Accounts Payable
Payments owed to suppliers for goods and services.

Accounts Receivable
Payments owed by customers for delivered goods and services.

Amortization
The process of liquidating (paying off) a debt through installment payments; amortization also refers to the process of prorating expenditures over time in order to write them off.

Asset
The resources that the company possesses for the future benefit of the business (includes cash, inventory, accounts receivable, equipment, buildings).

Attributes
The features of your product or service. For example, the attributes of a copier might be that it copies twenty-five pages per minute and creates double sided copies.

Balance Sheet
Snapshot of a company’s holdings at given point in time. Shows the assets owned by a company, the liabilities owed to others, and the accumulated investment of its owners.

Balloon Payment
Principal is paid back in a lump sum at the end of the loan term. This keeps payments lower during life of loan as company pays only accrued interest.

Benchmarking
Comparing your business with other similar businesses or competitors.

Benefits
What the customer "gets" from using your product or service. For example, the benefits of a copier are that the customer receives fast, reliable copies.

Brand Equity
The goodwill, associations and recognition earned by a brand.

Break Even Point
The amount of sales (in dollars or units) that will cover all the costs of running the business.

Call Option
The company’s ability to pay back the debt before maturity. Calls are usually applied to bonds. Often a call option will require that the company pay more than the face value of the debt. Calls are also attached to preferred equity.

Cash Flow
The money coming in to the business and the money going out is the flow of cash that determines whether a business will survive.

Cash Flow Statement
Document summarizing the business’s cash flow position for a given period. Often shows the sources and uses of cash.

Competitive Analysis
Examination of your company’s position in the marketplace relative to the competition.

Core Competencies
Advantages and strengths your company has relative to the competition.

Cost of Goods Sold (COGS)
The cost to your company of acquiring or producing the goods and services sold in a given period of time. Includes cost of raw materials, labor associated with production, or purchase of inventory. For example: In a grocery store, the cost of goods sold is simply the amount that the store paid its suppliers for the individual grocery items.

Coupon Rate
Interest rate on a bond (sometimes used to refer to the interest rate on any debt instrument)

Covenants
A way for the debt holder to ensure some control over the organization. Covenants include limits on different financial ratios (like assets to liabilities or debt to equity) and may bar the company from selling any major assets without approval from the debt holder. A company may be in default if it breaks one of these covenants.

Debt service
The regular debt payment that a company makes (monthly or annually) which includes interest accrued and a portion of the principal

Dequity
Hybrid financing instruments that combine certain characteristics of both debt and equity.

Differentiation
Any way a company markets its products and services to distinguish them from the others in the market. Ways of differentiating include features, fit, styling, reliability, packaging, sizes, service, brand names.

Direct Competitors
Direct competitors offer similar products or services.

Direct Labor
Direct labor is the time spent working specifically on the production of the product or service. For a retail business, labor costs are usually included as a fixed cost (unless the employee works on commission). For a manufacturing business, direct labor refers to the wages paid to line workers who are involved in the production. For a service business, direct labor usually refers to the wages paid to staff providing the service.

Direct Materials
For retail businesses, direct materials cost is the cost of purchasing the inventory. For example, a museum store will source its products from a number of vendors in order to fill the store with merchandise that is relevant to the museum experience. The cost of purchasing each product from the vendor is the cost of the good. For manufacturing businesses, direct materials refer to all materials that can be traced directly to a unit of output. For example, the direct materials for a catering business include the cost of the food used to fulfill an order. The units of spices and other staple goods like butter, oil, etc. are also included in the cost.

Fixed Costs
Costs that do not vary with volume of goods or services produced or sold. Often includes rent, insurance.

Fixed Income
A security in which the holder receives a specific annual interest income and a specific amount at maturity.

Gross Margin
Gross profit divided by revenue.

Gross Profit
Revenue minus cost of goods sold.

Income Statement (Profit and Loss Statement)
Shows the flow of activity and transactions over a specific period of time. In general, revenue minus expenses equals income (profit).

Indirect Competitors
Indirect competitors offer a related product or service that fulfills the same need.

Industry
Your industry refers to the type of business you are operating. The Department of Labor has created industry divisions from the North American Industry Classification System (www.census.gov/epcd/www/naics.html).

Interest-only payments
Debt service in which company pays only the interest that accrues. Principal is paid back either in a lump sum (balloon payment) or in installments at the end of the interest-only period.

Liabilities
Obligations to repay borrowing, debts, and other obligations to provide goods or services to others (includes bank debt, accounts payable, advance payments from customers to deliver goods or services, taxes owed, wages owed).

Marginal Revenue and Cost
The revenue and cost of producing and selling one more item.

Market Opportunity
Market opportunity is the potential to sell your product or service.

Market Segment
The portion of all consumers that is the ideal buyer for a product or service. For example, a snack food manufacturer might target a young consumer who makes purchases on impulse, while a gourmet food manufacturer targets an older consumer who does research on quality.

Market Share
The ratio of company sales in a market to total sales in a market. Can be expressed in dollars or sales units.

Maturity
The length of the term of debt.

Moratorium
Debt service is not paid for a specific amount of time (helps start-ups by not requiring them to immediately begin debt repayment).

Nonrecourse Debt
Debt for which the borrower cannot be held personally liable for payment.

Operating Income/Operating Profit/EBIT
Earnings before interest and taxes, or the profit made from the operations of the company, usually the production and sale of goods and services. Equals gross margin minus selling, general and administrative expenses.

Opportunity Cost
The sacrifice made to use an asset for one purpose instead of another. For example, by deciding to produce more pizza, a café might have to produce fewer sandwiches. The opportunity cost is the revenue lost from sandwiches not sold.

Owners’ Equity
The accumulated dollar measure of the owners’ investment in the company. Assets minus liabilities equals owners’ equity.

Positioning
The niche that a marketer tries to occupy with a good or service. For example, a clothing designer must decide whether her line of clothing will be athletic, casual, chic, or dressy.

Principal
The original amount borrowed or financed; interest is paid on the principal.

Return or Return on Investment (ROI)
A measurement of the amount of money that has been realized as a result of a certain investment of resources; the amount earned in proportion to the capital invested, usually stated as a percentage.

Revenue
Price times sales volume.

Secured
Debt is guaranteed by an asset. If company defaults, that asset is sold and proceeds are used to pay the secured creditor. Typical assets include land/buildings and accounts receivable.

Seniority
The order in which debt holders are paid back. Each debt holder will have a different seniority. Senior, general and subordinate debt are the most common terms for levels of seniority. All debt is senior to equity.

Variable Contribution
Amount remaining from sales revenue after covering variable costs, expressed per unit of sales. This is the amount that will go toward covering fixed costs.

Variable Costs
Costs that vary with production or sale of goods and services. Often includes materials, sometimes labor.

Working Capital
The amount of funds available to pay short-term expenses. Seen as a cushion to meet unexpected or out-of-the-ordinary expenses. It is determined by subtracting current liabilities from current assets.

• Silberger, Steven. The Ten Day MBA. New York: William Morrow, 1993.
  
• Gladstone, David. The Venture Capital Handbook. New York: Prentice Hall, 1988.
  
• Higgins, Robert C. Analysis for Financial Management. New York: Irwin/McGraw-Hill. 2001.
• Glossary on www.entreworld.org
  
• www.investorwords.com