 |
||
| Small Business Terms Glossary Search for Terms U underwrite v: to assume financial risk as an underwriter. Investment banks are in the business of helping companies raise capital from public and private financial markets by underwriting companies' issuances of either debt or equity securities. The act of underwriting entails the investment bank (a.k.a. underwriter) purchasing the entire security issuance from the issuing company and then reselling those securities, typically to a syndicate of institutional and/or individual investors. underwriter n: a financial services firm or group of firms, usually investment banks, that buys an entire debt or equity financing roundor issuance from a corporation, usually at a discount (up to 6%+ for an equity issuance) and then resells it into the private or public markets. The act of buying and then reselling such a financing round, and taking on the associated financial risk, is known as underwriting. upside case n: in reference to a financial model, or financial projections: the financial model scenario (also known as aggressive case or optimistic scenario) that uses management's most aggressive (i.e., optimistic) assumptions that is, assumptions that revenues will begin sooner and/or rise faster, and that the costs of doing business will be limited or contained. The financial projections resulting from your upside case assumptions should be better than those for your conservative case(lowest) and base case (medium). useful life n: the number of years over which a given large, one-time expense, such as research and development or financial closing costs, is deemed to have economic value to a business (see also amortize and amortization period). V 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. VAD n: (see VAR) value-added dealer n: (see VAR) value-added reseller n: commonly referred to by its acronym, VAR,orsimply as reseller; in some industries, referred to as VAD, or value-added dealer. VARs are often locally- or regionally-oriented businesses, typically fairly small and privately-held, that specialize in selling and servicing a certain category of products; VARs are most common in business-to-business sales. Most VARs will represent products from multiple vendors (the producers of the original products). Their value proposition to vendors is to offer access to local customers with whom the VARs have preexisting relationships, plus local pre- and post-sales support, in exchange for a sales commission that varies by industry. VARs' value proposition to end-user business customers is local service and support, often from a know supplier with whom the customer has an established business relationship. VAR n: (see value-added reseller) variable cost- n: Any costs which change significantly with the level of output. The obvious example is cost of materials. 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. valuation n: the measure of how much a company is worth. (See also pre-money valuation and post- money valuation) valuation analysis n: the process of determining the value of an asset or company. There are many techniques for conducting valuation analysis, and it is often partially objective and partially subjective. Approaches used in valuation analysis include: the analysis of market multiples of comparable companies, and discounted cash flow analysis based on pro forma financial projections. value chain n: the series of steps by which value is created for a given product or service. For instance, value chain may include "value-added stages" such as original invention, product design and development, manufacturing/production, branding/marketing, distribution and sales, warranty service, and after-market service. When planning a new business, it is useful to understand and carefully analyze the value chain for your product or service, in order to thoroughly understand the types of companies or "players" who serve each function or "link" in the chain, and how much each link or function in the chain gets paid and by whom. (see also: margin structure) Value Date. In banking parlance, the date on which the funds become available to the depositor. value driver n: an important factor that determines or causes an increase in value of a business, as viewed by investors Example:For a brand new startup (i.e., a business still in the Shaping stageof the Venture Value Chain), key value drivers can include the assembly of a strong management team, a seasoned and influential board of directors and advisory board, the development of a compelling business plan, and the ability to produce a demonstrable prototype of product. Key value drivers for early-stage ventures (in the Launchstage) can include the completion of a first commercial version of the product and attracting the first paying customers. Important value drivers in the Scale stage usually include a strengthened management team, expanded infrastructure for sales, distribution and customer support, and predictably ramping revenue. 