Glossary
With over 300 terms, our business dictionary is designed to help you better understand the terms that you will come across daily while running your business or dealing with your accountant and your bank.
Accelerated payment
Accelerated payments reduce the borrower’s interest costs (the total fee paid to the lender for the loan). This can...
Accounting Standards for Private Enterprises (ASPE)
The Accounting Standards for Private Enterprises (ASPE) are accounting...
Accounts payable
Managing accounts payable is one of the most important financial responsibilities for any business...
Accounts receivable
Accounts receivable refer to the money a company’s customers owe for goods or services they have received...
Accrual cash accounting
Accrual- and cash-based accounting are two different methods that accountants use to prepare financial...
Accrued expenses
Accrued expenses are those incurred for which there is no invoice or other documentation. They are classified...
Acid-test ratio
The acid-test ratio compares a company’s “quick assets” (cash and accounts receivable) to its current liabilities...
Amortization period
The amortization period is the total length of time it takes a company...
Asset-backed securities
When investors invest in companies, they are issued a “security”...
Assets
Assets are the economic resources a business uses to increase sales, reduce costs or otherwise generate...
Audited, accountant-reviewed and notice-to-reader financial statements
Audited, accountant-reviewed and notice-to-reader are three types...
Average collection period (receivables turnover)
The average collection period is the average number of days...
Bank operating loan
A bank operating loan (also called a line of credit) is a short-term, flexible loan that a business...
Bonded warehouse
A bonded warehouse is a warehouse operated by a private company in a foreign country...
Business bank account
Operating a business entails managing a number of different types of...
Canada-Europe Trade Agreement (CETA)
The Canada-Europe Trade Agreement (CETA) is Canada’s...
Capital cost allowance (CCA)
Capital cost allowance (CCA) is the amount of amortization...
Change management
Change management is a way to move an organization to a new state of operating to better meet demands...
Commercial letter of credit
A commercial letter of credit (CLC) is a bank-issued document...
Competitive forces
Competitive forces are the factors and variables that threaten a company’s profitability...
Content syndication
With content syndication, companies post or promote their own blogs, articles, videos...
Corporate social responsibility
Corporate social responsibility (CSR) is a company’s commitment...
Cost of capital
A company’s cost of capital is the cost of all its debt (borrowed money) plus the cost...
Cost of goods sold (COGS)
The cost of goods sold (COGS) is the sum of all direct costs associated with manufacturing a product...
Cost of goods sold (COGS)
Cost of goods sold (COGS) is the direct cost of making a company’s products. It is an important line on your...
Cost of sales (COS)
Cost of sales (COS) indicates how much a retail or wholesale business spends on the products it...
Covenants
Covenants are promises that borrowers make to lenders as part of their loan agreements...
Credit card debt
Credit card debt is money a company owes for purchases made by credit card...
Current assets
Current assets (also called short-term assets) are assets a business uses, replaces…
Current liabilities (short-term liabilities)
Current liabilities (also called short-term liabilities) are debts...
Current portion of long-term debt (CPLTD)
The current portion of long-term debt (CPLTD) is the amount...
Current ratio
Current ratio compares a company’s current assets to its current liabilities...
Debt-to-total assets ratio (debt-to-total capital ratio)
The debt-to-total-assets ratio shows how much of a business...
Default
In the relationship between a borrower and a lender, default means one or more of the...
Direct costs
Direct costs are the expenses a business incurs directly to make a product or service, or buy a…
Direct marketing
Direct marketing is any marketing activity that communicates directly with a potential customer...
Diversification
Diversification is a strategy companies and investors use to ensure they are not dependent on a single...
Dividend payout ratio
The dividend payout ratio shows how much of a company’s earnings after tax (EAT) are paid to...
Dividends
Companies pay dividends to shareholders in return for using their capital. Dividends are paid out of...
Duty
A duty is an import fee (tariff) charged on goods entering a country, as specified in the country's...
