Currently 268 terms in dictionary
| Transaction Term | Description |
|---|---|
| Accredited Investor | An accredited investor is an individual or entity who has met certain qualifications set out by the government or other regulatory body in regard to their net worth or income level and is therefore able to invest in certain forms of high-risk investments, such as venture capital and angel investing. |
| Accrual Basis Accounting | A method of accounting wherein income and expenses are recognized, within the statements, when the business first acquires the right to receive the income, or the obligation to pay the expense. Companies with inventories are required to use the accrual method for tax purposes. (Also see Cash Basis Accounting.) |
| Acquisition | One company taking over controlling interest in another company. |
| Add-backs | All or a portion of expenses that are added back to net income in an effort to place the figures as close as possible to the economic earnings that were actually derived from the business. |
| Add-On Acquisition | Refers to a company that is added by a private equity firm to one of its platform companies, or by a strategic buyer pursuing a consolidation investment strategy. |
| Adjusted Book Value | The measure of a company's valuation after liabilities, including off-balance sheet liabilities, and assets are adjusted to reflect true fair market value. |
| Adjusted Book Value Method | A valuation method within the Asset Approach category whereby all assets and liabilities (including off-balance sheet, intangible, and contingent) are adjusted to their fair market values. (NOTE: In Canada on a going concern basis.) |
| Adjusted EBITDA | Adjusted earnings before taxes, interest income or expense, nonoperating and non-recurring income/expenses, depreciation, and other non-cash charges and prior to deducting an owner's/officer's compensation, but after replacing that owner's/officer's compensation and benefits with the market rate compensation and benefits to replace that owner's/officer's functions. This is a measure of a company's operating performance without having to factor in financing decisions, accounting decisions or tax environments. |
| Adjusted Net | See Discretionary Earnings. |
| Aging Accounts Receivable | A snapshot of the accounts receivable, usually alphabetized, as of the date of the balance sheet you are using, wherein each account receivable is shown in columnar form as either current, over 30 days, over 60 days, over 90 days, or over 120 days delinquent. The aging report is the primary tool used by collections personnel to determine which invoices are overdue for payment. |
| Amortization | This is an accounting technique, used for tax planning purpose, to periodically lower the book value of a loan or an intangible asset over a set period of years. This is accomplished by monthly lowering the intangible asset value on the balance sheet by a specific amount and charging that same amount to expense on the income statement. The amount of amortization taken as a non-cash charge in any given accounting period is almost always based upon number of years approved by the IRS for cost recovery. See also Depreciation, which is the corresponding accounting technique for tangible assets. |
| Analysis | The act or process of providing information, recommendations and/or conclusions on diversified situations, processes, or problems in businesses, other than estimating value. Also (as a noun), the result of the act or process of analysis. |
| Appraisal | The act or process of estimating value. Also, the result of the process of estimating value. The words "valuing" (verb) and "valuation" (noun) are synonymous with "appraisal." |
| Asking Price | The total amount for which a business or an ownership interest is offered for sale. The asking price could be inclusive or exclusive of inventory or other assets. |
| Asset (Asset-Based) Approach | A general way of determining a value indication of a business, business ownership interest, or security by using one or more methods based on the value of the assets of that business net of liabilities. |
| Balance Sheet | A financial statement that provides a snapshot of a company's assets, liabilities, and shareholders' equity at a specific point in time. |
| Book Value | The value of a company's assets as shown on its balance sheet, calculated as total assets minus total liabilities. |
| Broker | A professional intermediary who facilitates business transactions between buyers and sellers, typically earning a commission upon successful completion of the deal. |
| Business Broker | A professional who assists in the buying and selling of businesses, providing services such as valuation, marketing, and negotiation support. |
| Buyer Profile | A detailed description of the ideal buyer for a business, including financial qualifications, industry experience, and strategic fit. |
| Cash Basis Accounting | A method of accounting where income and expenses are recorded when cash is actually received or paid, rather than when the transaction occurs. |
| Cash Flow | The net amount of cash and cash equivalents moving into and out of a business during a specific period. |
| Closing | The final step in a business transaction where ownership is transferred from seller to buyer and payment is completed. |
| Confidentiality Agreement | A legal document that requires parties to keep certain information confidential and not disclose it to third parties. |
| Consideration | The payment or value exchanged in a business transaction, which can include cash, stock, assets, or a combination thereof. |
| Depreciation | An accounting method of allocating the cost of a tangible asset over its useful life. Depreciation reduces the value of assets on the balance sheet. |
| Discretionary Earnings | The total financial benefit that a single owner/operator would realize from the business, including salary, benefits, and profit. Also known as Seller's Discretionary Earnings (SDE). |
