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9.5: Key Terms

  • Page ID
    50809
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    accounting
    system of recording and classifying a company’s financial transactions and summarizing and communicating those transactions in the form of financial statements
    accounting equation
    assets = liabilities + equity
    accounts payable
    account that includes vendors that the company owes money to
    accounts receivable
    account that includes customers that owe the business money
    angel investor
    wealthy, private individual seeking investment options with a greater potential return than is generally available with traditional publicly traded stocks
    assets
    items a business owns and derives future use from
    balance sheet
    financial statement that summarizes a company’s financial condition according to the accounting equation
    bartering
    exchanging goods or services for other goods or services instead of for cash
    bootstrapping
    funding strategy that seeks to optimize use of personal funds and other creative strategies (such as bartering) to minimize cash outflows
    breakeven point
    level of operations that results in exactly enough revenue to cover costs
    burn rate
    rate at which cash outflow exceeds cash inflow
    charitable organization
    nonprofit company founded for altruistic purposes
    collateral
    something of value pledged to secure a loan
    contribution margin
    gross profit from a single item sold
    cost of goods sold
    cost required to produce the product or service
    credit
    lending of funds in exchange for a promise to repay
    crowdfunding
    financing with investments of small amounts of money from a large number of people
    debt financing
    borrowing funds that must be repaid, usually with interest
    donation
    financial gift intended to support an organization’s general operations
    early stage
    company lifecycle stage in which the product or service has begun development
    equity
    owner’s interest in the assets of the business
    equity financing
    funds provided in exchange for a share of ownership in a business
    expenses
    costs incurred in the normal course of business operations
    financial statement
    output of an accounting system that is used to make financial decisions
    financial viability
    long-term financial sustainability of an organization to fulfill its mission
    financing
    raising money to fund the startup and operation of a business
    financing activities
    section of the statement of cash flows that shows where new infusions of cash are coming from
    fixed assets
    major purchases with a long life, such as buildings, land, and so on
    fixed costs
    costs that do not change, regardless of the amount of sales
    funds
    financial resources for acquiring assets
    grant
    financial gift intended to fund a specific goal or project
    gross profit
    selling price of a product or service minus its direct costs
    income (profit-and-loss) statement
    financial statement that describes how much a company earned while the business was operating and what costs were incurred to generate those revenues
    initial public offering (IPO)
    process by which a company lists its ownership shares on a public stock exchange
    investing activities
    section of the statement of cash flows that shows major purchases of equipment or facilities
    liability
    company’s debt to another party
    mature stage
    company lifecycle stage in which the business has reached commercial viability
    moonlighting
    earning income from a source outside of one’s primary employ
    net income
    revenue minus expenses
    operating activities
    section of the statement of cash flows that shows day-to-day activities of the business, such as purchasing supplies, paying rent, and receiving cash from customers
    profit margin
    amount by which revenue exceeds costs, typically described as a percent
    program services
    basic offerings that a nonprofit provides to generate a portion of its revenue to sustain operations
    projection
    forecast of the future operations of a business
    revenue
    amount a business earns through product sales or providing a service
    run rate
    cost of running a business over a specified period of time
    seed stage
    company lifecycle stage in which the business is largely still an idea
    statement of cash flows
    financial statement that explains the sources and uses of the company’s cash
    sustainable strategy
    strategy that can maintain an organization’s financial stability
    tax-exempt status
    treatment under U.S. tax law that removes the burden of taxes from nonprofit organizations
    valuation
    estimate of a company’s worth
    variable costs
    costs that fluctuate with the level of revenue
    venture capitalist
    individual or investment firm that specializes in funding startup companies
    working capital
    funds available for day-to-day operations

    9.5: Key Terms is shared under a CC BY license and was authored, remixed, and/or curated by LibreTexts.

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