Differences

This shows you the differences between two versions of the page.

--- glossary [2014/06/16 16:37]
mdavis created
+++ glossary [2016/05/26 19:58]
@@ Line 1: / Line 1: @@
-{{page_001.jpg?850x1100}}
-.
-Accounting Fees
-An __e____x____p____e____n____s____e__ of your company, incurred when you pay an accountant. Typical services include
- Perform an annual audit of your company
- Provide ongoing financial and accounting advice to you
- Maintain your day-to-day financial records.
-. Accounts Payable (aka A/P)
-Amounts owed by your company to other parties for goods or services purchased from them. They
-appear on your __b____a____l____a____n____c____e__ ______s____h____e____e____t__ as a liability (because you owe the accounts payable). Meanwhile, the
-__c____a____s____h__ ______f____l____o____w__ ______s____t____a____t____e____m____e____n____t__ entry titled accounts payable reflects the change in accounts payable between
-the previous period and the current period.
-.
-Accounts Receivable (aka A/R)
-Amounts owed to your company by other parties for goods or services purchased by them from
-you. They appear on your __b____a____l____a____n____c____e__ ______s____h____e____e____t__ as an asset (because somebody owes you the accounts
-receivable). Meanwhile, the __c____a____s____h__ ______f____l____o____w__ ______s____t____a____t____e____m____e____n____t__ entry titled accounts receivable reflects the change
-in accounts receivable between the previous period and the current period.
-. Accumulated Deficit (aka Cumulative Losses)
-The sum of all net profits and losses from previous periods. When negative, it is called an
-accumulated deficit. When positive, it is called __r____e____t____a____i____n____e____d__ ______e____a____r____n____i____n____g____s__.
-.
-Acquisition
-An example of an __e____x____i____t__ ______s____t____r____a____t____e____g____y__ in which your entire company, or just its assets, are purchased by
-another entity. That entity pays for the purchase using either cash or its own company equity.
-. Anti-Dilution Rights
-A very common preference associated with __p____r____e____f____e____r____r____e____d__ ______s____t____o____c____k__ in a start-up. In essence, anti-dilution
-protects holders of __p____r____e____f____e____r____r____e____d__ ______s____t____o____c____k__ from a down round, i.e., from a subsequent sale of stock in the
-company in which stock this investor purchased is later sold at a lower price. Although there are
-many ways to calculate the way to compensate the investor, all of them aim to provide the investor
-with additional shares at no additional cost, so as to in effect retroactively enable the investor to
-purchase his/her shares at a lower price.
-.
-AOS (see Average Order Size)
-. Attorney Fees
-An __e____x____p____e____n____s____e__ of your company incurred when you pay an attorney to provide you with any legal
-counsel.
-. Attrition Rate (aka Churn)
-The rate at which current customers stop being customers. The opposite of __r____e____t____e____n____t____i____o____n__ ______r____a____t____e__.
-. Average Order Size (aka AOS)
-The average size of a purchase by a customer.
-. Balance Sheet
-A standard __f____i____n____a____n____c____i____a____l__ ______s____t____a____t____e____m____e____n____t__ thatshowsallyourcompany’sassets,liabilities,andshareholders’
-equity at a specific point in time.
-. Base Starting Salary
-{{page_002.jpg?850x1100}}  * nemployee’sstartingsalaryifs/hewereworkingfull -time. If an employee were working half-time
-and earning $25,000, his/her base starting salary would be $50,000.
-. Board of Advisors
-A group of individuals generally appointed by officers of the company to advise them on matters
-that enable officers to improve their on-the-job performance. Advisors are typically experts in the
-industry, technology or market.
-. Board of Directors
-A group of individuals generally elected by shareholders of the company and who have the
-responsibilitytooverseethecompany’sactivities,appointthepresidentandCEOofthecompany,
-and execute the responsibilities described i nthecompany’sbylaws.
-. Board Member
-  * memberofthecompany’sboardofdirectors.lsoknownasadirector.
-. Cap Table (see Capitalization Table)
-. CAC (see Customer Acquisition Cost)
-. Capital Asset (see Fixed Asset)
-. Capitalization Table (or Cap Table)
-A standard table that shows rounds of investment as multi-part columns and investors (or
-aggregated classes of investors) as rows. The multi-part columns are divided into three smaller
-columns: # of shares, % ownership, and fully diluted % ownership. The entries in the table show
-how the number of shares and the % ownership changes for each investor with each successive
-__i____n____v____e____s____t____m____e____n____t__ ______r____o____u____n____d__.
