer following the conclusion of discussions

Board Of Directors - individuals elected by stockholders to establish corporate management policies

Break-Even Point -  the point at which there is neither a profit nor loss -- under varying levels of activity

Business Birth - formation of a new establishment or enterprise

Business Death - voluntary or involuntary closure of a firm or establishment

Business Dissolution - for enumeration purposes, the absence from any current record of a business that was present in a prior time period

Business Failure - the closure of a business causing a loss to at least one creditor

Business Information Center - a one-stop location for information, education, and training designed to help entrepreneurs start, operate, and grow their businesses

Business Plan - a comprehensive planning document which clearly describes the business developmental objective of an existing or proposed business applying for financial assistance

Business Profile - concise definition and description of your intended business and how you plan to about it

Business Start - for enumeration purposes, a business with a name or similar designation that did not exist in a prior time period

Business Taxes - refer to taxes collected from income, self-employment, employment, and excise

Calendar Tax Year - 12 consecutive months beginning January 1 and ending December 31

Canceled Loan - the annulment of an approved loan prior to disbursement

Capital - 1) assets less liabilities, representing the ownership interest in a business; 2) a stock of accumulated goods, especially at a specified time and in contrast to income received during a specified time period

Capital Assets - all tangible property, including securities, real estate and other property, held for the long term

Capital Expenditures - business spending on additional plant equipment and inventory

Capital Gain - the profit realized when a capital asset is sold for a higher price than the purchase price

Capital Loss - the loss incurred when a capital asset is sold for a lower price than the purchase price

Capitalization - the sum of a corporation's long-term debt, stock and surpluses

Cash Discount - an incentive offered by the seller to encourage the buyer to pay within a stipulated time

Cash Flow - an accounting presentation showing how much of the cash generated by the business remains after both expenses (including interest) and principal repayment on financing are paid

Cash Method - reporting income one receives during the year, usually deducting expenses in the year you pay them

Category Killer - large discount chains with powerful buying power and efficiencies of scale

Charge-Off - an accounting transaction removing an uncollectible balance from the active receivable accounts

Charged Off Loan - an uncollectible loan for which the principal and accrued interest were removed from the receivable accounts

Closed Loan - any loan for which funds have been disbursed, and all required documentation has been executed, received and reviewed

Closing - actions and procedures required to effect the documentation and disbursement of loan funds after the application has been approved, and the execution of all required documentation and its filing and recordation where required

Collateral - something of value pledged to support the repayment of an obligation

Collateral Document - a legal document covering the item(s) pledged as collateral on a loan, i.e., note, mortgages, assignment, etc

Common Stock - a security that represents ownership in a corporation; Holders of common stock exercise control by electing a board of directors and voting on corporate policy

Compromise - the settlement of a claim resulting from a defaulted loan for less than the full amount due

Consortium - a coalition of organizations, such as banks and corporations, set up to fund ventures requiring large capital resources

Consumer Price Index - a measure of price changes in consumer goods and services used to identify periods of inflation or deflation

Contingent Liability - a potential obligation that may be incurred dependent upon the occurrence of a future event

Contract - a mutually binding legal relationship obligating the seller to furnish supplies or services (including construction) and the buyer to pay for them

Contracting - purchasing, renting, leasing, or otherwise obtaining supplies or services from nonfederal sources

Contracting Officer - a person with the authority to enter into, administer, and/or terminate contracts and make related determinations and findings

Contractor Team Arrangement - (a) an arrangement in which two or more companies form a partnership or joint venture to act as potential prime contractor; (b) an agreement by a potential prime contractor with one or more other companies to have them act as its subcontractors

Copyright - a form of protection for published and unpublished literary, scientific and artistic works that have been fixed in a tangible or material form

Corporation - a group of persons granted a state charter legally recognizing them as a separate entity having its own rights, privileges, and liabilities distinct from those of its members

Costs - money obligated for goods and services received during a given period of time, regardless of when ordered or whether paid for

Credit Rating - a grade assigned to a business concern to denote the net worth and credit standing to which the concern is entitled in the opinion of the rating agency as a result of its investigation

Current Assets - cash and other assets that are expected to be converted into cash within the next twelve months

Current Liabilities - debts payable within twelve months

Debenture - debt instrument evidencing the holder's right to receive interest and principal installments from the named obligor

