Personal
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."
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."
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.
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.
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.
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.
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."
Brokerage
A company that provides individuals and companies with access to financial
markets. Example: "I buy stocks and bonds from my broker."
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.
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.
Capital Expenditures
Expenditures on equipment the business will use for many years.
Cash Flow
Total Revenues minus Total Cost minus one-time expenditures (called “capital
expenditures”) on equipment that will be used for many years.
Covered Loss
A loss that an insurance company will reimburse a policyholder for in the
event of a claim.
Credit (or Debt)
Funds lent to a business with an agreement that the business will repay the
lender with interest.
Credit-Worthiness
A person or a business with a strong credit score and the financial resources
that make it likely they will be able to repay any loan.
Crowdfunding
An Internet phenomenon, where strangers learn about a business online and
then decide whether or not to make an investment.
Deductible
The amount an insurance company makes a policyholder pay as part of any
claim.
Default
Failure to repay a loan.
Determination
Commitment to get something done. Individuals with determination exhibit
willpower to accomplish what they set out to do.
Differentiated Offering
Distinguishing a product or service "different than anything else," attracting
customers, generating sales and serving as the foundation for a thriving
business.
Differentiation
The act of making a business different (and presumably more attractive to
target customers) than any competitor.
Dividend
Money paid by a company to a person who owns stock in that company.
Dividends are optional – many companies do not pay dividends.
Elevator Speech
A clear, concise and compelling way to describe a business or new business
concept in 30 seconds; a differentiating vision to encourage potential
investors or employees to learn more.
Engaging Question
Open ended questions that prompts more than a "Yes" or "No" response.
Engaging questions give entrepreneurs more information they can use to help
them frame their differentiating offering and launch their business.
Extended Payment Terms
An option a supplier might grant a company to pay their bills later than they
normally would.