-. Cash Flow Statement
-A standard __f____i____n____a____n____c____i____a____l__ ______s____t____a____t____e____m____e____n____t__ that shows all cash going in and out of the company over a specific
-period of time. The statement is organized into three major sections:
-__C____a____s____h__ ______f____r____o____m__ ______o____p____e____r____a____t____i____n____g__ ______a____c____t____i____v____i____t____i____e____s__
-__C____a____s____h__ ______f____r____o____m__ ______i____n____v____e____s____t____i____n____g__ ______a____c____t____i____v____i____t____i____e____s__
-__C____a____s____h__ ______f____r____o____m__ ______f____i____n____a____n____c____i____n____g__ ______a____c____t____i____v____i____t____i____e____s__.
-. Cash from Financing Activities
-The bottom third section of the __c____a____s____h__ ______f____l____o____w__ ______s____t____a____t____e____m____e____n____t__ shows all sources and uses of cash related to
-thecompany’s
-Offering and repurchase of its equities
-Acquisition and repayment of loans.
-. Cash from Investing Activities
-The middle third section of the __c____a____s____h__ ______f____l____o____w__ ______s____t____a____t____e____m____e____n____t__ shows all sources and uses of cash related to
-thecompany’spurchaseandsaleof __f____i____x____e____d__ ______a____s____s____e____t____s__.
-. Cash from Operating Activities
-The top third section of the __c____a____s____h__ ______f____l____o____w__ ______s____t____a____t____e____m____e____n____t__ shows all sources and uses of cash related to the
-company’s principal business. It starts with the profit (or loss) from the __i____n____c____o____m____e__ ______s____t____a____t____e____m____e____n____t____.__
-Although most items represented by the profit (or loss) are reflected in cash, a few are not. The
-remaining lines of this section back out those items from the profit (or loss) that are not cash.
-{{page_003.jpg?850x1100}}These are __d____e____p____r____e____c____i____a____t____i____o____n__, changes to accounts receivable, changes to accounts payable, and changes
-to accrued liabilities.
-. Churn (See Attrition Rate)
-. COGS (See Cost of Goods Sold)
-. Collection Period (aka Days Outstanding)
-The number of days between when that revenue is booked and when customers pay for goods or
-services related to that revenue. During this number of days, that amount remains as an __a____c____c____o____u____n____t____s__
-__r____e____c____e____i____v____a____b____l____e__.
-. Commission
-The percent of a sale of an item that is awarded to employees (usually salespeople) for the roles
-they played in making that sale.
-. Common Stock
-An example of __e____q____u____i____t____y__ in a company. Common shares are generally sold to founders of the company.
-They are generally used in __s____t____o____c____k__ ______o____p____t____i____o____n____s__, i.e., stock options awarded to employees and others are
-generally options to purchase common stock at some predefined __s____t____r____i____k____e__ ______p____r____i____c____e__. Investors in start-ups
-generally purchase __p____r____e____f____e____r____r____e____d__ ______s____t____o____c____k__, but sometimes purchase common stock.
-. Competitor
-A company that is selling products that directly or indirectly cause customers to forgo purchasing
-your product. Notice that a competitor could be in an entirely different industry than you are in.
-For example, a highly-effective rapid transit system could be seen as a competitor to an automobile
-dealer in a metropolitan area. See __d____i____r____e____c____t__ ______c____o____m____p____e____t____i____t____o____r__ ____and substitute competitor.
-. Consultant
-An individual or company that your company decides to retain for goods or services.
-. Convertible Loan (aka Convertible Debenture)
-A __l____o____a____n__ in which either or both parties (depending on the terms) may decide to accept payment for
-the balance of the loan in equity of the company instead of cash. Often the terms include __w____a____r____r____a____n____t____s__
-to purchase additional equity.
-. Cost of Goods Sold (aka COGS)
-These are the costs that the company incurs in order to make products or services to be sold to
-customers. If you are a reseller, it includes costs to purchase gross products from suppliers. If you
-are a manufacturer, it includes costs of all raw materials as well as all manufacturing and inventory-
-related labor. If you are a service provider, it includes costs of any materials you provide to
-customers as part of your service and it could include the labor directly involved in delivering that
-service depending on the industry.