Debt Capital - business financing that normally requires periodic interest payments and repayment of the principal within a specified time

Debt Financing - the provision of long term loans to small business concerns in exchange for debt securities or a note

Deduction - an item or expenditure subtracted from adjusted gross income to reduce the amount of income subject to tax

Deed Of Trust - a document under seal which, when delivered, transfers a present interest in property

Defaults - the nonpayment of principal and/or interest on the due date as provided by the terms and conditions of the note

Deferred Loan - loans whose principal and or interest installments are postponed for a specified period of time

Depreciation - the decrease in the value of a property or asset

Disbursement - the actual payout to borrower of loan funds, in whole or part

Disbursing Officer - an employee authorized to pay out cash or issue checks in settlement of vouchers approved by a certifying officer

Divestiture - change of ownership and/or control of a business from a majority (non-disadvantaged) to disadvantaged persons

Dividend - a distribution of the earnings of a corporation; dividends may be in the form of cash, stock or property

Due Diligence - the careful investigation by underwriters to ensure that all material information pertinent to an issue has been disclosed to prospective investors

Earning Power - the demonstrated ability of a business to earn a profit, over time, while following good accounting practices

Easement - a right or privilege that a person may have on another's land, as the right of a way or ingress or egress

e-Commerce - the sale of products and services over the Internet

Electronic Data Interchange - transmission of information between computers using highly standardized electronic versions of common business documents

Enterprise - aggregation of all establishments owned by a parent company; it can consist of a single, independent establishment or it can include subsidiaries or other branch establishments under the same ownership and control

Entrepreneur - one who assumes the financial risk of the initiation, operation and management of a given business or undertaking

Equity - an accounting term used to describe the net investment of owners or stockholders in a business

Equity Financing - the provision of funds for capital or operating expenses in exchange for capital stock, stock purchase warrants and options in the business financed, without any guaranteed return, but with the opportunity to share in the company's profits

Equity Partnership - a limited partnership arrangement for providing start-up and seed capital to businesses

Escrow Accounts - funds placed in trust with a third party, by a borrower for a specific purpose and to be delivered to the borrower only upon the fulfillment of certain conditions

Establishment - a single-location business unit, which may be independent or owned by a parent enterprise

Estimated Tax - regular, estimated payments on income during the year

Expenses - costs incurred (other than purchases) to carry on a business

Fair And Reasonable Price - a price that is fair to both parties, considering the agreed-upon conditions, promised quality, and timeliness of contract performance

Fiduciary - (1) a person legally appointed and authorized to hold assets in trust for another person and manage those assets for the benefit of that person; (2) something financial in nature

Financial Reports - reports commonly required from applicants requesting for financial assistance, e.g., the balance sheet, income statement, etc.

Financing - new funds provided to a business, by either loans or purchase of debt securities or capital stock

Fiscal Tax Year - 12 consecutive months ending on the last day of any month other than December, or a 52-53 week year

Fixed Costs - expenses that do not change regardless of production increases or decreases, for example, rent, insurance, interest on loans, etc.

Flow Chart - a graphical representation for the definition, analysis, or solution of a problem, in which symbols are used to represent operations, data, flow, equipment, etc.

Foreclosure - the act by the mortgagee or trustee, upon default in the payment of interest or principal of a mortgage, of enforcing payment of the debt by selling the underlying security

Franchising - a continuing relationship in which the franchisor provides a licensed privilege to the franchisee to do business, and offers assistance in organizing, training, merchandising, marketing and managing in return for a consideration

Full And Open Competition - situation wherein all responsible sources are permitted to compete

Gross Domestic Product (GDP) - the market value of the total output of the goods and services produced by a nation's domestic economy

Gross National Product (GNP) - a measure of a nation's aggregate economic output considering both domestic and foreign resources

Gross Receipts - total income received from one's business

Guaranteed Loan - a loan made and serviced by a lending institution under agreement that a governmental agency will purchase the guaranteed portion if the borrower defaults

Hazard Insurance - insurance required showing lender as loss payee covering certain risks on real and personal property used for securing loans

Incubator - a facility designed to encourage entrepreneurship and minimize obstacles to new business formation and growth, particularly for high technology firms, by housing a number of fledgling enterprises that share an array of services

