Encyclopedia

Small Business Encyclopedia
Financial Management

Cash Float Accounts

A bank account specifically set up by a business owner to float money through from Business A to enhance the perceived value of Business B

Cost-Benefit Analysis

A process by which you weigh expected costs against expected benefits to determine the best (or most profitable) course of action

Assets

The value of any tangible property and property rights owned by a company less any reserves set aside for depreciation. Assets don't reflect any appreciation in value unless they're sold for the greater value.

Debt-to-Equity Ratio

A measure of the extent to which a firm's capital is provided by owners or lenders, calculated by dividing debt by equity. Also, a measure of a company's ability to repay its obligations. If ratios are increasing--more debt in relation to equity--the company is being financed by creditors rather than by internal positive cash flow which may be a dangerous trend.

Deductible Expenses

Expenditures for business items that have no future life (such as rent, utilities or wages) and are incurred in conducting normal business activities which a business owner may deduct from gross earned income for federal tax purposes

Break-Even Analysis

A technique for analyzing how revenue, expenses and profit vary with changes in sales volume

Budgeting

Establishing a planned level of expenditures, usually at a fairly detailed level. A company may plan and maintain a budget on either an accrual or a cash basis.

Intangible Assets

The assets you cannot touch or see but that have value. Intangible assets include franchise rights, goodwill, noncompete agreements and patents, among others.

Invoices

An itemized list of goods shipped or services rendered, stating quantities, prices, fees, shipping charges, etc. Also known as a "bill."

Payables Management

The administration of a company's outstanding debts, or liabilities, to vendors for purchases of goods and services made on credit

Undercapitalization

The condition that exists when a company doesn't have enough cash to carry on its business and pay its creditors

Net Worth

The amount of equity a company has, which is the difference between its total assets and total liabilities.

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