-. Cumulative Losses (See Accumulated Deficit)
-. Current Assets
-Any assets that you can convert into cash within one year.
-. Current Liabilities
-Any liabilities that are due within one year.
-. Current Ratio
-{{page_004.jpg?850x1100}}__C____u____r____r____e____n____t__ ______a____s____s____e____t____s__ ____divided by current liabilities.
-. Customer Acquisition Cost (aka CAC)
-The amount of money needed to convert one member of the target market into a paying customer.
-. Days Outstanding (see Collection Period)
-. Debt to Equity Ratio
-__L____i____a____b____i____l____i____t____i____e____s__ divided by shareholders’equity .
-. Depreciation
-When you purchase a __f____i____x____e____d__ ______a____s____s____e____t__, you can take a percentage of its cost as an expense each month
-over its entire useful life. This expense is called depreciation, and is subtracted from the value of
-the fixed asset on the __b____a____l____a____n____c____e__ ______s____h____e____e____t__.
-. Direct Competitor
-An example of a __c____o____m____p____e____t____i____t____o____r__. In this case, the competitor is producing goods or services that are
-perceived by the customer as performing the same function in roughly the same manner.
-. Disability Insurance
-An __e____x____p____e____n____s____e__ of your company. In most states, this is a mandated payment of a percentage of total
-__g____r____o____s____s__ ______p____a____y____r____o____l____l__ tocoverworkers’compensationintheeventofawork -related injury.
-. Division (or Department)
-A part of your company. For example,
-General and Administrative (G&A)
-Marketing and Sales (M&S)
-Manufacturing and Production (M&P)
-Research and Development (R&D).
-. Down Round
-An __i____n____v____e____s____t____m____e____n____t__ ______r____o____u____n____d__ in which equity is sold at a price lower than it was sold in an earlier round.
-. Dues and Subscriptions
-An __e____x____p____e____n____s____e__ of your company incurred when you reimburse your employees when they pay
-for dues in professional societies and/or
-purchase subscriptions in professional publications
-to keep them up-to-date in their specialty.
-. Earnings after Tax (aka EAT)
-After we subtract all __c____o____s____t____s__ ______o____f__ ______g____o____o____d____s__ ______s____o____l____d__ and expenses from revenue, we get EBITDA. After we
-subtract interest, tax, __d____e____p____r____e____c____i____a____t____i____o____n__, and amortization from EBITDA ,weget“earningsaftertax”
-. Earnings Before Interest and Tax (see EBIT)
-. Earnings Before Interest, Tax, Depreciation and Amortization (see EBITDA)
-. EAT (see Earnings after Tax)
-. EBIT (aka Operating Profit)
-{{page_005.jpg?850x1100}}Literally, earnings before interest and tax. After we subtract __d____e____p____r____e____c____i____a____t____i____o____n__ and amortization from
-__E____B____I____T____D____A__, we get EBIT.
-. EBITDA
-Literally, earnings before interest, tax, depreciation, and amortization. After we subtract all __c____o____s____t____s__ ______o____f__
-__g____o____o____d____s__ ______s____o____l____d__ and expenses from revenue, we get EBITDA.
-. Equity
-Ownership in a company. Also known as stock.
-. Exercise (of an option)
-Exercising a __s____t____o____c____k__ ______o____p____t____i____o____n__ is when an optionholder decides to purchase the stock at the strike price.
-. Exercise Price (see Strike Price)
-. Exit Strategy
-Theterm“exitstrategy”referstodetermininginadvancehowthecompanyplanstoenableexternal
-investors to achieve a return on their investment. Exit strategies typically include a __l____i____q____u____i____d____i____t____y__ ______e____v____e____n____t__
-for the company.
-. Expense
-A cost incurred by the company that is not directly related to
-Purchase of a __f____i____x____e____d__ ______a____s____s____e____t__
-Purchase of raw materials to be used to produce products for sale to customers (these become __c____o____s____t____s__
-__o____f__ ______g____o____o____d____s__ ______s____o____l____d____)__
-Purchase of products for resale to customers (these become __c____o____s____t____s__ ______o____f__ ______g____o____o____d____s__ ______s____o____l____d____)____.__
-. Financial Statements
-Tables of data reporting the financial condition of a company. Usually consists of an __i____n____c____o____m____e__
-__s____t____a____t____e____m____e____n____t__, balance sheet, and cash flow statement.
