View source for Entrepreneurship 2e by Bygrave, Zacharakis

[[Entrepreneurship 2e by Bygrave, Zacharakis]] is the 2nd edition of the ''Entrepreneurship'' textbook authored by William D. Bygrave, Babson College, and Andrew Zacharakis, Babson College and published in 2011 John Wiley & Sons, Inc.

*[[Accredited Investor]]. Under the Securities Act of 1933, a company that offers or sells its securities must register the securities with the SEC or find an exemption from the registration requirements. The Act provides companies with a number of exemptions. For some of the exemptions, such as rules 505 and 506 of Regulation D, a company may sell its securities to what are known as "accredited investors." The federal securities laws define the term accredited investor in Rule 501 of Regulation D as: 1. a bank, insurance company, registered investment company, business development company, or small business investment company; an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million; 2. a charitable organization, corporation, or partnership with assets exceeding $5 million; 3. a director, executive officer, or general partner of the company selling the securities; 4. a business in which all the equity owners are accredited investors; 5. a natural person who has individual net worth, or joint net worth with the person's spouse, that exceeds $1 million at the time of the purchase; 6. a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or 7. a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.
*[[Acquisition]]. Acquiring control of a corporation, called a target, by stock purchase or exchange, either hostile or friendly; also called takeover.
*[[Agency theory]]. A branch of economics dealing with the behavior of principals (for example, owners) and their agents (for example, managers).
*[[All-hands meeting]]. A meeting of managers, lawyers, accountants, and investment bankers that sets the timetable and tasks to be accomplished prior to an initial public offering.
*[[American Stock Exchange]] ([[Amex]]). Stock exchange located in New York, listing companies that are generally smaller and younger than those on the much larger New York Stock Exchange.
*[[Angel]]. An individual who invests in private companies. The term business angel is sometimes reserved for sophisticated angel investors who invest sizeable sums in private companies. (See informal investor.)
*[[Anglo-Saxon capitalism]]. So-called AngloSaxon capitalism (also Anglo-Saxon finance) is largely practiced in English speaking countries such as the United Kingdom and the United States. It is a capitalist macroeconomic model in which levels of regulation and taxes are low. In addition, Anglo-Saxon economies generally are more "liberal" and free-market oriented than other capitalist economies in the world. Another major difference between Anglo-Saxon and non-Anglo-Saxon countries is the legal system, which is based on case-law rather than civil code law.
*[[Antidilution]] (of [[ownership]]). The right of an investor to maintain the same percentage of ownership of a company's common stock in the event that the company issues more stock. (See dilution.)
*[[Asked]]. The price level at which sellers offer securities to buyers.
*[[ASP]] ([[Application Service Provider]]). An ASP deploys, hosts, and manages access to a packaged software application for multiple parties from a centrally managed facility. The applications are delivered over networks on a subscription basis.
*[[Asset acquisition]]. Means of effecting a buyout by purchase of certain desired assets rather than shares of the target company.
*[[Asset-based valuation]]. This method considers the fair market value of fixed assets and equipment, and inventory. It is most appropriate for asset intensive businesses such as retail and manufacturing companies.
*[[Audited financial statements]]. A company's financial statements prepared and certified by a certified public accounting firm that is totally independent of the company.
*[[Babson College]]. Babson College, located in Wellesley, Massachusetts, is recognized internationally for its entrepreneurial leadership in a changing global environment. Babson grants BS, MBA, and custom MS and MBA degrees, and has a school of executive education. The Arthur M. Blank Center for Entrepreneurship was dedicated in 1998, and provides a dynamic home for Babson's world-famous entrepreneurship program.
*[[Backlog]]. The sales that have been made but not fulfilled due to lack of inventory to finalize the sale.
*[[Bake-off]]. When a private company compares offers from different investment banks to take it public.
*[[Balance sheet]]. Summary statement of a company's financial position at a given point in time. It summarizes the accounting value of the assets, liabilities, preferred stock, common stock, and retained earnings. Assets = Liabilities + Preferred stock + Common stock + Retained earnings. (See pro forma statements.)
*[[Basis point]]. One-hundredth of a percent (0.01%), typically used in expressing yield differentials (1.50% − 1.15% = 0.35%, or 35 basis points). (See yield.)
*[[Bear]]. A person who expects prices to fall.
*[[Bear market]]. A period of generally falling prices and pessimistic attitudes.
*[[Best efforts offering]]. The underwriter makes its best efforts to sell as much as it can of the shares at the offering price. Hence, unlike a firm commitment offering the company offering its shares is not guaranteed a definite amount of money by the underwriter.
*[[Beauty contest]]. When investment banks make their best offers to take a company public.
*[[Bid]]. The price level at which buyers offer to acquire securities from sellers.
*[[Big Board]]. See New York Stock Exchange.
*[[Blue sky]]. Refers to laws that safeguard investors from being misled by unscrupulous promoters of companies with little or no substance.
*[[Book value]] (of an [[asset]]). The accounting value of an asset as shown on a balance sheet is the cost of the asset minus its accumulated depreciation. It is not necessarily identical to its market value.
*[[Book value]] (of a [[company]]). The common stock equity shown on the balance sheet. It is equal to total assets minus liabilities and preferred stock (synonymous with net worth and owners' equity).
*[[Bootstrap]]. To build a business out of nothing, with minimal outside capital.
*[[Bottom-up forecasting]]. Forecasting your income sheet revenue and expenses based upon a typical day and then multiplying those forecasts by the number of days in the period (i.e., month, quarter, or year).
*[[Brain-writing]]. Similar to brainstorming, but the process is done with written versus oral communication. Ideas are presented and participants add their thoughts in writing. The key is to build on the idea rather than argue why the idea can't work.
*[[Break-even point]]. The sales volume at which a company's net sales revenue just equals its costs. A commonly used approximate formula for the break-even point is Sales revenue = Total fixed costs/Gross margin.
*[[Bridge financing]]. Short-term finance that is expected to be repaid relatively quickly. It usually bridges a short-term financing need. For example, it provides cash needed before an expected stock flotation.
*[[Burn rate]]. The negative, real-time cash flow from a company's operations, usually computed monthly.
*[[Business Angel]]. See angel.
