Terms of the Business Trade how to buy a business mail order restaurant service


Accounts Payable- balance sheet entry reflecting amounts owed to creditors (current liability)

Accounts Receivable- balance sheet entry reflecting amounts owed to the business for goods or services (current asset)

AGS- annual gross sales

Allocation- the process of distributing an expense to a number of items or areas

ANP- annual net profit

Assessed Valuation- the taxable value of a property

BLI- business listing information (sheet)

Book Value- value stated on owner's statements or accounting records

Current Ratio- comparison of current assets to current liabilities (assets divided by liabilities)

Cash Flow- profit before income tax, depreciation, interest and owners compensation & benefits

Contingencies- performance is dependent upon successful outcome of named event (verification of tax returns)

Cost of Goods Sold- generally includes amount of goods & labor for service or delivery

Covenant Not to Compete- agreement that the seller will not compete with the buyer for so many years in so many miles

Depreciation- loss in value of a fixed asset due to wear & tear or obsolescence (which cannot be repaired by normal repairs)

Due Diligence- process of evaluating the business for purchase in a set amount of time

E2-Visa- Long term visa issued to a person making a substantial investment in an active enterprise

EBIT- earnings before interest and taxes

EBITA- earnings before interest, taxes and amortization

EBITDA- earnings before interest, taxes, depreciation and amortization

Escrow- held by a third party until all conditions are met

Escrow Account- "non-interest bearing" account that is used for deposits on business purchase, regulated by the State

FF&E- furniture, fixtures, & equipment

FICA- Federal Insurance Contributions Act

Goodwill- the difference between the total value of the business and the hard assets (FF&E)

Gross Profit- income from sales less cost of goods sold (before overhead, general & administrative expenses)

Guarantee- promise to pay, could be Corporate Guarantee or Personal

Keystone- cost times two (triple key 3X)

Letter of Intent- Non-binding intent to purchase and intent to sell (unless a better offer comes along!)

Majority Owners- owners of a majority of the stocking a corporation

Maker- the person signing or giving a promissory note

Markup- amounted added to cost to arrive at retail (expenses plus desired profit)

MGS- monthly gross sales

Net Profit- difference between total income and total expenses

Non-Disclosure Agreement (NonD)- agreement from buyer that he/she will divulge information about or that the business is for sale, talk to employees, customers, suppliers or anyone not directly involved in sale (lawyer, accountant)

Nonrecurrent item- income or expense arising from a cause not likely to exist in future years

Partner- one of the owners of an unincorporated business

Pool Margin- average profitability expressed in cents

Proprietary income- may include officer's salary,bonuses, owner's salary, perks and profit of business

Proprietor- the owner of an unincorporated business

Prorate- to spread equally over a period of time

Recast Financial- owner "perks" are added back to come up with a true "owner benefit"

Replevin- an action whereby the person entitled to repossession of goods may recover from one that has wrongfully detained such goods or chattels

Residual Value- estimated scrap value of a tangible asset

Retained Earnings- those profits kept in a corporation and not distributed as dividends

SBA- Small Business Administration

Service Business- firm dealing in non merchandising activities

Simple Interest- interest on the principal only as compared to compound interest

Sole Proprietorship- business owned by one person

Taxable Income- gross income minus both exemptions and personal deductions

Turnover- the rate at which an asset is replaced within a given time period

UCC- Uniform Commercial Code

WGS- weekly gross sales

Working Capital- surplus liquid cash used to finance ongoing operations of the business


Send in your request or response for more!

Bizology - the study of business for sale


email to : info [at] bizology [dot] com
Chambersburg, PA 17201-1712
* TAX - LEGAL * * BUYING * | you are in buying index now |
| business checklist | buyer disclosure | buyers cash requirements |
| buyers ask questions | valuation program | buyer information |
| where's the value | what happened to seller financing |
| what to look for | business information sheet | buyer memorandum |
| confidential buyer profile | | thank you | terms of the trade |
| how to evaluate a business | food service | pre-paids | ratios |
| let's see the books | escrow deposit | | main index



Click Here!