Independent And Qualified Public Accountants - public accountants are independent when neither they nor any of their family have a material, direct or indirect, financial interest in the borrower other than as an accountant

Independent Contractor - someone who is self-employed

Individual Retirement Account (IRA) - a retirement investing tool for employed individuals that allows an annual contribution of 100% of earned income up to a maximum of $2,000

Industrial Revenue Bond (IRB) - a tax-exempt bond issued by a state or local government agency to finance industrial or commercial projects that serve a public good

Innovation - introduction of a new idea into the marketplace in the form of a new product or service, or an improvement in organization or process

Insolvency - the inability of a borrower to meet financial obligations as they mature, or having insufficient assets to pay legal debts

Interest - an amount paid a lender for the use of funds

Intermediary Organization - organizations that play a fundamental role in encouraging, promoting, and facilitating business-to-business linkages

Intrapreneur - one who takes on entrepreneur-like ventures within a large corporate environment

Investment Banking - businesses specializing in the formation of capital

Invitation For Bids - formal solicitations for offerings to perform procurements

Job Description - a written statement listing the elements of a particular job or occupation, e.g., purpose, duties, equipment used, qualifications, training, physical and mental demands, working conditions, etc.

Joint Venture - the cooperation of two or more individuals or enterprises in a specific business enterprise, rather than in a continuing relationship as in a partnership

Journal - a book in which one records each business transaction from supporting documents

Judgment - judicial determination of the existence of an indebtedness, or other legal liability

Judgment By Confession - the act of debtors permitting judgment to be entered against them for a given sum with a statement to that effect, without the institution of legal proceedings

Junk Bond - a high-yield corporate bond issue with a below-investment rating that became a growing source of corporate funding in the 1980s

Lease - a contract between the owner (lessor) and the tenant (lessee) stating the conditions under which the tenant may occupy or use the lessor's property

Ledger - a book that contains the totals from all of journals

Legal Rate Of Interest - the maximum rate of interest fixed by the laws of the various states, which a lender may charge a borrower for the use of his money

Lending Institution - any institution, including a commercial bank, savings and loan association, or commercial finance company qualified to participate in money-lending activities

Leveraged Buy-Out - the purchase of a business, with financing provided largely by borrowed money, often in the form of junk bonds

Liability - a legal obligation to pay a debt owed

Lien - a charge upon or security interest in real or personal property maintained to ensure the satisfaction of a debt or duty ordinarily arising by operation of law

Limited Partnership - an association of two or more partners formed to conduct a business jointly and in which one or more of the partners is liable only to the extent of the amount of money they have invested

Line-of-credit - a mechanism wherein a lender agrees to allow a borrower to draw a pre-specified amount from an account on an as needed basis

Liquidation - the disposal, at maximum prices, of the collateral securing a loan, and the voluntary and enforced collection of the remaining loan balance from the obligators and/or guarantors

Liquidation Value - the net value realizable in the sale (ordinarily a forced sale) of a business or a particular asset

Liquidity - money in the bank or cash that can immediately be used to pay your obligations

Litigation - the practice of taking legal action through the judicial process.

Loan Agreement - Agreement to be executed by borrower, containing pertinent terms, conditions, covenants and restrictions

Loan Payoff Amount - the total amount of money needed to meet a borrower's obligation on a loan

Long-term Liabilities - debts payable over a period of more than twelve months

Loss Rate - a rate developed by comparing the ratio of total loans charged off to the total loans disbursed from inception of the program to the present date

Loss Reserve Adjustment Rate - a reserve rate based upon the ratio of the aggregate net chargeoffs (chargeoffs less recoveries) for the most recent five years to the total average loans outstanding for the comparable 5-year period

Markup - the difference between invoice cost and selling price

Maturity - as applied to securities and commercial paper, the period end date when payment of principal is due

Maturity Extension - extension of payment beyond the original period established for repayment of a loan

Mentor - a business, usually large, or other organization that has created a specialized program to advance strategic relationships with small businesses

Merger - a combination of two or more corporations wherein the dominant unit absorbs the passive ones, the former continuing operation usually under the same name

Mortgage - an instrument giving legal title to secure the repayment of a loan made by the mortgagee (lender)