*[[Business model]]. The way in which a business makes a profit. As an example, here is IBM's definition of its business model: "IBM sells services, hardware and software. These offerings are bolstered by IBM's research and development capabilities. If a customer requires financing, IBM can provide that too." Southwest Airlines' business model is to provide inexpensive fares by keeping costs low through being more efficient than its major competitors.
*[[Business plan]]. Document prepared by entrepreneurs, possibly in conjunction with their professional advisors, detailing the past, present, and intended future of the company. It contains a thorough analysis of the managerial, physical, labor, product, and financial resources of the company, plus the background of the company, its previous trading record, and its market position. The business plan contains detailed profit, balance sheet, and cash flow projections for two years ahead, and less detailed information for the following three years. The business plan crystallizes and focuses the management team's ideas. It explains their strategies, sets objectives, and is used to monitor their subsequent performance.
*[[Buyback]]. A corporation's repurchase of stock that it has previously issued; for example, a company buys its stock back from a venture capital firm that has previously been issued stock in return for money invested in the company.
*[[Call]]. A contract allowing the issuer of a security to buy back that security from the purchaser at an agreed-upon price during a specific period of time.
*[[Capital gain]]. The amount by which the selling price of an asset (for example, common stock) exceeds the seller's initial purchase price.
*[[Capitalization rate]]. The discount rate, K, used to determine the present value of a stream of future earnings. PV = (Normalized earnings after taxes)/(K /100), where PV is the present value of the firm and K is the firm's cost of capital.
*[[Carried interest]]. A venture capital firm's share of the profit earned by a fund. In the United States, the carried interest (carry) is typically 20% of the profit after investors' principal has been repaid.
*[[Cash flow]]. The difference between the company's cash receipts and its cash payments in a given period.
*[[Cash-flow statement]]. A summary of a company's cash flow over a period of time. (See pro forma statements.)
*[[Channel coverage]]. The product distribution strategy in regards to how many channels to use. It can be intensive (multiple channels), selective (a subset of channels), or exclusive (one channel).
*[[Chattel mortgage]] (or [[property mortgage]]). A loan secured by specific assets.
*[[Classic venture capital]]. Money invested privately in seed-, startup-, expansion-, and late-stage companies by venture capital firms. The term "classic" is used to distinguish from money invested privately in acquisitions, buyouts, mergers, and reorganizations.
*[[Collateral]]. An asset pledged as security for a loan.
*[[Common stock]]. Shares of ownership, or equity, in a corporation.
*[[Common-sized income statement]]. Converting the income statement into percentages with total revenue equaling 100% and all other lines a percentage of total revenue.
*[[Comparable]]. Using existing industry or company financials to forecast your own venture's financials.
*[[Compensating balance]]. A bank requires a customer to maintain a certain level of demand deposits that do not bear interest. The interest forgone by the customer on the compensating balance recompenses the bank for services provided, credit lines, and loans.
*[[Conversion ratio]]. The number of shares of common stock that may be received in exchange for each share of a convertible security.
*[[Convertible debt]]. A loan that can be exchanged for equity.
*[[Convertible security]]. Preferred stock that is convertible into common stock according to a specified ratio at the security holder's option.
*[[Cooperative]] ([[co-op]]). an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.
*[[Corporation]]. A business form that is an entity legally separate from its owners. Its important features include limited liability, easy transfer of ownership, and unlimited life.
*[[Cost of capital]]. The required rate of return of various types of financing. The overall cost of capital is a weighted average of the individual required rates of returns (costs).
*[[Cost of debt capital]]. The interest rate charged by a company's lenders.
*[[Cost of equity capital]]. The rate of return on investment required by the company's common shareholders (colloquially called the hurdle rate).
*[[Cost of goods sold]]. The direct cost of the product sold. For a retail business, the cost of all goods sold in a given period equals the inventory at the beginning of the period plus the cost of goods purchased during that period minus the inventory at the end of the period.
*[[Cost of preferred stock]]. The rate of return on investment required by the company's preferred shareholders.
*[[Covenant]]. A restriction on a borrower imposed by a lender. For example, it could be a requirement placed on a company to achieve and maintain specified targets such as levels of cash flow, balance sheet ratios, or specified capital expenditure levels in order to retain financing facilities.
*[[Cumulative dividend provision]]. A requirement that unpaid dividends on preferred stock accumulate and have to be paid before a dividend is paid on common stock.
*[[Current ratio]]. Current assets/Current liabilities. This ratio indicates a company's ability to cover its current liabilities with its current assets.
*[[Customer relationship management]] ([[CRM]]). Systems designed to compile and manage data about customers.
*[[Customer value proposition]] ([[CVP]]). The difference between total customer benefits and total customer costs, which are both monetary and non-monetary.
*[[Deal flow]]. The rate at which new investment propositions come to funding institutions.
*[[Debenture]]. A document containing an acknowledgment of indebtedness on the part of a company, usually secured by a charge on the company's assets.
*[[Debt service]]. Payments of principal and interest required on a debt over a given period.
*[[Deep pockets]]. Refers to an investor who has substantial financial resources.
*[[Default]]. The nonperformance of a stated obligation. The nonpayment by the issuer of interest or principal on a bond or the nonperformance of a covenant.
*[[Deferred payment]]. A debt that has been incurred and will be repaid at some future date.
*[[Depreciation]]. The systematic allocation of the cost of an asset over a period of time for financial reporting and tax purposes.
*[[Dilution]] (of [[ownership]]). When a new stock issue results in a decrease in the preissue owners' percentage of the common stock.
*[[Discounted cash flow]] ([[DCF]]). Method of evaluating investments by adjusting the cash flows for the time value of money. In the decision to invest in a project, all future cash flows expected from that investment are discounted back to their present value at the time the investment is made. The discount rate is whatever rate of return the investor requires. In theory, if the present value of the future cash flows is greater than the money being invested, the investment should be made. (See discount rate, internal rate of return, net present value, and present value.)
*[[Discount rate]] ([[capitalization rate]]). Rate of return used to convert future values to present values. (See capitalization rate, internal rate of return, and rate of return.)
*[[DJIA]]. Dow Jones Industrial Average. The Dow Jones Industrial Average is a priceweighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896. Often referred to as "the Dow," the DJIA is the oldest and single most watched index in the world. The DJIA includes companies like General Electric, Disney, Exxon, and Microsoft.
