A-Z Business terms

Assets

Assets are property that a business owns, including cash and receivables, inventory,
and so on.

Assets are any possessions that have value in an exchange. The more formal
definition is the entire property of a person, association, corporation, or estate
applicable or subject to the payment of debts. What most people understand as
business assets are cash and investments, accounts receivable, inventory, office
equipment, plant and equipment, and so on.
Burden rate

Burden rate refers to personnel burden, the sum of employer costs over and above
salaries (including employer taxes, benefits, and so on).
The burden rate is the allocation rate at which indirect costs are applied to the direct
costs of either labor or inventory​. You should add burden to the direct cost of either
labor or inventory in order to present the total absorbed cost of these items. The two
situations in which the burden rate is used are labor and inventory.
Cash flow

The cash flow in a business plan is the change in the cash balance.

For example, the cash flow for a month would be a positive $10,000 if the balance
was $10,000 at the beginning of the month and $20,000 at the end of the month. It is
important to distinguish cash flow, which is the change in the balance, from cash or
cash balance, which is the resulting ending balance.
Depreciation

Depreciation is an accounting and tax concept used to estimate the loss of value of
assets over time. For example, cars depreciate with use.
Depreciation is an accounting method of allocating the cost of a tangible or physical
asset over its ​useful life or life expectancy. Depreciation represents how much of an
asset's value has been used up. Depreciating assets helps companies earn revenue
from an asset while expensing a portion of its cost each year the asset is in use. If
not taken into account, it can greatly affect ​profits​.
Entrepreneur in heat

The term “entrepreneur in heat” describes an entrepreneur that continues to develop

new products and services beyond what the venture can support and inadvertently
may diminish the focus and effectiveness of the activities supporting the venture’s
primary revenue streams.
Fixed costs

Running costs that take time to wind down: usually rent, overhead, some salaries.
Technically, fixed costs are those that the business would continue to pay even if it
went bankrupt.

In practice, fixed costs are usually considered the running costs. These are static
expenses that do not fluctuate with output volume and become progressively smaller
per unit of output as volume increases.

Fixed costs are an important assumption for developing a break-even analysis. The
standard break-even formula estimates a break-even point of sales based on
per-unit price or revenue, per-unit variable costs, and fixed costs.
Goodwill

Goodwill is when a company ​purchases another company for more than the value of
its assets—which is quite common—the difference is recorded as an asset named
“goodwill.”

This is not a general term for the value of a brand, for example, but a very specific
accounting term.

For example, if one business buys another business for $1 million then it needs to
show the $1 million spent as an asset. If there are only $500 thousand in real assets,
the accounting result should be $500,000 in real assets purchased and another
$500,000 in “goodwill.”
Harvesting

Harvesting is most often referring to selling a business or product line, as when a

company sells a product line or division or a family sells a business.

A harvest strategy or harvesting strategy is a business plan for either canceling or

reducing marketing spending on a product. The management has decided that it
would cost too much to boost sales. In other words, they could not justify the
expense after considering likely future revenues from the product.

The term ‘harvest strategy’ may also refer to a brand or line of business.

Marketing executives choose a harvesting strategy when a product has reached the
end of its life cycle. They aim to extract maximum profit from any remaining sales.
Income statement

Also called profit and loss statement, an income statement is a financial statement
that shows sales, cost of sales, gross margin, operating expenses, and profits or
losses.

The income statement reports the revenues, gains, expenses, losses, net income
and other totals for the period of time shown in the heading of the statement. If a
company's stock is publicly traded, earnings per share must appear on the face of
the income statement.
Jobber

A jobber is an intermediary that buys from producers to sell to retailers and offers
various services with that function.

Jobber is a slang term for an agent in business, particularly trading.

In the broadest sense of the word, a jobber is an individual who makes a living from
commissions he/she earns as an agent for transactions between two parties. In this
respect, a jobber might sell merchandise produced by someone else or hire himself
out for various types of short-term work
.
Kickback

A return of a part of a sum received often because of confidential agreement or

coercion.

Money that is paid secretly and dishonestly to obtain someone’s help.

A ​kickback can take many forms, all of which are illegal. For example, a building
contractor might give a portion of what he or she is paid to a government official who
approved the building plans for the project. Or, a biomedical company might ​offer
training, travel, or other benefits to doctors who recommend their product to patients.
Liabilities

Liabilities are debts, or money that must be paid. Usually debt on terms of less than
five years is called ​short-term liabilities​, and debt for longer than five years is called
long-term liabilities​.

