los angeles cpa
RICHARDS, HEALTH BUSINESS CONSULTANT Co.
Health Consultants · Certified Business Development

business consultant

   
           
       

GLOSSARY
Of
Business, Computer, Financial, Real Estate, and Tax Terms

 



business consulting









helpful hints
income tax returns







EMAIL US
for health business
services and solutions

 contact@llrcpa.com

 

QuickBooks ProAdvisor
Certified QuickBooks
ProAdvisor On Staff


As seen in



los angeles accountant


.





Los Angeles Certified Health Business Development Consultant

Last Updated:
Tuesday February 07, 2017


(Keep in mind that the definitions are abbreviated and, as with all terms, accepted usage can vary by industry, area of the country, etc.)

A      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP

  • Accelerated Depreciation. A method of calculating depreciation where deductions are higher in the early years of the asset's life. This contrasts with straight-line depreciation where deductions are equal for each year of the life of the asset.
  • Acceleration Clause. A contract clause that requires payment of the full amount of the debt owed if a payment is missed or another triggering event (such as bankruptcy of the debtor) occurs. This type of clause often appears in promissory notes or loan agreements.
  • Accounting. The recording, classifying, summarizing, and interpreting of events of a financial character. These events can include income, expenses, and cash flow.
  • Accounting Opinion. If a independent certified public accountant is requested to audit a company's books, he will issue a opinion as to the condition of the financial statements. There are several degrees of opinion from clean to adverse. A clean opinion doesn't mean that every number is correct, only that the financials fairly represent the position of the company. An adverse opinion means the financials don't represent the position of the company. A disclaimer means the auditor can't (for any number of reasons) express an opinion on the statements.
  • Accounting Controls. Methods and procedures intended to safeguard assets, authorize transactions, and ensure the accuracy of financial records.
  • Accounting Equation. Simply stated, assets are equal to liabilities plus owners' equity.
  • Accounting Method. Any number of approaches for calculating the income of an entity. Usually applied to the general means of recognizing income and expenses, e.g., cash or accrual. But it can also apply to method of keeping inventories, etc.
  • Accounting Procedure. Similar to accounting method, but applied to more routine issues. For example, the method of computing depreciation, or handling small capital expenditures.
  • Accounts Payable. A liability arising when a vendor provides goods or services that are not immediately paid for and where the liability is not formalized in writing but backed by the reputation and credit worthiness of the debtor. When a business using the accrual basis of accounting purchases goods or services the company reports an expense and an account payable. When payment is made the account payable is reduced.
  • Accounts Receivable. For accrual basis businesses, transactions not paid in cash create an account receivable, an unsecured promise to pay in the future. The accounting entry is a debit to accounts receivable and a credit to sales. On payment, the account receivable is credited and cash is debited.
  • Accounts Receivable Financing. Borrowing money where the company's accounts receivable are used as collateral. This type of financing is usually short-term in nature.
  • Accounts Receivable Turnover. A measure of how well the company is collecting its accounts receivable. Ratio obtained by dividing total credit sales by accounts receivable. The result indicates how many times the receivables have been collected during the period covered by the sales.
  • Accrual Basis of Accounting. An accounting method in which income is recorded when it is earned rather than when it is received, and expenses are recorded when an obligation is established rather than when the money is paid.
  • Accrued Expense. An expense that has been incurred, but not yet paid in cash. Similar to accounts payable, but usually associated with non-trade vendors.
  • Accrue. To record an item in the accounting books pursuant to the accrual basis of accounting. IRS requirements here frequently diverge from accounting rules.
  • Accumulated Depreciation. The total depreciation taken on an asset since it was acquired.
  • Acid-Test Ratio. Also called the quick ratio, it's equal to the sum of cash, short-term investments and net current receivables divided by current liabilities. It's a measure of whether or not the business could pay all its current liabilities if they came due immediately.
  • Active Participation. Involvement in a rental real estate activity by making management decisions. Requires no specific number of hours.
  • Activity. For the passive activity rules, it's the integral economic unit for measuring a taxpayer's level of participation in a trade or business. One location can have more than one business activity. For example, you might have an S corporation that sells computers at retail and does typesetting working out of the same location. The two may be separate activities. On the other hand, two or more related businesses can also be combined into one activity.
  • Additional Paid-In Capital. Equity contributions to a corporation in excess of the amount of capital stock. See Owner's Equity, below.
  • Add-On Interest. Interest that isn't paid by the debtor, but added to the principal amount.
  • Adjusted Basis. Used for determining depreciation and gain or loss on the disposition of an asset. Your adjusted basis in an asset is your beginning basis (see Basis, below), decreased by depreciation, depletion or any Sec. 179 expense taken or increased by capital additions. For example, you purchase a machine for $10,000 (your basis) and take a Sec. 179 expense deduction of $1,000 and depreciation of $2,000 in the first year. At the end of the year your adjusted basis is $7,000. Note. Even professionals often say basis when they really mean adjusted basis.
  • Adjusted Gross Income. Also known as AGI, it's your individual income before personal exemptions or standard or itemized deductions. It's the total of wages, interest, dividends, capital gains (or up to $3,000 in losses), profit or loss from real estate or pass-through entities (e.g., S corporation), pension income and certain other items less contributions to an IRA or Keogh plan, one-half of any self- employment income, and health insurance for self-employed individuals, and certain other deductions.
  • Adjusted Trial Balance. A list of all the ledger accounts with their adjustments resulting in adjusted balances.
  • Adjusting Entry. An entry made to the general ledger that corrects, reclassifies or revises original entries.
  • Administrative Dissolution. The dissolution of a corporation by the Secretary of State or similar state authority as a result of the corporation's failure to file corporate tax returns, file an annual report, maintain a registered agent, etc.
  • Advances. Funds made available to another party and expected to be repaid.
  • Age Discrimination in Employment Act (ADEA). A federal law that prohibits employers from discriminating against individual’s age 40 or more. This law generally applies to companies with 20 or more employees.
  • Agent. A person granted the authority to act on behalf of another person or entity, known as the "principal." The actions and decisions of the agent can be binding on the principal. Also while a person can act on his own, a corporation can only act through its agents.
  • Aggregation. The combination of several business operations into a larger unit. Primarily used to combine passive trade or business undertakings into one or more activities in order to determine whether a taxpayer is a material participant.
  • Aging of Accounts Receivable. A listing of accounts receivable according to the length of time they have been outstanding. For example, 30 days or less, 60 days or less, etc.
  • All-Risk. An insurance policy covering real or personal property against any loss except those specifically excluded.
  • Allowance for Doubtful Accounts. An offset, or contra account, to accounts receivable to reflect the estimated collection losses on outstanding accounts receivable. The allowance reduces revenue. Such an allowance is generally not allowed for tax purposes. Also known as an allowance for bad debts and allowance for uncollectible accounts.
  • Alternative Dispute Resolution (ADR). An approach to conflict resolution designed to avoid court proceedings. ADR traditionally encompasses two main forms: arbitration and mediation.
  • Americans with Disabilities Act (ADA). A federal law that prohibits discrimination against those with physical or mental disabilities in employment, public services and public places, such as restaurants, hotels and shops. The ADA requires companies with 15 or more employees to make reasonable accommodations to enable qualified disabled employees to perform their job.
  • Amortization. This is similar to straight-line depreciation, allowing a business or individual to write off an expenditure over a number of years. Amortization generally applies to intangible assets. For example, you purchase a business consisting of a machine with a fair market value of $10,000 and goodwill of $15,000. You can't expense (write off) the cost in the year acquired, but you can depreciate the machine using any of several methods, including one that provides greater deductions in the early years. The goodwill can only be amortized over 15 years using a straight-line method, or $1,000 per year.
  • Annual Meeting. A meeting of the shareholders held each year to elect directors of the corporation, present the annual report, and conduct other business including items, which requires shareholder approval.
  • Annual Percentage Rate (APR). The effective interest rate required to be disclosed under the Truth in Lending Act.
  • Annuity. The dictionary definition is a contract issued by an insurance company that pays an annuitant an amount periodically for a certain time for the remainder of his life. Common usage has expanded that definition to the point where you must dig deeper to understand the meaning. Variations include a deferred annuity where you make payments into a fund over a period of years (where tax on the fund's income is deferred), an immediate annuity (the original definition) or many other plans where a series of payments, either into or out of the fund, are involved.
  • Appreciation. The increase in the value of an asset.
  • Appropriation of Retained Earnings. Restriction of retained earnings that is recorded by a formal journal entry. The restriction may be made voluntarily by the board of directors to show the earnings are being accumulated for a particular purpose or the restriction may be the result of a covenant in a loan agreement.
  • Arbitration. A form of alternative dispute resolution in which a neutral third party (an arbitrator) considers the competing parties´ arguments and evidence and renders a decision or award. Arbitration can be binding or non-binding.
  • Articles of Incorporation. Document to be filed in most states with the secretary of state or similar authority of a state by the founders of the corporation specifying such items as the name, location, nature of the business, capital investment, etc. The document is also known as a Certificate of Incorporation. The corporation only comes into existence when the filing is approved by the state.
  • Articles of Organization. Similar to Articles of Incorporation, but the document filed with the secretary of state or similar authority of a state by the founders of an limited liability company (LLC). It is also known as Articles of Formation.
  • Assessments. The right to secure additional payments from partners or co-ventures in a project.
  • Asset. Anything that an individual or an entity owns that has value. Cash, equipment and stocks are all considered assets.
  • Assign. To give or sell a right or an interest. The person who receives the right or interest is the "assignee" and the person making the transfer is the "assignor."
  • Assignment. A transfer of your rights to another party. For example, in the case of an insurance policy it's the partial or total transfer of the policy owner’s rights to another party. If you're selling a piece of equipment, you may be able to assign the warranty to the buyer. Some contracts expressly prohibit assignment.
  • Assumption. An agreement where the purchaser agrees to make the payments on an existing mortgage on the property. The original borrower remains liable unless he is specifically released.
  • At-Will Employment. The policy allowing employers or employees to end an employment relationship at any time for any reason -- or for no reason at all. In some states, the law may place practical limits on this policy.
  • Audit. A review or examination of an individual or organization’s records to determine legal compliance or proper record keeping.
  • Authorized Shares. The maximum number of shares of stock a corporation may issue according to its articles of incorporation. If additional shares are to be issued either to be sold or because of a stock split or dividend, the corporation must file an amendment with the state.
  • Average Cost Method. Inventory costing method based on the average cost of inventory during the period. Average cost is determined by dividing the cost of goods in inventory by the number of units of the same type in inventory at any point in time.
  • Award. A decision rendered by a court or arbitrators that one party in a dispute is owed money and that the other party or parties are liable.
B      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • Backup. A copy of a file or application that is kept separate from the original as a precaution against data loss in the event the original is lost or destroyed.
  • Bad Debt Expense. Generally, the cost of uncollectible accounts receivable, which occurs when customers to whom a business has extended credit fail to pay. It can also refer to any debt owed you, which is uncollectible.
  • Balance Sheet. A financial statement that lists the assets, liabilities and owner's equity at a specific point in time.
  • Balloon Payment. The final installment on a loan, which is greater than the prior payments and pays any remaining amount outstanding under the loan. For example, a loan calls for equal monthly payments of $500, where most of the payment is for interest. At the end of the loan a balloon payment of $100,000 is due.
  • Bankruptcy. A condition in which a business cannot meet its debt obligations and petitions a federal district court for either reorganization of its debts (Chapter 11) or liquidation of its assets (Chapter 7). In the action the property of a debtor is taken over by a receiver or trustee in bankruptcy for the benefit of the creditors. The action may be voluntary or involuntary.
  • Banner Ad. A common form of online advertising, banner ads come in a variety of sizes and typically appear on a Web page as a box or rectangle containing text, images, animation or other effects. Users who click on a banner typically follow a hyperlink to the advertiser’s Web site.
  • Basis. Used in determining depreciation or gain or loss on the sale of property. In the simplest situation, your basis in property you purchase is the cost. For example, you pay $1,000 for a machine--that's your basis. How you acquire the property determines your basis. For example, if you inherited the machine, your basis would be the fair market value at the decedent's death. In a simple trade-in, your basis is equal to your adjusted basis (see above) in the equipment traded in plus any cash paid. If you contributed the property to a corporation, the corporation's basis would be the basis of the property in your hands. Your basis in the stock in an S corporation is your cost plus profits taxed to you fewer losses passed through and distributions. There are a number of other ways of arriving at basis. Please see Adjusted Basis, above.