*[[Doriot]], [[General Georges]]. Founder of the modern venture capital industry, Harvard Business School professor, and one of the creators of INSEAD.
*[[Double bottom line]]. Captures both the financial profit the organization earns and also the social benefit it provides society; associated with social entrepreneurship.
*[[Double jeopardy]]. The case where an entrepreneur's main source of income and most of her/his net worth depend on her/his business.
*[[Due diligence]]. The process of investigation by investors into a potential investee's management team, resources, and trading performance. This includes rigorous testing of the business plan assumptions and the verification of material facts (such as existing accounts).
*[[Dun & Bradstreet]] ([[D&B]]). The biggest credit-reporting agency in the United States.
*[[Early-stage financing]]. This category includes seed-stage, startup-stage, and firststage financing.
*[[Earnings]]. This is synonymous with income and profit.
*[[Earnings before interest and taxes]] ([[EBIT]]). See operating income.
*[[Earnings before interest, taxes, depreciation, and amortization]] ([[EBITDA]]). Often referred to as cash flow. It removes non-cash charges, such as depreciation and amortization, to get a clearer view of the cash-flow-generating ability of a company.
*[[Earning-capitalization valuation]]. This values a company by capitalizing its earnings. Company value = Net income/Capitalization rate.
*[[Earnings per share]] ([[EPS]]). A company's net income divided by the number of common shares issued and outstanding.
*[[Earn-out]]. A common contract provision when a company is sold or acquired. The founders will earn a portion of the sales price over time based upon continuing performance of the new venture.
*[[Elasticity of demand]]. The percentage change in the quantity of a good demanded divided by the percentage change in the price of that good. When the elasticity is greater than 1, the demand is said to be elastic, and when it is less than 1, it is inelastic. In the short-term, the demand for nonessential goods (for example, airline travel) is usually elastic, and the demand for essentials (for example, electricity) is usually inelastic.
*[[Employee stock ownership plan]] ([[ESOP]]). A trust established to acquire shares in a company for subsequent allocation to employees over a period of time. Several possibilities are available for structuring the operation of an ESOP. Essentially, either the company makes payments to the trust, which the trust uses to purchase shares; or the trust, having previously borrowed to acquire shares, may use the payments from the company to repay loans. The latter form is referred to as a leveraged ESOP and may be used as a means of providing part of the funding required to affect a buyout. A particular advantage of an ESOP is the possibility of tax relief for the contributions made by the company to the trust and on the cost of borrowing in those cases where the trust purchases shares in advance.
*[[Employment agreement]]. An agreement whereby senior managers contract to remain with the company for a specified period. For the investing institutions, such an agreement provides some measure of security that the company's performance will not be adversely affected by the unexpected departure of key managers.
*[[Equity]]. See owners' equity.
*[[Equity kicker]] (or [[Equity warrant|warrant]]). An option or instrument linked to the provision of other types of funding, particularly mezzanine finance, which enables the provider to obtain an equity stake and hence a share in capital gains. In this way, providers of subordinated debt can be compensated for the higher risk they incur.
*[[EU]]. The European Union, originally included the following countries: the Netherlands, Sweden, Finland, Denmark, Germany, Belgium, Luxembourg, the United Kingdom, Ireland, France, Austria, Portugal, Spain, Italy, and Greece. Since May 1. 2004, the following countries also belong to the EU: Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia, and the Czech Republic.
*[[Exit]]. The means by which investors in a company realize all or part of their investment. (See harvest.)
*[[Expansion financing]]. Working capital for the initial expansion of a company that is producing and shipping products and has growing accounts receivable and inventories.
*[[Factoring]]. A means of enhancing the cash flow of a business. A factoring company pays to the firm a certain proportion of the value of the firm's trade debts and then receives the cash as the trade debtors settle their accounts. Invoice discounting is a similar procedure.
*[[FAQ]]. Frequently asked questions -- a computer text file that contains answers to common questions about a topic.
*[[FASB]] ([[Financial Accounting Standards Board]]). A private sector board (industry) that establishes financial accounting and reporting standards.
*[[Filing]]. Documents, including the prospectus, filed with the SEC for approval before an IPO.
*[[Financing flows]]. Cash flows generated by debt and equity financing.
*[[Finder]]. A person or firm that attempts to raise funding for a private company.
*[[Firm commitment offering]]. The underwriter guarantees to raise a certain amount of money for the company and other selling stockholders at the IPO.
*[[First-round financing]]. The first investment made by external investors.
*[[First-stage financing]]. Financing to initiate full manufacturing and sales.
*[[Five Cs of credit]]. The five crucial elements for obtaining credit are character (borrower's integrity), [[capacity]] (sufficient cash flow to service the debt), capital (borrower's net worth), collateral (assets to secure the debt), and conditions (of the borrowing company, its industry, and the general economy).
*[[Fixed and floating charges]]. Claims on assets pledged as security for debt. Fixed charges cover specific fixed assets, and floating charges relate to all or part of a company's assets.
*[[Floating lien]]. A general lien against a group of assets, such as accounts receivable or inventory, without the assets being specifically identified.
*[[Flotation]]. A method of raising equity financing by selling shares on a stock market, and often allowing management and institutions to realize some of their investment at the same time. (See initial public offering.)
*[[Follow-on financing]]. A second or subsequent round of funding for a company.
*[[Founder shares]]. Shares that the founders issue to themselves in exchange for their "sweat equity;" meaning that the founders buy their shares for a nominal amount of cash. Founder shares are typically issued prior to the first round of financing.
*[[Four Fs]]. Founders, family, friends, and foolhardy person who invest in a person's private business, generally a startup. (See informal investor and angel.)
*[[Franchising]]. An organizational form in which a firm (the franchisor) with a market-tested business package centered on a product or service enters into a continuing contractual relationship with franchisees operating under the franchisor's trade name to produce or market goods or services according to a format specified by the franchisor.
*[[Free cash flow]]. Cash flow in excess of that required to fund all projects that have a positive net present value when discounted at the relevant cost of capital. Conflicts of interest between shareholders and managers may arise when the organization generates free cash flow. Shareholders may desire higher dividends, but managers may wish to invest in projects providing a return below the cost of capital. (See cost of capital and net present value.)