-. Fiscal Year
-The contiguous 12-month period in which a company reports its financial results.
-. Fixed Asset
-An item purchased by the company, usually not of insignificant value, that has a useful life longer
-than a year, and cannot be easily converted into cash.
-. Founder
-An individual who is present when the company is founded, and who purchases a percent
-ownership in the company.
-. Founders’Shares
-The shares in a company purchased by a __f____o____u____n____d____e____r__ when the company is created.
-. Fringe Rate
-The cost to provide all employment benefits to employees, expressed as a percent of __g____r____o____s____s__ ______p____a____y____r____o____l____l__.
-This includes the company’s contributions to medical/dental in surance plans, 401(k) ’s, life
-insurance, and so on.
-. Fully Diluted
-{{page_006.jpg?850x1100}}Refers to the total number of shares in the company assuming that all individuals exercise all their
-individual rights to the extreme. In most cases, this means that all stock options in the authorized
-option pool are granted by the officers of the company, and all individuals granted those options
-exercise those options. Contrast with __u____n____d____i____l____u____t____e____d__.
-. General and Administrative (aka G&A)
-A specific __d____i____v____i____s____i____o____n__ of the company. The labor costs for any employee not directly assigned to a sales
-& marketing, manufacturing and production, or research & development functions should be
-assigned to G&. lso, any “other expense” not directly assigned to a sales & marketing,
-manufacturing and production, or research & development function should be assigned to G&A.
-. Grant (of an option)
-Granting a stock option is when the company offers an individual (who then becomes an
-__o____p____t____i____o____n____h____o____l____d____e____r__) the right to purchase stock at the strike price during some pre-set period of time.
-. Grantee (see Optionholder)
-. Gross Income (see Gross Profit)
-. Gross Margin (aka Gross Profit Margin)
-__G____r____o____s____s__ ______p____r____o____f____i____t__ divided by revenues. It is a measure of how efficiently you produce products.
-. Gross Payroll
-The sum of the salaries paid to all employees, before payroll deductions.
-. Gross Profit (aka Gross Income)
-__R____e____v____e____n____u____e__ minus Costs of Goods Sold.
-. Gross Profit Margin (see Gross Margin)
-. Income Statement (aka Profit and Loss Statement aka P&L Statement)
-A standard __f____i____n____a____n____c____i____a____l__ ______s____t____a____t____e____m____e____n____t__ that shows revenues, cost of goods sold, expenses, EBITDA, EBIT,
-and __e____a____r____n____i____n____g____s__ ______a____f____t____e____r__ ______t____a____x__ of a company over a specific period of time.
-. Indirect Competitor (see Substitute Competitor)
-. Industry
-A set of companies that provide goods and services to satisfy a specific set of needs of a __m____a____r____k____e____t__.
-. Initial Public Offering (aka IPO)
-A mechanism by which cash for your company is raised by selling __e____q____u____i____t____y__ to the public.
-. Internal Rate of Return (aka IRR)
-A standard way of calculating financial return for investors in a start-up. IRR is the annualized
-compounded rate of return. For example, an investment of $100,000 that yields a return of $150,000
-in one year has produced an IRR of 50%. An investment of $100,000 that yields a return of $225,000
-in two years has also produced an IRR of 50%. An investment of $100,000 that yields a return of
-$337,500 in three years has also produced an IRR of 50%.
-. Internet Services
-An __e____x____p____e____n____s____e__ of your company, incurred when you pay for services such as web hosting, email, and
-so on.
-. Inventory
-{{page_007.jpg?850x1100}}Inventory consists of (a) raw materials purchased by the company, (b) work-in-process (i.e.,
-partially assembled products), and (c) finished products that are waiting to be sold to customers.
-. Inventory Days
-On average, the number of days items are expected to remain in __i____n____v____e____n____t____o____r____y__?
-. Inventory Turnover
-__C____o____s____t__ ______o____f__ ______g____o____o____d____s__ ______s____o____l____d__ divided by average inventory, where average inventory is the average of
-__i____n____v____e____n____t____o____r____y__ at the end of the current period and the inventory at the end of the previous period.