  • Basis Point. A way of quoting the yield on a bond, note, or other debt instrument. One basis point is equal to 0.01%. Thus, a 50 basis point yield increase in a bond would be equal to 0.5%.
  • Batch Processing. Entering transactions in a group rather than as they occur.
  • Bearer Bond. While new issues are rare because of a change in the tax law, the principal and interest on the bond is payable to whoever has possession. On the other hand, the ownership of a bond in registered form is recorded with a bank, the issuer, etc.
  • Bearer Instrument. A note, instrument, or draft, payable to someone other than a designated payee, i.e., the bearer or to cash. Beneficiary. A person entitled to the benefits of a trust, will, insurance policy, pension plan, etc. For example, if you name your daughter as the sole beneficiary of a life insurance policy, only she is entitle to the proceeds.
  • Beta Software. A test version of software issued prior to a final commercial release.
  • Bid Bond. An agreement in which a third party agrees to be liable in the event the bidder fails to sign the contract as bid (if his bid is accepted). A bid deposit is similar, but the bidder must deposit cash or a certified check.
  • Blanket Mortgage. A single mortgage that covers more than one property.
  • Blanket Order. A purchasing arrangement where the purchaser contracts with a vendor to provide his requirements for an item or service on an as-required basis.
  • Blanket Position Bond. A fidelity bond where each employee is covered up to the bond penalty. The maximum liability is equal to the bond penalty times the number of employees.
  • Blind Pool. A partnership or syndication where the investments to be purchased are not specified at the time the investments are sold.
  • Blue Sky Laws. State laws that govern the issuance and sale of securities (stocks, bonds, etc.) to residents of the state and require the registration of the securities with the state prior to sale. The rules are designed to protect investors from fraud. While a new stock issue may be exempt from federal regulation, it may not be exempt from state rules.
  • Bonds. Securities issued by the U.S. government, corporations, federal agencies, or state or local municipalities. Bonds are sometimes further classified as follows:
    • Corporate bonds - Debt instruments issued by corporations, as distinct from ones issued by a government agency, typically interest-bearing with a fixed maturity.
    • High-Yield Bonds - A bond that has a rating of BB or lower and pays a higher yield to compensate for the greater credit risk.
    • Long-Term Government Bonds - Securities issued by the US government and debt issues of federal agencies having a maturity of 10 years or more.
    • Mortgage-Backed Bonds - Securities backed by mortgages issued by FMLMC and FNMA or guaranteed by GNMA. Investors receive payments out of the interest and principal on the underlying mortgages.
    • Municipal bonds - Debt obligation of a state or local government entity. The funds may support general government needs or fund special projects. The interest on these bonds is typically exempt from federal income taxes, and most state and local taxes.
  • Bond Discount. The excess of the value of a bond at maturity (the par value) over the issue price of a bond or the purchase price. The difference between the value at maturity and the issue price is often called original issue discount. For example, the par value of a bond is $1,000; the bond is issued at $990. The bond has $10 of original issue discount. Another bond has a par value of $1,000; you purchase it in the open market at $900. The bond has $100 of discount.
  • Bond Premium. The excess of the bond's price over the maturity (par) value. For example, you purchase a bond for $1050; the maturity value is $1,000. The bond has a premium of $50.
  • Bond Sinking Fund. Amounts accumulated and segregated for the purpose of redeeming or retiring bonds. Can also apply to preferred stock.
  • Bonus. A cash award granted to employees by the employer, usually based on personal and/or company performance. Bonuses can also come in the form of extra vacation time, gifts and other non-monetary awards.
  • Bookmark. A marker or address that identifies a Web site or Web page. Most Web browsers, such as Microsoft Internet Explorer (which calls bookmarks "Favorites"), allow users to save and organize bookmarks as a convenient way to mark Web sites for future reference.
  • Book Value of an Asset. The asset's cost less accumulated depreciation.
  • Book Value of Stock. The book value of the assets of a company less the liabilities. Can be translated into book value per share by dividing by the number of shares outstanding.
  • Boot. A tax term that means cash or unlike property received in an exchange. For example, you trade investment real estate worth $500,000 for another property worth only $300,000. In addition to the deed on the new property you receive $200,000 in cash (or notes). The $200,000 is boot.
  • Boot (or Reboot). The process of starting (or restarting) a computer. The term boot drive or boot disk refers to the disk drive from which the computer loads its operating system.
  • Boutique. A small company or firm that specializes in a particular industry or provides a limited service, such as investment banking firms that concentrate solely on technology companies.
  • Breach of Contract. A violation of or failure to perform according to the terms and conditions of an agreement.
  • Break-Even Point. The dollar amount or unit amount of sales where total revenue equals total expenses.
  • Breakpoint. See Overage Rent.
  • Broadband. A high-speed transmission medium. T-1, ISDN, DSL and cable modems are broadband media. Besides downloading Web pages more quickly, broadband can also transmit high-quality streaming video.
  • Broken Link. A hyperlink that does not work, usually because the URL is incorrect or the Web page to which the link refers has been moved or deleted.
  • Browser. Software that let’s you view Web sites. Most browsers display text, images, graphics, animation and other online content. Popular browsers include Netscape Navigator and Microsoft Internet Explorer.
  • Bug. A programming error that causes computer software to malfunction or generate errors.
  • Builder's Bonds. Mortgage-backed securities issued by builders on mortgages accumulated from the sales of houses.
  • Bullet Loan. Generally, a loan where no principal repayments are made during the loan. Only interest is paid, leaving the total amount borrowed as a balloon payment at maturity.
  • Business Interruption Insurance. A policy that pays a stipulated amount when the business cannot operate because of some insured peril. For example, a policy will pay a certain percentage of the business's earnings lost because of a fire.
  • Business Plan. A planning document that describes a company, its market, its management team, its potential, its competitors, and all other relevant information about its business and its prospects.
  • Buy-Down. A loan in which someone other than the borrower puts up money to reduce the interest rate or borrower's monthly payments. Frequently done by builders in poor markets. It makes the house more affordable. The buy-down usually expires within a few years.
  • Bylaws. The rules governing the operation of an organization. In the case of a corporation, the bylaws are drawn up at the time, or shortly after incorporation. (Most stationery stores have standard forms, which can be modified.)
  • Byproduct. Output of a production process with relatively little sales value when compared to the main product.
C      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • CD-ROM (Compact Disc - Read-Only Memory). An optical storage technology that encodes data on a laminated metallic disc. One CD-ROM holds about 600 megabytes, equal to more than 400 floppy disks. Unlike a floppy disk, you cannot erase or edit the data on a CD-ROM.
  • Cafeteria Plan. An employee benefit plan where employees use pretax salary or wages to create their own customized benefits package. Employees may be able to take cash (which becomes taxable) for unused credits or convert more pretax dollars to pay for more benefits. Also known as a flexible benefits plan.
  • Callable Bond. A bond that can be redeemed by the issuer before the stated maturity date. Usually, the bond cannot be redeemed before a certain time, say 5 years. And often bonds are only callable at certain times. If a call date is missed, the bond may not be callable until the next call date. The call privilege is to enable the issuer to refund the bonds at a lower interest rate should that occurs during the term. The yield and value of a bond can be affected by any call privilege. Sometimes known as a call feature.
  • Call Option. 1. The right to buy 100 shares of a stock (or stock index, etc.) at set price. Usually, the option holder has the right, but not the obligation to purchase the property. The option expires at a set time. For example, the current price of Madison Inc. is $50. For $5 per share you can purchase an option that allows you to buy Madison stock at $52 at anytime within the next 60 days. Traded options expire at preset times. 2. The right to prepay a mortgage.
  • Call Premium. In the case of straight or convertible bonds or preferred stock, it's the amount in excess of the par value of the security the issuer may have to pay for the privilege of redeeming the security before maturity. For example, if the par value is $1,000, the issuer may have to pay $1,100 to redeem the bond. The call premium can vary with the timing of the call feature. For example, the call premium may be $100 on a bond that's callable 5 years from issuance. The premium may be only $50 if the bond is callable 10 years after issuance. The term call premium can also refer to the purchase price of a call option.
  • Call Protection. The length of time during which a bond, preferred stock, etc. cannot be redeemed by the issuer.
  • Cancellation Fee. A fee for breaking a contract. Many cellular phone service contracts impose a cancellation fee for ending the contract before the end of its term.
  • Capital. Sometimes used as a synonym for the owner's equity in a business.
  • Capital Budgeting. A formal plan for making investments in plant, equipment, other fixed assets, advertising projects, etc. Items included in the capital budget have lives in excess of one year and often require long-range planning.
  • Capital Expenditure. The purchase of or outlay for an asset with a life of more than a year, or one that increases the capacity or efficiency of an asset or extends it's useful life. Generally, such expenditures cannot be deducted currently for tax purposes (or expensed for financial accounting purposes.) Instead, they must be depreciated or amortized over their useful life.
  • Capital Gain (or loss). A category of gain or loss under the tax law resulting from the sale or other disposition of specified property such as stock or bond investments, real estate, etc. It does not include property used in a trade or business. However, special rules apply in such situations that can result in similar treatment for business property.
  • Capitalization Rate. The rate of interest used to discount the future income from a property to arrive at a present value.
  • Cash.
    • Cash Equivalents - Investments of high liquidity and safety with a known market value and a very short-term maturity. Examples include Treasury bills and money market funds.
    • CDs - CDs, or certificates of deposit, are interest-bearing debt instruments issued by banks with maturities from a few weeks to several years.
    • Fixed Annuities - Investment contract sold by an insurance company that guarantees fixed payments, either for life or for a specified period, to the annuitant. The insurer takes both the investment risk and the mortality risk.
    • T-Notes - T-Notes are negotiable debt obligations of the US government with maturities of 1 to 10 years.
  • Cash Discount. An incentive offered by the seller to encourage a buyer to pay within a stipulated time. For example, if the terms are 1%/10/net 30, the buyer may deduct 1 percent from the amount of the invoice (if paid with 10 days); otherwise the full amount is due within 30 days.
  • Cash Flow. An accounting presentation showing how much of the cash generated by a business remains after both expenses (including interest) and principal repayment on loans are paid. A projected cash flow statement indicates whether the business will have cash to pay its expenses, loans, and make a profit. Cash flows can be calculated for any given period of time, normally done on a monthly basis or yearly basis.
  • Cash-On-Cash Return. Usually reserved for real estate income properties, it's the annual cash flow from the property divided by your cash investment. Sometimes called return on equity or equity dividend rate. It's a quick and dirty way to evaluate an investment.
  • Claims-Made Basis. Under this type of insurance policy the insurer is responsible only for claims filed during the period the policy is in force. See Claims-Occurrence Basis below.
  • Claims-Occurrence Basis. With this type of insurance policy the insurer is responsible for claims from events that occurred during the time the policy was in force. It makes no difference when the claim is filed.
    Example--A customer slips on a wet floor in your store in March 1997. You're covered by Madison Insurance. The customer doesn't file a claim until a year later when you're covered under a new company, Chatham. Under a claims-occurrence basis policy you'd report the claim to Madison, the insurer at the time the accident occurred. Under a claims-made basis you'd report the claim to Chatham, the insurer at the time the claim is filed.
  • Close. The point during the sales process when the customer agrees to buy a product or service.
  • Closely Held Corporation. A corporation with five or fewer shareholders who own more than 50% in value of the stock at any one time during the year. Note: this is the IRS definition. In common usage the definition can be broader.
  • Collateral. Something of value pledged to support the repayment of an obligation or loan. Examples include real estate and certificates of deposit.
  • Collateralization. To pledge mortgages, bonds, accounts receivable or other marketable properties as security for a loan.
  • Coinsurance Clause. In the case of a partial loss where the property is not insured for the indicated percentage of its cash value at the time of the loss, the recovery from the company is based on a percentage.
    Example--Your insurance policy contains a coinsurance clause of 80%. Your building sustained $100,000 in damages. The actual cash value of the property at the time of the loss was $500,000, but you only carried $300,000 of insurance. Based on the coinsurance clause, you should have had coverage of $400,000 (80% of $500,000). You can't recover the full $100,000 in damages. Instead, your recovery is limited by the percentage of your coverage ($300,000/$400,000) times the loss, or $75,000. If you had coverage of $400,000, your insurance would have reimbursed you for the full $100,000 loss.
  • .com. One of the major Internet domains, usually representing for-profit business entities. Other major Internet domains include .net, .org, .gov, .info, .biz, and .edu.
  • Commercial Blanket Bond. A bond that covers employee theft by one or more employees up to a fixed amount.
  • Commercial Property Form. An all-risk type insurance policy covering business personal property against physical loss for retailers, wholesalers and certain other types of businesses.
  • Common Law. Law made by judges in individual cases, rather than by the legislature.
  • Comparable Properties. One of the ways of appraising real estate (or other property) is to find recent selling prices of properties that are comparable to the one being appraised. If the properties are not identical, an appraiser can make adjustments.
  • Compensation. Direct and indirect monetary and non-monetary rewards given to employees based on the value of the job, their personal contributions and their performance. For example: wages, commissions, bonus, etc.
  • Completion Bond. A guarantee provided by a bonding company to a lender or other party that the contractor will turn over the property to the owner free of any claims.