Early-stage investing
Early-stage investing funds the first three stages of a company’s development. It is divided into...
Earnings after tax (EAT)
Earnings after tax (EAT) is the measure of a company’s net profitability. It is calculated by subtracting...
Earnings before interest and taxes (EBIT)
Earnings before interest and taxes (EBIT) indicate how effectively a company generates earnings...
Earnings before tax (EBT)
Earnings before tax (EBT) measures a company’s profitability before income taxes are factored...
Earnings per common share
Earnings per common share (EPS) is a measure of profitability that shows how much of a...
EBITDA
Earnings before interest, taxes, depreciation and amortization (EBITDA) is the primary calculation...
E-commerce
E-commerce (electronic commerce) is the process of buying, selling or exchanging products and...
Economic environment
The term economic environment refers to all the external economic factors that influence buying...
Economic union
An economic union is an agreement between two or more nations to allow goods, services, money...
Efficiency, effectiveness and flexibility
The terms “efficiency,” “effectiveness” and “flexibility” are used to describe the way a company operates...
Emerging markets
An emerging market (sometimes also called a developing economy) is a country with a...
Employee buyout
An employee buyout occurs when employees purchase the company they work for. To do so, they...
Employee coaching
Employee coaching for performance happens when a manager helps an employee achieve his or...
Enterprise resource planning software
Companies use enterprise resource planning (ERP) software to manage the various aspects of their...
Equipment
Equipment is a long-term asset that benefits a business over several years of use. Computers, trucks...
Equity dilution
Further, their share of the company’s profits is also diluted. This happens because the total number...
Equity financing
When companies sell shares to investors to raise capital, it is called equity financing. The benefit of...
Exchange rate
An exchange rate indicates how much it costs to buy units of one currency using a different currency...
Exit
An exit occurs when an investor sells part or all of his or her ownership. In a healthy or growing...
Export plan
An export plan outlines how a company will establish or grow its business internationally, and...
Exports / Exporting
Selling goods and services to buyers in another country is called exporting. To ensure they follow...
Financial statements
Financial statements are a set of documents showing a company’s current financial status...
Fiscal year end
The fiscal year end is the date on which a company finishes a 12-month business cycle. Most companies’...
Fixed costs
A fixed cost is an expense that does not change when sales or production volumes increase...
Fixed-rate (term) loan
In a fixed-rate loan (also called a term loan), the interest rate stays the same for the loan’s entire term...
Floating-rate loan
In a floating-rate loan (also called a variable-rate loan), the interest rate varies over the term of the loan...
Foreign market
Foreign markets are any markets outside of a company’s own country.Selling in foreign markets...
Foreign sales agent
A foreign sales agent represents a business in a market outside of its home country (i.e., a foreign market)...
Franchise
With a franchise, a company licences its processes, intellectual property (e.g., trademarks), trade...
Free on board (FOB)
Free on board (FOB), also referred to as freight on board, is a commercial shipping term used in overseas...
Free Trade Agreement (FTA)
A free trade agreement (FTA) is a treaty between two or more countries to facilitate trade and eliminate...
Free trade zone
A free trade zone is any location where goods can be shipped, handled, manufactured, reconfigured...
Freight bill
A freight bill, like any other invoice, informs you of what your business owes the logistics company for...
General expenses
General expenses are the costs a business incurs as part of its daily operations, separate from...
General partnership
A general partnership is a business established by two or more owners. It is one of three ways of...
Global business
A global business is a company that operates facilities (such as factories and distribution centres)...
Global strategy
A global strategy is a plan to help a company grow from an international business (which sells...
Global supply chain
A global supply chain covers all the steps involved in manufacturing and delivering a product or service...
Global value chain
Global value chain refers to five interrelated activities, taking place in more than one country, that...
Globalization
Globalization is a process of increasing social and economic integration among countries around...
Goods and Services Tax (GST) / Harmonized Sales Tax (HST)
The GST/HST is a sales tax on supplies of most goods and services in Canada, as well as many supplies...