-Inventory turnover can also be thought of as the number of times during the year that inventory is
-replaced, i.e., an inventory turnover of 2 means that, on average, the entire inventory is replaced
-twice a year. A low turnover (when compared to the rest of your industry) means that you may end
-up with obsolete goods in your inventory. A high turnover (when compared to the rest of your
-industry) means that you may end up with the inability to fulfill customer orders.
-. Investment Round
-Investments in companies are done in rounds. During any one round, all investors purchase
-identical classes of stock at the identical price under identical terms and conditions.
-. IPO (see Initial Public Offering)
-. IRR (see Internal Rate of Return)
-. Licenses and Permits
-An __e____x____p____e____n____s____e__ of your company, incurred when you pay government entities for the right to do
-business. This includes:
-Domain name registrations
-Tax licenses
-Occupancy permits
-Incorporation fees.
-. Liquidation Rights
-A very common preference associated with __p____r____e____f____e____r____r____e____d__ ______s____t____o____c____k__ in a start-up. When a liquidity event
-occurs, holders of __p____r____e____f____e____r____r____e____d__ ______s____t____o____c____k__ with liquidation rights first receive some multiple of their initial
-investment (generally 1x, but some liquidation rights specify 2x or 3x) prior to general distribution
-of the proceeds of the sale.
-. Liquidity
-The quality of an asset to be easily convertible to cash.
-. Liquidity Event
-An event in which some or all the equity in the company can be converted into cash. Typical
-liquidity events include:
-__A____c____q____u____i____s____i____t____i____o____n__ by a publicly traded company in a stock swap, which enables investors to then sell
-equity of the acquiring company on public markets.
-__A____c____q____u____i____s____i____t____i____o____n__ by a publicly traded or privately held company in a cash deal.
-An __i____n____i____t____i____a____l__ ______p____u____b____l____i____c__ ______o____f____f____e____r____i____n____g__ (IPO), which raises new rounds of investments for the company from the
-public and may give external investors an opportunity to sell their shares on the public market.
-Certainly, founders’ and officers’ equity will likely be locked out (read “prevented”) from selling
-their shares for some period after the IPO.
-{{page_008.jpg?850x1100}}88. Loan
-Your company can borrow money from a third party with terms that specify how the money must
-be paid back. See __c____o____n____v____e____r____t____i____b____l____e__ ______l____o____a____n__ for one such example.
-. Long-Term Liability (aka Long-Term Debt)
-Any liability that is due after one year.
-. Lot Size (see Unit of Manufacture)
-. Major Purchase (see Fixed Asset)
-. Manufacturing and Production (aka M&P)
-The specific __d____i____v____i____s____i____o____n__ of your company involved in the creation of products to be sold to customers.
-. Market
-Customers your company is targeting for purchasing your goods and/or services, and from which
-you expect to derive revenue.
-. Market Penetration
-The percent of the __m____a____r____k____e____t__ ______s____i____z____e__ that your company is selling to.
-. Market Size
-The number of customers in the target __m____a____r____k____e____t____.__
-. Marketing and Sales (aka M&S)
-The specific __d____i____v____i____s____i____o____n__ of your company involved in the creation of awareness by customers,
-branding, and all aspects of the sales funnel.
-. Marketing and Sales Expense
-An __e____x____p____e____n____s____e__ of your company that broadly covers advertising, trade shows, etc.
-. Net Income (See Earnings After Tax)
-. Net Income Margin (aka Net Profit Margin)
-__E____a____r____n____i____n____g____s__ ______a____f____t____e____r__ ______t____a____x__ (aka net income) divided by revenues.
-. Net Profit (see Earnings After Tax)
-. Net Profit Margin (see Net Income Margin)
-. Net Working Capital
-__C____u____r____r____e____n____t__ ______a____s____s____e____t____s__ ____minus current liabilities.
-. “NewCustomersbyMonth”SalesModel
-A method of modeling your sales by stating an average monthly purchase (__a____v____e____r____a____g____e__ ______o____r____d____e____r__ ______s____i____z____e__), and
-then predicting how many new customers you expect to add each month (in each market).