  • Concealment. Intentionally withholding adverse facts that are known when you're obligated to reveal them.
  • Concessions. In real estate, free rent, allowances for alterations, etc., or similar payments or allowances from a landlord to induce a tenant to sign a lease.
  • Conditional. In insurance parlance, a contract requiring the insured to meet specified conditions to obtain payment for any losses.
  • Consequential Losses. Indirect losses from an event.
  • Consideration. The inducement to a contract. Some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other.
  • Construction Loan. A loan intended only to finance the construction of a property. Usually must be converted to a term loan after construction is complete.
  • Contingency Fee. A common legal fee arrangement that relies on the collection of monetary damages for the plaintiff before any legal fees are owed. Most common in litigation (such as in personal injury lawsuits), it allows the client to receive legal services while paying the attorney little or no money up front.
  • Contingent Liability. A potential obligation that may be incurred dependent upon the occurrence of a future event. Two examples are: (1) the liability of a guarantor of a promissory note if the primary borrower fails to pay as agreed and (2) the liability that would be incurred if a pending lawsuit is resolved in the other party's favor.
  • Contingent Business Interruption Insurance. An insurance policy that provides benefits if your earnings are reduced because of damages to another business on which yours is dependent.
  • Contingent Financing Clause. A clause in a purchase and sale agreement the specifies that the buyer must be able to secure financing on reasonable terms or he can back out of the purchase.
  • Contingent Payments. Payments where the amount and/or timing is dependent on other events, usually the income from the property.
    Example--Fred buys all the stock of Madison Inc. for $250,000 plus 5% of Madison's sales in excess of $1,000,000 for two years from the date of the sale.
  • Contingent Interest. Income from a note that is at least partially based on the income from the property. This is common in financing commercial real estate. For example, Fred loans Madison $1 million at 8%. The terms also require the payment of 3% of the cash flow from the property in any year that the cash flow exceeds $750,000.
  • Contra Account. An asset account that normally has a credit balance. The contra account is used to offset a related account. The approach is used so that the regular asset account is shown at the original or undiminished value. For example, accounts receivable has a contra account usually called allowance for doubtful accounts. Fixed assets have a contra account called accumulated depreciation.
  • Contract Interest Rate. The stated, or nominal, interest rate in a contract.
  • Contributory Negligence. A defense argument that the plaintiff did not exercise sufficient care and that this contributed to his injury.
  • Controlled Circulation. Publications, generally business oriented, delivered only to readers who have some special qualifications. Generally, these publications are free to the qualified recipients, who must complete registration questionnaires in order to receive them. Also called "qualified circulation."
  • Conventional Loan. A mortgage loan that is not backed by insurance from a government agency or other source.
  • Convertible Term. Term life insurance, which is convertible into whole life without showing insurability.
  • Cookie. A string of text sent by a web server that a browser stores in a small text file on the user’s hard drive. Cookies store information supplied by the user and read it back later to keep track of user behavior.
  • Copyright. An exclusive ownership interest in an artistic or literary work. The term "literary work" includes computer software and other information stored in electronic form. Copyright is often noted by the following example: "Copyright© 2003 by AllBusiness.com."
  • Corporation. A form of organization that provides its owners and shareholders with certain rights and privileges, including protection from personal liability, if proper steps are followed. Corporations may take a number of forms, depending on the goals and objectives of the founders. Types include C, S and nonprofit corporations. Corporations are regarded as "persons" in the eyes of the law and may thus sue and are sued, own property, borrow money and hire employees.
  • Cost Method. An appraisal method that values a property based on the cost to reproduce it today. That amount is usually adjusted for depreciation.
    Example--Madison owns a 15-year old factory building. The cost to reproduce the building today would be $900,000. The appraiser adjusts that figure downward for wear and tear and, possibly, the cost to upgrade electric service, etc.
  • Cost of Goods Sold. This term represents the cost of buying raw materials and producing the goods that a company sells. It also includes the cost of the company’s labor force and overhead costs.
  • Covenants. Promises included in an agreement to perform or not to perform certain acts. For example, a loan may contain a covenant that the borrower's debt-to-equity ratio cannot exceed 2 to 1.
  • CPU (Central Processing Unit). The main microprocessor chips in a computer. Also used to describe the whole computer "box," apart from the display screen, keyboard, mouse or other external devices.
  • Crash. A hardware or software problem that causes an application to quit working. Some crashes render the entire computer unusable, requiring the user to reset or restart the machine.
  • Credit Enhancements. Using third-party guarantees such as a cosigner, the pledging of assets, an insurance company bond, or a letter of credit to provide additional security for a loan.
  • Credit Rating. A formal evaluation of an individual or a company’s credit history and capability of repaying debt.
  • Credit Score. A statistical summary of the individual pieces of information on a credit report. A credit score predicts how likely it is that a company or individual will repay debts. Lenders use credit scores to determine whether to extend credit and at what interest rate. Also called a risk score.
  • Cross-Purchase Plan. A plan by which each stockholder or partner in a closely held business agrees to purchase the interest of a departing stockholder or partner. Usually funded by life insurance on the lives of the other stockholders or partners. (Note, cross-purchase agreements can become unwieldy when more than four owners are involved.)
  • Current Ratio. The ratio of the company’s current assets to its current liabilities. A current ratio of less than 1-to-1 typically indicates a poor credit risk. A current ratio of greater than 2-to-1 typically indicates a good credit risk.
  • Current Yield. The yield of a bond or similar instrument, taking into account only the current interest and the price paid. Computed by dividing the annual interest by the purchase price.
    Example--You purchase a bond for $900 (with a face amount of $1,000) that pays $40 twice a year. The current yield is 8.89% ($80 divided by $900).
    The current yield is not a true indication of the return on your investment if the purchase price is not the same as the face amount. In the example above, your total return would be greater because at maturity you'll receive $100 more in principal than you paid for the bond. The return will be affected not only by the face amount to be paid at maturity, but also by the time to maturity.
  • Customer. Someone who has bought or made the decision to buy a product or service.
  • Cyclical Industry. An industry that has natural high and low sales periods based on the time of year, season or other factors.
  • C Corporation. A corporation where the entity is taxed separately from its owners under subchapter C of the Internal Revenue Code.
D      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • Damages. A cash compensation ordered by a court or arbitrator to offset losses or suffering caused by another’s fault or negligence. Damages are a typical request made of a court or arbitrator when persons sue for breach of contract or tort.
  • Database. A computer program that helps users organizes information. Databases range from simple collections of rows and columns (similar to a spreadsheet) to complex systems that process and manipulate millions of records in a variety of ways.
  • Debenture. Debt instrument evidencing the holder's right to receive interest and principal installments from the debtor.
  • Debt Financing. The provision of long term loans to small business concerns in exchange for debt securities or a note.
  • Debt Instrument. A generic term representing any written promise to repay the debt.
  • Debt Service. The cash required to pay the interest and principal due (usually during one year) on outstanding debt.
  • Debt-To-Equity Ratio. Total liabilities divided by total shareholders' equity. This is a measure of the cushion available to creditors should the firm be forced to liquidate. The ratio is sometimes calculated by dividing total long-term debt by shareholders' equity.
  • Debt Service Coverage. The borrower's annual net operating income before debt service and taxes divided by the annual debt service. A measure of how safe the loan is to the lender.
  • Deed In Lieu Of Foreclosure. The delivery of an asset's title to the lender when the loan is in default. The approach may benefit both parties by avoiding the expenses associated with foreclosure and the stigma of foreclosure. CAUTION. For tax purposes, the transaction is the same as a sale.
  • Deed of Trust. A document that, when properly delivered, transfers a security interest in real property.
  • Deep Discount Bond. A bond where the market price is less than 20% or so of its face value. Like a zero coupon bond, the market price of a deep discount bond will rise faster when interest rates fall and drop faster when interest rates rise than a bond that is selling close to its face value.
  • Deep In, Deep Out Of The Money. A call option whose exercise price is well below the market price of the underlying stock (deep in the money) or well above the market price (deep out of the money). Thus, the premium associated with buying a deep-in-the-money call option is high.
  • Default. The failure of a debtor to comply with a provision of a bond indenture or loan agreement (commonly known as a technical default) or to make timely payment of interest or principal when due. Also, the nonpayment of principal and/or interest on the due date as provided by the terms and conditions of a promissory note or loan agreement.
  • Defeasance. In corporate finance it is generally the discharge of old, low-rate debt without repayment prior to maturity. The corporation replaces it with newly issued securities with a lower face value by paying higher interest or having a higher market value. The technique can result in tax and balance sheet advantages.
  • Deferred Charge. An expenditure carried as an asset until the amount represents a true expense for the period. For example, if a one-year insurance premium is paid three months before the end of the fiscal year, three months of the premium would be an expense in the year paid, nine months would be an expense of the following year. Thus, 9/12 of the premium would be a deferred charge. In this case it would be represented by an account called prepaid insurance. Deferred income is the opposite situation. For example, six months rent received in advance. Any amount not properly credited to the current period would be represent a liability.
  • Deferred Interest Bond. A bond where interest payments are not made currently, but at a later date. Similar to a zero coupon bond which pays 'interest' and principal at maturity. The interest, in effect, is compounded and paid at maturity. Market prices for such bonds are much more volatile than bonds which pay interest currently.
  • Demand Deposit. The technical name for a checking account or any other type of account where the funds can be withdrawn without prior notice.
  • Demand Letter. A letter from a lawyer on behalf of a client that demands payment or some other action. Demand letters often threaten litigation if the other party does not perform.
  • Demand Loan. A loan with no set maturity date. The loan is payable whenever the lender chooses to call it.
  • Depreciation. A method of recovering your purchase price or other basis in an asset over its life rather than deducting the full amount immediately. An expense for book purposes or a deduction for tax purposes. Depreciation is often different for book and tax purposes. See Accelerated Depreciation above.
  • Depreciation Recapture. When tangible personal property is sold, the tax gain is based on the difference between the asset's adjusted basis and the selling price. Any gain up to the amount of depreciation taken is deemed depreciation recapture and taxed as ordinary income.
    Example--Madison bought a machine for $10,000. Five years later its adjusted basis is $4,000. Madison sells the asset for $9,000. The gain is $5,000, all of which is depreciation recapture. If Madison sold the asset for $11,000, it would have $6,000 in depreciation recapture (ordinary income) and $1,000 of capital gain.
             CAUTION.
    The rules for real property are more complicated.
  • DHTML (Dynamic Hypertext Markup Language). Dynamic HTML is an umbrella term used to include HTML and related technologies such as Cascading Style Sheets (CSS) and JavaScript that bring animation and other interactivity to Web pages.
  • Direct Overhead. Costs directly associated with the manufacture of goods. That could include factory lighting, rent, insurance. Indirect overhead could include office expenses, R&D, lighting, etc.
  • Direct Placement. Also known as a private placement, the sale of securities directly to one or more professional investors or institutions, frequently insurance companies. The sale of securities in this fashion avoids many of the fees typically associated with public offerings.
  • Disability Benefits. Benefits paid to an employee who cannot work because of disability, usually limited to what is not covered by workers compensation. Disability benefits are usually a percentage of the employee’s prior income and generally run for a limited time.
  • Discount. This term can have a number of meanings, depending on the context. When used in connection with a loan, it's where the bank deducts its interest payment before giving the loan proceeds to the borrower. For example, where $100 is borrowed at 10% for one year, the borrower receives only $90. For bonds, it's the difference between the current market price and the face amount of the bond.
  • Discounted Cash Flow. The application of a factor based on the cost of the firm's capital or prevailing interest rates (with a possible adjustment for risk), to the cash inflows and outflows from a project or investment. Also called net present value analysis.
  • Discount Rate. 1. The rate used to compute discounted cash flows or the present value of an investment. 2. The interest rate that the Federal Reserve charges member banks for loans.
  • Discount Yield. The yield on a security sold at a discount. U.S. treasury bills are sold at a discount. The face amount is returned to the investor at maturity. The annual yield is computed by dividing the discount by the face amount, then multiplying by the number of days in the year (360) and dividing by the number of days to maturity.
  • Dissolution. Annulment or termination of a formal or legal bond, tie, or contract.
  • Dividend Exclusion. Regular (not S) corporations can exclude from income 70% of dividends received. If the corporation owns 20% or more of the stock of the other corporation, it can exclude 80%. A 100% exclusion is provided for 80% plus owned corporations.
  • Dividend Payout Ratio. The ratio of the annual dividend to the earnings of a company. Stable, mature companies (such as utilities) typically have a high payout ratio.
  • Doing Business As (DBA). A situation in which a business owner operates a company under a different name than the one under which it is incorporated. The owner typically must file a fictitious name statement or similar document with the appropriate county or state agency.