Goodwill
Goodwill refers to the value a company gets from its brand, customer base and reputation associated...
Gross domestic product
Gross domestic product (GDP) is a broad measure of a country’s economic activity based on the...
Gross margin
Gross margin is one of the most important indicators of a company’s financial performance. It’s the portion of business...
Gross profit margin ratio
The gross profit margin ratio shows the percentage of sales revenue a company keeps after it covers...
Guerrilla marketing
Guerrilla marketing refers to unconventional approaches to promote products or...
Import
An import is a good, product or service brought into a country from another country. The person...
Inbound marketing
Inbound marketing is a marketing strategy designed to generate interest in a company’s products or...
Income statement
An income statement (also called a profit-and-loss statement) shows the profitability of a business...
Income tax
Governments collect income tax on the profit earned by businesses in their territory — whether those...
Indirect costs
Indirect costs are the costs of going to market with a product or service that cannot be directly traced to the...
Industrial design
Industrial designs are about how things look. Industrial design registrations protect a new or original...
Information technology
Information technology (IT) refers to a company’s networks, hardware, software and data storage...
Inflation
Inflation can have a significant impact on the profitability of your business. It's a very good idea to learn how inflation...
Initial public offering (IPO)
An initial public offering (IPO) refers to the first time a company sells shares publicly. It is a form of...
Insolvent
A business is insolvent when it has both a negative debt service coverage ratio...
Intellectual property (IP)
Intellectual property (IP) is anything created by human minds: Inventions, literary and artistic works...
Interest
Interest is the fee a business pays a lender (creditor) to borrow money. Interest payments are usually...
Interest-only loan
With an interest-only loan, the borrower’s regular payments include only interest, not the principal...
International business
An international business is one that sells products or services in other countries but operates facilities...
International certification standards
An international certification standard outlines the requirements and specifications a product,...
International commercial terms
International commercial terms (Incoterms) are rules and standards for commercial transactions...
International Financial Reporting Standards (IFRS)
International Financial Reporting Standards (IFRS) are the rules, standards and procedures accountants...
International market
An international market is any market outside a company’s home country—which is its...
International trade
International trade is the exchange of goods or services between countries. Free trade agreements...
International trade show
An international trade show is an event where companies from different countries showcase and...
Inventory
A company’s inventory includes any finished units of product it is holding for sale, any unfinished units...
Inventory management
Inventory management is the practice companies follow to ensure they have enough raw material...
Inventory turnover (number of days in inventory)
Inventory turnover shows how many times per year a company converts its inventory into sales...
Investments
A company’s balance sheet may show funds it has invested in other companies. Investments appear...
ISO 9001
ISO 9001 is an international standard that sets out the requirements for a quality management ...
Joint venture
In a joint venture, two or more companies join together to collaborate on a particular project. Through...
Kaizen
The Japanese word “kaizen” means “continuous improvement” and refers to a structured...
Kanban
Kanban is a tool and scheduling system for managing interdependent manufacturing processes...
Key success factors
Key success factors (also known as competitive emphasis or strategic posture) state the important...
Labour expenses
While all companies pay for labour (in the form of the wages they pay to people who work for them)...
Labour productivity
Labour productivity is the value a business adds in goods, services or both and is calculated by the...
Land and buildings
Land and buildings are tangible, long-term assets companies use and benefit from over time. They...
Late-stage investing
Late-stage investing supports companies that have moved beyond the start-up phase of development...
Leadership
Leadership is the ability to clearly define a vision for your business and to motivate people to achieve...
Lean manufacturing
Lean manufacturing is a systematized approach to production that helps companies manufacture the...
Lender
Lean manufacturing is a systematized approach to production that helps companies manufacture the...
Lending agreement
A lending agreement (loan agreement) is a formal contract between a lender and a borrower...
Letter of guarantee
A letter of guarantee is a document issued by your bank that ensures your supplier gets paid for the...
