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