  • Domain Name. The text-based URL or address of a Web site. Domain names usually consist of several different segments. The name www.allbusiness.com, for example, includes the generic "www" and ".com" identifiers, along with the unique name "allbusiness."
  • DSL (Digital Subscriber Line). A family of telecommunications protocols designed to allow data communications over standard telephone lines at speeds up to 1.5Mbps -- about 30 times faster than a standard 56K modem. DSL service lets users receive voice and data transmissions simultaneously over the same phone line, allowing "always on" Internet access.
  • Due Diligence. The thorough investigation of a potential acquisition candidate, real estate investment, etc. Often used to refer to the investigation of a company for an initial public offering.
  • Due-On-Sale. A clause in a mortgage that stipulates any balance remaining on a mortgage is due when the underlying property is sold.
E      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • EBITDA. Earnings before interest, taxes, depreciation, and amortization.
  • Embezzlement. Theft or use of money or property by an individual in whose care the money or property had been entrusted.
  • Employee Retirement Income Security Act (ERISA). A broad-reaching law that establishes the rights of pension plans participants, standards for the investment of pension plan assets, and requirements for the disclosure of plan provisions and funding.
  • Employer ID Number (EIN). An identification number assigned to businesses for taxpaying purposes by the IRS or state taxing authorities. An Employer ID Number is required for partnerships, corporations, and trusts, and it may be required for sole proprietorships that have employees. Also called a Federal ID Number or Taxpayer ID Number.
  • Employment Agreement. An agreement that sets forth the rights and obligations of employees and employers. Typical employment agreements oblige employees to keep trade secrets confidential and to not solicit other employees after their departure.
  • Encryption. The translation of plain-text data, such as an email message, into an unreadable code in order to ensure its safe transmission over the Internet. To read encrypted data, you must have software that allows you to decrypt it.
  • Endorsement. A written agreement modifying a standard insurance policy to meet certain conditions or to complete a policy.
  • Entity. A partnership, corporation, LLC, S corporation, trust, estate, or joint venture of any kind recognized for tax purposes.
  • Entrepreneur. One who assumes the financial risk of the initiation, operation, and management of a given business undertaking.
  • Equity. An ownership interest in a business. For example, stock in a corporation represents equity in the corporation.
  • Equity Kicker. See Kicker, below.
  • Equity Financing. The provision of funds for capital or operating expenses in exchange for capital stock, stock purchase warrants, and/or options in the business financed, without any guaranteed return, but with the opportunity to share in the company's profits.
  • Escalation. 1. Additional rent payments owed by a tenant based on the increase in the costs of operating the building. See Base, above. 2. A clause in a purchase contract providing for upward adjustment of the contract price if specified contingencies occur.
  • ESOP (Employee Stock Ownership Plan). A retirement-type plan in which a trust holds stock in the employees´ names. Employees receive cash from the stock only when they leave the company or perhaps when the company is sold.
  • Ethernet. The most common method for transferring data over a Local Area Network (LAN).
  • Excess Liability Insurance. A policy that covers losses that exceed those covered under another policy. For example, your regular policy covers losses up to $300,000. You purchase an excess liability policy that covers losses from $300,000 to $2,000,000. In effect, an excess liability policy is one with a very high deductible. Also known as an umbrella policy.
  • Exempt Employee. Employees who are not bound to overtime regulations and minimum wage laws. Who is exempt depends on level of responsibility or professional status.
  • Exit Interview. An interview conducted at the end of an employee’s term of employment to obtain employment feedback and to remind the employee of his or her confidentiality obligations.
  • Experience Rating System. Insurance premiums in such a system are based on the insured's past experience.
F      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • 401(k) Plan. A tax-deferred retirement plan designed to encourage long-term retirement savings. Some companies provide contributions as an employee benefit.
  • Fair Labor Standards Act (FLSA). A federal law that defines the 40-hour workweek, the federal minimum wage, overtime pay, record keeping and child labor standards affecting private sector, federal, state and local government workers.
  • Fair Market Value. The price at which an item can be sold by a willing seller to a willing buyer, neither of which are under any pressure to buy or sell. Furthermore, it's assumed that both parties are dealing rationally, have knowledge of relevant facts, and are not related.
  • Family and Medical Leave Act (FMLA). A federal law requiring employers to provide eligible employees with unpaid leave during a year’s time for the birth or adoption of a child, family health needs or personal illness. The FMLA generally applies to all public agencies, including state, local and federal employers; private companies that employ 50 or more people; and public schools.
  • FICA (Federal Insurance Contributions Act). A payroll deduction for Social Security required by the federal government.
  • Fidelity Bond. A bond which pays an employer up to an amount stated in the bond for losses caused by dishonesty or infidelity on the part of an employee.
  • Fiduciary. A person to whom property is entrusted to hold, control, or manage for another. The fiduciary of a trust is the person who is legally responsible for managing the assets of the trust in a competent manner.
  • Financial Reports. Reports concerning the financial aspects of a business, such as:
    • (1) Balance Sheet - A report of the status of a firm's assets, liabilities and owner's equity at a given time.
    • (2) Income Statement - A report of revenue and expense, which shows the results of business operations or net income for a specified period of time.
    • (3) Cash Flow - A report that analyzes the actual or projected source and disposition of cash during a past or future accounting period.
  • Firewall. Software that protects a private network, such as a LAN or an intranet, from intruders or unauthorized traffic. Firewall software usually screens traffic by IP address or other traits, admitting certain types of traffic while blocking others.
  • Fixed Costs. Costs that do not vary with the number of units produced. For example, depreciation, rent, and utilities. In the long run all costs are variable and some costs have both a fixed and variable component.
  • Fixed Price Contract. A contract, which provides for a firm price.
  • Flow Chart. A graphical representation for the definition, analysis, or solution of a problem, in which symbols are used to represent operations, data, flow, equipment, etc.
  • Flow-Through Entity. An entity where the income, losses, and certain other items of income and deduction are passed through to the owners. For example, partnerships, trusts, and S corporations.
  • Foreclosure. The act by the mortgagee or trustee upon default, in the payment of interest or principal of a mortgage of enforcing payment of the debt by selling the underlying secured property.
  • Form W4, Employee's Withholding Allowance Certificate. An IRS form completed by the employee and used by the employer to determine the amount of income tax to withhold.
  • Forward Supply Contract. A contract for future supply of definite quantities of goods or services over a fixed period.
  • Franchising. A relationship in which the franchisor provides a licensed privilege to the franchise to do business and offers assistance in organizing, training, merchandising, marketing, and managing in return for a consideration. Examples of franchises include Burger King and Taco Bell.
  • Free and Clear. In real estate the term is used to indicate that the investment analysis has ignored any debt on the property. (Debt can distort the analysis by increasing the return if the interest rate is lower than the rate of return on property and vice versa if the interest rate is higher.)
  • FTP (File Transfer Protocol). The most common way to download and upload files over the Internet, FTP operations require special software that is built into the most popular Web browsers and that is also available in a number of stand-alone applications. Web site builders use FTP to upload files to a Web host computer.
G      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • General Ledger. A book of final entry summarizing all of a company’s financial transactions, through offsetting debit and credit accounts.
  • General Property Form. A standard form for insuring commercial buildings and their contents.
  • Graduated Payment Mortgage. A loan where the initial payments are lower than the amount needed to amortize the loan. Debt service grows each year till it reaches a set amount. Used to increase the affordability of a home or real estate investment.
  • Gross Lease. As opposed to a net lease, a gross lease is one where the tenant is responsible for either none of the increase in operating expenses of the building, or only the amount above a stop. If a base or stop is involved, the lease is sometimes known as a modified gross lease.
  • Guarantee. A promise to step in and perform another’s obligation if that person should fail or default.
  • Guarantor. A person who makes a legally binding promise either to pay another person’s obligation or to perform another person’s duty if that person defaults or fails to perform.
H      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • Hard Costs. The direct costs of acquiring a business (such as the purchase price), constructing a building (brick and mortar), etc., as opposed to legal, accounting, consulting, financing, costs, which are called soft costs.
  • Hedged Position. A hedged position occurs if you own a second asset that should move in the opposite way the first asset would react to changes in the market. For example, you own a stock and a put and/or a call on the stock.
  • Holdback. The portion of a loan not paid out to the borrower until a certain requirement is completed. For example, a lender may release 10% of the total amount of a loan on completion of the foundation, an additional 15% when rough plumbing is in, etc.
  • Hold Harmless. An agreement where one party agrees to release another party from any legal liability that may occur as the result of a specific event.
  • HTML (Hypertext Markup Language). One of the foundations of the Web, HTML is a text-based language used to describe the structure and layout of a document -- headlines, paragraphs, table elements and so on.
  • HTTP (Hypertext Transfer Protocol). The set of standards that lets Web servers and browsers communicate with each other.
  • Hyperlink (link). Web developers use HTML to create hyperlinks that a user clicks on to be transported to another Web page. Hyperlinks can appear as graphics or as areas of differently colored or underlined text.
I      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • Imprest Funds. Funds set aside as a cash reserve for expenditures expressly designated. Also, a petty cash fund.
  • Incentive Stock Options (ISOs). Stock options granted to employees that are taxed as capital gains rather than income if the employee meets the required holding period before selling them. Also called statutory stock options and qualified stock options.
  • Income Statement. A record of the financial performance of a company over a period of time. It records all the income generated by the business during the period and deducts all its expenses for the same period to arrive at net income, or the profit for the period.
  • Independent Contractor. A worker who works on a specific project for a specified period of time. Independent contractors are not subject to tax withholdings and usually don’t receive benefits granted to full-time employees.
  • In-the-money. For options, if exercising the option will result in a gain, the option is in-the-money. For a call option, it is in-the-money if the market price of the stock is greater than the exercise price. A put option is in-the-money if the market price of the stock is less than the exercise price.
  • Industrial Property Form. An all-risk or specific peril type of insurance for manufacturers or businesses engaged in processing.
  • Inflation Endorsement. A clause in a homeowner’s policy where the coverage is automatically increased periodically to account for changes in a price index.
  • Infringement (of copyright). Any unauthorized use of a copyrighted work other than fair use.
  • Infringement (of patent). Violation of a patent through production, use or sale of a patented invention or its functional equivalent without the patent holder’s permission.
  • Infringement (of trademark). Unauthorized use of a protected trademark or service mark or use of a confusingly similar mark.
  • Integrated Operations. Two or more business operations, which are conducted as though they were one single economic unit.
  • Internal Revenue Service (IRS). The federal agency that collects income taxes in the United States.
  • INS Form I-9. The form used by the Immigration and Naturalization Service to verify an employee’s eligibility to work in the United States.
  • Insolvency. The inability of a borrower to meet financial obligations as they mature, or having insufficient assets to pay legal debts.
  • Interest. (1) An amount paid a lender for the use of funds, or (2) cost of using credit or another person’s or company’s money. Interest is usually calculated as a rate per a period of time, typically a year.
  • Interest Rate. Percentage of a sum of money charged for the use of the money. Borrowing $100 for one year at a 10 percent simple interest rate would cost $10.
  • Internet. A network of networks, built upon a set of widely used software protocols that links millions of computers around the world. Services such as email and the Web use the Internet to transfer data.
  • Intranet. A private corporate network built with Internet-based protocols and software applications.
  • Invoice. A bill prepared by the seller of goods or services. Invoices tell purchasers how much they owe.
  • IP Address. A numeric address devices use to find one another on the network and to exchange information. Every device connected to the Internet has an identifying IP address. Most Internet users never see an IP address; instead, they use text-based domain names, which are easier to remember.
  • IRS Form 1099-MISC. The tax form sent to the IRS and the independent contractor at the end of the year when an independent contractor’s annual wages meet or exceed $600.
  • IRS Form W-4. The IRS form used to record filing status and withholding allowances. Also known as the Employee Withholding Tax Certificate.
  • ISDN (Integrated Services Digital Network). A set of communications standards that enable a single wire to carry data, voice and video transmissions at the same time. ISDN uses existing analog phone lines to provide faster Internet access (up to 128Kbps, or twice as fast as a 56K modem).
  • ISP (Internet Service Provider). Companies that provide access to the Internet, either via dial-up access numbers or a dedicated service such as DSL. Many ISPs also offer Web hosting, domain name registration and other services. There are thousands of ISPs, ranging in size from tiny local providers to giant corporations such as America Online.
J      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • Java. A programming language created by Sun Microsystems. Java offers a number of advantages for Internet developers and users: The same Java program can run on many different operating systems, and Java offers built-in security features that make it safer for computer users to download unfamiliar applications.
