Comprehensive Business Glossary | Playbook Advisory  

Commonly Used Terms

Welcome to our comprehensive business glossary of business terms to navigate the complexities of buying and selling businesses. Our guide provides clear, concise definitions to empower your decision-making. Perfect for entrepreneurs and business professionals.

Alphabetical Order

A
Accounts Receivable: Money owed to the company from completed work orders.
Angel Investors: Private individuals that provide funding to businesses at startup or early in their lifecycle.
Assets: Items owned by the company, such as cash, accounts receivable, vehicles, and deposits.
Accumulated Depreciation: Reduction in value of an asset over time due to wear and tear.
Asking Price: The price a seller is asking for the business. Typically, the average sales price is 85-90% of the initial asking price.
Attorney: An M&A attorney is crucial for navigating legal complexities in business transactions.

B
Balance Sheet: Financial statement showing assets, liabilities, and owner’s equity on a specific date.
BizBuySell, BizQuest: Third-party websites for business sellers and buyers.
Blog: A platform for sharing news and information on buying or selling a business.
Book Value: Also known as net worth. Reflects the company's actual value accounting for assets and liabilities.
Building Type: Categories of properties such as commercial, retail, industrial, or residential.
Business Broker: A professional who assists in buying or selling privately held businesses.

C
Capital Stock: Amount paid by shareholders for their ownership stake in a business.
Cash Flow: Net amount of cash being transferred into and out of a business.
Cash Flow Valuation: Valuation method based on a multiple of cash flow, often using Seller Discretionary Earnings (SDE).
Cost of Goods Sold (COGS): Direct costs attributable to the production of goods sold by a company.
Collateral: Assets pledged as security for a loan.
Current Assets/Liabilities: Assets that can be converted into cash within a year/liabilities due within a year.

D
Debt: An amount owed to another party.
Debt to Equity Ratio: Measures a company's financial leverage.
Depreciation: Allocation of the cost of an asset over its useful life.
Discounted Cash Flow (DCF): A valuation method using projected future cash flows, adjusted to get their present value.
Dividends: Payments made by a corporation to its shareholders.

E
Equity: The value of ownership interest in the company, calculated as total assets minus total liabilities.
Equity Financing: Raising capital through the sale of shares.

F
Fair Market Value: An estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would likely pay.
Free Cash Flow: Cash a company generates after accounting for cash outflows to support operations and maintain capital assets.
Fiscal Year: A year as reckoned for taxing or accounting purposes, not necessarily aligning with the calendar year.

G
Goodwill: An intangible asset that arises when a buyer acquires an existing business.
Gross Margin/Profit: Revenue minus cost of goods sold.

H - I
Income Statement: A financial statement showing the company's revenue and expenses over a specific period.

J - K
Jim Peddle: President of Playbook Advisory.

L
Lease Expiration: The termination date of a lease agreement.
Liabilities: Financial obligations of a company.

M
Market Rent: Typical cost of renting space in the open market.
Multiple Listing Sheet: A document listing various businesses for sale.

N
Net Income: Total revenue minus total expenses.
Non-Compete Agreement: A contract where the seller agrees not to start a similar trade in competition against the buyer.

O
Owner's Equity: The residual interest in the assets of the holder after deducting all liabilities.

P
Part-Time Employees: Employees who work fewer hours than full-time employees and receive different benefits.

Q - R
Recourse Loan: A loan where the borrower is personally liable if the proceeds from the sale of the collateral are insufficient to pay off the loan.

S
SBA Financing: Loans supported by the Small Business Administration, offering guarantees to lenders.
Seller Financing: A transaction where the seller provides a loan to the buyer.

T
Tax Returns: Official documents filed with taxing authorities reporting income, expenses, and other pertinent tax information.
Terms and Options: Describes the specifics of a lease, including the length of the term and renewal options.

U - V
Variable Costs: Costs that vary depending on a company's production volume.

W

Warren Buffet: Chairman and Largest Shareholder Berkshire Hathaway -$BRKA
Working Capital: Current assets minus current liabilities, indicating the short-term liquidity of a company.

X - Y - Z
No specific terms under these letters.