*[[Future value]]. The value at a future date of a present amount of money. FVt = PV × (1 + K/100)t where FV, is the future value, PV is the present value, K is the percentage annual rate of return, and t is the number of years. For example, an investment of $100,000 must have a future value of $384,160 after four years to produce a rate of return of 40%, which is the kind of return that an investor in an early-stage company expects to earn. (See net present value, present value, and rate of return.)
*[[Gatekeeper]]. Colloquial term for a person or firm that advises clients on investments in venture capital funds; formally called an investment advisor.
*[[G7]]. Group of Seven Countries -- Canada, France, Germany, Italy, Japan, United Kingdom and USA --  that meet to discuss issues covering macroeconomic management, international trade, international finances, relations with developing countries, and other global issues. They are sometimes joined by Russia, making the co-called G8.
*[[GDP]] ([[Gross Domestic Product]]). The total market value of goods and services produced by workers and capital within a country's borders during a specific period, which is generally a calendar year.
*[[Gearing]]. British term of leverage. (See leverage.)
*[[GEM]] ([[Global Entrepreneurship Monitor]]). An annual study of entrepreneurial activity within different countries.
*[[General partner]]. A partner with unlimited legal responsibility for the debts and liabilities of a partnership.
*[[Going concern]]. This assumes that the company will continue as an operating business as opposed to going out of business and liquidating its assets.
*[[Golden handcuffs]]. A combination of rewards and penalties given to key managers to dissuade them from leaving the company. Examples are high salaries, paid on a deferred basis while employment is maintained, and stock options.
*[[Goodwill]]. The difference between the purchase price of a company and the net value of its assets purchased.
*[[Gross margin]]. Gross profit as a percentage of net sales revenue.
*[[Gross profit]] ([[gross income]], [[gross earnings]]). Net sales revenue minus the direct cost of the products sold.
*[[Guarantee]]. An undertaking to prove that a debt or obligation of another will be paid or performed. It may relate either to a specific debt or to a series of transactions such as a guarantee of a bank overdraft. For example, entrepreneurs are often required to provide personal guarantees for loans borrowed by their companies.
*[[Guerilla marketing]]. Unique, low cost marketing methods to capture attention in a crowded marketplace.
*[[Harvest]]. The realization of the value of an investment. (See exit.)
*[[Headcount]]. The number of employees within a company at a particular point in time.
*[[High-potential venture]]. A company started with the intent of growing quickly to annual sales of at least $30-50 million in five years. It has the potential to have a firm-commitment IPO.
*[[Hurdle rate]]. The minimum rate of return that is acceptable to investors. (See return on investment.)
*[[Hybrid organization]]. nonprofit with an earned income component dedicated to achieving social value at a level significantly higher (say, two-thirds or more) than economic value.
*[[Income statement]]. A summary of a company's revenues, expenses, and profits over a specified period of time. (See pro forma statements.)
*[[Informal investor]]. An individual who puts money into a private company -- usually a startup or a small business. Informal investments range from micro loans from family members to sizable equity purchases by sophisticated business angels.
*[[Initial public offering]] ([[IPO]]). Process by which a company raises money, and gets listed on a stock market. (See flotation.)
*[[Intellectual property]] ([[IP]]). Knowledge that a company possesses and considers proprietary. IP can be protected through patents, trademarks, etc.
*[[Interest cover]]. The extent to which periodic interest commitments on borrowings are exceeded by periodic profits. It is the ratio of profits before the deduction of interest and taxes to interest payments. The ratio may also be expressed as the cash flow from operations divided by the amount of interest payable.
*[[Internal locus of control]]. Persons with an internal locus of control see themselves as responsible for the outcomes of their own actions. These individuals often believe that they control their destiny.
*[[Internal rate of return]] ([[IRR]]). The discount rate that equates the present value of the future net cash flows from an investment with the project's cash out-flows. It is a means of expressing the percentage rate of return projected on a proposed investment. For an investment in a company, the calculation takes account of cash invested, cash receipts from dividend payments and redemptions, percentage of equity held, expected date of payments, realization of the investment and capitalization at that point, and possible further financing requirements. The calculation will frequently be quoted in a range depending on sensitivity analysis. (See discount rate, present value, future value, and rate of return.)
*[[Inventory]]. Finished goods, work in process of manufacture, and raw materials owned by a company.
*[[Investment bank]]. A financial institution engaged in the issue of new securities, including management and underwriting of issues as well as securities trading and distribution.
*[[Investment flows]]. Cash flows associated with purchase and sales of both fixed assets and business interests.
*[[IPO]]. See initial public offering.
*[[IRR]]. See internal rate of return.
*[[ISP]]. Internet Service Provider -- a company that provides direct connections to the Internet for computer users.
*[[Junior debt]]. Loan ranking after senior debt or secured debt for payment in the event of a default.
*[[Junk bonds]]. A variety of high-yield, unsecured bonds tradable on a secondary market and not considered to be of investment quality by credit-rating agencies. High yield normally indicates higher risk.
*[[Key person insurance]]. Additional security provided to financial backers of a company through the purchase of insurance on the lives of key managers who are seen as crucial to the future of the company. Should one or more of those key executives die prematurely, the financial backers would receive the insurance payment.
*[[Key success factors]] ([[KSF]]s). The attributes that customers use to distinguish between competing products or services. KSFs go beyond just product attributes, and may include brand and other intangibles.
*[[Lead investor]]. In syndicated deals, normally the investor who originates, structures, and subsequently plays the major monitoring role.
*[[Lead underwriter]]. The head of a syndicate of financial firms that are sponsoring an initial public offering of securities or a secondary offering of securities.
*[[Lead venture capital firm]]. The head of a syndicate of venture capital firms that is investing privately in a company.
*[[Lemons and plums]]. Bad deals and good deals, respectively.
*[[Leverage]]. The amount of debt in a company's financing structure, which may be expressed as a percentage of the total financing or as a ratio of debt to equity. The various quasi-equity (preference-type shares) and quasi-debt (mezzanine debt) instruments used to fund later-stage companies means that great care is required in calculating and interpreting leverage or gearing ratios.
*[[Leveraged buyout]] ([[LBO]]). Acquisition of a company by an investor group, an investor, or an investment/LBO partnership, with a significant amount of debt (usually at least 70% of the total capitalization) and with plans to repay the debt with funds generated from the acquired company's operations or from asset sales. LBOs are frequently financed in part with junk bonds.