  • JavaScript. Unrelated to Java, JavaScript is a relatively simple text-based scripting language that can be embedded in HTML documents. JavaScript lets developers add special effects to Web pages.
  • Joint-and-Last Survivor Annuity. A type of annuity where income is payable during the lifetimes of two or more annuitants and continues until the death of the last survivor.
  • Joint-and-Last-Survivorship Option. When paying out the proceeds of an insurance policy, payments continue until the death of the last survivor of two persons.
  • Joint Venture. An agreement between two or more partners ("joint ventures") to pursue collaboratively a particular project or business, with a sharing of profits or losses.
  • JPEG (Joint Photographic Experts Group). One of the two most common image types used on the Web. (GIF is the other.) JPEG is used mostly for photographic reproductions. Also referred to as jpg.
  • Judgment. Judicial determination of the existence of an indebtedness or other legal liability.
  • Junior Mortgage. A lien that is below that of another mortgage. The holder of a junior mortgage can usually be satisfied only after a more senior lender is paid off. Thus, the interest rate on a junior mortgage is usually higher.
  • Jurisdiction. The authority of a court to hear and decide a case. For a decision to be valid, a court must have both "subject matter jurisdiction" (the ability to hear the type of case at issue) and "personal jurisdiction" (authority over the parties).
K      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • K-1. The information form from a partnership, S corporation, trust or estate, which provides the flow-through income and losses to be reported on an investor's individual return.
  • Kbps (Thousands of Bits Per Second). A measurement of data transfer rates.
  • Kilobit. One thousand bits. Abbreviated as Kb.
  • Kicker. An additional benefit a lender or investor receives as an inducement to make the loan or investment. For example, a lender may receive an Equity Kicker allowing him to receive a share of the income from the property if it exceeds a specified amount or giving the lender warrants to purchase shares of stock in the investment at a price below market value.
L      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • LAN (Local Area Network). A geographically limited communications network linking computers, printers and other devices. Ethernet is the most common means of creating a LAN.
  • Lanham Act. The main federal statute governing trademarks, service marks and unfair competition. It seeks to prevent deceptive and unfair competitive practices in the marketplace. Many states have similar laws.
  • Latent Defect. A defect, which could not be discovered by ordinary and reasonable inspection.
  • LCD (Liquid Crystal Display). A display technology that uses rod-shaped crystals that flow like liquid and bend light when energy flows through them. LCD technology is used in laptop computer and flat-panel displays.
  • Lease. A contract by which a tenant (the "lessee") takes possession of office space, furniture, equipment or other property for a specified rent and specified amount of time. At the end of a lease, the property reverts back to its owner (the "lessor").
  • Leasehold Interest. The right to the use of real property created by a lease. If the rent payable on the lease is below the current market, the lease has a number of years to run and is for a very desirable property, etc. the lease can be a valuable asset, particularly if the space can be subleased.
  • Lessee. The renter or tenant.
  • Lessor. A party who owns property and leases it to a tenant.
  • Letter of Credit. A document issued by a bank guaranteeing payment of a customer’s debt up to a set amount over a set period of time. Letters of credit are used extensively in international trade.
  • Letter of Intent (LOI). An agreement, usually nonbinding, documenting the general terms of a proposed business relationship. Often used as a prelude to a binding, definitive agreement.
  • Leverage. 1. Financial leverage is the act of increasing the return on an investment by borrowing some of the funds at an interest rate less than your return on the project. 2. Operating leverage has the same objective, but you increase your return by increasing cheaper fixed costs. Leverage can be positive or negative. If the return on an investment is greater than the cost of borrowing, leverage is positive. If the return is less, leverage is negative.
  • Liability. Any debt or obligation due now or potentially in the future. Liability is synonymous with legal responsibility.
  • Lien. A type of encumbrance that makes designated property security for a debt or for an obligation. For example, a mortgage or a tax judgment.
  • Life Income Period-Certain Annuity. The annuitant is guaranteed payments for the rest of his life, but should he die before a certain time, there is a payout based on a minimum number of payments.
  • Like-Kind Exchange. A tax device for deferring gain on the transfer of a property by exchanging it for similar property. For example, you exchange investment property in New Hampshire for investment property in Colorado. If you receive no cash or unlike property, there is no tax on any gain.
  • Limited Liability Company (LLC). A flexible business structure, popular with small businesses, offering owners the advantage of limited personal liability and the choice of being taxed like a partnership or a corporation.
  • Limited Liability Partnership (LLP). A type of partnership recognized in many states that protects individual partners from personal liability for negligent acts committed by other partners and employees not under their direct control. Some states restrict this type of partnership to professionals, such as lawyers, accountants and architects.
  • Limited Partner. An investor in a partnership whose personal liability is limited. Such investors are generally considered passive for income tax purposes.
  • Limited-Pay Life. Premiums on a life insurance policy that are payable for a stated period or until the insured reaches a certain age.
  • Liquidated Damages. A specific sum of money, set as part of a contract, to be paid by one party to the other if the first should default on the contract.
  • Liquidity Premium. The part of an interest rate or other return that is intended to cover the fact that the investment is illiquid.
  • Liquidity Risk. The risk that a party will not be able to have enough cash to meet its obligations as they come due.
  • Litigation. Lawsuits instituted through the judicial process.
  • Loan Commitment. A agreement by a lender to make a loan in the future if all the conditions in the agreement are satisfied.
  • Loan-to-Value Ratio. The percentage a lending institution will loan to the appraised value of a property. For example, if the property is appraised for $100,000 and a bank will loan only $70,000, the loan-to-value ratio is 70%.
  • Logo. A symbol that a company uses to represent itself or its brand.
  • Long Position. In stocks, bonds, etc. it means you own the stock, bond, option, etc. Often just referred to as simply long.
  • Long Bond. A bond that matures in more than 10 years.
  • Long-Term Debt. Obligations or liabilities that a company owes in one year or more.
  • Lump Sum. A price for a group of goods or services where there is no breakdown of price for the various items.
M      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • Market Share. The percentage of a product category’s sales, in dollars or units, that a particular brand, product line or company controls.
  • Market-Value Clause. A clause in an insurance policy that allows for the settlement of a claim based on the market value rather than the actual cash value.
  • Material Participation. Regular, substantial, and continuous involvement in a business on the part of either the taxpayer and/or spouse. Allows losses from trades or businesses to be deducted without limitation under the passive loss rules. Applies to S corporations and partnerships.
  • Maturity. In general, the period and date when payment of a loan is due. As applied to securities and commercial paper, the period and date when payment of principal is due.
  • Mechanic's Lien. A claim in favor of mechanics, contractors, laborers or material suppliers against a building or other structure. The lien can only be filed by persons who worked on the building or supplied materials.
  • Mediation. A form of alternative dispute resolution in which a neutral party (a mediator) seeks to promote and negotiate a settlement between opposing parties in a dispute. There is no mechanism to compel the parties to settle; they must voluntarily agree to any settlement.
  • Merger. Typically, a combination of two or more corporations into one corporation.
  • Modified Adjusted Gross Income. Your AGI (adjusted gross income) computed without considering any passive activity loss, IRA or SEP plans, taxable social security or the deduction for one-half of the self-employment tax.
  • Mortgage. An instrument giving legal title to secure the repayment of a loan made by the mortgagee (lender).
  • Mortgagee. A lender who loans money to a mortgagor. The loan is usually secured by real estate or other property.
  • MP-3 (MPEG Third Layer). A popular audio file format. Files encoded in MP-3 compress data at a 10:1 ratio, making it suitable for sending large, high-quality audio files over the Internet.
  • Multimedia. Information that combines different types of content, such as text, images, animation, video and audio.
  • Multiple Line Insurance. An insurance policy that combines both liability and property damage coverage and insures against a range of perils.
N      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • Naked Position. An investor is said to hold a naked position if he holds only a stock, bond, put, call, etc. If he holds both the underlying asset and a put, call, etc. he is said to have a hedged position.
  • Negative Amortization. A situation where the outstanding principal on a loan increases because debt service payments are insufficient to cover even all the interest, and the unpaid interest is added to the principal amount.
  • Negligence. An action or omission falling below the standard of care that a reasonable person would exercise in the same situation.
  • Net Operating Income. In real estate parlance, it's gross income less operating expenses but before items such as debt service, brokerage commissions, tenant improvements, and other capital items.
  • Net Lease Property. Property where the tenant or lessee pays most, if not all, of the expenses. The tenant may pay the expenses directly, or reimburse the landlord. If the tenant is responsible for all the expenses, the lease is often called triple net or NNN. For tax purposes, a net lease is where the deductions allowed solely by reason of IRC Sec. 162 (general business expenses) are less than 15% of gross rents from that property or property where the lessor is either guaranteed a specific return or is protected in whole or part against loss of income. Deductions allowed solely by reason of Sec. 162 are deductions other than interest, taxes and depreciation.
  • Nondisclosure Agreement (NDA). A contract in which a person or business agrees to maintain the confidentiality of proprietary information or trade secrets and not disclose such information without authorization. Employees, consultants, business partners and investors are often asked to sign nondisclosure agreements.
  • Nonexempt Employee. Employees who are protected by wage laws that mandate payment for every hour of overtime worked.
  • Non-passive Activity. A trade or business in which the taxpayer materially participates, that is, on a regular continuous, and substantial basis. Losses can be deducted without limitation as to the passive loss rules. Income cannot be offset by passive losses, except those passive losses remaining after disposition of a passive activity.
  • Nonprofit Corporation. A form of corporation in which no stockholder or trustee shares in profits or losses and which usually exists to accomplish some charitable or educational function. These organizations are exempt from corporate income taxes, and donations to these groups may be tax deductible.
  • Non-qualified Stock Options (NSOs). Nonqualified stock options may be granted to employees, consultants, contractors and others. When nonqualified stock options are exercised the holder must pay ordinary income tax on them, even if the shares have not yet been sold.
  • Non-recourse Loan. A loan where the debtor does not assume personal responsibility for the loan. CAUTION. Such a loan has special tax implications.
  • Notes Receivable. A secured or unsecured receivable evidenced by a note.
O      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • Occupational Safety and Health Administration (OSHA). A federal organization established to promote healthy and safe work environments. OSHA requires employers to inform employees of potential hazards, provide safety training and report workplace injuries. Many individual states have similar agencies.
  • OCR (Optical Character Recognition). Software that lets computers "read" printed documents input via a scanner and converts the image into a computer text file that users can edit.
  • OEM (Original Equipment Manufacturer). A company that produces the equipment that bears another company’s label.
  • Office Burglary and Robbery Policy. An insurance policy for businesses that have no stock or merchandise for sale; the policy only covers the contents of the office.
  • Office Personal Property Form. An insurance policy that covers all risks related to occupancy of an office for physical damage.
  • Open-End Contract. A contract in which the quantity and/or duration is not specified.
  • Open-End Mortgage. A mortgage where the amount that can be borrowed with the property as security can be increased, i.e., there is no fixed amount of principal.
  • Operating Expenses. In real estate, the costs of maintaining a property, such as utility charges and property taxes.
  • Option. The right to buy (or sell) or lease a property at a certain price for a limited period of time. For example, you pay $2,000 for a option to purchase 20 acres of land for $200,000. The option expires in one year. Depending on the terms, you may or may not be able to sell the option.
  • Out-of-the Money. In options, it means the current exercise of the option would produce a loss. Thus, a call option is out-of-the-money if the current price of the asset is less than the exercise price; a put option is out-of-the-money if the current price of the asset is more than the exercise price.
  • Overage Rent. Additional rent usually based on a tenant's sales. Such an agreement usually contains one or more breakpoints. For example, you rent space in a mall. The lease calls for you to pay 3% of all sales above $500,000. In 1998 your sales are $700,000. You owe the landlord $6,000 (3% of $200,000).
  • Overrun. A quantity of printed material or other manufactured product that exceeds the amount ordered.
  • Owner's Equity. The amount of an owner's interest in an entity that is at-risk should the company become bankrupt. In the case of a corporation, it consists of capital stock, additional paid-in capital, and retained earnings. Capital stock may be par value or no par value. If par value, the total capital stock is equal to the number of shares outstanding times the par value. Additional paid-in capital is additional amounts paid for the stock over an above the par value. Retained earnings come from the net profits of the corporation. Profits increase retained earnings, losses and distributions decrease them.
    • Example--Madison Inc. issues 200 shares of its common stock to Fred Flood for $60 per share, for a total of $12,000. Madison's common stock has a par value of $0.50. On the balance sheet the transaction would be recorded as capital stock of $100 (200 shares times $0.50 par value), and additional paid-in capital of $11,900 (the difference between the amount received for the stock and the par value).

