Business Article - Business Terms Glossary
This information should aid the novice business owner in defining business terms. Below is a glossary containing several common business terms. The definitions for each shall be listed beside them. These terms are listed in alphabetical order.
- Accessory goods – These are products or services that are needed by the business to conduct business.
- Accounts Payable – These are accounts that have not been paid by a business. The service was received but there is still a balance due to the business.
- Accounts Receivable – This represents money that is due to a business for services provided or assets sold. Credit customers are also included in accounts receivable.
- Accrual Basis Accounting – Any monies made are reported if it is earned in the fiscal period; this is also true of any expenses deducted. It does not matter when the money was or is received or if the service was paid for or not. The revenues, expenses, etc are recorded as they occur.
- Advertising – This is the persuasive way of attempt influencing the customer or influencing a potential buyer by persuasive messages about the product or service. It ultimately influences buying behavior and attitude of the potential customer.
- Angel Investor – This is a person who provides monies for start up or for the expansion of a business by investing in it. This is a person who wants higher return on their investments.
- Assets – All of the business’s intellectual or real property that shows a positive value.
- Balance sheet – This is a statement of both the liabilities and the assets of the business.
- Barriers of entry – This is any condition that causes a competitor difficulty when trying to get into the market.
- Break even point – This is the point that the expenses and revenue equal out.
- Business services – These are services that businesses are in need of. Temp services, maintenance of equipment, advertising, etc.
- Capital – This are the investments that are required for starting or operating a business.
- Cash Basis Accounting – This is an accounting method involving the entering of income or expenses into the ledgers when payment is made or at the time of the expense occurring.
- Cash flow – The movement of monies into and out of a business’s accounts.
- Collateral – The items or assets that can be used as a guarantee for a loan.
- Convenience goods – These are items that are used or wanted by the consumer but consumers do not want to spend a lot of time attaining the items.
- Corporate image advertising – This is an advertisement created to promote the business first while secondarily promoting the products/services that the business offers.
- Cost of goods – This is the direct cost of creating a product as well as a service and includes the fees for materials and costs of labor.
- Cost of sale – This is the cost of the actual goods as well as the costs involved in selling the product and delivery of the product.
- Current assets – These are current business assets that can be liquidated into cash easily.
- Current Liabilities – This is any debt that is, in the everyday business, incurred. These debts are due in one year.
- Debt service – These are the payments or monies that are needed to keep current on a loan.
- Depreciation – This is the breaking down over time of a business’s fixed assets.
- Direct sales method – This is the process of selling to the consumer directly; using telemarketing, advertising, and direct mail.
- Distributor – This is an entity that buys products in order to resell them to their consumers; most often retail outlets. A large price cut is usually expected for the service.
- Distribution channel – This is the product route followed in order to be received by the end user.
- Equity – This is usually in the form of stock but it is considered any percentage clarifying ownership in a business.
- Fashion goods – These are the products that are considered important where style is concerned. Price is only secondary.
- Fixed assets – These are often long term assets and are regularly assets that cannot be liquidated but are important for a business’s everyday operations.
- Fixed costs – This is the pay of employees, cost of goods, general productions costs, utilities, rents, etc.
- Full service retail sales method – This is the selling of items from an outlet to the proposed end user. This method offers sales associates who are able to explain the product but retail prices.
- Gross profit – This is the revenue minus the cost of any sales.
- Impersonal Service at Customer’s Site – This is a service that usually entails work regarding the customer’s property. The service is performed at the customer’s site.
- Impersonal service at service’s site – This service entails the work on a customer’s property but is provided at the business of the service provider.
- Impersonal Service, Volume – This is a service that is created to satisfy the desires of all customers.
- Income statement – This is a document of expenses as well as revenues.
- Installation goods – These are items that require sizeable and expensive investments of capital but will have a longer life. Examples include homes, buildings, facilities, and equipment.
- Intangible Assets – These are assets that are not physical. Customer bases, patents, and trademarks all fall under this category.
- Inventory turnover – This is a ratio used by businesses to rate sales effectiveness. The equation is: Revenue total / product inventory’s average retail value
- Licensing agreement – This is an agreement that occurs between two businesses or entities allowing one entity to sell the products/services of the other with the ability to use the other entity’s name, copyrights, etc.
- Liquidity – This is the amount of a business’s assets that can be converted to cash quickly.
- Long term assets – These are assets that are not liquid but are a part of the business’s everyday operations.
- Long term liabilities – These are all of the debts that are currently not liabilities. In order to consider a debt a long term liability, it must not be due for at least a calendar year into the future.
- Market life cycle – This is the amount of time it takes for a large amount of the public to be interested in buying a certain product/service.
- Market penetration pricing strategy – This is the art of setting prices low when the income is not critical and control of the market is desired.
- Market share – This is the percentage of your sales divided by the total sales from any and all sources.
- Material goods – Commonly raw materials or processed materials that will make up the purchaser’s basic end product.
- Net profit – This is total revenue minus total expense.
- Net worth – This is assets less liabilities.
- On site sales method – Door to door salespeople fall into this category as it is act of selling directly to the user by use of a sales team that goes to the place of business or home of the end user.
- Partnership – This is the legal relationship involving two or more entities to run a clearly defined business.
- Parts/Sub assembly goods – These are products that should usually make up a percentage of a purchaser’s total end product.
- Personal service at customer’s site – Can potentially deal with confidential factors. This work is done at the customer’s site.
- Personal service at the service site – Can potentially deal with confidential factors but the work is done at the service provider’s site.
- Personal Service, volume – This is a high volume service with a personal touch.
- Pro forma – These are the financial forms of future business expectations.
- Product Benefits Advertising – These are created to tie the strengths with the resulting benefits of a service or product.
- Product Comparison Advertising – This compares the product or service features with the competitor’s. The aim is to prove your product to be richer in features than that of the competitor.
- Production Capacity – This is the amount, using the current resources, of products and services that can potentially be produced by the business.
- Profit Margin - total revenues minus total expenses.
- Proprietary Technology – This is a legally owned technology that is an important part of the product or it could be used during the product production.
- Retained Earnings – These are profits that are kept by the business instead of disbursed among the shareholders. These profits are used to make improvements to the business value.
- ROI - (Return on Investment) this is the net profit which is divided by the Net Worth. This ratio determines the percentage of profitability.
- Service/Product Mix - this business involves the service and the product but is unique because the quality of service is usually much more important than the actual product that is received.
- Self-Service Retail Sales Method – This is the selling of a product from an outlet directly to an end user, often at prices much lower than the full retail price.
- Service Goods – These are goods that are “shopped” to get the best price for the standard.
- Skimming Pricing Strategy – Setting prices very high in order to receive quick cash with little desire for any market penetration.
- Sole Proprietorship – This is a business owned by one single individual.
- Specialty Goods – These are the products that are appealing to a big segment of the public. These products are considered “special” enough to ask for.
- Strategic Relationships – This is an agreement involving two or more businesses to conduct specified processes by means of joint manner.
- Supplies Goods – These are production products that only aid in the actual production and will not be included as part of the end product.
- Trademark – This is a business’s name for a product/service that has been legally registered.
- Unsought Goods - These are products often purchased due to adversity instead of desire.
- Vertical Integration – This is the potential of a business to incorporate any aspects of production, sales, distribution, and management into their business operations
- Wholesale Sales Method - This is the act of selling product to distributors at a significantly lower price. They then sell to full service outlets or to self service retail outlets.
- Working Capital – This is any monies available to a business for everyday operations.