-. “NewCustomersbyYear”SalesModel
-A method of modeling your sales by stating an average annual purchase (__a____v____e____r____a____g____e__ ______o____r____d____e____r__ ______s____i____z____e__), and
-then predicting how many new customers you expect to add each year (in each market).
-. Office Supplies
-{{page_009.jpg?850x1100}}An __e____x____p____e____n____s____e__ of your company, incurred when you purchase items used in your office such as
-consumables, office equipment, and office furniture.
-. Operating Profit (see EBIT)
-. Option (see Stock Option)
-. Option Pool
-A pool of __e____q____u____i____t____y__ (shares) in the company that has been earmarked and reserved by the board of
-directors and shareholders for use as __s____t____o____c____k__ ______o____p____t____i____o____n____s__ to be granted by officers of the company as
-incentives to employees (for incentive stock option plans) and others (for non-qualified stock
-option plans).
-. Optionholder (aka Optionee aka Grantee)
-The individual granted a __s____t____o____c____k__ ______o____p____t____i____o____n__.
-. Other Insurance
-An __e____x____p____e____n____s____e__ of your company, incurred when you pay for insurance other than disability insurance
-and medical/dental insurance (part of __f____r____i____n____g____e__ ______r____a____t____e__) for employees. A partial list includes
-Key person insurance
-Liability insurance.
-. P&L Statement (see Income Statement)
-. Participation Rights
-A very common preference associated with __p____r____e____f____e____r____r____e____d__ ______s____t____o____c____k__ in a start-up. When a liquidity event
-occurs, holders of __p____r____e____f____e____r____r____e____d__ ______s____t____o____c____k__ with liquidation rights first receive some multiple of their initial
-investmentpriortogeneraldistributionoftheproceedsofthesale.“Participationrights”meanthat
-these preferred shares are then converted into common shares so that they then participate in the
-distribution of the proceeds of the sale. Sometimes, participation rights of __p____r____e____f____e____r____r____e____d__ ______s____h____a____r____e____s__ are
-capped at a multiple of their initial investment.
-. Payroll Tax Rate
-The cost to pay all government employment taxes as a percent of __g____r____o____s____s__ ______p____a____y____r____o____l____l__. This includes the
-company’scontributionstofederalandstateincometaxes,socialsecurity,andMedicare.
-. Pivot
-When a company discovers that one or more of its underlying business assumptions is false, it may
-discover that the current business strategy is no longer viable, i.e., does not result in solid financial
-returns for stakeholders. When this happens, the business needs to pivot, i.e., must change its
-business strategy and its underlying assumptions to return it to a state in which solid financial
-returns for stakeholders are once again possible.
-. Postage and Shipping
-An __e____x____p____e____n____s____e__ of your company, incurred when you package and ship items.
-. Post-Money Valuation
-{{page_010.jpg?850x1100}}The number of outstanding shares in the company (after an investment round) times the __p____r____i____c____e__ ______p____e____r__
-__s____h____a____r____e__ paid in the most recent round of investment. In other words, this is what the parties believe
-the company is worth.
-. Preferred Stock
-An example of equity in a company. Preferred shares are generally sold to investors in the
-company. Owners of preferred stock in start-ups enjoy certain preferences over common share
-owners. Typical preferences are:
-Liquidation rights
-Participation rights
-Antidilution rights.
-. Pre-Money Valuation
-The __p____o____s____t____-____m____o____n____e____y__ ______v____a____l____u____a____t____i____o____n__ minus the amount of money invested in the current round. In other
-words, this is what the parties believe the company is worth just before the investment round.
-. Price (for products or services)
-The amount that the customer pays your company in return for one unit of the product or service.
-. Price per Share
-The price that investors are paying for each share of equity of the company.
-. Printing
-An __e____x____p____e____n____s____e__ of your company, incurred when you print items outside of your office.
-. Proceeds from Notes Payable
-In the __c____a____s____h__ ______f____r____o____m__ ______f____i____n____a____n____c____i____n____g__ ______a____c____t____i____v____i____t____i____e____s__ section of the cash flow statement, this line reflects (when
-positive) the amount of a new loan that the company has acquired or (when negative) the amount
-paid on an existing loan.
-. Product Development (see Research and Development)
-. Production Days
-The number of days it takes the company to transform __r____a____w__ ______m____a____t____e____r____i____a____l____s__ into a finished product.