| Due Diligence | The comprehensive investigation and analysis of a business before completing a transaction, including financial, legal, operational, and commercial aspects. |
| EBITDA | Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of a company's operating performance. |
| Earnout | A contractual provision in a business sale where part of the purchase price is contingent on the business achieving certain future performance targets. |
| Equity | The ownership interest in a business, representing the residual value after liabilities are subtracted from assets. |
| Escrow | A financial arrangement where a third party holds funds or assets until specific conditions of a transaction are met. |
| Fair Market Value | The price at which a business would change hands between a willing buyer and a willing seller, both having reasonable knowledge of relevant facts. |
| Financial Statements | Formal records of a business's financial activities, including balance sheets, income statements, and cash flow statements. |
| Franchise | A business model where a franchisor grants a franchisee the right to operate a business using the franchisor's brand, systems, and support. |
| Going Concern | A business that is expected to continue operating indefinitely, as opposed to being liquidated or closed. |
| Goodwill | An intangible asset representing the value of a business's reputation, customer relationships, and other non-physical assets that contribute to its earning power. |
| Holdback | A portion of the purchase price that is withheld by the buyer for a specified period after closing to cover potential liabilities or warranty claims. |
| Income Statement | A financial statement that shows a company's revenues, expenses, and profits over a specific period of time. |
| Intangible Assets | Non-physical assets such as trademarks, patents, customer lists, brand recognition, and proprietary technology that have value to a business. |
| Key Person | An individual whose skills, knowledge, or relationships are critical to the success of a business. |
| Letter of Intent (LOI) | A document outlining the preliminary agreement between buyer and seller regarding the terms of a proposed transaction. |
| Liability | A company's legal debts or obligations that arise during business operations, including loans, accounts payable, and accrued expenses. |
| Liquidation Value | The estimated value of a business's assets if they were to be sold individually, typically lower than going concern value. |
| Market Approach | A valuation method that determines value by comparing the subject business to similar businesses that have recently been sold. |
| Merger | A transaction where two companies combine to form a single entity, typically with both companies' shareholders receiving shares in the new company. |
| Multiple | A factor used to value a business, typically applied to revenue, EBITDA, or net income to determine the business's worth. |
| Net Income | The total profit of a business after all expenses, taxes, and costs have been deducted from total revenue. |
| Non-Compete Agreement | A contract in which the seller agrees not to compete with the buyer in the same business or industry for a specified period and geographic area. |
| Off-Market Deal | A business transaction that is not publicly advertised or listed, typically involving a direct approach to potential buyers or sellers. |
| Operating Expenses | The costs associated with running a business on a day-to-day basis, excluding cost of goods sold and non-operating expenses. |
| Purchase Agreement | The legal document that outlines the terms and conditions of a business sale, including price, payment terms, and closing conditions. |
| Purchase Price | The total amount paid by the buyer to acquire a business, which may include cash, notes, and assumption of liabilities. |
| Qualified Buyer | A potential buyer who has the financial resources, experience, and qualifications necessary to successfully acquire and operate a business. |
| Revenue | The total income generated by a business from its normal operations, before expenses are deducted. |
| Seller Financing | A financing arrangement where the seller provides a loan to the buyer to help finance the purchase of the business. |
| Seller's Discretionary Earnings (SDE) | The total financial benefit that a single owner/operator would realize from the business, including salary, benefits, and profit. |
| Synergy | The additional value created when two businesses combine, resulting from cost savings, increased market share, or complementary capabilities. |
| Tangible Assets | Physical assets owned by a business, such as equipment, real estate, inventory, and vehicles, that have a physical form and can be touched. |
| Term Sheet | A non-binding document outlining the basic terms and conditions of a proposed business transaction. |
| Transaction | The process of buying or selling a business, including all negotiations, due diligence, and closing activities. |
| Underwriter | A financial institution or individual that evaluates and assumes risk in a business transaction, typically in exchange for a fee. |
| Valuation | The process of determining the economic value of a business or business interest, typically performed by a professional appraiser or business broker. |
| Value Driver | A factor that significantly impacts the value of a business, such as revenue growth, profit margins, market position, or customer base. |
| Working Capital | The difference between a company's current assets and current liabilities, representing the capital available for day-to-day operations. |
| Warranty | A guarantee provided by the seller regarding the accuracy of information about the business and its condition at the time of sale. |
NOTE: This glossary should give you a good understanding of the terms used in the business brokerage industry, but please keep in mind that this list is not exhaustive and there may be other terms that are specific to a certain region or industry.