Negotiated Grievance Procedure - the sole and exclusive procedure available to all employees in a bargaining unit and the employer for processing grievances and disputes

Negotiation - the "face to face" process used by local unions and the employer to exchange their views on those matters involving personnel policies and practices, or other matters affecting the working conditions of employees in the unit and reduced to a written binding contract

Negotiation Dispute - that point in negotiations where labor and management cannot come to an agreement

Net Profit - result obtained when expenses are subtracted from revenues

Net Worth - result obtained when debts and obligations owed (liabilities) are subtracted from the value of properties owned (assets)

Notes And Accounts Receivable - a secured or unsecured receivable evidenced by a note or open account arising from activities involving liquidation and disposal of loan collateral

Obligations - the amount of orders placed, contracts awarded, services received, and similar transactions during a given period which will require payments during the same or a future period

Ordinary Interest - simple interest based on a year of 360 days, contrasting with exact interest having a base year of 365 days

Outlays - net disbursements (cash payments in excess of cash receipts) for administrative expenses and for loans and related costs and expenses

Outsourcing - the practice of using subcontractors rather than paid employees

Owner's Draw - amount of money taken from the business by the owner

Partnering - a mutually beneficial business-to-business relationship based on trust and commitment  that enhances the capabilities of both parties

Partnership - a legal relationship existing between two or more persons contractually associated as joint principals in a business

Patent - the exclusive right to make, use and sell an invention for 17 years

Petty Cash Fund - fixed fund used to make small payments without having to write a check or use credit

Prime Contract - a contract awarded directly by the Federal government

Prime Rate - interest rate which is charged business borrowers having the highest credit ratings, for short term borrowing

Principal - amount owed on a loan not including interest

Pro Forma - financial planning statement that projects future performance

Product Liability - type of tort or civil liability that applies to product manufacturers and sellers

Profit-Sharing Plan - an employee benefit plan established and maintained by an employer whereby the employees receive a share of the profits of the business

Proprietorship - the most common legal form of business ownership wherein the liability of the owner is unlimited

Protest - a statement in writing by any bidder or offeror on a particular procurement alleging that another bidder or offeror on such procurement is not a small business concern

Purchases - items bought and resold to customers, including the cost of all raw materials or parts purchased for manufacture into finished products

Ratio - denotes relationships of proportion between items within and between financial statements, e.g., current ratio, quick ratio, inventory turnover ratio and debt/net worth ratios

Request For Proposals - a document outlining a government agency's requirements and the criteria for the evaluation of offers

Return On Equity - a measure of a corporation's profitability, specifically its return on assets, calculated by dividing aftertax income by tangible assets

Return On Investment - the amount of profit (return) based on the amount of resources (funds) used to produce it

Secondary Market - those who purchase an interest in a loan from an original lender, such as banks, institutional investors, insurance companies, credit unions and pension funds

Secured Credit - loans secured by the assets of your business or your personal assets or both

Self-employment Tax - the social security and medical tax for individuals who work for themselves

Small Business - a business smaller than a given size as measured by its employment, business receipts, or business assets

Start-up Costs - expenses incurred before the business opens

Subcontract - a contract between a prime contractor and a subcontractor to furnish supplies or services for the performance of a prime contract or subcontract

Supporting Documents - information needed to record in one's books, generated from business transactions, including sales slips, paid bills, invoices, receipts, deposit slips, and cancelled checks

Turnover (Business) - the number of times that an average inventory of goods is sold during a fiscal year or some designated period, measuring the efficiency of a business

Undelivered Orders - the amount of orders for goods and services outstanding for which, the liability has not yet accrued

Unfair Labor Practice - action by either the employer or union which violates the provisions of applicable labor laws

Usury - interest which exceeds the legal rate charged to a borrower for the use of money

Variable Costs - costs that change as production changes, e.g., raw materials, production labor, storage and shipping, etc.

Venture Capital - money used to support new or unusual commercial undertakings, e.g., equity, risk or speculative capital, usually provided to new or existing firms that exhibit above-average growth rates and a significant potential for market expansion

Working Capital - money available to a firm for daily operations

Zoning - local municipalities regulating businesses to operate at particular sites

References:

1.  www.4hb.com

2.  www.about.com

3.  www.myownbusiness.org

4.  www.richdad.com

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