-. Profit and Loss Statement (see Income Statement)
-. Pro Forma
-When describing __f____i____n____a____n____c____i____a____l__ ______s____t____a____t____e____m____e____n____t____s__, pro forma indicates predictive, or looking to the future, as
-opposedtoactual,orreportingonthepast.Literally,“asamatterofform.”
-. Raw Material
-Any item purchased from a __s____u____p____p____l____i____e____r__ to be used in the manufacturing process.
-. Recruitment and Training
-An __e____x____p____e____n____s____e__ of your company, incurred when you recruit new employees or train new or existing
-employees.
-. Rent
-Includinganystockoptionsthatare“inthemoney,”i.e.,thosethatarecurrentlyexercisableatastrikepricelower
-than the fair market value of the underlying stock.
-{{page_011.jpg?850x1100}}An __e____x____p____e____n____s____e__ of your company, incurred when you pay a landlord to occupy office space.
-. Research and Development (aka R&D aka Product Development)
-The specific __d____i____v____i____s____i____o____n__ of your company involved in the creation and development of new products
-and processes.
-. Retained Earnings
-The sum of all net profits and losses of previous periods. When negative, it is called an __a____c____c____u____m____u____l____a____t____e____d__
-__d____e____f____i____c____i____t__. When positive, it is called retained earnings.
-. Retention Rate
-The rate at which current customers remain current customers. The opposite of churn and __a____t____t____r____i____t____i____o____n__
-__r____a____t____e__.
-. Return on Investment
-The financial return investors receive between the time they invest in the company and the
-__l____i____q____u____i____d____i____t____y__ ______e____v____e____n____t____.__ Usually measured as an internal rate of return.
-. Revenue
-The sums that customers pay the company for goods and services provided to them.
-. “SalesbynnualGrowth”SalesModel
-A method of modeling your sales by predicting how many units you expect to sell each month (of
-each product in each market) during the first year, and then predicting an annual growth rate for
-each successive year.
-. “SalesbyManufacturedProductvailability”SalesModel
-A method of modeling your sales by predicting how many units you expect to sell each month (of
-each product in each market) by estimating how many such products you can manufacture.
-. “SalesbyMonthlyGrowth”SalesMode l
-A method of modeling your sales by predicting how many units you expect to sell each month (of
-each product in each market) during the first year, and then predicting a monthly growth rate for
-each successive month.
-. “SalesbyMarketPenetration”SalesModel
-A method of modeling your sales by stating what percentage of the market you expect to capture
-each month (or year).
-. “SalesbyMarketingandSalesDollarsSpent”SalesMo del
-A method of modeling your sales by predicting how many units (of each product in each market)
-will be sold as a result of marketing efforts each month.
-. “SalesbyMarketingandSalesPeopleEffort”SalesModel
-A method of modeling your sales by predicting how many units (of each product in each market)
-each salesperson (or any other type of employee) can sell per month.
-. “SalesbyMonth” Sales Model
-A method of modeling your sales by predicting how many units you expect to sell each month (of
-each product in each market).
-. “SalesbyRawMaterialvailability”SalesModel
-{{page_012.jpg?850x1100}}A method of modeling your sales by predicting how many units you expect to sell each month (of
-each product in each market) by estimating how many __r____a____w__ ______m____a____t____e____r____i____a____l____s__ ____will be available to produce
-those products.
-. “SalesbyYear”SalesModel
-A method of modeling your sales by predicting how many units you expect to sell each year (of
-each product in each market).
-. Sales Cycle
-In general, the average number of days between when your company initiates some marketing
-effortandwhenacustomer’spurchasecreatesrevenue.
-. Series A
-The name usually given to the first __i____n____v____e____s____t____m____e____n____t__ ______r____o____u____n____d__ in a company by external investors.
-. Series B
-The name usually given to the second __i____n____v____e____s____t____m____e____n____t__ ______r____o____u____n____d__ in a company by external investors.
-. Series C
-The name usually given to the third __i____n____v____e____s____t____m____e____n____t__ ______r____o____u____n____d__ in a company by external investors.
-. Shareholders’Equity
-The sum of all shareholder investments plus __r____e____t____a____i____n____e____d__ ______e____a____r____n____i____n____g____s__.
-. Short-Term Liability (aka Short-Term Debt)
-Any liability that is due with one year.