*[[Lien]]. A legal claim on certain assets that are used to secure a loan.
*[[Limited liability company]]. A company owned by "members," who either manage the business themselves or appoint "managers" to run it for them. All members and managers have the benefit of limited liability, and, in most cases, are taxed in the same way as a subchapter S corporation without having to conform to the S corporation restrictions.
*[[Limited partnership]]. A business organization with one or more general partners, who manage the business and assume legal debts and obligations, and one or more limited partners, who are liable only to the extent of their investments. Limited partners also enjoy rights to the partnership's cash flow, but are not liable for company obligations.
*[[Line of credit]] ([[Line of credit with a bank|with a bank]]). An arrangement between a bank and a customer specifying the maximum amount of unsecured debt the customer can owe the bank at a given point in time.
*[[Line of credit]] ([[Line of credit with a vendor|with a vendor]]). A limit set by the seller on the amount that a purchaser can buy on credit.
*[[Liquidation value]] ([[Liquidation value of an asset|of an asset]]). The amount of money that can be realized from the sale of an asset sold separately from its operating organization.
*[[Liquidity]]. The ability of an asset to be converted to cash as quickly as possible and without any price discount.
*[[Listing]]. Acceptance of a security for trading on an organized stock exchange. Hence, a stock traded on the New York Stock Exchange is said to be listed on the NYSE.
*[[Living dead]]. Venture capital jargon for a company that has no prospect of being harvested with a public offering or an acquisition; hence, the venture capital firm cannot realize its investment in the company.
*[[Liquidation value]]. The total amount that could be realized from selling the business' individual assets, after satisfying all of the business' liabilities.
*[[Loan note]]. A form of vendor finance or deferred payment. The purchaser (borrower) may agree to make payments to the holder of the loan note at specified future dates. The holder may be able to obtain cash at an earlier date by selling at a discount to a financing institution that will collect on maturity.
*[[Lock-up period]]. An interval during which an investment may not be sold. In the case of an IPO, employees may not sell their shares for a period of time determined by the underwriter and usually lasting 180 days.
*[[Locus of control]]. The perception of the factors responsible for the outcome of an event. Individuals with an internal locus of control believe their actions caused the outcome. Conversely, individuals with an external locus of control believe the outcome was determined by outside forces.
*[[Management buy in]] ([[MBI]]). The transfer of ownership of an entity to a new set of owners in which new managers coming into the entity are a significant element.
*[[Management buyout]] ([[MBO]]). The transfer of ownership of an entity to a new set of owners in which the existing management and employees are a significant element.
*[[Market capitalization]]. The total value at market prices of the securities in issue for a company, a stock market, or a sector of a stock market, calculated by multiplying the number of shares issued by the market price per share.
*[[Market-comparable valuation]]. The value of a private company based of the valuation of similar public companies.
*[[Marketing]]. An organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. (American Marketing Association, 2004)
*[[Merger]]. The combining of two or more entities into one, through a purchase acquisition or a pooling of interests.
*[[Mezzanine financing]]. Strictly, any form of financing instrument between ordinary shares and senior debt. The forms range from senior mezzanine debt, which may simply carry an interest rate above that for senior secured debt, to junior mezzanine debt, which may carry rights to subscribe for equity but no regular interest payment.
*[[Microcredit]]. Tiny loans to entrepreneurs too poor to qualify for traditional bank loans. In developing countries especially, microcredit enables very poor people to engage in selfemployment projects that generate income.
*[[Microfinancing]]. Same as microcredit.
*[[Modified book value]]. Valuation of a business in which all assets and liabilities (including off-balance sheet, intangible, and contingent) are adjusted to their fair market values.
*[[Money left on the table]]. The difference between the price at the end of the first day's trading and the initial offering price, multiplied by the number of shares in the offering.
*[[Multiple]]. The amount of money realized from the sale of an investment divided by the amount of money originally invested.
*[[Murphy's Law]]. What can go wrong, will go wrong. An unexpected setback will happen at the most inconvenient moment.
*[[National Association of Securities Dealers Automated Quotation]] ([[NASDAQ]]). An electronic system for trading stocks. It is owned and operated by The Nasdaq Stock Market, Inc.
*[[Necessity entrepreneurship]]. A business started out of necessity by an entrepreneur who cannot find a better source of income through employment.
*[[NGO]]. Non-Governmental Organization.
*[[Net Assets]]. Assets less liabilities.
*[[Net income]] ([[net earnings]], [[net profit]]). A company's final income after all expenses and taxes have been deducted from all revenues. It is also known as the bottom line.
*[[Net income margin]]. Net income as a percentage of net sales revenue. In a typical year an average US company has a net income margin of about 5%.
*[[Net liquid value]]. Liquid financial assets minus callable liabilities.
*[[Net present value]]. The present value of an investment's future net cash flows minus the initial investment. In theory, if the net present value is greater than 0, an investment should be made. For example, an investor is asked to invest $100,000 in a company that is expanding. He expects a rate of return of 30%. The company offers to pay him back $300,000 after four years. The present value of $300,000 at a rate of return of 30% is $105,038. Thus, the net present value of the investment is $5,038, so the investment should be made. (See free cash flow, future value, present value, and rate of return.)
*[[Net profit]]. See net income.
*[[Net surplus]]. Total revenue minus total cost and expenses in a non-profit organization; equivalent to net income in a for-profit enterprise.
*[[Net worth]]. See book value.
*[[New York Stock Exchange]] ([[NYSE]]). The largest stock exchange in the world, located in New York. Also known as the Big Board.
*[[Nonprofit organization]]. organizations that are considered public charities are owned by the public and, as such, cannot accrue privately owned profits. These organization have applied and been granted nonprofit status and thus do not have to pay taxes.
*[[NPO]]. Non-Profit Organization; also Notfor-profit Organization.
*[[OECD]]. The Organization for Economic Cooperation and Development comprises Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Republic of Korea, Japan, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey, UK, and United States.
*[[Offering circular]]. See prospectus.