Leverage
Leverage is the amount of debt a company has in its mix of debt and equity (its capital structure)...
Leveraged buyout (LBO)
A leveraged buyout (LBO) occurs when the buyer of a company takes on a significant amount of...
Limited partnership
A limited partnership is a form of general partnership which is one of three ways of organizing a...
Liquidity
Liquidity is a company’s ability to raise cash when it needs it. There are two major determinants of...
Loan
A loan is a sum of money borrowed by a company with the agreement to pay the lender back within...
Loan acceptance
Loan acceptance occurs when a borrower accepts the terms and conditions of a loan in writing. The...
Loan authorization
Loan authorization occurs when a lending institution completes its “due diligence” (comprehensive...
Loan maturity date
Loan maturity date refers to the date on which a borrower’s final loan payment is due. Once that...
Loan-to-value ratio
The loan-to-value ratio (LTV) determines the maximum amount of a secured loan based on the market...
Local culture
Local culture is the set of behaviours, beliefs and customs that exist in a country—everything from...
Logistics
AS one component of supply chain management, logistics is the process of coordinating and managing the flow of material goods as they make...
Long-term assets (fixed assets)
Long-term assets (also called fixed or capital assets are those a business can expect to use, replace...
Long-term liabilities (long-term debts)
Long-term liabilities, also called long-term debts, are debts a company owes third-party creditors that...
Managerial preferences
Managerial preferences are the likes, dislikes, beliefs and perceptions that influence a manager’s...
Market capitalization
Market capitalization refers to the total value of a publicly traded company’s outstanding common...
Market entry
Market entry includes all the activities involved in bringing a product or service to a new market...
Market entry strategy
A market entry strategy is a company’s plan for delivering goods or services to a new market (a...
Market research
Market research is information about customers, competitors and emerging trends that helps...
Marketing plan
A company’s marketing plan outlines its intended marketing and advertising activities for a...
Mergers and acquisitions (M&A)
Mergers and acquisitions (M&A) combine two business entities into one. A merger occurs...
Mezzanine financing
Mezzanine financing is a business loan that offers repayment terms adapted to a company’s cash...
Most favoured nation
The most favoured nation (MFN) principle is based on the idea that countries should treat all...
Multinational corporation
A multinational corporation is a company that does business in a select few countries around the...
National Treatment
National treatment is a principle that says countries should treat imported goods, services and...
Net profit margin ratio
The net profit margin ratio shows the percentage of sales revenue a company keeps after covering...
Net revenue
Net revenue is the revenue a company earns in a given period after any purchaser purchase discounts...
Notes payable
Notes payable are long-term liabilities that indicate the money a company owes its financiers...
Notes to financial statements
Notes to the financial statements disclose the detailed assumptions made by accountants when...
Offer advantage
A company has an offer advantage when its product or service stands out from the competition...
One-time expenses/revenues
One-time expenses or revenues arise from non-operating activities, that is, those...
Online marketing
Online marketing (also called Internet marketing or web marketing) is marketing and advertising...
Operating activities/non-operating activities
Operating activities are all the things a company does to bring its products and services to market...
Operating expenses (selling, general & administrative expenses)
Operating expenses—also called selling, general and administrative expenses...
Operating profit margin
The operating profit margin is calculated by subtracting the cost of goods sold and selling…
Opportunity cost
Every choice we make also means giving up another option. If I buy a building, I won’t…
Organizational behaviour
Organizational behaviour refers to the ways people communicate and work together to accomplish...
Organizational culture
Organizational culture is generally understood as all of a company’s beliefs, values and attitudes...
Overhead
Overhead is a general term describing indirect costs—i.e., all costs not directly related...
Par value of shares
Par value is the value of a single common share as set by a corporation’s charter. It is not typically...
Pari-passu
Pari-passu—Latin for “equal footing”—is a financing arrangement that gives multiple lenders...
Patient capital
Patient capital is money a small or medium-sized private business raises. Its name refers to...