-. Spoilage (aka Waste)
-That percent of __r____a____w__ ______m____a____t____e____r____i____a____l____s__ or inventory that will be discarded and never used for customer sale.
-. Statement of Cash Flows (see Cash Flow Statement)
-. Stock Option
-An agreement between the company (called the grantor) and an __o____p____t____i____o____n____h____o____l____d____e____r__ giving the
-optionholder the right to purchase up to a certain number of shares in the company at an agreed-to
-__s____t____r____i____k____e__ ______p____r____i____c____e__ provided that optionholder exercises that option during a specific time period.
-. Strike Price (aka Exercise Price)
-The price at which a __s____t____o____c____k__ ______o____p____t____i____o____n__ optionholder mayexercisehis/heroption.Inotherwords,let’s
-say an employee has an option for 10,000 shares at a strike price of $1.00. That means that s/he can
-(at any time during the exercise window) purchase up to 10,000 shares at the price of $1.00 per
-share.Noticethatifthecurrentvalueofsuchashareisonly50cents,theoptionis“underwater”
-and the optionholder is likely not motivated to exercise. If the current value of such a share is $5.00,
-the optionholder is likely motivated to exercise, because s/he could purchase a share worth $5.00
-for just $1.00.
-. Substitute Competitor (aka Indirect Competitor)
-An example of a __c____o____m____p____e____t____i____t____o____r____.__ In this case, the competitor is producing goods or services that are in a
-different industry, but nonetheless compete for the revenues.
-. Supplier
-{{page_013.jpg?850x1100}}An entity that sells raw materials (in the case of a manufacturing company) or products (in the case
-of a wholesaler, retailer, or distributor) to the company.
-. Sweat Equity
-Working for a company in return for an ownership stake in that company (usually either __f____o____u____n____d____e____r____s____’__
-__s____h____a____r____e____s__ or stock options) instead of cash salary.
-. Telephone
-An __e____x____p____e____n____s____e__ of your company, incurred when you pay a telephone company for either office phones
-or employee-held cellular phones.
-. Travel
-An __e____x____p____e____n____s____e__ of your company, incurred when you pay for your employees to travel or reimburse
-them for meals and entertainment.
-. Undiluted
-Refers to the total number of shares in the company that have been issued, excluding stock options.
-Contrast with __f____u____l____l____y__ ______d____i____l____u____t____e____d__.
-. Unit of Manufacture (aka Lot Size)
-The number of products created during one production run.
-. Unit of Purchase
-The size or quantity of __r____a____w__ ______m____a____t____e____r____i____a____l__ or product that the company purchases from a supplier. For
-example, a 24-box carton of candies, a 200 gallon shipment of gasoline, a vehicle .
-. Unit of Sale
-The size or quantity of a product that the customer purchases. For example, a box of candies, a
-single download of software, a day of car rental, a vehicle .
-. Valuation
-The value of your company as agreed to by you and the purchasers of equity in your company.
-When individuals agree to purchase (and you agree to sell) X% of your company for $Y, both parties
-are implicitly agreeing that the company is valued at $Y/X%.
-. Value (of an option)
-The value of being granted a single __s____t____o____c____k__ ______o____p____t____i____o____n__ is extremely hard to calculate. After all, it must
-take into consideration the __s____t____r____i____k____e__ ______p____r____i____c____e__ of an option (what the optionholder will have to pay to
-purchase the share), the expected growth in value of the company (tied to many factors such as
-revenue, profit, cash flow, etc.), probability of the company succeeding/failing, and so on.
-. Virality Rate
-The rate at which current customers attract others to become customers.
-. Warrant
-A warrant to purchase X shares gives the bearer of the warrant the right to purchase X shares in the
-companyasaspecificpriceupuntilaspecificdate.warrantoftenservesasa“sweetener”toother
-deals, such as
-__P____r____e____f____e____r____r____e____d__ ______s____t____o____c____k__, so that a purchaser of preferred shares may also negotiate the right to purchase
-additional shares.
-__C____o____n____v____e____r____t____i____b____l____e__ ______l____o____a____n____s__, so that the lender may also negotiate the right to purchase additional shares.
-{{page_014.jpg?850x1100}}167. Waste (see Spoilage)

User Tools

Differences

Page Tools

Site Tools