*[[Olin College]]. Starting in the late 1980's, the National Science Foundation and the engineering community at-large started calling for reform in engineering education. In order to serve the needs of the growing global economy, it was clear that engineers needed to have business and entrepreneurship skills, creativity, and an understanding of the social, political, and economic contexts of engineering. The F.W. Olin Foundation decided the best way to maximize its impact was to help create a college that could address these emerging needs. Olin College was chartered in 1997 and took its first freshman class in 2002. It is located adjacent to Babson College.
*[[Operating cash flows]]. Cash flows directly generated by a company's operations. The cash flow from operating activity equals net income plus depreciation minus increase in accounts receivable minus increase in inventories plus increase in accounts payable plus increase in accruals. (See financing flows and investment flows.)
*[[Operating income]]. Earnings (profit) before deduction of interest payments and income taxes, abbreviated to EBIT. It measures a company's earning power from its ongoing operations. It is of particular concern to a company's lenders, such as banks, because operating income demonstrates the ability of a company to earn sufficient income to pay the interest on its debt. (See times interest earned.)
*[[Opportunity]]. An idea that has commercial viability and that provides the entrepreneur and company the potential to earn attractive margins and a return on their investment.
*[[Opportunity entrepreneurship]]. The pursuit of a new venture because it is deemed as better than remaining in one's current job or other jobs that might be available.
*[[Options]]. See stock option plan.
*[[Out of cash]] ([[OOC]]). A common problem with entrepreneurial companies. The OOC time period is cash on hand divided by the burn rate.
*[[Over the counter]] ([[OTC]]). The purchase and sale of financial instruments not conducted on a stock exchange such as the New York Stock Exchange or the American Stock Exchange. The largest OTC market is the NASDAQ.
*[[Owners' equity]]. Common stock plus retained earnings. (See book value of a company.)
*[[Pain point]]. A potential customer's problem that a business can relieve with its product or service.
*[[Paid-in capital]]. Par value per share times the number of shares issued. Additional paidin capital is the price paid in excess of par value times the number of shares issued.
*[[Partnership]]. Legal form of a business in which two or more persons are co-owners, sharing profits and losses.
*[[Par value]]. Nominal price placed on a share of common stock.
*[[Patent]]. Granted by the government, patents protect unique devices (or combinations of components integrated into a device) and processes.
*[[Penetration pricing]]. Pricing your product at a relatively lower price to gain high market share, but with lower margins.
*[[Piggy-back registration rights]]. The right to register unregistered stock in the event of a company having a public stock offering.
*[[Pledging]]. The use of a company's accounts receivable as security (collateral) for a shortterm loan.
*[[Pop]] ([[first day]]). Percentage increase in the price of a stock at the end of the first day's trading over the initial offering price.
*[[Positioning]]. A company's offering on certain product attributes -- the ones customers care about most -- relative to competitive offerings.
*[[Portfolio]]. Collection of investments. For example, the portfolio of a venture capital fund comprises all its investments.
*[[Post-money valuation]]. The value of a company immediately after a round of additional money is invested.
*[[Pratt's Guide to Private Equity Sources]]. Annual sourcebook for private equity, especially venture capital.
*[[Preemptive rights]]. The rights of shareholders to maintain their percentage ownership of a company by purchasing a proportionate number of shares of any new issue of common stock. (See antidilution, dilution, and pro rata interest.)
*[[Preferred stock]] ([[Preference shares]]). A class of shares that incorporate the right to a fixed dividend and usually a prior claim on assets, in preference to ordinary shares, in the event of a liquidation. Cumulative preference shares provide an entitlement to a cumulative dividend if, in any year, the preference dividend is unpaid due to insufficient profits being earned. Preference shares are usually redeemable at specific dates.
*[[Pre-money valuation]]. The value of a company's equity before additional money is invested.
*[[Preliminary prospectus]]. The initial document published by an underwriter of a new issue of stock to be given to prospective investors. It is understood that the document will be modified significantly before the final prospectus is published; also called a red herring.
*[[Prepayment]]. A payment on a loan made prior to the original due date.
*[[Present value]] ([[PV]]). The current value of a given future cash flow stream, FVt after t years, discounted at a rate of return of K% is PV = FV<sub>t</sub>/(1 + K/100)<sup>t</sup>. For example, if an investor expects a rate of return of 60% on an investment in a seed-stage company, and she believes that her investment will be worth $750,000 after five years, then the present value of her investment is $71,526. (See discount rate, future value, net present value, and rate of return.)
*[[Present value of future cash flows]] ([[valuation]]). Present value is today's value of a future payment, or stream of payments, discounted at some appropriate compound interest, or discount rate; also called time value of money. The present value of company is the present value of the future free cash flows plus the residual (terminal) value of the firm: PV = E(sum of all values from t = 1 to N) (FCF<sub>t</sub>)/(1 + K)<sup>t</sup> + (RV<sub>N</sub>)/(1 + K)<sup>N</sup>, where K is the cost of capital; FCF<sub>t</sub> is the free cash flow in year t; N is the number of years; and RV<sub>N</sub> is the residual value in year N. Free Cash Flow = Operating Income − Interest − Taxes on Operating Income + Depreciation & Other Non-Cash Charges − Increase in Net Working Capital − Capital Expenditures (Replacement & Growth) − Principal Repayments
*[[Prevalence rate]]. The percentage of a population participating in a particular activity.
*[[Price discrimination]]. A strategy where different customer segments are charged different prices.
*[[Price-earnings ratio]] ([[P/E ratio]]). The ratio of the market value of a firm's equity to its after-tax profits (may be calculated from price per share and earnings per share).
*[[Price points]]. Product pricing in standardized or fixed points.
*[[Price promotion]]. Discounts from the base price for a short period to attain specific goals such as introducing a product to new customers.
*[[Price skimming]]. The strategy of pricing your product high to generate high margins, but recognizing that you'll gain limited market share because prices are relatively high.
*[[Primary data]]. Market research collected specifically for a particular purpose through focus groups, surveys, or experiments.
*[[Primary target audience]] ([[PTA]]). A group of potential customers identified by demographic and psychographic data that will be the focus of the company's early marketing and sales efforts.
*[[Prime rate]]. Short-term interest rate charged by a bank to its largest, most credit-worthy customers.
*[[Private placement]]. The direct sales of securities to a small number of investors (See Regulation D.)
*[[Product life cycle]]. A stage model of a product's life, including introduction, growth, maturity, and decline; a similar concept to the S-curve lifecycle for an industry.
