Browse the glossary by topic or alphabetically.


Accounts payable
What a business owes to its suppliers and other creditors at a given point in time
Accounting period
Period of time (month, quarter, year) for which a financial statement is produced
Accounts receivable
Amount due to a business by its customers at a given point in time
Accrual accounting
Method of bookkeeping in which income and expenses are allocated to periods to which they apply, regardless of when actually received or paid (i.e. when an invoice is submitted, its value is added to income immediately, even though it has not been paid)
Personal possessions of value, including cash, real estate and investments
Verification of financial records and accounting procedures generally conducted by a CPA or accounting firm
Balance sheet
Financial statement showing assets and liabilities at a specific time
Third party obligation promising to pay if a vendor does not fulfill its valid obligations under a contract (Types of bonds include license, performance, bid, indemnity & payment)
Break-even point
Point at which sales equal total costs
Physical equipment (buildings, equipment, human skills) used in the production of goods and services (also used to refer to corporate equity, debt securities, and cash)
Capital asset
Asset that is purchased for long-term use such as machinery and equipment
Cash accounting
Simplest form of accounting in which income is considered earned when received and expenses are not taken into account until paid
Cash flow
In investments, it represents earnings before depreciation, amortization and non-cash charges; also called cash earnings
Certified lenders
Banks that participate in the SBA's guaranteed loan program
Asset that can be sold for cash and has been pledged to a creditor to secure a future obligation (i.e. if one finances a car, it is the collateral for the loan)
Commercial credit
A bank loan to a company; also called commercial lending or business credit
Also known as compound interest, ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings
Someone brought in for a limited time to solve one or more specific problems; often used interchangeably with the terms independent contractor, freelancer and vendor
Agreement between two (or more) parties in which each promises to perform in some way; can be complex and should always be reviewed by an attorney; may not be binding if not correctly drafted and executed
Contract employee
Works for an agency that contracts out their work to various employers; agency usually provides Worker's Compensation insurance and withholds taxes
Form of protection provided by U.S. laws to authors of "original works of authorship," including literary, dramatic, musical, artistic and certain other intellectual works; available for all unpublished works, regardless of the nationality or domicile of the author
Credit limit / line
Amount of credit that a financial institution extends; maximum amount a credit card company will allow someone to borrow on a single card
Credit report
Report of an individual or company's history of repaying past loans and other liabilities; provided to a bank/company when it is considering granting credit to customers
Credit score
Number that indicates individual's creditworthiness; determined by credit bureaus with a statistical program that gives points for such things as credit card debt, number of cards, total debt level and whether one rents or owns his/her home; creditors use the score to decide whether to approve a mortgage loan, issue a credit card or offer a small business loan; a good score can result in a lower interest rate; a poor score can result in a higher interest rate or loan denial
Debt financing
Financing in which one gets a loan from someone or somewhere and goes into debt; that person is obligated to repay the money at some predetermined interest rate
Failure to make timely payment of interest or principal on a debt security
Decrease in the value of an item or property over time due to wear, age or other cause
Direct deposit
Electronic deposit of wages or benefits, such as pension or Social Security, into a personal bank account; deposits are handled through the automated clearinghouse (ACH)
Drop shipment
Shipment that comes directly from the manufacturer to the end user
Due diligence
Process by which a person conducts inquiries for the purposes of timely, sufficient and accurate disclosure of all material statements/information or documents which may influence the outcome of the transaction; is a critical component in mergers and acquisitions
DUNS (Data Universal Numbering System)
Database maintained by Dun and Bradstreet that is used by the government to identify each contractor and their location(s); number is required to register with the Central Contractor Register (CCR) that is used by the government's electronic commerce/electronic data interchange (EC/EDI) system called FACNET
Generally, refers to buying and selling of goods and services and the transfer of funds on the Internet
Electronic bill
Allows users to electronically send and receive bill and payment information using technology
Electronic check presentment (ECP)
Captures an electronic image of the check at the point of sale, which is then processed by banks and clearinghouses
Electronic deposit verification (EDV)
Customer protection security process for opening accounts online
