Example
This is an example.
Accountant
A professional who manages and analyzes business records.
Accounts Payable
The money that your business owes for goods and services.
Accounts Receivable
Money that a customer owes to your business for goods and services (also known as outstanding invoices).
Administrative Expenses
Operating costs incurred while running a business, such as telephone and internet, materials and supplies, wages and salaries, professional fees, taxes, etc.
Amortization
The process of paying off a debt or mortgage, usually by equal monthly payments.
Annual Percentage Rate
Helps you to calculate the actual borrowing cost over a particular period. It is expressed in percentage and represents the yearly cost of loan.
Application Fee
An added cost associated with submitting an application for consideration.
Assets
Something that has value for your business and/or contributes to creating value for your business. Assets can be tangible (such as material and equipment) or intangible (such as the business owner’s skills and expertise).
Audit
A formal review of a business’ accounts and transactions to ensure they are accurate.
Balance Sheet
A financial statement that shows all assets, liabilities and equity of a business, at a given point in time. It provides a “snapshot” of the business’ financial strength.
Bankrupt
The condition of a business that is unable to pay its bills. A business declared legally bankrupt may have its property confiscated by the courts and divided up among its creditors.
Book Value
The value of an asset as shown on a balance sheet. Book value takes depreciation into account, so it normally differs from the asset’s market value.
Bookkeeping
The process of maintaining a business’ daily accounting records and transactions.
Break-Even Point
The point at which a business’ expenses are equal to revenue. Beyond this point, the business starts making a profit.
Budget
An estimate of expected revenue and expenses over a given period of time (monthly,quarterly, annually, etc.). It is used as a financial control for the business.
Business Number
A nine-digit number the Canada Revenue Agency assigns to a business or non-profit asa tax ID. A BN is unique to a single organization and is used when dealing with the federal government and certain provincial governments.
Business Plan
A detailed list of goals and objectives set out by the entrepreneur, identifying and describing the means and time frame by which to achieve them.
Capital
Money and assets available for business activities. It is the owner's equity in the business.
Capital Gains/Losses
Capital gain is the profit one earns on the sale of an asset like stocks, bonds or real estate. Capital loss arises when the cost price is higher than the selling price.
Cash Flow
The money that is coming into and going out of your business. It is important to keep track of your business’ cash flow so that you know whether or not you can pay your bills.
Cash Flow Statement
Financial statement that shows monthly inflows (e.g. earnings) and outflows (e.g.expenses) of cash in the business, normally over the course of a year. It helps a business to plan for its upcoming expenses.
Closing Inventory
Value of the total inventory that a business has on hand at the end of an accounting period.
Collateral
Something pledged as security for repayment of a loan, to be forfeited in the event of a default.
Collections
A term used by a business when referring to money owed to that business by a customer. When a customer does not pay the business within the terms specified, the amount of the bill becomes past due and is sometimes submitted to a collection agency.
Competition; Competitor
Another business that is selling the same of similar product or service as yours, in the same area or region.
Compound Interest
Money earned on interest that was earned by the same investment in a previous period. This can lead to exponential growth of the investment.
Consumer
A person or business that buys products and services for its own needs, not for resale or for use in producing products and services for resale.
Contract
A legal agreement between two or more parties, specifying each party’s responsibilities and obligations in meeting the shared objectives identified in the agreement.
Copyright
The legal right of the owner of intellectual property, and the right to copy the intellectual property that has been created or produced. The original owners/creators of it, as well as anyone they give authorization to, are the only ones with the exclusive right to reproduce the work.
Corporation
A legal entity incorporated under federal or provincial legislation. It is separate and distinct from the people who own it. The owners (or shareholders) are not liable for the debts or obligations of the corporation.
Cost
The amount of money, time, or energy spent on something.
Cost of Goods Sold
This is also commonly referred to as ‘Cost of Sales’ or ‘COGS’. It is the direct cost of producing or providing the business' products or services.
Credit Bureau
A company that collects information relating to the credit ratings of individuals and makes it available to credit card companies, financial institutions, etc.