*[[Profit]]. Synonymous with income and earnings.
*[[Pro forma statements]]. Projected financial statements: income and cash-flow statements and balance sheets. For a startup company, it is usual to make pro forma statements monthly for the first two years and annually for the next three years.
*[[Pro rata interest]]. The right granted the investor to maintain the same percentage ownership in the event of future financings. (See antidilution and dilution.)
*[[Prospectus]]. A document giving a description of a securities issue, including a complete statement of the terms of the issue and a description of the issuer, as well as its historical financial statements. Also referred to as an offering circular. (See red herring.)
*[[Psychographics]]. Information that categorizes customers based upon their personality, psychological traits, lifestyles, values, and social group membership. It helps to understand what motivates customers to act in the ways they do, and is important because members of a specific demographic category can have dramatically different psychographic profiles. Marketing strictly based on demographic information will be ineffective because it ignores these differences.
*[[Purchasing Power Parity]] ([[PPP]]). A method of measuring the relative purchasing power of different countries' currencies over the same types of goods and services. Because goods and services may cost more in one country than in another, PPP allows us to make more accurate comparisons of standards of living across countries. PPP estimates use price comparisons of comparable items, but, since not all items can be matched exactly across countries and time, the estimates are not always "robust."
*[[Put]]. A contract allowing the holder to sell a given number of securities back to the issuer of the contract at a fixed price for a given period of time.
*[[Quiet period]]. The period starting when an issuer hires an underwriter and ending 25 days after the security begins trading, during which the issuer cannot comment publicly on the offering, due to SEC rules.
*[[R2]] ([[R-Square]]). The fraction of variation in the dependent variable that is explained by variation in the independent variable. A high value indicates a strong relationship between the two variables.
*[[Rate of return]]. The annual return on an investment. If a sum of money, PV, is invested and after t years that investment is worth FVt the return on investment K = [(FV/PV)l/t − 1] × 100%. For example, if $100 is invested originally, and one year later $108 is paid back to the investor, the annual rate of return is 8%.
*[[Realization]]. See exit and harvest.
*[[Redeemable shares]]. Shares that may be redeemable at the option of the company, or the shareholder, or both.
*[[Red herring]]. Preliminary prospectus circulated by underwriters to gauge investor interest in a planned offering. A legend in red ink on its cover indicates that the registration has not yet become effective and is still being reviewed by the SEC.
*[[Registration statement]]. A carefully worded and organized document, including a prospectus, filed with the SEC before an IPO.
*[[Regulation D]]. An SEC regulation that governs private placement exemption.
*[[Reserve]](s). Non-profit organization's equivalent of owners' equity in a for-profit company.
*[[Residual value]]. Market capitalization of a company at a specific time.
*[[Revenue drivers]]. Elements within a business model that can be influenced to increase revenue, such as price, quantity purchased, awareness of product, availability, and so forth.
*[[Retained earnings]]. The part of net income retained in the company and not distributed to stockholders.
*[[Return on investment]] ([[ROI]]). The annual income that an investment earns.
*[[Roll-up]]. A strategy to consolidate a fragmented industry.
*[[Running returns]]. Periodic returns, such as interest and dividends, from an investment (in contrast to a one-time capital gain).
*[[Road show]]. A series of meetings with potential investors and brokers, conducted by a company and its underwriter, prior to a securities offering, especially an IPO.
*[[SBA]]. Small Business Administration.
*[[SBDC]]. Small Business Development Centers (supported by the SBA).
*[[SBI]]. Small Business Institutes, run by universities and colleges with SBA support.
*[[SBIC]]. Small Business Investments Companies.
*[[SBIR]]. Small Business Innovation Research Program.
*[[S-curve]]. A model of new market product adoption. It illustrates market emergence, rapid growth, stability, and decline.
*[[Schumpeter]], [[Joseph A.]]. Moravian-born economist whose book The Theory of Economic Development, written in Vienna in 1912, introduced the modern theory of entrepreneurship, in which the entrepreneur plays the central role in economic development by destroying the static equilibrium of the existing economy. Excellent modern examples are the roles played by Steve Jobs, Bill Gates, and Dan Bricklin in creating the microcomputer industry in the late 1970s. By the beginning of the 1990s, microcomputers (personal computers) were the principal force shaping the computer industry, and the old companies manufacturing mainframe and minicomputers, which dominated the computer industry until the mid-1980s, were in distress, ranging from outright bankruptcy to record-breaking losses.
*[[SCORE]]. Service Core of Retired Executives, sponsored by the SBA to provide consulting to small businesses.
*[[Secondary data]]. Market research that is gathered from already published sources, like an industry association study or census report.
*[[Second-round financing]]. The introduction of further funding by the original investors or new investors to enable the company to grow or deal with unexpected problems. Each round of financing tends to cover the next period of growth.
*[[Second-stage financing]]. Financing to fuel the growth of a young company.
*[[Secondary offering]]. The sale of stock by an issuer or underwriter after a company's securities have already begun trading publicly.
*[[Secondary target market]] ([[STA]]). See primary target audience. A group of potential customers identified by demographic and psychographic data that will be a secondary or alternative focus of the company's early marketing and sales efforts.
*[[Securities and Exchange Commission]] ([[SEC]]). Regulatory body for investor protection in the United States, created by the Securities Exchange Act of 1934. The supervision of dealers is delegated to the self-regulatory bodies of the stock exchanges and NASD under the provisions of the Maloney Act of 1938.
*[[Seed financing]]. A relatively small amount of money provided to prove a concept; it may involve product development and market research but rarely involves the initial marketing of a product.
*[[Seed-stage company]]. A company that doesn't have much more than a concept.
*[[Sensitivity analysis]]. Examination of how the projected performance of the business varies with changes in the key assumptions on which the forecasts are based.
*[[Short-term security]]. Generally, an obligation maturing in less than one year.
*[[Slotting fees]]. The fees that a product manufacturer pays a retail outlet to place products in its warehouse and then ultimately in the retail store.
*[[Small business]]. The SBA defines most small businesses as ones with 500 or fewer employees; but there are exceptions. Details can be found at sba.gov
*[[Social capital]]. Networks, norms, and trust that facilitates coordination and cooperation between people for mutual benefit.
