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Business Terms

This glossary provides concise definitions of commonly used business terms.

Accounts Payable – an account of money owed that has not yet been paid.

Accounts Receivable – an account of the amount of money owed to the business.

Asset – Anything owned by the business that is of value.

Benchmarking – An evaluation of performance relative to other similar businesses.

Brand – The collection of ideas, signs, or marks that represent a business.

Business Plan – An overview of the goals of a business and their detailed plan for achieving them.

Competitor Analysis – An analysis of the weaknesses and strengths of a business’s competitors.

Corporation – A separate legal entity from those who form it.

Debt to Equity Ratio – The proportion of equity to debt when financing an asset.

Depreciation – The loss of value of an asset throughout its existence.

Direct Marketing – Marketing by any means which makes direct contact with customers such as telesales or email.

Dividend – The payout of profits to the shareholders of a business.

Earnings Before Interest and Taxes – A business’s profit before interest and taxes are considered.

Effective Tax Rate – The actual tax rate paid by a business after offsets and payments are taken into account.

Fiscal Year – The period used by businesses for the calculating of annual financial statements.

Fixed Asset – An asset that is not liquid.

Gross Margin – A business’s profit for each unit sold; usually expressed as a percentage.

Guerrilla Marketing – A low budget, high energy marketing strategy that is generally considered unconventional.

Human Resources – The department that deals with employee relations in administrative aspects.

Income Statement – A statement that details the conversion of revenue into income.

Initial Public Offering (IPO) – When business shares or stock are offered to the public for the first time.

Interest Expense – The cost incurred by a business for borrowing money.

Liability – An obligation, which is binding, to settle a particular debt.

Limited Liability Company (LLC) – A company whose owners have limited responsibilities for its actions and debts.

Limited Liability Partnership (LLP) – A company in which the partners share limited responsibilities for its actions and debts.

Market Penetration – A marketing strategy that involves a business entering the market using current products.

Market Share – The portion of the total market occupied by a business.

Market Value – The price at which a liability or asset would trade in a particular market.

Net Worth – A company’s assets minus their liabilities.

Operating Expense – The ongoing costs of running a business.

Outsourcing – When a business subcontracts part of their process involving a good a service.

Partnership – A business entity in which partners share control of a business.

Payroll – The record of wages, salaries, deductions, and bonuses for a business.

Public Limited Company (PLC) – A type of company that offers shares to the public.

Public Relations – The control of the image and relations of a company with the public.

Receivables – The total amount of money that customers owe to a business.

Return on Investment – A measure of money made from an investment in proportion to how much money was spent.

S Corporation (S Corp) – A corporation that is taxed under US Internal Revenue Code Subchapter S of Chapter 1.

Shareholder – A company or individual who holds share in a business.

Stock Market – A market where derivatives and stocks are sold.

SWOT Assessment – An assessment used by businesses to examine the strengths, weaknesses, and opportunities of a particular action.

Tax Rate – The percentage at which the income of a business is taxed.

Valuation – The process of establishing the market value of an asset or liability.

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