|
Glossary of Business Terms A-F G-Z
Common used terminology used in the mergers and acquisitions industry.
Acknowledge
A declaration by someone that something is true.
Adjusted Book Value
The book value (equity) of a company after adjusting the values of assets and liabilities the values of assets and liabilities to reflect estimated market values rather than depreciated tax values and removing non-operating assets and liabilities from the balance sheet.
Adjusted Earnings
The earnings of a business after adjusting for a one-time or extraordinary expenses, excess owner compensation, and discretionary expenses or other expenses that are not essential for the successful ongoing operation of the business.
Affidavit
A sworn statement; written oath such as acknowledgment.
Affirmation
A solemn declaration; a non-religious oath.
Agency
The legal relationship between a principal and his agent arising from a contract in which the principal engages the agent to perform certain acts on the principals behalf.
Agency Disclosure
A written explanation to be signed by a prospective buyer or seller, explaining to the client the role that the broker plays in the transaction. The purpose of disclosure is to explain whether the broker represents the buyer or seller or is a dual agent (representing both) or a subagent (an agent of the sellers broker). This allows the customer to understand to which party the broker owes loyalty.
Agent
A person (natural), corporation, society, association or partnership (legal persons) acting by authority of a principal in a realty transaction for compensation.
Agreement of Sale
A bilateral contract whereby buyer promises to buy and seller promises to sell by execution and delivery of deed; also know as Purchase and Sale Agreement (P&S). Agreement means the same as Contract.
Amortization
Act of liquidating an indebtedness by equal and periodic payments usually monthly; this direct reduction method means each payment remains constant but ratio of principal and interest changes with an increasing larger portion credited to reducing debt; savings and loan associations popularized method.
Appraisal
An estimate of value.
Appreciation
Increase in value resulting from market forces such as demand stronger than supply.
Asset Approach
A way of estimating the value of a business ownership interest using one or more methods based on the value of the Adjusted Book Value of the company.
Asset Sale
A form of acquisition whereby a selling entity agrees to sell all or certain assets and liabilities of a company to a purchaser. The corporate entity is nor transferred.
Attachment
A writ issued, beginning or during a legal action commanding sheriff to attach (seize) property, rights and effects of defendant to satisfy possible credit demands of plaintiff if judgment comes out in plaintiffs favor.
Attorney-in-Fact
Anyone who is authorized in writing to perform certain acts for another under written power of attorney; valid only during lifetime of party giving this power.
Base Year
The Company's current fiscal year. Since complete financial statements are not available for the current year, sales and income are projected based on the expectations of management.
Bill of Sale
A written instrument which is the evidence of transfer of one persons right in personal property to another.
Blue Sky
Any intangible portion of a price above the maximum goodwill through the application if established valuation methodology.
Book Value
The value, net of depreciation, at which an asset appears on a company's balance sheet.
Capital Expenditures
Investments of cash for improvements to remain competitive in a business.
Capitalized Items
Have an economic life of one year or more and the cost is moved to the balance sheet, and then these costs can be written down by depreciation or amortization over time.
Capitalizing Net Income
Determining the value of a Company by dividing annual adjusted income by the capitalization rate (required ROI)
Cash Flow
Profit after principal and interest are deducted from net operating income (NOI).
Cash Flow Statement
An analysis of all the changes that affect the cash account during an accounting period. These changes may be shown as either sources or uses of cash.
Closing Costs
Costs of seller and buyer at conveyance of realty.
Closing Statement
A written accounting of funds to seller and buyer at passing of papers.
Collateral
A security, such as a mortgage, given to protect debt.
Commingling
The mixing of funds held for the benefit of others with the brokers personal or business funds.
Commission
Money or other valuable consideration given to broker by principal for services rendered; amount is by agreement.
Conditional Sales Contract
A contract in which owner retains title until buyer has met all terms and conditions; a familiar device in land sales; also called land contract or installment contract. Buyer acquires equitable title until final payment; after delivery of deed, buyer has legal title.
Consideration
Something of value exchanged between parties of a contract; money, services, goods or promises.
Contract
A legal instrument between two parties to do or not to do something; in reality, it must be in writing to be enforceable.
Covenant
A promise in an agreement or contract agreeing to performance or nonperformance of certain acts, or requiring or preventing certain acts or uses.
Confidentiality Agreement
A pact that forbids buyers, sellers, and their agents in a given business deal from disclosing information about the transaction to others.
Counter Offer
Voids first offer and creates new offer.
Deal Structure
The combination of any types of payment by which the purchase of a business is accomplished. It can include cash, notes, stock, consulting agreements, earnout provisions, and covenants not to compete. The sale can take the form of an asset sale or a stock sale,
Deficiency Judgment
Court award to lender if sale at public auction does not equal mortgage debt.
Depreciation
Decrease in value for various reasons
Discount Rate
A rate of return used to calculate the present value of a stream payment.
Discretionary Earnings
Earnings of a business enterprise prior to these expenses:
Income taxes
Non-operating income & expenses
Depreciation and amortization
Interest expense or income
A single owner's total compensation and benefits
Due Diligence
Due diligence is often performed on the acquirer as well as the target.
Earnout
The portion of the purchase price that is contingent on future performance of the business. It is payable to the sellers after certain predefined levels of sales or income are achieved in the year(s) after acquisition.
Earnest Money
Deposit or binder given with Agreement to Buy.
Enterprise Value
The total value of the stock of the business, plus the face value of all interest-bearing debt owed by the business.
Equity
Value or interest an owner of realty has above any debt on property; difference between value and mortgage debt.
Escrow
The holding of something of value by a person (escrowee or escrow agent) for the benefit of other parties.
Exclusive Right to Sell
An employment agreement and contract giving the broker the right to receive a commission if the property or business is sold by anyone including the seller during the term of the agreement.
Expense
Anything that a company buys that has an economic life of less than one year. It shows up immediately on the income statement.
Fair Market Value
The estimated price at which an asset or service would pass from a willing seller to a willing buyer, assuming that both buyer and seller are acting rationally, at arms length, in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts. It is also presumed that the price is not affected by special or creative financing or sales concessions granted by anyone associated with the sale.
Fiduciary
A position of trust (e.g. broker to principal).
Finders Fee
Fee to broker for arranging loan for client; can also mean fee to broker for locating a property for client
Fixed Interest Rate
An interest rate which does not fluctuate over the term of the loan.
Free Cash Flow
Cash available for distribution to owners after taxes but before the effects of financing. Calculated as net income, plus depreciation and amortization, plus interest expense, less required capital expenditures and changes in working capital.
| 