Credit Check
The process by which a lender or other party requests a potential borrower or customer's credit history from the credit bureau.
Credit Rating
An estimate of the ability of a person or organization to fulfill their financial commitments, based on previous dealings.
Credit Score
A number assigned to a person that indicates to lenders their capacity to repay a loan.
Creditor
A business or individual who extends credit to someone else, or to whom money is owed.
Customer
A person or business that purchases products or services from your business.
Customer Service
The maintenance and servicing of a product or service once it has been sold; the act of maintaining and fostering customer satisfaction and loyalty.
Debt
Something that is owed (usually money). A debt can take the form of a loan, line of credit, credit card balance, mortgage, etc. The lender will normally charge interest and/or a fee until the debt is repaid.
Debt Ratio
The ratio of debts to assets.
Deductions
An expense that can be subtracted from a taxpayer's gross income in order to reduce the amount of income that is subject to taxation.
Default
Failure to fulfill an obligation, especially to repay a loan.
Deficit
This is when a business’ expenses exceed revenue. It is the opposite of surplus.
Demand
A consumer’s desire for a commodity, coupled with the ability to pay for it. The amount of money a consumer is ready and willing to spend on a product or service in the marketplace.
Demographics
Age, sex, income, occupation, household composition, etc. of a particular target market.
Depreciation
Reduction of the value of a tangible asset, over the lifespan of that asset. As an example, if you purchase a vehicle for your business that you expect will last 10 years, you will need to “depreciate” the vehicle by showing that its value reduces by a certain amount of money each year.
Disbursements
Funds paid out of a business, in settlement of obligations.
Diversification
A method of decreasing risk by spreading an investor’s money among many different investments.
Dividend
An amount of money paid to shareholders of a corporation out of earnings.
Drawings
Withdrawal of assets (usually cash) from a business by a sole proprietor or a partner.
Earnings
Money obtained in return for labor or services or an income derived from an investment or product.
Endorsement
Signature on the back of a cheque, rendering it payable.
Entrepreneur
Someone who is willing and eager to create a new venture in order to present a concept to the marketplace.
Equity
The value of a business, after the debts have been paid. On a balance sheet, it is calculated as total assets less total liabilities.
Expenses
Money spent for products or services.
Financial Plan
An estimate of a business’ future revenue and expenses, broken down weekly, monthly, or annually.
Financial Statements
Formal reports, prepared from accounting records, describing the financial position and performance of the business.
Financing
Money that investors and lenders put into your business. Investors become owners of the business, and they invested because they hope the business will grow. Investors get a return on their investment in the form of dividends, or if someone else buys their ownership share for more than what they paid for it. On the other hand, lenders do not become owners of the business. They expect to receive their money back with interest, within a set period of time.
Fiscal Period
An accounting period, usually 12 months, and most commonly used for tax purposes.
Fixed Assets
Property or equipment that is owned by a business, for use in its operations and not intended to be sold. This includes land, buildings, vehicles, furniture, equipment, etc.They are also called ‘capital assets’.
Fixed Costs
Business expenses that must be paid whether or not any sales are being generated by the business e.g. utilities, salaries, advertising, insurance, loan interest, rent, etc.
Forecast
An estimate or prediction of your business’ future revenues and expenses. This is called a forecast or projection.
Funding
Money offered as subsidies or incentives by governments (First Nation, municipal, provincial and federal) and/or the private sector. Repayment is typically not required; however, the funder will normally require the recipient business to report on its expenditures and activities.
Grace Period
An extra amount of time in which you are free from certain consequences normally associated after a certain date.
Grants
Sources of free money that generally do not have to be repaid. Grants can come from the federal government, your state government, your college or career school, or a private or non-profit organization.
Gross
Total amount of something, before deductions.
Gross Profit
This is the profit made by the business before deducting any expenses. It is the business’ sales minus cost of goods sold (COGS). It helps to evaluate sales performance, buying policies, mark-ups and inventory controls.
Income
Money received for products or services produced, or as a return on investment.
