Account
A record of financial transactions. Businesses that extend credit to their customers maintain an account of their transactions.
Accounts Payable
Amounts owed by a business that are payable within one year. These are listed in the current liabilities section of a balance sheet.
Amounts owed by a business that are payable within one year. These are listed in the current liabilities section of a balance sheet.
Accounts Receivable
Money owed to a business for goods and services the business has sold. These are listed in the current assets section of a balance sheet.
Money owed to a business for goods and services the business has sold. These are listed in the current assets section of a balance sheet.
Amortization
A long term expense calculated on a monthly or periodic cost basis. A payment process by which the borrower gradually writes off the initial cost of an asset through payments of principal and interest.
A long term expense calculated on a monthly or periodic cost basis. A payment process by which the borrower gradually writes off the initial cost of an asset through payments of principal and interest.
Appreciation
A rise in value of your business's goods or services. Represented as a credit on your balance sheet.
A rise in value of your business's goods or services. Represented as a credit on your balance sheet.
Assets
Everything a business owns. These include cash, equipment, securities, accounts receivable, merchandise as well as intangible assets such as trademarks and patents.
Everything a business owns. These include cash, equipment, securities, accounts receivable, merchandise as well as intangible assets such as trademarks and patents.
B
Balance Sheet
A financial statement that shows what a business owns and what it owes at a certain date. Also called a statement of financial position.
A financial statement that shows what a business owns and what it owes at a certain date. Also called a statement of financial position.
Book Value
The value of a business as presented by the excess of the total assets over the total liabilities. Factors such as depreciation will affect book value.
The value of a business as presented by the excess of the total assets over the total liabilities. Factors such as depreciation will affect book value.
Business Plan
A plan detailing the setting up, operation and direction your business will take. A business plan is a management tool used to focus on objectives as well as a resource when looking for financing.
A plan detailing the setting up, operation and direction your business will take. A business plan is a management tool used to focus on objectives as well as a resource when looking for financing.
C
Cash Equivalents
Short term, temporary securities that can be quickly converted to cash. Included in the assets of a business.
Short term, temporary securities that can be quickly converted to cash. Included in the assets of a business.
Cash Flow
The flow of cash in and out of a business. Positive cash flow means having enough cash to meet your operating needs and to pay your bills on time. It is an important sign of a healthy and stable business.
The flow of cash in and out of a business. Positive cash flow means having enough cash to meet your operating needs and to pay your bills on time. It is an important sign of a healthy and stable business.
Cash Reserve
Money set aside for unexpected or unbudgeted expenses. Usually the equivalent of 3 to 6 months net income. Also called contingency.
Money set aside for unexpected or unbudgeted expenses. Usually the equivalent of 3 to 6 months net income. Also called contingency.
Contract
A legally binding agreement between parties (individuals, businesses, governments, organizations, etc.) for goods or services at a specified price.
A legally binding agreement between parties (individuals, businesses, governments, organizations, etc.) for goods or services at a specified price.
Corporation
A form of business organization having a legal entity independent of its owners. The corporation's owners (shareholders) have no liability for its debts.
Depreciation
A decrease in value of an asset due to age or wear. Depreciation affects the book value of assets of a business. It is a non-cash expense.
A decrease in value of an asset due to age or wear. Depreciation affects the book value of assets of a business. It is a non-cash expense.
Dividend
The portion of a company's profits paid to its shareholders. A stock selling for $20 a share with an annual dividend of $1 a share yields the investor 5%.
The portion of a company's profits paid to its shareholders. A stock selling for $20 a share with an annual dividend of $1 a share yields the investor 5%.
E
Equity
The part of a business's assets owned by the stockholders. In other words, the money left over if a company sold all of its assets and paid off its liabilities.
The part of a business's assets owned by the stockholders. In other words, the money left over if a company sold all of its assets and paid off its liabilities.
F
Fixed Assets
Property and equipment owned by a business and used for more than one year. These include anything businesses use to display, ship or store products.
Property and equipment owned by a business and used for more than one year. These include anything businesses use to display, ship or store products.
G
Generally Accepted Accounting Principles (GAPP)
A set of guidelines and rules for financial reporting. A company must follow these to prepare and present financial statements.
A set of guidelines and rules for financial reporting. A company must follow these to prepare and present financial statements.
Gross Income
The total income of a company for a set period, before deductions and expenses. Also called gross profit.
The total income of a company for a set period, before deductions and expenses. Also called gross profit.
Inventory
Raw materials, items available for sale or in the process of being made ready for sale. Inventory can be individually valued by several different means, including cost or current market value.
Raw materials, items available for sale or in the process of being made ready for sale. Inventory can be individually valued by several different means, including cost or current market value.
L
Leverage
The ratio by which debt exceeds equity. The use of debt instead of equity to support assets and growth.
The ratio by which debt exceeds equity. The use of debt instead of equity to support assets and growth.
Limited Partnership
A type of business where owners assume responsibility for only up to the amount they invested.
A type of business where owners assume responsibility for only up to the amount they invested.
M
Market Value
The value of something in the market-place, determined by an agreement between two disinterested parties.
The value of something in the market-place, determined by an agreement between two disinterested parties.
Money Markets
Part of stock markets in which short term financial obligations are bought and sold. These include treasury bills and other federal government debts of up to three years.
Part of stock markets in which short term financial obligations are bought and sold. These include treasury bills and other federal government debts of up to three years.
N
Net Earnings
The total earnings of a company for a set period, minus deductions and expenses. Also called net profit or net income.
The total earnings of a company for a set period, minus deductions and expenses. Also called net profit or net income.
O
Partnership
A business entity of two or more people who share the responsibilities, profits and liabilities of that entity.
A business entity of two or more people who share the responsibilities, profits and liabilities of that entity.
Patent
The legal right to ownership of an invention issued, in Canada, under the Patent Act. To protect an invention, the maker should obtain patenting from the government patent office.
The legal right to ownership of an invention issued, in Canada, under the Patent Act. To protect an invention, the maker should obtain patenting from the government patent office.
Preferred Shares
Preferred shares give investors a fixed dividend from the company's earnings. Preferred shareholders get paid before common shareholders.
Preferred shares give investors a fixed dividend from the company's earnings. Preferred shareholders get paid before common shareholders.
Profit & Loss Statement
A list detailing the total amount of revenue and total liabilities for a set period of time. The difference between the two is either profit or loss.
A list detailing the total amount of revenue and total liabilities for a set period of time. The difference between the two is either profit or loss.
Profit Margin
The difference between the price you charge for goods or services and the costs to produce these goods and services.
The difference between the price you charge for goods or services and the costs to produce these goods and services.
R
Receivables
Money owed to a business during the current year for goods and services the business has sold. These are listed in the current assets section of a balance sheet.
Money owed to a business during the current year for goods and services the business has sold. These are listed in the current assets section of a balance sheet.
S
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