Account
Account Payable
Money owed by a company to a supplier. Example: "I purchased $20,000 of beauty supplies for my big sidewalk sale. My supplier gave me 60 days to pay for this huge order. That $20,000 is now an Account Payable for my company. The supplier trusts me to pay this account payable on the terms we agreed to."
Bond
A loan. A bond is security that investors buy and sell, that represents a legal obligation from the company issuing the bond that they will repay the funds they received when they issued the bond.
Capital Expenditures
Expenditures on equipment the business will use for many years.
Commission
Money earned when something is sold. Example: the real estate agent who sells you a house is paid a 2% commission on the value of the house sold.
Contribution Margin
Unit price minus cost of goods sold.
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."
Breakeven Analysis
A determination of how many units are needed to sell in order to pay for all fixed costs. Example 1: "That equipment costs $4,000. The contribution margin for each item it makes is $10. I will need to sell 400 items to breakeven on that investment." Example 2: "My overhead expenses are $50,000. The contribution margin on each item I sell is $50. I will need to sell 1,000 items for my company to breakeven."
Cash Flow
Total Revenues minus Total Cost minus one-time expenditures (called “capital expenditures”) on equipment that will be used for many years.
Communications Skills
The ability to accurately convey information. Both verbal (or spoken) and written communication skills are important.
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.
Angel Investors
Individuals that make small investments in an enterprise or to support an entrepreneur where they do not expect an immediate or large return on investment. Angel Investors are typically “friends and family,” individuals who know the business owner and want the owner to succeed. Angel Investors typically provide small amounts of equity with no expectation of a large return.
Brokerage
A company that provides individuals and companies with access to financial markets. Example: "I buy stocks and bonds from my broker."
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."
Computer Literacy
The ability to use computers for basic tasks such as developing documents, sending emails and searching the internet for information.
Corporation
A corporation is a person in the eyes of the law. The corporation is taxed for profits and is liable for any debts or judgments. Corporations are owned by shareholders (individuals or other corporations).
Assets
Something of value. Anything owned is an asset. Assets can be something big (like a house) or something small (like a piece of jewelry). A security is a financial asset, meaning a piece of paper that represents ownership and is worth money.
Business Ethics
Proper business behavior beyond complying with legal requirements. A simple rule guides business ethics, the same basic rule that should guide all human behavior: act towards your stakeholders as you would hope they would act towards you.
Collateral
Equipment, inventory or other goods that are pledged to the bank in the case the company can not make a loan payment.
Confidentiality
Individuals and companies often promise to keep information they learn secret. This promise is often formalized by signing a Non--Disclosure Agreement (or NDA). Example: the bank signs an NDA when an entrepreneur submits lots of personal information on a bank loan application.
Cost of Goods Sold
Costs that make up one unit of what you sell. These can be labor costs as well as material costs. Example: when you sell a hat, the variable costs include: a) the hat’s material; and b) the labor cost required to make the hat.
Bank Loan
Debt from a bank. Banks require much more information from potential borrowers, and take more time to make a lending decision based on a great deal of analysis. Therefore bank loans are less expensive than online lines of credit.
Capital (or Equity)
Funds contributed by investors to a business. Investors contribute capital to a business because they expect a significant return on their investment when the business succeeds.
Comfort Engaging with Strangers
The ability to interact in a friendly and effective way with unfamiliar people. The ability to seem welcoming and easy to talk to, even with people who are different in age, appearance or background.
Conflict of Interest
A situation in which an individual might take an action to his/her advantage that would be to the disadvantage of a person or company that believes this individual is serving them. Example: a customer tells a supplier in confidence that they are buying a large quantity of a specific product to advertise a major sale in two weeks. It would be a conflict of interest for that supplier to go to competitor stores and use this information to get them to buy more of this product and put it on sale immediately.
Credit (or Debt)
Funds lent to a business with an agreement that the business will repay the lender with interest.