Electronic funds transfer (EFT)
Transfer of money between accounts by consumer electronic systems such as automated teller machines (ATMs) and electronic payment of bills
Employee stock ownership plan (ESOP)
Plan where employees have a vested interest (stock ownership) in the company
Employer identification number (EIN)
Number obtained by a business from the IRS by filing form SS-4; if a person is a sole proprietorship, the EIN is his/her social security number
Security technology that scrambles information sent over the Internet or any other insecure connection, such as an internal network
Someone who is willing to assume the responsibility, risk and rewards of starting and operating a business
Equal Credit Opportunity Act
Federal law that prohibits discrimination in credit transactions on the basis of race, color, religion, national origin, sex, marital status, age, source of income or the exercise of any right under the Consumer Credit Protection Act
Equity financing
Involves "selling" a portion of one's company to an outside investor; the business owner has no obligation to repay the funds; venture capital firms provide this type of funding
Temporary monetary deposit with an independent third party by agreement between two parties; the escrow money is released when certain agreed conditions have been met
Goods and services that are produced domestically and sold to buyers in another country
Export subsidy
Lump sum given by the government for the purpose of promoting an enterprise considered beneficial to the public welfare
Extension of credit
Granting of credit in any form
External accounts
Accounts that owned at another financial institution
Buying and selling of invoices or accounts receivables
Person or company entrusted with assets owned by another party (beneficiary) and responsible for investing the assets until they are turned over to the beneficiary
Fiscal year
Any 12-month period used as an accounting period
Fixed cost
Production cost which does not vary significantly with the volume of output (i.e. administrative costs)
Amount of time the bank takes to clear or reject (bounce) a check for payment; the time at which funds are debited from the issuer's account
Form of licensing; the franchiser provides services through a series of franchisees
Free on board (FOB)
Commercial term in which the seller's obligations are fulfilled when the goods reach a point specified in the contract
One who pursues a profession under no long-term contractual commitments to any one employer or company; they are on their own to find work, negotiate the terms and compensation for that work, and deliver the work to the satisfaction of the paying client; often used interchangeably with the terms independent contractor, consultant and vendor
Fringe benefit
Indirect, non-cash benefit provided to employees by employers in addition to regular wage or salary compensation, such as health insurance, life insurance, profit-sharing, etc.
General partnership
Partnership that is a joint venture in which each general partner shares in the administration, profits and losses of the operation
Good faith
Standard of conduct between parties meaning honesty in the conduct of the transaction
Grace period
Time allowed a debtor in which legal action will not be undertaken by the creditor when payment is late
Gross income
An individual's total personal income before taking taxes or deductions into account; ALSO a company's revenue minus cost of goods sold (also called gross margin and gross profit)
Pledge by a third party to repay a loan in the event that the borrower cannot; a special case is a personal guarantee in which one personally guarantees an obligation
Guaranteed / insured loans
Programs in which the federal government makes an arrangement to indemnify a lender against part or all of any defaults by those responsible for repayment of loans (i.e. a small business loan guaranteed by the SBA)
Income statement
Financial statement that measures a company's financial performance over a specific accounting period; also known as the profit and loss statement or statement of revenue and expense
Obligation of one party to reimburse another party for losses which have occurred or which may occur
Independent contractor
Person or business that follows an independent trade, business or profession in which they provide goods or services to the public; used interchangeably with independent professionals, consultants, freelancers and temps
Intellectual property
Ownership, as evidenced by patents, trademarks and copyrights, conferring the right to possess, use or dispose of products created by human ingenuity
Job sharing
Arrangement in which the responsibilities and hours of one job position are carried out by two people
Joint venture
Two or more businesses joining together under a contractual agreement to conduct a specific business enterprise with both parties sharing profits and losses; venture is for one specific project only, rather than for a continuing business relationship as in a strategic alliance
Keogh plan
Tax-deferred pension account for self-employed workers or employees of unincorporated businesses
Contract granting use/occupation of property during a specified period in exchange for a specified rent
Individual who possesses or has use of property through a lease
Ledger balance