      Assume further than Susan Newly buys 200 shares the following week for $70 per share ($14,000 total). The capital stock amount is the same ($100), but now the paid-in capital amount is increased by $13,900.
P      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • P.I.T.I. Payments that cover Principal, Interest, property Taxes, and Insurance.
  • Parallel Port. An interface on a computer used for connecting printers and other devices. Most personal computers have at least one parallel port along with a serial port and special ports for a mouse and keyboard.
  • Parent Company. A company that owns a majority stake (51 percent or more) of another company’s shares. It may have its own operations, or it may have been set up solely for the purpose of owning the operating company.
  • Partnership. A legal relationship existing between two or more persons or entities contractually associated as joint principals in a business.
  • Passive Activity. For taxes, rentals, regardless of participation and trades or businesses where you do not materially participate. Losses are limited to passive income plus a special $25,000 allowance for rental real estate.
  • Passive Loss. Loss from a passive activity, that is, rental or trade or business in which you do not materially participate.
  • Passive Income. Income from a passive activity. In other words, income from rentals or businesses in which you do not materially participate.
  • Patch. An interim update to a computer program that fixes a particular problem.
  • Patent. A patent secures to an inventor the exclusive right to make, use and sell an invention for a designated period of time. See information at www.uspto.gov.
  • Payback Period. The length of time it will take for an investor to recoup his cash outlay. Often used as a quick way to analyze an investment, usually in personal property. For example, a new machine will cost you $10,000. It will generate income before depreciation of $3,000 the first year; $4,000 the second year and $3,000 the third year. The payback period is 3 years.
  • Pay Period. The frequency with which payroll is processed and paychecks are issued.
  • PDA (Personal Digital Assistant). A class of small, highly portable computers, such as 3Com´s Palm Pilot. PDAs are typically used to store contact information, to access email and the Web and to run other business-related applications.
  • PDF (Portable Document Format). Adobe Systems´ PDF file format delivers print-quality documents in downloadable form. Although PDF is a proprietary format, it is the de facto standard for delivering documents in which formatting is essential, such as business forms and schematics.
  • Performance Bond. A contract of guaranty by a successful bidder to protect the buyer from loss due to the bidder's inability to complete the contract as agreed.
  • Peripheral. Any hardware device, such as a modem, printer or mouse that operates separately from a computer’s CPU.
  • Personal Articles Floater. Generally, an endorsement on an insurance policy that provides for all-risk coverage on scheduled (named) valuable personal property.
  • Personal Property Floater. Generally, an endorsement on an insurance policy that covers all property individually owned no matter where it's located.
  • Personal Property Replacement Cost Endorsement. A provision in an insurance policy that changes the recovery from an actual cash value basis to a replacement cost basis.
  • Placed in service. Strictly a tax term. You can only start depreciating property (or take a Sec. 179 expense election) when the property is 'placed in service.' That means when the property is available for use in its assigned function. For example, you purchase a machine and it's not delivered until 1997. Even though you may have paid for the machine in 1996, you can't begin depreciation until 1997. Similarly, if the machine is delivered in 1996, but the technicians didn't arrive to install and test the machine until 1997, you can't begin depreciation until 1997.
  • Plug and Play. A Microsoft/Intel standard that let’s users install new components into their computer system and begin using them immediately. In order for Plug and Play to work, both the computer and the peripheral device must support the standard.
  • Points. Payments to secure a loan, stated as a percentage of the borrowed amount. For example, 2 points is 2% of the loan.
  • Point-of-Purchase (POP) Display. Advertising material located in a retail store, usually placed near the checkout counter.
  • Policy Face Amount. The maximum amount payable under an insurance policy, so-called because the amount is printed on the face of the policy.
  • Port. A connection for sending data into or out of a personal computer. Most printers, for example, plug into a computer’s parallel port. Also used to denote an address reserved for a particular use on an Internet server.
  • Portfolio Income. Interest, dividends, royalties, and gains from the sale of stocks and bonds as well as other investment activities. Portfolio income is generally not considered passive income. Portfolio income cannot be offset by passive losses except those passive losses remaining after the disposition of a passive activity.
  • Power of Attorney. A written authorization that lets one person act as an agent for another and to make binding decisions for the principal. A power of attorney can be limited to specific types of decisions or it can be general.
  • Percentage Rent. See Overage Rent.
  • PPP (Point-to-Point Protocol). A set of standards that lets computers connects to the Internet through a telephone connection. Most dial-up Internet connections are now based on PPP instead of the older, less reliable SLIP protocol.
  • Preferred Stock. A class of stock with a liquidation preference before payment is made to the common stock holders. Preferred stock is the security most used by venture capital investors.
  • Prepayment Privilege. The right to prepay a mortgage without penalty.
  • Press Kit. A collection of publicity materials, including press releases and general company information that is packaged and sent to media organizations.
  • Press Release. A document that communicates information to the press. Press releases can publicize good news such as positive earnings and new product or service launches.
  • Price At The Time of Delivery. A term used in sales contracts when market prices are so volatile that a vendor will not give a firm price or use an escalator clause but will only agree to charge the price charged other customers for similar purchases on the day he ships or delivers the goods.
  • Price Protection. An agreement by a vendor with a purchaser to grant the purchaser any reduction in price which the seller may establish prior to, or within a certain time after, shipping of the purchaser's order.
  • Prime Rate Interest rate, which is charged business borrowers having the highest credit ratings, for short-term borrowing.
  • Privacy Policy - Internet. The policy established by a Web site regarding the use of information obtained from users or viewers of the Web site.
  • Private Letter Ruling. These are written pronouncements from the IRS interpreting the Internal Revenue Code with respect to a specific set of facts and circumstances. Letter rulings arise from a taxpayer's request to interpret the law, usually before engaging in a transaction. For example, when two corporations decide to merge, they typically request a letter ruling to insure the transaction will be tax-free. The ruling applies only to the taxpayer requesting it and cannot be cited as precedent. However, letter rulings often give important insight into the way the IRS would rule under similar circumstances. Despite the filing fee and legal costs involved in obtaining a ruling, if the tax consequences are substantial, a ruling is often advisable.
  • Private Limited Partnership. A partnership that does not have to be registered with the SEC, but can have no more than 35 accredited partners.
  • Private Placement. Also known as a private offering, the sale of an investment or business to a small group of accredited investors that conforms to certain exemptions from registration with the SEC.
  • Profit Sharing. Employee incentives in which a company distributes or receives a portion of the business’s profits to employees.
  • Pro Forma. Generally, financial information that reflects a hypothetical or projected transaction. For example, reconstructing a balance sheet or income statement to reflect the effects of a loan. (The loan will increase assets and liabilities and interest expense.) Also used to describe projected financial statements in general.
  • Proprietorship. The most common legal form of business ownership; about 85 percent of all small businesses are proprietorships. The liability of the owner is unlimited in this form of ownership.
  • Prospecting. The process by which salespeople determine whether or not a business or an individual could qualify as a potential customer.
  • Pro Rata Liability Clause. When more than one insurance company covers a property, the clause provides a formula for sharing liability among the companies.
  • Proxy. A right given to an agent, most often in the context of shareholder voting in corporations.
  • Public Domain. A copyright term that means a particular work is free for all to use without permission. Works in the public domain include those that were never copyrighted, those for which the copyright has expired and public documents.
  • Public-Key Encryption. This popular form of Internet-based encryption includes two elements: a public key and a private key. An individual creates a public key and sends it to people with whom they exchange email. Recipients then use this public key to create coded messages for the sender. When someone receives a message encrypted with their public key, they use a secret private key to decode the message.
  • Publicly Traded Partnership. A partnership whose interests are traded on an established securities market or are readily tradable on a secondary market.
  • Public Relations. Communication with various sectors of the public to influence their attitudes and opinions in the interest of promoting a person, product or idea.
  • Purchase Money Mortgage. A mortgage made by the seller to a buyer. Often a junior mortgage used in connection with the sale of investment property or a business where the buyer can't meet the full purchase price through his own and borrowed funds.
  • Purchase Order. A form that contains pricing, quantity and other purchasing information.
Q      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • Qualify. The information-gathering process that salespeople use to determine a prospect’s buying potential.
R      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • RAM (Random Access Memory). Chips in a computer that store frequently used information, allowing the CPU to access it quickly. But data stored in RAM is erased when the computer is turned off. RAM is usually measured in megabytes of storage capacity.
  • Rentable Square Feet. The total square feet available for lease. Typically, when landlords quote a price per square foot, they are talking about rentable square feet.
  • Rate of Return on Assets. In real estate parlance, the net operating income from a property divided by the price of the property.
  • Real Estate Investment Trust. A special corporation that is generally not taxed under federal law. The trust (REIT) must invest funds in real property. Income is taxed to the shareholders.
  • Recapture. See Depreciation Recapture, above.
  • Re-characterization Rules. Generally, rules, which reclassify passive income as non-passive. This type of income should not be reported on Form 8582 and cannot be offset by passive activity losses except those passive losses remaining after disposition of a passive activity.
  • Registered Bond. See Bearer Bond, above.
  • Release Price. The amount that must be repaid on a development loan when a property under a blanket mortgage is sold.
  • Renewable and Convertible Term. Term life insurance that is both renewable for an additional period without evidence of insurability and convertible into a permanent or whole life policy. A policy may contain one or both clauses.
  • Replacement Cost. The cost of replacing a property with one having similar amenities and functionality, but not identical improvements.
  • Reporting Forms. Commercial property insurance where the insurer requires periodic reports on the value of the inventory to ensure coverage is adequate and the premiums commensurate with the risk.