A liability, in general, is an ​obligation to, or something that you ​owe somebody else.
Liabilities are defined as a company's legal financial debts or obligations that arise
during the course of business operations. They can be limited, or ​unlimited liability​.
Liabilities are settled over time through the transfer of economic benefits including
money, goods, or services. Recorded on the ​right side of the ​balance sheet​, liabilities
include loans, ​accounts payable​, mortgages, deferred revenues, earned premiums,
unearned premiums​, and accrued expenses.
Market share

Market share is the total sales of an organization divided by the sales of the market
they serve.

Out of total purchases of a customer of a product or service, what percentage goes

to a company defines its market share. In other words, if consumers as a whole buy
100 soaps, and 40 of which are from one company, that company holds 40% market
share.
Newsletter subscription

In online marketing, newsletter subscription is a conversion value measuring the

number of users who voluntarily include themselves in your database and are willing
to accept unsolicited email from you.

A newsletter is a ​printed or ​electronic report containing ​news concerning of the

activities of a ​business or an ​organization that is sent to its members, customers,
employees or other subscribers. Newsletters generally contain one main topic of
interest to its recipients. A newsletter may be considered ​grey literature​.
E-newsletters are delivered electronically via ​e-mail and can be viewed as ​spamming
if ​e-mail marketing​ is sent unsolicited.
On-costs

On-costs are ​labor costs in addition to salaries and wages; that is, payroll tax,
workers’ compensation and other liability insurance, the cost of subsidized services
to employees, training costs, and so on.
Profit

Profit is an accounting concept, normally the bottom line of the income statement,
which is also called profit or loss statement. Start with sales, subtract all costs of
sales and all expenses, and that produces profit before tax. Subtract tax to get net
profit.
Questionable costs

Questionable costs are costs that may be considered as ​variable or as ​fixed costs​,
depending on the specifics of the situation.
Receivables

Short for account receivables, this refers to debts owed to your company, usually
from sales on credit. Accounts receivable is a business asset, the sum of the money
owed to you by customers who haven’t paid.

The standard procedure in business-to-business sales is that when goods or

services are delivered they come with an invoice, which is to be paid later. Business
customers expect to be invoiced and to pay later. The money involved goes onto the
seller’s books as accounts receivable, and onto the buyer’s books as accounts
payable.
Shareholders

Shareholders are individuals or companies that legally own one or more shares of
stock​ in a company.

A shareholder, also referred to as a stockholder, is a person, company, or institution

that owns at least one share of a company’s ​stock​, which is known as equity.
Because shareholders are essentially owners in a company, they reap the benefits
of a business’ success. These rewards come in the form of increased stock
valuations, or as financial profits distributed as dividends. Conversely, when a
company loses money, the share price invariably drops, which can cause
shareholders to lose money, or suffer declines in their portfolios’ values.
Target market

A target market is a defined segment of the market that is the strategic focus of a
business or a marketing plan. Normally the members of this segment possess
common characteristics and a relative high propensity to purchase a particular
product or service. Because of this, the member of this segment represent the
greatest potential for sales volume and frequency. The target market is often defined
in terms of geographic, demographic, and psychographic characteristics.
Upmarket

Upmarket ​goods and ​products are of very high ​quality and ​intended to be ​bought by
people​ who are ​quite​ ​rich​.

used to ​describe​ ​products​ and ​services​ that are of a high ​quality​ ​compared​ to ​others​.
Valuation

Used as a noun, valuation is what a business is worth, as in, “this company’s

valuation is $10 million.”

This would mean that a company is valued at $10 million, or worth $10 million. The
term is used most often for discussions of sale or purchase of a company; it’s
valuation is the price of a share times the number of shares outstanding, and the
price of a share is the total valuation divided by the number of shares outstanding.
Wholesaler

A wholesaler is a ​channel member that purchases from the producer and supplies to
the retailer and primarily performs the function of physical distribution and amassing
inventory​ for rapid delivery.
XML or eXtensible Markup Language

A metalanguage that describes rules for defining tagged markup languages.

Yield

The income from an investment. Calculated by taking the annual dividend or interest
payment, multiplying by 100 and dividing by the current market price.
Zombie funds

More formally these are called closed funds. It’s a name given to a closed
with-profits fund that no longer accepts new business until the existing policies
mature.