N

Net Income (Net Earnings, Net Profit)
A company's final income after all expenses and taxes have been deducted from revenues.

Non-Mandatory Benefits
Benefit programs created at the employers initiative. They include: Retirement, Medical & Health, Insurance, and Time-Off. Some are subject to government regulation.

O

Operating Expenses
Expenses incurred in the course of business activities.

Operating Income
Earnings before deduction of interest payments and income taxes. It measures a company's earnings power from on-going operations and demonstrates the ability of a company to earn sufficient profit to pay interest on its debt. Referred to as EBIT.

Operating Lease
A lease accounted for by the lessee without  showing an asset for the lease rights or a liability for the lease payment obligations. Rental payments of the lessee are merely shown as expenses of the period. The asset remains on the lessor's (owner) books, where rental collections appear as revenues. Contrast with Capital Lease.

Owner's Equity
Proprietorship: Assets minus Liabilities.  Corporation: Paid-in capital plus retained earnings less liabilities. Partnership: partners' capital accounts. Sole proprietorship: Owner's capital account.

P

Paid-in Capital
Par value per share times the number of shares issued.

Partnership
Legal form of business where two or more individuals share resources and operations in a jointly run business.

Payables
Related: Accounts Payable

Periodic Rate
The monthly effective interest rate. For example, the periodic rate on a credit card with an 18% annual percentage rate is 1.5% per month.

Plan Sponsors
The entities that establish pension plans.

Prepayment
A payment made on a loan prior to the original due date.

Prime Rate
The short-term interest rate charged by a bank to it's best customers.

Private Placement
The direct sale of securities to a small number of investors.

Pro Forma Statement
Hypothetical statements of how financial statements would appear if forecasted events such as sales or production increases had occurred.

Profit
Synonymous with Income and Earnings

Q

 

R

Ratio Analysis
A way of expressing relationships between a firm's financial numbers. Ratios are most commonly used to analyze the financial and operational characteristics of a company in an industry, market, or region. Ratios give managers a tool to conduct comparison and trend analysis.

Retained Earnings
The part of net income retained in the company and not distributed to shareholders.

Return on Investment (ROI)
A concept used in business planning to determine the profit earned in relation to the value of the capital required to produce the profit.

Revolving Line of Credit
A bank line of credit on which the customer pays a commitment fee and can take and repay funds at will.

S

SBA (Small Business Administration)
Federal agency who makes direct or participating loans with private lenders to the small business community.

SBDC (Small Business Development Centers)
SBDCs is an SBA Program that offers one-stop assistance to small businesses by providing a wide variety of information and guidance in central and easily accessible branch locations. The program is a cooperative effort of the private sector, the educational community and federal, state and local governments.

SBI
Small Business Institutes. Run by universities and colleges with SBA support.

SBIC
Small Business Investment Companies - Private investment firm licensed by the SBA to provide small businesses with debt/equity financing. SBICs prefer investments between $100,000 to $250,000 and have much more generous underwriting guidelines than a venture capital firm.

SBIR
Small Business Innovation Research Program - Government program that encourages small business to explore their technological potential and provides the incentive to profit from its commercialization. Program mandated by Congress that requires Federal agencies to set a percentage of their R & D budget for small business

SCORE
Service Corps of Retired Executives. Sponsored by the SBA to provide consulting to small businesses.

Semi-Variable Costs
Costs that change only when certain levels of activity are reached. For example, Rent. Adding an employee will not cause increases in rent expense, however at some point additional employees will require more space and higher rent expense.

Senior Debt
Debt whose terms in the event of default, require it to be repaid before subordinated debt receives any payment.

Sensitivity Analysis
Examination of how the projected performance of the business varies with changes in key forecasted assumptions.

SEPs
Simplified Employee Pensions (SEPS). A low-cost retirement plan option for employers. Instead of establishing a separate retirement plan, in a SEP, the employer makes contributions to his or her own Individual Retirement Account (IRA) and the IRA's of his or her employees, subject to certain percentage limites and dollar limitations.

SIMPLE IRA
Savings Incentive Match Plan for Employees (SIMPLE). A retirement plan where employees can choose to make salary reduction contributions. The company is generally required to match employee contributions up to 3% of the employees compensation.

Sole Proprietorship
A business form with one owner who is responsible for all the firm's liabilities.

Strategic Alliance
Collaboration between two or more companies designed to achieve some corporate objective.

Strategic Business Unit (SBU)
An operating unit or planning focus that groups a distinct set of products and services which are sold to a uniform set of customers, facing a well-defined set of competitors.

Sub-Chapter S Corporation
A private corporation of 35 or fewer stockholders who pay personal income rather than corporate tax on net profits.

Subordinated Debt
Debt over which senior debt takes priority. In the event of default, subordinated debt holders receive payment only after senior debt claims are paid in full.

T

Term Loan
A bank loan, typically with a floating interest rate, for a specified amount that matures in between one and ten years, and requires a specified repayment schedule.

Trade Credit
Credit granted by suppliers.

Trading Cycle
The process of purchasing inventory, converting that inventory to cash or accounts receivable via sales, collecting those accounts receivable, and paying suppliers who extended trade credit.

U

Uniform Commercial Code
Set of laws that pertains to the main areas of business law. UCC has adopted in whole or part by most states.

Unsecured Loan
Debt that is not backed by a pledge of specific assets.

V

Variable Cost
A cost that is directly proportional to the volume of output produced. When production is zero, the variable cost is equal to zero.

W X Y Z

Waiver
Consent granted by a lender to permit the borrower to be in default of a loan covenant.

Warranty
A statement of fact or opinion concerning the condition of the company. Commonly found in loan agreements.

Working Capital
The difference between a company's current assets and current liabilities.

Working Capital Loan
Short-term loan that provides money to buy income generating assets.

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