Dictionary

501(c): A provision of the United States Internal Revenue Code listing 27 types of non profit organizations exempt from some federal income taxes.

accounts payable: The business accounts that represent a firm's financial obligations (what it owes) for goods and services it has received.

accounts receivable: A business' accounts representing the money due to it for goods or services it has provided.

accrued expenses: An expense that has been incurred, but isn't paid for yet.

accrued revenue: Monies that have not been received yet, but are considered revenue.

acid-test ratio: A ratio of the assets minus inventory as compared to liabilities. The acid-test ratio shows how much of the company's debt could be paid off by selling all liquid assets.

adjustable rate loan: Also known as a variable rate loan, the adjustable rate loan is a loan with an interest rate that changes periodically based on an outside index, such as the prime interest rate.

adjusted gross income: The amount of a person's income that can be taxed. The adjusted gross income is determined after some adjustments have been made to the figure (such as payments to a retirement plan), but before any deductions or exemptions are claimed.

all-or-none bid: A bid submitted for a number or services or products, in which the buyer wishes to receive all of the services or products and will not accept a partial award.

amortization: A debt that reduces gradually over time through regular payments of interest and principal.

annual percentage rate (APR): The standard interest rate that will be paid on a loan.

annuity: A specific monetary amount paid to a person over a period of time, such as the annual payments for a lottery winner.

articles of incorporation: A document set forth by a new company that contains certain basic information, such as the name of the company, purpose, directors, etc.

assets: All property a person or business owns that can be used to pay off debts.

audit: When a company has their financial records examined and verified by an official, such as an IRS agent. Audits generally only occur when a company's financial decisions have been called into question.

average cost method: A method of determining the average cost of each unit of an inventory by dividing the total cost of the inventory by the total number of individual units.

balance sheet: A financial document that shows a company's assets, debts and equity on a certain date.

balloon payment: A final loan payment that is substantially larger than the previous payments.

bankruptcy: A legal proceeding declaring that a person is unable to meet his financial obligations. Once a person has declared bankruptcy, any his assets can be sold and distributed among the creditors to satisfy the debts.

batch processing: Processing a number of transactions simultaneously. For example, a business with run all of the credit card sales at the end of the night to "batch" the sales.

bearer bond: A bond payable to whoever holds it.

blanket mortgage: A mortgage that covers a number of properties under one lien.

book value: The actual value of property after deducting the depreciation from the cost.

break-even point: When income equals expenditures, with neither profit or loss.

bridge loan: A short-term loan that provides financing until permanent financing is arranged.

buy-down: To lower a mortgage rate by paying money up front.

bylaws: Rules that govern how a business is run.

call option: The option to buy a certain stock at a certain price on a certain date. The opposite of a call option is a put option.

cap: To place a maximum limit on wages, spending, etc. Also, a cap refers to the set maximum for any such amount.

capacity building: Assistance that is provided to entities that have need to develop a certain skill or competence or for general upgrading or performance ability.

capital expenditure: Spending by a business on necessary equipment used for long-term investment and improvement.

capital gain: The profit that is realized when an asset is sold.

capital: The amount that remains after deducting liabilities from assets, representing the value of the company.

charitable organization: A group whose purpose is to help people or a cause in some fashion.

charitable trust: A trust established for the purpose of helping others without asking for anything in return.

charity badge: A type of widget or digital placeholder used on Web sites, blogs or social networks of e-mail promotion of some humanitarian initiative, mainly gathering donations for charity projects.

Charity Navigator: An independent, non profit organization that evaluates American charities.

citizen sector organization: Another term meaning non profit organization, usually defined by “as one of citizens, for citizens”.

civil society organization: A more recent term meaning non profit organization.

closely held corporation: Describes a company in which most stock is held by stockholders with no intention of selling. A closely held corporation only has a limited amount of publicly-traded stock.

closing costs: Fees charged to a buyer to complete the sale of real estate. Closing costs include fees such as appraisals, title search, etc.

collateral: Something valuable, such as money or property, that is used as a pledged asset to repay a loan.

community organizations: Non profit organizations that operate within a single local community.

cooperative: An autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.

corporate governance: A set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. The same rules often apply to non profit organizations.

cram-down: A business deal which forces investors to accept a deal that is undesirable.

cross sell: The act of suggesting that a buyer purchase products related to the one he's interested in. For example, a company may try to cross sell soil and shovels to a client purchasing plants.

debt instrument: A written promise to repay a debt that contains the terms and conditions of repayment, as agreed upon by lender and borrower.

debt service: The annual amount necessary to pay principal and interest payments on a loan.

debt-to-equity ratio: The measure of what a company owes (debt) versus how much it is worth (equity). The debt-to-equity ratio determines a company's borrowing power (i.e. how much the firm can borrow).

default: When the principal and interest on a loan is not paid by the set date. Borrowers are in default when they haven't made their loan payments.

defeasance: Ending a debt by setting aside enough money to repay the principle and interest over the term of the loan.

depreciation: A decrease in the value of an asset, like a car or house, over time.

direct costs: Easily identifiable costs associated with a project. Direct costs include the cost of materials, labor, etc.

direct deposit: When a person's salary is electronically transferred to his bank account. Direct deposit eliminates the need for paper checks.

domain name: A name that identifies a computer or group of computers on the Internet. The name appears on the URL and is often referred to as hostname.

donation: A gift given generally to a cause or to a charitable purpose.

down payment: A partial payment that secures the purchase. The entire balance is due at a later, agreed upon time.

due diligence (DD): An assessment of a company's methods of production, management and overall capacity to succeed before an investor commits to putting capital into that firm.

earning power: An assest's ability to make money or generate capital under the best conditions.

equity: Assets minus liabilities. The amount of equity a person or business holds determines the borrowing power.