Definitions of terms used in the study of business practices.
Financial
- Accounts Payable — money owed to suppliers for goods or services received
- Accounts Receivable — money owed by customers for goods or services delivered
- Accrual Accounting — recording revenue when earned and expenses when incurred (vs. cash basis)
- Average Check — mean customer spend per transaction
- Balance Sheet — assets, liabilities, and equity at a point in time
- Bank Reconciliation — matching internal records against bank statements
- Bookkeeping — day-to-day recording of business transactions
- Break-even Analysis — the sales volume at which revenue covers total costs
- Cash Conversion Cycle — days between paying suppliers and collecting from customers
- Cash Flow Statement — actual money movement into and out of a business
- Chart of Accounts — the master list of accounts for categorizing transactions
- Collateral — asset pledged as security for a loan
- Cost of Goods Sold — direct costs of producing goods or services (COGS)
- Customer Acquisition Cost — cost of gaining a new customer (CAC)
- Debt Service — total loan payments and the coverage ratio (DSCR)
- Depreciation — spreading asset cost over its useful life
- Financial Projections — forward-looking estimates of financial performance
- Gross Margin — percentage of revenue remaining after direct costs
- Income Statement — revenue, costs, and profit over a period (P&L)
- Line of Credit — revolving credit facility for short-term borrowing
- Net Income — final profit after all expenses, interest, and taxes
- Operating Expenses — ongoing costs not tied to producing goods (rent, utilities, salaries)
- Pro Forma — projected financial statements based on assumptions
- Revenue Model — the structure by which a business earns money
- Use of Funds — how invested capital will be allocated
- Working Capital — cash available for day-to-day operations
Market and Strategy
- BATNA — best alternative to a negotiated agreement (negotiating leverage)
- Competitive Analysis — evaluation of rival businesses
- Market Analysis — systematic study of external business conditions
- Marketing Plan — strategy for reaching and converting customers
- SWOT Analysis — strengths, weaknesses, opportunities, and threats
- Target Market — the specific customer group a business pursues
Pricing
- Menu Engineering — optimizing product mix by profitability and popularity
- Pricing Strategy — method for setting prices (cost-plus, competitive, value-based)
Operations
- Capacity Utilization — percentage of maximum productive capacity in use
- FIFO — first in, first out inventory management practice
- Inventory — goods held for sale or use in production
- Inventory Turnover — how quickly stock is sold and replaced
- Labor Cost — total employee cost as a percentage of revenue
- Payroll — employee compensation and employment tax administration
- Point of Sale — transaction processing system (POS)
- Risk Mitigation — identification and reduction of business threats
- Standard Operating Procedures — documented step-by-step processes (SOPs)
- Supply Chain — the sequence from raw materials to finished product
Legal and Corporate
- At-Will Employment — default U.S. employment relationship allowing termination without cause
- Business Insurance — liability, property, and workers’ comp coverage
- Progressive Discipline — escalating consequences for repeated performance issues
- Commercial Lease — contract for the use of commercial property
- Corporate Structure — legal entity type (LLC, S-Corp, C-Corp)
- Exit Strategy — how ownership converts to liquidity
- Franchise — licensed replication of a business system