Pay per click
With pay-per-click (PPC) advertising, companies are charged for online ad space only when users...
Payables turnover
Payables turnover shows how many times a year a company pays its suppliers...
Performance appraisal
Performance appraisal is a process for evaluating and documenting how well an employee is...
Performance management
Performance management is a process of continuing, in-person dialogue between an employee and...
Personal loan
A personal loan (also known as a consumer loan) describes any situation in which an individual...
Personal objectives
Personal objectives refer to the job-specific goals of each individual employee. They are important...
Point of sale (POS)
Point of sale systems help businesses conduct transactions with their customers, primarily for...
Preferred shares
Preferred shares are issued to business owners and other investors as proof of the money they...
Pre-paid expenses
Pre-paid expenses are intangible assets a company has already paid for and expects to benefit...
Price-earnings ratio (P/E multiple)
he price-earnings ratio (also called PE multiple or P/E) helps shareholders understand what their...
Prime interest rate
The prime interest rate, also known as the “prime rate,” is the interest rate commercial banks charge their...
Principal
Principal is the amount of money a company borrows when it takes a loan. This amount is recorded...
Principal + Interest payments
In a principal + interest loan, the principal (original amount borrowed) is divided into equal monthly...
Procurement
Procurement is the activity of finding and acquiring goods and services. Its aim is to ensure a...
Product adaptation
Product adaptation is the process of changing a product to meet the needs of customers in...
Promissory note
A promissory note is paper evidence of a debt that a borrower owes a lender. It outlines the amount...
Public company
A public company is a company whose shares trade on a stock exchange. Typically, public companies...
Purchase discounts and allowances
Businesses use discounts and allowances to encourage customers to buy from them or to pay...
Ratio analysis
Business owners, managers and financiers use ratio analysis to understand how...
Raw material expenses
Raw material expenses refer to the cost of the components that go into a final...
Return on common equity ratio
The return on common equity ratio measures how much money common shareholders receive...
Return on investment (ROI)
Return on investment (ROI) is the broadest measure of profitability used by shareholders to gauge how...
Return on shareholders’ equity ratio
The return on shareholders’ equity ratio shows how much money is returned to the...
Return on total assets ratio
The return on total assets ratio compares a company’s total assets with the amount...
Reward and recognition
Companies use rewards and recognition to motivate employees and demonstrate...
Role descriptions
A role description explains the work an employee is expected to perform. It covers the activities and...
Rules of origin
Rules of origin are laws, regulations and procedures that identify where an imported product originally...
Search engine
A search engine is a software program that helps people find the information...
Search engine optimization (SEO)
Search engine optimization (SEO) is the practice of using keywords and other techniques to ensure a...
Seasonal payment
A seasonal payment (seasonal loan) is a loan that is repaid in keeping with a company’s seasonal...
Secured loan
In a secured loan, the lender has a legal claim against a borrower’s assets...
Seed capital
Seed capital is the initial amount of money an entrepreneur uses to start a business...
Segmentation
Segmentation is the process of dividing a company’s target market into groups of potential customers...
Self-employed worker
A self-employed worker is an individual hired by a company to perform a specific...
Selling expenses
Selling expenses are the costs associated with distributing, marketing and...
Semi-variable costs
Semi-variable costs are expenses that include a mixture of fixed and variable costs.
Senior debt
Senior debts are loans secured by collateral (assets) that must be paid off before any other debts...
Share capital
The term “share capital” refers to the amount of money the owners of a company have invested...
Shareholder
A shareholder is a person or institution that has invested money in a corporation in exchange for...
Shareholder injections/redemptions
A shareholder injection occurs any time a company’s existing shareholders put cash into the business...
Shares authorized, issued and outstanding
The term “authorized, issued and outstanding” refers to shares in a company that have been sold...
Short selling
Short selling is a strategy used by stock market traders to make a profit on...
SKUs (stock keeping units)
A stock keeping unit, also known as a SKU (pronounced "skew"), is an internal...