Balance in an account at the beginning of each day; includes all deposits or transactions posted from the previous night, whether or not any money has been collected; also known as the current balance
Individual to whom a lease is granted
Company's legal debts or obligations that arise during the course of business operations
When a creditor has the right to sell the mortgaged or collateral property if one fails to meet the obligations of a loan contract
Party who has a claim upon real or personal property until the satisfaction of some debt or duty
Limited liability company
Legal entity that has the option of being taxed like a partnership, but shields personal assets from business debt like a corporation
Limited partnership
Partnership that is a business arrangement where the operation is administered by one or more general partners and funded by limited or silent partners who are legally responsible for losses based only on the amount of their investment
Line of credit (LOC)
Arrangement between a financial institution, usually a bank, and a customer that establishes a maximum loan balance that the bank will permit the borrower to maintain; borrower can draw down on the line of credit at any time, as long as he or she does not exceed the maximum set in the agreement
Sale of the assets of a business to pay off debts
Marginal cost
Additional cost associated with producing one more unit of output
Minority businesses
As defined by the Small Business Administration, business owned by those who are "socially and economically disadvantaged"
Multi level marketing (MLM)
Way of selling goods or services through distributors; plans promise that if one signs up as a distributor, he/she will receive commissions-for both sales of the plan's goods or services and those of other people who are recruited to join the distributors; plans that offer to pay commissions for recruiting new distributors are called "pyramiding" and illegal in most states
Net Operating Income (NOI)
Company's operating income after operating expenses are deducted, but before income taxes and interest are deducted; if this is a positive value, it is referred to as net operating income; a negative value is called a net operating loss
Office of Small and Disadvantaged Business Utilization (OSDBU)
Offices that offer small business information on procurement opportunities, guidance on procurement procedures, and identification of both prime and subcontracting opportunities with the U.S. government
Online banking
Service that allows an account holder to obtain account information and perform certain banking transactions through a personal computer
Online bill payment
Service that sends money out of a person's/company's bank account to whoever one wishes
Operating income
Amount of profit realized from a business' operations, but excluding operating expenses (such as cost of goods sold) and depreciation from gross income; also referred to as operating profit or recurring profit
Purchasing a functional service for the company from another business; type of services include payroll, taxes and advertising
Business expenses not directly related to a particular good or service produced (i.e. utilities)
Business entity in which two or more individuals carry on a continuing business for profit as co-owners; legally, it is regarded as a group of individuals rather than a single entity, although each of the partners file their share of the profits on their individual tax returns; also can be an agreement between businesses to jointly pursue some objective
Legal protection for an invention
Person or business to whom a check is issued
Party delivering funds
Personal liability
Liability insurance that provides protection for the personal actions of an individual, which cause bodily injury or property damage to another
Scam that uses spoofed e-mails from well-known companies to direct consumers to fraudulent Web sites, where victims unknowingly submit sensitive information directly to scammers
Power of attorney
Agreement authorizing someone (generally an attorney) to act as one's agent in making legal decisions and taking other actions, such as signing legal documents; may be general (complete authority) or special (limited authority)
Preferred lenders
Banks that have a special written agreement with the SBA which allows them to make a guaranteed SBA loan without prior SBA approval
Price fixing
Actions, generally by a several large corporations that dominate in a single market, to escape market discipline by setting prices for goods or services at an agreed-on level
Act of turning previously government-provided services over to private sector enterprises
Procurement Automated Source System (PASS)
Central referral system of small businesses that are interested in selling to the government; managed by the Small Business Administration
Profit & loss (P&L) statement
Listing of income, expenses, and the resulting net profit or loss; also called an income statement
Profit margin
Indicator of profitability; ratio of earnings available to stockholders to net sales; determined by dividing net income by revenue for the same 12-month period; result is shown as a percentage; useful when comparing companies in similar industries
Ratio of output (goods and services) produced per unit of input (productive resources) over some period of time
Prompt Payment Act
