GLOSSARY OF TERMS
An accredited investor is an individual or entity who has met certain qualifications set out by the government or other regulatory body in regard to their net worth or income level and is therefore able to invest in certain forms of high-risk investments, such as venture capital and angel investing.
A method of accounting wherein income and expenses are recognized, within the statements, when the business first acquires the right to receive the income, or the obligation to pay the expense. Companies with inventories are required to use the accrual method for tax purposes. (Also see Cash Basis Accounting.)
One company taking over controlling interest in another company.
All or a portion of expenses that are added back to net income in an effort to place the figures as close as possible to the economic earnings that were actually derived from the business.
Refers to a company that is added by a private equity firm to one of its platform companies, or by a strategic buyer pursuing a consolidation investment strategy.
The measure of a company’s valuation after liabilities, including off-balance sheet liabilities, and assets are adjusted to reflect true fair market value.
A valuation method within the Asset Approach category whereby all assets and liabilities (including off-balance sheet, intangible, and contingent) are adjusted to their fair market values. (NOTE: In Canada on a going concern basis.)
Adjusted earnings before taxes, interest income or expense, nonoperating and non-recurring income/expenses, depreciation, and other non-cash charges and prior to deducting an owner’s/officer’s compensation, but after replacing that owner’s/officer’s compensation and benefits with the market rate compensation and benefits to replace that owner’s/officer’s functions. This is a measure of a company’s operating performance without having to factor in financing decisions, accounting decisions or tax environments.
See Discretionary Earnings.
A snapshot of the accounts receivable, usually alphabetized, as of the date of the balance sheet you are using, wherein each account receivable is shown in columnar form as either current, over 30 days, over 60 days, over 90 days, or over 120 days delinquent. The aging report is the primary tool used by collections personnel to determine which invoices are overdue for payment.
This is an accounting technique, used for tax planning purpose, to periodically lower the book value of a loan or an intangible asset over a set period of years. This is accomplished by monthly lowering the intangible asset value on the balance sheet by a specific amount and charging that same amount to expense on the income statement. The amount of amortization taken as a non-cash charge in any given accounting period is almost always based upon number of years approved by the IRS for cost recovery. See also Depreciation, which is the corresponding accounting technique for tangible assets.
The act or process of providing information, recommendations and/or conclusions on diversified situations, processes, or problems in businesses, other than estimating value. Also (as a noun), the result of the act or process of analysis.
The act or process of estimating value. Also, the result of the process of estimating value. The words “valuing” (verb) and “valuation” (noun) are synonymous with “appraisal.”
The total amount for which a business or an ownership interest is offered for sale. The asking price could be inclusive or exclusive of inventory or other assets.
A general way of determining a value indication of a business, business ownership interest, or security by using one or more methods based on the value of the assets of that business net of liabilities.