*[[Social entrepreneur]]. Someone who develops social innovation through entrepreneurial solutions. A social entrepreneur recognizes a social problem or need, comes up with a solution, and creates an organization to pursue it.
*[[Social model]]. This term is often applied to the economic systems of nations where there is high welfare protection including restrictions on employer's rights to hire and fire employees, generous unemployment benefits, and mandated work weeks (e.g., 35 hour maximum in France). The social models are especially strong in France and Germany.
*[[Sole proprietorship]]. A business form with one owner who is responsible for all the firm's liabilities.
*[[Startup company]]. A company that is already in business and is developing a prototype but has not sold it in significant commercial quantities.
*[[Startup financing]]. Funding provided to companies for use in product development and initial marketing. Companies may be in the process of being organized or may have been in business a short time (one year or less), but have not sold their product commercially. Generally, such firms have assembled the key management, prepared a business plan, made market studies, and completed other preliminary tasks.
*[[Stock option plan]]. A plan designed to motivate employees, especially key ones, by placing a portion of the common stock of the company under option at a fixed price to defined employees. The option may then be exercised by the employees at a future date. Stock options are often introduced as part of the remuneration package of senior executives.
*[[Stock-out]]. Demand for a product exceeds the inventory that a company has on hand. Stock-outs may lead to lost sales as customers seek other options.
*[[Strategic acquisition]]. When a company buys another company to get access to a product or service that complements its existing business.
*[[Subchapter S corporation]]. A small business corporation in which the owners personally pay the corporation's income taxes.
*[[Subordinated debt]]. Loans that may be unsecured or, more commonly, secured by secondary charges that rank after senior debt for repayment in the event of default. Also referred to as junior debt or mezzanine debt.
*[[Sweat equity]]. Equity acquired by the management team at favorable terms reflecting the value to the business of the managers' past and future efforts.
*[[Syndicate]]. A group of investors that act together when investing in a company.
*[[TEA Indices]] ([[Total Entrepreneurial Activity Indices]]). The percent of the adult population that is participating in a specific type of entrepreneurship. For example, the TEA (Overall) Index is the percent of the adult population that is in the process of starting a new business or has a business less than 42 months old.
*[[Tertiary Target Audience]] ([[TTA]]). See primary target audience. A group of potential customers identified by demographic and psychographic data that will not be the focus of the company's early marketing and sales efforts.
*[[Term loan]]. Debt originally scheduled to be repaid in more than one year, but usually in 10 years or less.
*[[Term sheet]]. Summary of the principal conditions for a proposed investment in a company by a venture capital firm.
*[[Third-stage financing]]. Funding to fuel the growth of a young company.
*[[Times interest earned]]. Earnings before interest and taxes, divided by interest (EBIT/I). The higher this ratio, the more secure the loan on which interest is paid. It is a basic measure of the creditworthiness of a company.
*[[Top-down forecasting]]. Determining projected revenues by estimating what a certain percentage of market share translates into in terms of revenues. This method is highly suspect and bottom-up and comparable projections tend to be better.
*[[Trade promotion]]. Price promotions offered to retailers to induce them to carry your product.
*[[Trade sale]]. This is the sale of a business to another company, often, but not always, in  similar line of business.
*[[Trade secret]]. Knowledge that is kept secret for the purpose of gaining an advantage in business over one's competitors.
*[[Trademarks]]. Protection obtainable for any word, symbol, or combination thereof that is used on goods to indicate their source.
*[[Triggering event]]. An incident that prompts a person to take steps to start a new venture.
*[[Triple bottom line]]. captures the financial profit the organization earns and also the social and environmental benefit it provides society; associated with social entrepreneurship.
*[[Underpricing]]. The difference between the closing price on the first day of trading and the initial offering price of a stock.
*[[Underwater stock options]]. When the price of a stock is lower than the exercise price of a stock option. (See stock option.)
*[[Underwrite]]. An arrangement under which investment banks each agree to buy a certain amount of securities of a new issue on a given date and at a given price, thereby assuring the issuer of the full proceeds of the financing.
*[[Underwriter]]. An institution engaged in the business of underwriting securities issues.
*[[Underwriting fee]]. The share of the gross spread of a new issue accruing to members of the underwriting group after the expenses of the issue have been paid.
*[[Unsecured loans]]. Debt that is not backed by a pledge of specific assets.
*[[Valuation]] ([[Valuation of a company|of a company]]). The market value of a company. (See market capitalization.)
*[[Value-added]] ([[Value-added by investors|by investors]]). Many venture capital firms claim that they add more than money to investee companies. They call it value-added, which includes strategic advice on such matters as hiring key employees, marketing, production, control, and financing.
*[[Venture philanthropy]]. Applying the concepts of venture capital to achieving philanthropic goals.
*[[Value proposition]]. The value of a business' products and services to its customers.
*[[Venture capitalist]]. A financial institution specializing in the provision of equity and other forms of long-term capital to enterprises, usually to firms with a limited track record but with the expectation of substantial growth. The venture capitalist may provide both funding and varying degrees of managerial and technical expertise. Venture capital has traditionally been associated with startups; however, venture capitalists have increasingly participated in later-stage projects.
*[[Vesting period]]. The time period before shares are owned unconditionally by an employee who is sold stock with the stipulation that he must continue to work for the company selling him the shares. If his employment terminates before the end of that period, the company has the right to buy back the shares at the same price at which it originally sold them to him.
*[[Visible venture capital]] ([[formal venture capital]]). The organized venture capital industry consisting of formal firms, in contrast to invisible venture capital or informal venture capital.
*[[Vulture capital]]. A derogatory term for venture capital.
*[[Waiver]]. Consent granted by an investor or lender to permit an investor or borrower to be in default on a covenant.
*[[Walking wounded]]. Venture capital jargon for a company that is not successful enough to be harvested with an IPO or acquisition, but might be worth another round of investment to try to get it into harvestable condition.
*[[Warrant]]. An option to purchase common stock at a specified price. (See equity kicker.)
*[[Warranty]]. A statement of fact or opinion concerning the condition of a company. The inclusion of warranties in an investment agreement gives the investor a claim against the company if it subsequently becomes apparent that the company's condition was not as stated at the time of the investment.
*[[Yield]]. Annualized rate of return on a security.

[[Category: Reference Books]]