SMART objectives
Setting SMART objectives helps you figure out where you want to get to and...
Social entrepreneur
A social entrepreneur is a businessperson whose goal is to create long-term social or environmental...
Social media marketing
Social media marketing is the use of social media platforms such as Facebook, LinkedIn, Twitter...
Sole proprietorship
A sole proprietorship is a business with a single owner who alone is responsible for all liabilities...
Standard operating procedures
A standard operating procedure is a step-by-step set of instructions that communicate to employees the...
Start-up
A start-up is a business in the earliest stages of getting established. Companies...
Statement of changes in financial position
The statement of changes in financial position (sometimes called a “cash flow statement”...
Statement of retained earnings
The statement of retained earnings shows the relationship between a company’s...
Stepped payment
With a stepped-payment loan, a borrower’s monthly payments start low and increase gradually over...
Strategic goals
Strategic goals are the specific financial and non-financial objectives and...
Strategic plan
A strategic plan is a document that summarizes how a company plans to operate and grow over the next...
Strategic planning
Strategic planning is a process that helps a company decide what market opportunities to pursue and...
Subordinate financing
Subordinated financing (junior debt) is a loan secured by collateral (assets) that are to be paid if a...
Subsidiary
Whether its to comply with the regulations of a foreign country or to isolate the risks...
Succession planning
Succession planning is a process for identifying, recruiting, training and mentoring...
Supply chain management
Supply chain management refers to the ways a company controls all the steps ...
SWOT analysis
A SWOT analysis breaks down a company’s strengths, weaknesses, opportunities and threats (SWOT)...
Syndicated loan
A syndicated loan is a substantial loan provided to a large borrower ($1 million or more) by several...
Tangible and intangible assets
Assets are everything a company owns. Tangible assets are physical; they include cash, inventory...
Target market
A company’s target market is the set of customers it chooses to serve out...
Tariffs
A tariff is a fee on goods and services being imported into a country. It is usually imposed and collected...
Taxes payable
Taxes payable are the amount of money a company owes in federal, provincial and municipal...
Technical barriers to trade
A technical barrier to trade (TBT) is any regulation, standard or procedure that could make exporting...
Total quality management (TQM)
Total quality management (TQM) is a management philosophy that asks...
Trade credit insurance
Businesses buy trade credit insurance to protect against the risk of non-payment...
Trade mission
In a trade mission, government officials and businesspeople from one country...
Trade secret
Trade secrets include any valuable business information that derives its value from secrecy...
Trademark
A trademark is one or many words, sounds or designs used to distinguish the goods or services...
Trend analysis
A trend analysis examines the factors that drive business success. The analysis is used to make...
Values
Values are what a company stands for—the beliefs that drive its organizational behaviour and...
Variable costs
Variable costs are the expenses a business incurs that change with the amount of goods produced or services...
Venture capital
Venture capital is a form of early-stage financing sought by companies with high-growth...
Venture Capital Action Plan
The Venture Capital Action Plan (VCAP) was created by the Government of Canada to encourage...
Venture capital fund
A venture capital (VC) fund is a sum of money investors commit for...
Viral marketing
Viral marketing is an online marketing strategy that involves the creation of engaging...
Vision and mission statements
A vision statement expresses a company’s main goal for the future...
Web analytics
Web analytics allow a company to collect, measure and evaluate data on visitor traffic that comes...
Weighted average cost of capital
The weighted average cost of capital (WACC) is the average rate that...
Wholesaler
A wholesaler is a company that sources, buys or stores products and services from multiple suppliers...
Working capital
Working capital is the amount of cash and other assets a business has available after all its current...
Working capital loan
A working capital loan is used to finance the everyday operations of a business such as sales and...
World Customs Organization (WCO)
The World Customs Organization (WCO) is an international group of more than 180 customs...
World Trade Organization (WTO)
The World Trade Organization (WTO) is an international body dedicated to making trade flow...