Federal law that requires federal agencies to pay interest to companies on bills not paid within 30 days of invoice or completion of work
Real property
Real estate property, including buildings and land, as opposed to personal property
Recurring debt
Any payment that occurs on a continuing basis; involves payments that cannot be easily canceled at the payer's request, including alimony or child support and loan payments; is important in a lender's consideration of how much credit one can obtain
Request for proposal (RFP)
Solicitation of proposals by the government for product(s) or service(s) it needs from prospective contractors; includes request for description of how the business provider intends to carry out that request and at what price
Amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise; the top line or gross income figure from which costs are subtracted to determine net income
Revolving credit
A bank line of credit on which the customer pays a commitment fee and can use funds when they are needed; normally the line involves a firm commitment from the bank for a period of several years
Secured account
Account against which collateral or other security is held
Service Corps of Retired Executives (SCORE)
Volunteer management assistance program of the SBA; volunteers provide one-on-one counseling and workshops and seminars for small businesses
Same as a trademark except that it identifies and distinguishes the source of a service rather than a product
Simple interest
Interest computed only on the principal balance, without compounding
Simplified employee pension plan
Retirement program for self-employed people or owners of small companies allowing them to defer taxes on investments intended for retirement
Small Business Centers (SBC)
Centers located throughout the U.S. that can help small business people tap the multi-billion-dollar GSA market for goods and services
Small Business Development Centers (SBDC)
Centers located throughout the U.S. and administered by the SBA, which provide management assistance to entrepreneurs and new business owners
Small Business Investment Corporation (SBIC)
Licensed by the SBA as federally funded private venture capital firms; money is available to small businesses under a variety of agreements
Sole proprietor
Business owned and operated by one person for profit; individual is personally liable for all debts of the business to the full extent of his or her property; owner has complete control of the business
Standard Industrial Classification Code (SIC)
Four-digit number assigned to identify a business based on the type of business or trade involved; businesses can determine its SIC number by looking it up in a directory published by the Department of Commerce, or by checking in the SIC book in the reference section of a local library
Detailed record of transactions in a bank customer's account(s) for a certain period, usually each month, which shows debits, credits, transfers, payroll deposits, account balance, check fees, service charges, ATM activity, etc.
Surety bonds
Provide reimbursement to an individual, company or the government if a firm fails to complete a contract; SBA guarantees surety bonds in a program much like SBA's guaranteed loan program
Sweat equity
Common form of investment in time which owners make, with no salary, to a new business
Sweep account
Brokerage or bank account whose cash balance is automatically transferred into an interest-bearing investment, such as a money market fund; it earns interest on surplus cash; at the end of each business day, a sweep account would transfer excess funds into an interest-bearing account, earn overnight interest and make the funds available the next day
Duty levied on goods transported from one customs area to another either for protective or revenue purposes
Tax number
Number assigned to a business that enables the business to buy wholesale without paying sales tax on goods and products
Temp employee
Works for an agency that contracts out their work to various employers; also known as a contract employee
Legal protection for a word, name, symbol or device which is used in trade with goods to indicate the source of the goods and to distinguish them from the goods of others
Triple net
Rental type in which the tenant pays rent to the landlord and additionally assumes all costs regarding the operation, taxes and maintenance of the premises and building
Uncollected funds
Items deposited in an account that have not yet been collected, or paid, by the bank on which they were drawn
Variable cost
Any costs which change significantly with the level of output (i.e. cost of materials)
Seller of products or services; often used interchangeably with the terms independent contractor, freelancer and consultant; also used to describe a business being run on a street, such as a newspaper vendor
Venture capital
Money used to support new or unusual undertakings; equity, risk or speculative investment capital; provided to new or existing firms which exhibit potential for above-average growth
Wire transfer
Electronic payment service for transferring funds by wire; transfers are guaranteed funds for the recipient, meaning that the payment cannot be revoked by the sender after the transfer
Workers compensation coverage
Can pay for an injured employee's medical treatment and replace part of lost wages if a job-related injury causes lost time from work