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Contribution margin
Unit price minus cost of goods sold.
Crowdfunding
An Internet phenomenon, where strangers learn about a business online and then decide whether or not to make an investment. Crowdfunding investors are typically “fans” of an owner, but they do expect a return on investment. (The company pays a percentage of the capital raised to the online Crowdfunding website.)
Fiscal Year
The 12 month period a company uses to report financial results. A fiscal year can be the same as a calendar year (January through December), or any other 12 month period that makes sense. Example: a gift store chain sells most of its items during the Holiday season and then in clearance sales during January. Therefore the gift store chain uses a fiscal year of February 1 January 31 so that its year-‐end accounting doesn't interfere with its selling efforts.
geaux BIZ Portal
A computer portal offered by the Louisiana Secretary of State that enables entrepreneurs to go to a single source to learn which forms they need to file, to file the forms required by the Secretary of State, and to determine which other government agencies they may need to interact with.
Grit
An individual’s self-‐commitment to overcome obstacles to achieve long-‐term goals. The ability to keep pursuing your dream despite challenges and defeats. Perseverance, resilience and backbone.
Guarantor
A credit-‐worthy individual or business with sufficient liquidity that promises to repay a loan in the event that the debtholder can't make a required payment.
Lien
The right to take possession of collateral until a debt is repaid. Example: "The bank has a lien on my company's inventory. If we can't repay the bank loan, the bank has the right to take possession of our inventory and sell it to pay themselves the money we owe them."
Limited Liability Corporation (LLC)
A special type of corporation where individual owners (or “members”) are taxed on the profits of the company, but the corporation (not the member- owners) is liable for debts or judgments against the company.
Louisiana Department of Revenue
The state agency that collects state taxes.
Louisiana Secretary of State
The state government agency that helps individuals and companies file required legal forms.
Maturity
The date a loan (or debt or liability) is repaid in full. Example: the maturity of your car loan is five years from the day you buy the car five years from now that debt needs to be completely repaid.
Origination Fee
The percentage of a loan a bank or online credit company charges when a small business receives a loan. Original fees add to the cost of the loan.
Pro Forma
A Latin phrase (“for the sake of form”) that in business means a projection of future financial performance. A pro forma usually takes the form of a projection of future revenues and costs.
Sole Proprietorship
An individual that owns a company. Sole proprietors are taxed on the profits of the company, and are personally liable for any debts or judgments against the company
Pledged
A legal agreement that an assets is part of a guarantee to a lender, when the lender can take possession of the assets and sell it to recover the funds owed by a borrower in the event the borrower is unable to make a required debt payment.
Overhead
Costs
that
a
business
incurs
that
are
not
part
of
producing
the
goods
or
services its sells, but which are required to operate legally and efficiently. Example: "The salary I pay my accountant is overhead these funds don't help us sell more product, but I need my accountant to keep our financial records and submit all required filings."
Overdraft
When a company issues a check or makes a financial commitment for an amount greater than the amount the company has deposited in the bank. Also called "a bounced check."
Installment Payment
Debt owed to someone that is paid monthly. Examples: your car or truck payment, your credit cards and your mortgage are all paid in monthly installment payments.
Account Receivable
Money owed by a customer to a company. Example: "I sold the new computer system to my client for $20,000. They made an initial payment of $1,000 and now owe me $19,000, which they've promised to pay in 30 days. That $19,000 is an Account Receivable for me. I trust the customer to pay this account receivable on the terms we agreed to."
Cash Instruments
Cash, publicly traded stocks, government bonds or corporate bonds that can be quickly turned into cash. Cash Instruments can be turned into cash at values that are predictable and available to all holders of the cash instrument. Example: "Apple stock is a cash instrument because it can be sold and converted into cash immediately, and the amount anyone would get for that Apple stock is the same the price of the stock at that moment in the stock market."
Corporate Social Responsibility
Actions entrepreneurs and companies take that go beyond their financial self-interest. These actions are voluntary but often reflect the personal beliefs of business leaders about what their companies can or should accomplish. Many companies tie the actions they take for corporate social responsibility to initiatives that benefit their business. Example: the local pet store promises to donate $1 to the local animal shelter for every pet owner who buys the pet food they have on sale over a weekend.
Differentiated Offering
Distinguishing a product or service "different than anything else," attracting customers, generating sales and serving as the foundation for a thriving business.
Extended Payment Terms
An option a supplier might grant a company to pay their bills later than they normally would. Example: "I usually have to pay my supplier within 30 days of receiving their goods. But if I order extra for a big sale that features their product my supplier gives me extended payment terms 60 days so I don't run out of money before the sale."
Individual Retirement Account or IRA
A special account where individuals can deposit retirement funds that can grow tax deferred until they withdraw them after they retire. The advantage of an IRA: there are no annual income taxes on any dividends or profitable sales than an IRA makes the money remains in the account and only gets taxed when the individual retires. If an individual withdraw money from an IRA before he/she retires they are forced to pay the IRS significant penalties for early withdrawal.
Internal Revenue Service or IRS
The federal agency that collects federal taxes and performs audits.