Income Statement
Financial statement showing a business’ summary of income and expenses over a specified period of time. It indicates whether the business made a profit or loss.
Income Tax
A tax imposed by the government, usually calculated as a percentage of income.
Insolvent
The condition of a business that is unable to pay its bills.
Intangible Assets
Assets that cannot be touched, weighed or measured. They cannot be used for payments of debts. These include goodwill, patent, trademark and incorporation costs. They can produce income and can also be sold.
Interest
The fee that a lender charges to a borrower. It is normally calculated as an annual percentage of the amount owing. The word “interest” can also refer to a share of ownership in a business.
Inventory
The merchandise and raw materials that a business has on hand to be sold, or to be turned into products to be sold. Inventory must be counted each year and reported on the relevant financial statements.
Inventory Turnover
Financial ratio that measures the number of times inventory has been sold in a year. Products are not selling well if the turnover is low.
Investment
The act of putting money, effort, time, etc. into something to make a profit.
Invoice
An itemized statement of products and/or services sold (sales invoice) and purchased (purchase invoice).
Labour Expenses
Total cost to the business for its employees, including employee benefits.
Lease
Legal contract drawn up between an owner (lessor) and a tenant (lessee) regarding the use of property. It normally includes a stated amount of money (rent) and a specified length of time.
Leasehold Improvements
Renovations and/or other improvements to a leased property, at the expense of the lessee (tenant).
Liability
An amount that is owed by a business to another business or individual (employees, suppliers, lenders, etc.)
Licence
Permission to practice a specific business, trade or profession. Licences are also required to operate various types of equipment. They often require specialized training and testing.
Lien
An interest of a creditor in any real assets or property, as security for repayment of credit. It is a legal claim against property.
Limited Liability Company (LLC)
A hybrid business structure that combines the tax advantages of a partnership with the liability protection of a corporation.
Line of Credit
Agreement between a lender and a borrower under which the borrower can borrow continuously, up to a fixed maximum amount, without needing to renegotiate the loan.
Liquidate
The conversion of assets of cash.
Loan
Money that a lender offers to a person or business, for the purpose of generating interest income. A loan normally carries a cost, which is expressed as an interest rate.
Loss
A financial deficit. If expenses exceed income, it is a loss for the business.
Market
The exchange of goods and services. It is also a place where the needs of one person are satisfied by the offerings of another. A market has at least one seller and one buyer (normally many more of each). In a free market, every buyer has information about every seller and can decide, based on price and other factors, which product to purchase.
Market Value
The amount for which something can be sold on a given market.
Marketing
The activities involved in finding, accessing and informing a market of a business, in order to sell its products and/or services.
Maturity Date
The date on which the principal amount of a note, draft, acceptance bond or other debt instrument becomes due. The maturity date also refers to the termination date (due date) on which an installment loan must be paid back in full.
Merchandise
A business’ inventory of products.
Minimum Wage
A legally specified minimum rate of pay for labour in specific occupations.
Mortgage
A form of debt that is used to purchase property. A mortgage can have a fixed term (normally many years) and a fixed payment schedule. It is normally secured (also called ‘guaranteed’) by the property i.e. if the borrower does not make the required payments, the lender can take ownership of the property.
Net
In business, it is the profit or loss remaining after all costs have been subtracted.
Net Profit
Total revenue minus total expenses for an accounting period.
Net Worth
The value of a business after all expenses have been deducted.
Networking
Interacting with other people and organizations for the purpose of making contacts and developing possible business opportunities. Non-Sufficient Fund Indicates that a bank account does not have a sufficient balance to cover a transaction or payment.
Opening Inventory
Value of total inventory a business has on hand at the opening of an accounting period.
Operating Costs
Costs related to the production of a business’ products or services.
Overhead
The fixed costs of operating a business, such as utilities, advertising, wages or salaries, rent, lease payments, insurance, loan interest, etc.
Partnership
A business ownership structure where two or more individuals (or companies) provide the equity capital for a business enterprise. Partners share in the profits as well as the losses of the business.