  • Reproduction Cost. The cost of reproducing the improvements on a property so as to duplicate the original property.
  • Return on Investment. The amount of profit (return) based on the amount of resources (funds) used to produce it. Also, the ability of a given investment to earn a return for its use.
  • Retainer. A contract between a lawyer and a client in which the lawyer agrees to provide certain legal services for money. The agreement formalizes the lawyer-client relationship and explains the relative duties of lawyer and client toward one another.
  • Revenue Ruling. This is an official IRS interpretation of the Internal Revenue Code or Regulations on a specific issue. The ruling may have been prompted by a Technical Advice Memorandum, taxpayer request, court decision, etc. As opposed to a Private Letter Ruling, a revenue ruling usually has broader implications and can be cited by the IRS or taxpayers as precedent. Revenue rulings carry less weight than IRS regulations.
  • Revocable Beneficiary. In the case of an insurance policy, the policyholder, in the case of a trust, the grantor, has the right to change the beneficiary at any time.
  • Right of First Offer. The right to be the first person offered a particular item (such as stock or real estate).
  • Right of First Refusal. The right to be the first person allowed to purchase a certain item (such as stock or real estate) if it is ever offered for sale.
  • Roaming. Using a wireless phone outside the home service area defined by the service provider. Roaming often incurs higher per-minute rates as well as daily access fees and long distance charges.
  • ROM (Read-only Memory). Memory chips that permanently store data. A hardware or software vendor usually programs a computer’s ROM. The software necessary for a computer to start, including the BIOS, is usually stored in ROM.
S      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • S Corporation. A corporation that is not taxed as a separate entity. Instead, the income, losses, credits, etc. are passed through to the shareholders.
  • Sale-Leaseback. A transaction where the owner of a property sells it to another party but retains occupancy by immediately leasing it back from the buyer. Frequently a way of raising cash or getting rid of an unwanted property.
  • SBA. The US Small Business Administration (SBA), created by Congress in 1953 to help America's entrepreneurs form successful small business enterprises. See www.SBA.gov.
  • Salary. Regular compensation paid to an employee as a condition of employment. Salary is generally computed on an annual or a monthly basis.
  • Sales Tax. A tax on retail products based on a set percentage of retail cost.
  • Sarbanes-Oxley Act. A comprehensive federal law aimed at corporate governance and fraudulent financial transactions.
  • Search Engine. Software that indexes Web pages and allows users to search for particular keywords. Public search engines such as Lycos, AltaVista and Google constantly index Web sites and add information about these sites to their databases. Many individual Web sites also use their own built-in search engines.
  • Security Deposit. Money that a lessee must give a lessor as a guarantee that the lessee will make payments.
  • Self-Charged Interest. The portion of interest charged on a lending transaction between a flow-through entity (S corporation or partnership) and its partners or shareholders, which represents a payment a person makes to him or herself. Stated differently, it is the amount the lender/borrower reports as interest income/expense which is equal to the lender's/borrower's distributive share of the flow through entity's interest deduction. The interest payments received are generally treated as portfolio income.
  • Self-Rented Property. Personal or real property a taxpayer rents to an entity in which the taxpayer materially participates. For example, you rent real property you own personally to an S corporation in which you materially participate.
  • Seller Carry-Back. Also known as seller financing, it's where the seller provides some or all of the financing in connection with the sale of real estate or a business.
  • Sensitivity Analysis. An approach to taking into account risk by calculating the changes in potential returns if the original assumptions change. For example, by using your best estimates for costs and revenue you compute that a new machine will provide you with 18% return. If revenues are 10% lower, the return will be 14%.
  • Server. A computer on a network that offers shared hardware or software resources to multiple users. The term may apply in a general sense to a computer that "serves" shared files or applications over a LAN, or it may apply to a computer running a specific application, such as a Web server or mail server.
  • Settlement Options. Different ways of taking the proceeds from a life insurance policy. For example, rather than receiving the proceeds in a lump sum, the beneficiary can request the insurer to pay the amount out over several years. Interest is added to the principal to reflect the delayed payout.
  • Sexual Harassment. Uninvited sexual advances or related conduct that creates an intimidating, hostile or offensive work environment. Sexual harassment is prohibited by the federal Civil Rights Act of 1991 as well as by various state laws.
  • Shareholder Agreement. A written agreement between a corporation and its shareholders governing the nature of the relationship and the conduct of certain corporate activities (such as distribution of profits and resolution of shareholder disputes).
  • Shareware. Software that anyone may download for free and pass along to others. The creators of shareware programs usually ask users to pay a small fee if they use the product after a specified period of time.
  • Short. An investor is said to be short if he has sold stock that he does not own, that is, he has sold stock he borrowed from his broker. In the case of an option, the seller or writer has a short position if he has sold the option short.
  • Significant Participation Activity. A business in which you participate more than 100 hours without materially participating. If the total hours of participation in your significant participation activities (SPA) exceed 500, the total net income from SPAs is treated as non-passive.
  • Sister Company. Sister companies share the same parent company or individual owner. Like a subsidiary, a sister company is typically a separately incorporated business.
  • Small Claims Court. A court intended to simplify and expedite the resolution of minor disputes (such as disputes involving $5000 or less).
  • Social Security Tax. Provides benefits for retired workers and their dependents as well as for the disabled and their dependents. Also known as "Federal Insurance Contributions Act" (FICA) tax.
  • Soft Sell. The technique of using low-pressure appeals in sales.
  • Spam. Slang term for unsolicited commercial email. "Spamming" people with unwanted commercial email solicitations is considered unethical and it is now illegal in several US states. Most ISPs will terminate a user’s account if they use it to send spam.
  • Specific Coverage. An insurance policy or endorsement where coverage is limited to the property specified in the contract.
  • Spendthrift Clause. A clause in a trust, insurance policy, etc. that guards the assets against unwise use by the beneficiary. In some cases the assets cannot be attached by creditors. Often used by parents to provide for children who might otherwise waste the assets or pledge them.
  • SSL (Secure Socket Layer). Netscape Communications developed this protocol for transmitting credit card numbers and other sensitive data over the Internet. Both Netscape Communicator and Microsoft Internet Explorer support SSL, which is one of the most widely used e-commerce security methods (the other is SHTTP).
  • Standby Loan. A commitment by a lender to make a loan on specified terms. Generally, neither the potential borrower nor lender anticipates the loan will be taken down. Instead, it's anticipated it will be replaced by a permanent loan.
  • Stock Option. A right to buy a given amount of company stock at a given price for a given period of time.
  • Straddle. Any of a number of possible investment positions where the investor owns both a put and a call or protection from a drop in the market and a rise in the market. The put and call would have both the same exercise price and the same expiration date. An investor is long in a straddle if he buys a put and a call; he is short a straddle if he writes a put and a call.
  • Straight-Line Depreciation. Depreciation (also applies to amortization) where the amount for each period is equal. For example, annual depreciation on a $12,000 asset with a 10-year life would be $1,200 per year.
  • Streaming Media. Streaming technology lets users play audio or video files as they download, rather than waiting for the whole file. Popular streaming media platforms include QuickTime, RealPlayer and Windows Media Player.
  • Sublease. The act of a tenant leasing the property it is leasing to yet another tenant, called a sublessee.
  • Subordination Clause. In real estate lending, a clause in a mortgage that allows it to become junior to subsequent liens.
  • Subrogation. The right of an insurer to substitute itself for the victim in recovering the amount of the loss from the party responsible for the loss. For example, you rent space in a warehouse. A worker accidentally sets fire to the building. The landlord collects from his insurance company but the insurer files a claim against your business.
  • Subsidiary. A company owned by a parent company, a subsidiary is a separate legal entity listed as a corporation or LLC that is required to file its own taxes.
  • Substantial Part of an Activity. An identifiable piece or unit of a larger activity, such as a separate division or branch, or a separate product line of a business with several lines or divisions. Generally used in connection with the passive activity loss rules.
  • Suspended Losses. Passive losses, which are carried forward indefinitely until the taxpayer has passive income or there is an entire disposition of the activity.
  • Systems Integrator. An individual or a company that specializes in making different software and hardware systems work together. Systems integrators often specialize in particular applications, such as accounting, enterprise resource planning or Web and Internet systems.
  • System Board. A printed circuit board in a personal computer that contains the main processor, expansion slots and other basic hardware. Also known as a motherboard.
T      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • T-1. A type of high-speed Internet connection that carries data at more than 1.5Mbps. An even faster version, called T-3, operates at speeds up to 44Mbps.
  • Take-Out. Also know as a permanent loan commitment, it's a promise by a lender to replace a construction loan with a permanent one.
  • Target Market. A specified audience or demographic group that an ad, product or service is intended to reach.
  • Tax Credit. A dollar-for-dollar reduction in the tax. Can be deducted directly from taxes owed.
  • Tax Deduction. A part of a person or business' expenses that reduces income subject to tax.
  • Tax Deferred. A term that indicates no tax is currently due on the transaction or income received. Instead, tax is due at a later date when the transaction is closed. Earnings in an IRA account are tax deferred until you retire and the income is distributed to you. A trade-in is a tax-deferred transaction. You report no gain until you sell the property received in the trade-in.
  • TCP/IP (Transmission Control Protocol/Internet Protocol). These two communications protocols form the foundation of the Internet, allowing any two computers that support TCP/IP to communicate with one another.
  • Technical Advice Memorandum. This is written advice issued by the IRS national office at the request of an IRS district office or Appeals Office on a technical or procedural question, usually arising during the audit of a taxpayer's return or a claim for refund. Like Private Letter Rulings these are reported to the public, but are not official IRS pronouncements. Thus, they cannot be cited as precedent.
  • Teleconferencing. A meeting conducted by telephone among people in different locations.
  • Telemarketing. Using the telephone to sell, promote or solicit products and services.
  • Telephony. A catchall word describing the world of communications -- from wireless phones to digital computer communications to voicemail systems.