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). VC nor adj: acronym referring to either venture capital, a venture capitalist, a venture capital firm, or a venture capital fund. vendor n: a term commonly used in business-to-business markets, referring to the original producer of a product or service Vendor's Lien. Collateral for a note or credit advanced by the seller of the property. venture capital n: often referred to by its acronym, VC; a general term for money that is invested in equity securities (stock) of early-stage, high-growth and/or high-potential companies that are privately-held (i.e., their stock is not publicly traded on an exchange). Venture capital is a high-risk asset class, and consequently venture capital investors seek high rates of return on investment. Sources of venture capital include friends and family, angel investors, venture capital firms, corporate venture capital groups, as well as corporate strategic investors. venture capital fund n:also VC fund or simply VC; a closed-end, private pool of capital dedicated to investments in the equity securities of privately-held, early-stage or high-growth companies. A venture capital firm (the "general partner") raises a VC fund from institutional investors and/or high-net-worth individual investors (so-called "limited partners"). A successful VC firm will typically raise, manage and invest multiple VC funds over time. venture capitalist often referred to as by its acronym, VC; institutional investment firm, or an investment professional working for that firm, that specializes in making equity (stock) investments in privately-held, early-stage or high-growth companies. Venture Communication Pyramid TM The Venture Communication Pyramid TM is a tool designed to help startups better communicate their business message to investors, customers, partners and employees. By providing a simple, coherent communications model with cascading levels of detail, the Pyramid helps simplify and improve the impact of companies' marketing and fund-raising efforts. At the top of the pyramid (least detail) is the company's brand, and at the bottom is the company's domain knowledge (greatest level of detail). Each cascading level of detail builds logically on the one before and enables the company to present its messages clearly, compellingly, concisely and consistently. venture investor an individual or institution who invests in early-stage companies; typically, people or organizations who purchase the privately-held, illiquid equity (stock) of startup companies. Venture investors may include angels (high-net-worth individuals), private venture capital firms, or corporate venture capital groups. Venture Quotient TM n: abbrevi ated VQ, the venture quotient measures the overall likelihood of success of a new venture (i.e., a startup business) by accounting for the four categories of venture risk (market, technology/product, management, and financial risks). The VQ is calculated as follows: VQ = (1 RK) x (1 RP) x (1 RM) x (1 RF) venture risk n: the factors that can cause a startup business to fail. Venture riskis comprised of four major categories: market risk, technologyor product risk, anagement risk, and financial risk. Venture Value Chain n: a model that describes the lifecycle of a startup company, covering the following five stages: · Shape develop, research and plan the original new-business concept · Launch start the business · Scale drive hyper-growth by rapidly scaling sales and operations · Refine manage for consistent and predictable revenue and profit growth · Exit achieve liquidity for shareholders Entrepreneurs and startup teams can use the Venture Value Chain to identify where they are in the startup company lifecycle, understand the critical success factors for the business at each stage, and avoid unnecessary mistakes and oversights in planning and execution. vertically integrated adj: describing a company or a company's operations that are performed in house throughout the value chain. vest v: become exercisable (referring to a stockoption or warrant) after satisfying a vesting schedule or vesting requirement. vesting schedule n: also vesting requirement; the period of time over which a stock option becomes exercisable. Most stock options vest in a "straight line" fashion (i.e., linearly, or at a constant rate over time) over a set term of typically 3, 4 or 5 years. As an option recipient or grantee satisfies the time requirements (typically linked to employment or service tenure), the option continues to vest incrementally until it is fully vested (i.e., the vesting schedule is 100 percent satisfied). (See illustrative Example under stock option.) viral marketing n: a term used to describe marketing campaigns in which customers proactively attract other customers to a product or service in a geometrically expanding network of customers (e.g., I recruit five people, then each of those in turn recruit five people themselves, etc.). Example:Online digital photography services tend to benefit from viral marketing. For example, Jolie attends a class reunion, then posts her photos on an online service and e-mails the website link to a few dozen classmates. Each of the classmates can go online to view the photos for free, but they are first required to register with the photo service. If any of them want to order prints, they pay for that service. And, once these several dozen people are acquainted with the service, some will probably choose to post pictures themselves. For example, classmate Bob may subsequently choose to post photos of his newborn child and e-mail 25 people in his extended family to encourage them to view the pictures online. In this way, the online photo service benefits from viral marketing in a sense, "free advertising" as their customers promote the service through word-of-mouth to an ever-expanding network. vision n: a company's vision statement is the business's raison d'etre, or reason for being; often erroneously confused with a mission statement. 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. VQ n: (see Venture Quotient) W 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 Mistake or Informality. The act of disregarding errors or technical nonconformities in a bid which do not affect the substance of the bid and will not adversely affect the competition between bidders. 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 periof of time (typically 6 months on life insurance policies). war room n:- in reference to due diligence. The central location, generally a dedicated room or office, for due diligence documents for potential investors, acquirers or investment bankers to use. 