Patent
Exclusive right granted for an invention. Patent protection means that the invention cannot be commercially made, used, distributed, imported, or sold by others without the patent owner's consent.
Prepaid Expenses
Expenses paid in advance during an accounting period (e.g. annual insurance premiums, paid in full upfront for the coming year).
Principal
The original sum of money borrowed in a loan that you agreed to pay back.
Profit
The financial gain realized by doing business. It is calculated as revenue (or income) minus expenses. If the result is positive, the business has made a profit.
Profit Margin
Sale price of an item minus the total costs.
Ratio Analysis
Analysis that compares financial ratios of a business from one year to another to determine the change in performance over time. It also compares financial ratios of a business to those of other similar businesses and/or the industry in general, for the purpose of assessing the business’ performance in relation to others.
Regulatory Factors
Every business is subject to regulation. Each level of government and every jurisdiction has its own set of rules and regulations. It is essential to find out which regulations will apply to your business and what you must do to comply with them. Regulations are often enforced by industry itself, so it is important to check with your industry or trade association to find out what the rules are.
Retail
The selling of products or services to the end user (or consumer).
Retained Earnings
Profits not spent or distributed among owners of a business, but instead reinvested in the business.
Return on Assets
Financial ratio that shows how efficiently the business has used its available resources to generate income.
Return on Investment
Financial ratio that measures the profitability of the business for its shareholders.
Revenue
Money received by a business from the sale of products or services during an accounting period. It can also include gains from the sale or exchange of assets; interest and dividends earned on investments; and other increases in the owner's equity.
Risk
The degree of uncertainty and/or potential financial loss.
Risk Tolerance
The maximum degree of uncertainty someone is willing to accept when making a financial decision that entails the possibility of a loss.
Sales
Total value of products sold or revenue made from services provided. When preparing your accounting records, returns and discounts must be shown as a reduction from total sales.
Security
A financial asset that can be traded.
Selling Expenses
Operating costs directly related to the selling of a product or service.
Shares
Units of equity ownership interest in a corporation that exist as a financial asset providing for an equal distribution in any residual profits.
Sole Proprietor
A business that is owned by one individual. It is the simplest kind of business structure. The owner of a sole proprietorship has sole responsibility for making decisions, receives all the profits, claims all losses, and does not have separate legal status from the business.
Sole Proprietorship
A business owned and operated by one individual who is responsible for the debts and obligations of the business.
Start-Up Capital
Money needed to launch a new business venture during the pre-start-up and initial period of operations.
Statement of Changes in Financial Position
Financial statement showing the fluctuation of capital of a business over an accounting period.
Supply
The amount of a product or service made available by sellers of that product or service.
Supply Chain
A network of businesses that begins with a raw material, transforms it, then offers it for sale to the end consumer. The supply chain includes processing; manufacturing; purchasing; packaging; shipping; inventory management; warehousing; etc. A business may be involved in only one link in the chain, or many/all of them.
Target Market
A specific part of a market segment, identified by factors like age, gender, income, occupation, location, etc.
Tax Deduction
A deduction that lowers a person's or an organization's tax liability by lowering their taxable income. Deductions are typically expenses that the taxpayer incurs during the year that can be applied against or subtracted from their gross income to figure out how much tax is owed.
Taxes
An amount of money that a government requires people to pay according to their income, the value of their property, etc., and that is used to pay for the things done by the government.
Term Loan
Loan having a fixed term of repayment greater than one year and a monthly or seasonal principal reduction schedule.
Total Debt-to-Equity Ratio
Financial ratio that measures the solvency for the business. If the ratio is high, the business is at higher risk of not meeting its obligations if a reduction in sales occurs.
Transaction
A sale or transfer of products or services in exchange for money.
Variable Costs
Expenses that vary directly with changes in the volume of sales or production e.g. raw materials, direct labour, shipping, etc.
Working Capital
The amount of cash-on-hand a business has available to pay short-term expenses, as opposed to the capital it has invested in fixed assets. It is considered a cushion to meet unexpected or out-of-the-ordinary expenses, and is calculated by subtracting current liabilities from current assets.