  • Telnet. An Internet-based protocol for connecting to a remote host or server. Telnet was once the main way to access other computers over the Internet, and it supported a variety of text-based email, file transfer, chat and information retrieval programs.
  • Tenancy at Will. The occupancy of property at the will of the owner. The agreement may be written or oral, but the tenant may leave at any time without liability and the owner can evict the tenant at any time.
  • Tenant Improvements. Refurbishing a rental space for a new tenant. Improvements may include repainting, recarpeting and moving walls. In high-vacancy markets, landlords often entice tenants with money for tenant improvements. In tight rental markets, tenants may be on their own.
  • Term. The life of a contract, agreement, loan, etc.
  • Term Insurance. A type of life insurance issued for one or more years specified in the contract. As opposed to whole life, the policy does not build any cash value.
  • Tiered Entities. Partnerships or trusts or S corporations invested in other partnerships or trusts or S corporations.
  • Tort. A civil wrong or injury that results in a legal action for damages to rectify the wrong.
  • Tracking. Overnight shipping companies typically enable their customers to find out when a package was picked up, when it passed through certain regional shipping centers and airports, and when it was delivered. Tracking information is available either through toll-free phone numbers or Web sites.
  • Trademark. A name, phrase, logo, image or combination of images used to identify and distinguish a business from others in the marketplace. The term is often used to include service marks, which apply to businesses providing services as opposed to selling products. Trademarks can be either registered or unregistered, with different levels of protection.
  • Treasury Inflation Protection Securities (TIPS) These are treasury bonds where the principal is indexed to the CPI. The total yield is made up of current interest payments and semi-annual CPI adjustments to principal. While only the interest is paid, both portions are taxable. Because of the CPI adjustment, the interest rate is relatively low.
  • Trial Balance. A list of all the ledger accounts with their balances at any point in time.
  • Trojan Horse. A program that appears to serve a legitimate purpose but actually performs a destructive or unauthorized activity. Trojan horses differ from viruses mainly in that they do not replicate themselves.
  • Trustee. A person or legal entity that holds money or property for the benefit of another. The owner of the money or property is known as the beneficiary. In most cases, the trustee and the beneficiary can be the same person.
U      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • Unemployment Compensation. Money paid to eligible people who have lost a job and are actively looking for work. Unemployment compensation is partially paid by the employer’s unemployment insurance contributions.
  • Unfair Competition. A broad term describing illegal commercial activity ranging from trademark infringement to false advertising. Federal and state laws regulate unfair competition, and the remedies available range from money damages to court injunctions.
  • Unix. A computer operating system used mostly in high-end workstations and servers. A number of companies produce not completely compatible varieties of UNIX The well-known "open source" Linux operating system is a variety of UNIX
  • Unsecured Debt. A debt that is not guaranteed by a specific piece of real or personal property. If the debtor defaults, the creditor does not have the right to seize specific property to satisfy the debt.
  • Upsell. A technique to increase the value or quantity of a sale by suggesting additional options or upgrades. For example, a fast-food restaurant may upsell by suggesting that a customer buy a larger drink or an order of French fries.
  • URL (Uniform Resource Locator). The text address that allows users to find a particular Web site or Web page. The links on Web pages also consist of URLs, which are embedded in the HTML code on the page. URLs comprise of a domain name followed by the file path to a particular file on that domain’s Web server.
  • Usable Square Feet. The amount of space renters can actually use. Usable square footage is usually less than rentable square footage because it deducts common areas such as public corridors, elevators, lobbies and bathrooms.
  • Usenet. An Internet service that provides thousands of discussion lists, or newsgroups, on a variety of topics. Users can read newsgroup postings or they can add their own. Most newsgroups are completely open, although some are moderated. You can view Usenet newsgroups with special software built into browsers and email programs or via one of several Web-based services.
V      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • VAR (Value Added Reseller). A company that modifies or improves a system in some way and then resells it. A VAR might, for example, integrate a software application with its clients´ other systems or it might buy hardware components and build complete systems.
  • Vacancy and Collection Loss. The reduction in potential gross income from vacancies and bad debts in real property. For example, a building has 50,000 square feet of space that should rent for $10 per square foot. The gross potential rent is $500,000 per year. However, vacancy and collection losses are projected to reduce that by $40,000 to $460,000 annually.
  • Valuable Papers Insurance. Insurance that provides coverage for the destruction or loss of papers that have intrinsic value.
  • Value-Added Tax. A tax imposed on each step in the production process. The measure of the tax is the difference between the cost of the item to the taxpayer and the price at which the item is transferred to the buyer. For example, you purchase raw materials for $100. After machine work and assembly, you sell the item for $150. The tax is levied on the $50.
  • Vanishing Point. The point at which premiums on a cash value life insurance policy will end. See Vanishing Premium, below.
  • Vanishing Premium. A provision in many cash value life insurance policies where the premium, after a certain point in time, will end with the policy remaining in force. That time is usually estimated based on the premium and the assumed rate of return.
  • Variable Costs. Costs that change in direct proportion to the amount of product manufactured. For example, the cost of direct materials depends on the number of units produced. Contrast with Fixed Costs.
  • Variable Life Insurance. A life insurance policy where the face amount of the policy is not fixed (as in whole life) but can increase or decrease based on the performance of the investments purchased by the premiums. Like whole life, premiums are constant and the policy builds cash value.
  • Variance. In cost accounting, it's the difference between the actual cost and the standard cost of the cost components. In financial accounting it's the difference between actual income and expenses and budgeted amounts, or between comparative statements (e.g., prior year to current year).
  • Vendor's Lien. Collateral for a note or credit advanced by the seller of the property.
  • Vertical Integration. The IRS definition is a relationship between two businesses where one supplies more than 50% of its property or services to another, or where one receives more than 50% of its property or services from the other.
  • Virus. A self-replicating computer program that infects a PC without the user’s knowledge or permission. Most viruses are harmless, although some are very destructive.
  • Voicemail. An automated service that answers phone calls and records incoming messages. Enhanced voicemail services add features such as personalized greetings, longer recording times and more saved messages.
  • Voidable. A transaction that can be annulled if one of the parties asserts a claim to do so.
  • Voting Stock. An interest in a corporation where the shareholder is entitled to vote. Depending on its charter, a corporation can issue voting and nonvoting stock. Preferred stock is usually nonvoting.
  • Voting Trust Certificate. A document representing a beneficial interest in a voting trust. .
W      A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | TOP
  • Waive. To voluntarily relinquish a right or privilege.
  • Waiver. In insurance terminology, a provision in the policy releasing the insurance company from liability to pay for specified losses that would normally be covered under the policy.
  • Waiver of Premium Provision. A provision available in many disability income and life insurance policies that allow the policy to stay in force without the payment of premiums if the insured has been disabled for a specific period of time (typically 6 months on life insurance policies).
  • WAN (Wide Area Network). A communications network that covers a large geographic area, a WAN may be a public network such as the Internet or it may be a closed, proprietary network run by a corporation or government agency.
  • Warehouse Receipt. A document showing ownership of goods stored in a warehouse. The receipt can be used to transfer ownership of the goods without having to ship the actual goods to the buyer.
  • Warranty. A guarantee about the performance of a product, or a promise to perform a specific act, such as repairing or replacing a defective or broken product.
  • Warranty Deed. A deed that warrants that the seller is transferring title free and clear of any encumbrances. Should the title turn out to be defective, the buyer has recourse to the seller.
  • Wash Sale. A tax term describing the sale of stock or securities and the purchase of identical securities within 30 days before or after the sale. For tax purposes, any losses on the transaction are disregarded.
  • Watered Stock. Generally, stock that is overvalued because of accounting gimmicks or where unauthorized shares have been issued.
  • Waybill. Document prepared by a common carrier that provides the details of the route shipped goods are to follow.
  • Web Browser. A program that allows an individual to view Web pages.
  • Web Host. A service that operates Web servers for its clients and publishes their Web sites.
  • Web Page. A page in a Web document. Unlike printed pages, a Web page may be just a few words long or it may include thousands of words, images and other content.
  • Web Server. A computer that publishes a Web site on the Internet. It usually includes the Web server software, the appropriate software protocols such as TCP/IP, the Web site content and occasionally other software such as e-commerce or database applications. When the Web server receives a request from a Web client (or browser), it delivers the appropriate page or performs the requested task.
  • When Issued. Refers to a security that is being traded but has not yet been formally issued. Usually reserved for new issues of stocks and bonds and stocks that have split. For example, Madison Inc. is selling for $100 per share. The stock has been split 2-for-1 but new shares have not been issued. It may trade for $50 per share (the post-split price) on a 'when issued' basis. Usually abbreviated WI in financial newspapers.
  • White Goods. A term used in retailing and economic measurement for large household appliances such as stoves, washers, dryers, refrigerators, etc.
  • White Knight. When a company is the target of a hostile takeover it may seek out another company who is friendlier to rescue it. The friendly company is known as a white knight.
  • Whole Life Insurance. A life insurance policy that not only pays the face amount on the death of the insured, it builds cash value because the required premiums exceed the amount necessary to provide pure insurance protection. Premiums are level throughout the life of the policy. Contrast with Term Life.
  • Wi-Fi. Shorthand for "wireless fidelity," this is a high-frequency wireless local area network. Wi-Fi can be used to connect to the Internet wirelessly.
  • Winding Up. The processing of liquidating a company. Includes paying off creditors, selling and/or distributing assets to owners, etc.
  • Window Dressing. Sprucing up a balance sheet, financial statement, etc. for a monthly, quarterly, or annual report. Examples include trying to collect receivables just before the end of a quarter; booking sales at the very end of the period; in the case of a mutual fund, selling less desirable or investments with losses and replacing them with higher quality issues before the statement date.
  • Withdrawal Plan. I