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 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. 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 more friendly to rescue it. The friendly company is known as a white knight. win-win strategies n: progressive thinking to make partnerships, negotiations, and alliances greater than the sum of the parts. Thinking creatively is the key to win-win strategies. 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. whole product n:- derived from thoughts in Geoffrey A. Moore's seminal work on marketing for technology startups, "Crossing the Chasm"; A completely configured end product or solution for the target mainstream customer. 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. In the case of mutual funds, a plan that allows shareholders to receive regular payments of income or capital gains. Without Prejudice. A legal term indicating that an action is made without any admission or waivers. For example, where a party offers to settle a legal dispute without admitting liability. Without Recourse. Where a creditor's only recourse in the case of default is to sell any pledged property. Also applies to the factoring of receivables, loans or notes, etc. Wire Transfer. The transfer of money between two banks using a wire transfer system or the Federal Reserve's transfer system. Banks usually charge an extra fee for this service, but the transfer to your account is done faster, hence the funds wired from another party are available quicker than if you received the check and your bank waited for the funds to clear. working capital finance/accounting term; defined as the excess of current assets over current liabilities. In practice, working capital is the capital, or money, you need to fund the day to day cash needs of a business. Work in Process. Jobs currently being processed. Usually refers to manufactured goods where some work has been performed on the raw materials, but the goods are not yet ready for sale. Workers' Compensation Benefits. Life and health insurance coverage for employees only while they are on the job. Medical expenses, disability income, dismemberment, and death benefits are provided under the policies. Workout. An attempt by a debtor and creditor to avoid foreclosure or bankruptcy when the debtor is in financial difficulty. The creditor often will accept less than full payment of debts in order to avoid receiving less in a bankruptcy case. Workweek. The normal number of days and hours employees are scheduled to work for a week. In economic statistics, a measure of the economy. The longer the workweek, the more employees in general are working and is a reflection of whether employers are hiring new employees are just extending the hours of current employees. Wraparound Mortgage. A mortgage where an existing loan (or loans) on a property are not paid off on sale, but retained, and a new loan is made. The old loans are often retained because they are at an interest rate below the current market. The new lender makes the payments on the existing loans. Write Off. To reduce the value of an asset on a company's books to the fair market value, or fair market value less the cost of disposal. For example, a computer purchased for $5,000 and depreciated down to $3,000 is now found to be worth no more than $500. You write off $2,500 to show the asset at the current market value. Also known as write down. This procedure is generally not allowed for tax accounting purposes. Write Up. Generally, the reverse of Write Off, above. Usually not allowed for accounting purposes. Y Yearly Renewable Term. A term policy covering one year that is renewable each year without having to show insurability. Yield. See Current Yield, above. Yield Curve. A graph that plots the yields of similar quality bonds on the y-axis and the time to maturity on the x- axis. Generally, the longer the time to maturity, the higher the interest rate. Yield Equivalence. The interest rate at which a tax-exempt bond and a taxable one have the same after-tax return. The theory assumes that both bonds are of similar quality. To find the equivalent taxable yield of a tax-exempt bond, divide the tax-exempt yield by 1 minus your marginal tax rate. Example--A tax-exempt bond is yielding 6%; your marginal tax rate is 31%. One minus .31 is .69. Divide that into .06; the result is .08695, or 8.7%. Thus, a 6% tax-exempt yield is equivalent to an 8.7% fully taxable yield. Yield Spread. The difference in yields among bonds of the same maturity that's caused by differences in the quality of the bonds. Yield to Call. Similar to Yield to Maturity but the call price and earlier call date are substituted for maturity date when calculating the yield. For example, Madison Inc. issues a bond for $1,000 at 10%. The bond matures 15 years later, but is callable at the end of 7 years at 105 ($1,050). The higher call price and the shorter term is used to compute the yield. Yield to Maturity. A method of calculating the yield on a bond that takes into account not only the periodic interest payments and the purchase price, but also the return of principal at maturity. (See Current Yield above.) Z Zero-Base Budgeting. A technique where each budget starts from zero, rather than starting with the prior budget and increasing or decreasing it. Theoretically, under zero-base budgeting, every expense has to be justified. That should foster a closer look at all expenditures. Zero Balance Account. A checking account designed to have a zer zero coupon adj :finance/accounting term; describing a debt instrument (a bond or note) that pays no cash interest during its life or for a portion of its life. |
Business Solutions |
|
| Search |
||
|
|
||
Business
Articles|Free Business Forms|Small
Business Glossary|SBA
Information|Startup
Secrets|Personal
Finance|Using
EDI|Links
Information for Small Business 2008 |
||