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EARNINGS
Also known as income. Revenues minus cost of sales, operating expenses, and taxes, over a given period of time. The reason most corporations exist, and often the single most important determinant of a company's price. See also earnout, normalized earnings, operating income, price/earnings ratio, retained earnings, return on assets, return on equity.
EARNING POWER
The demonstrated ability of a business to earn a profit, over time, while following good accounting practices. When a business shows a reasonable profit on invested capital after fully maintaining the business property, appropriately compensating its owner and employees, servicing its obligations, and fully recognizing its costs, the business may be said to have demonstrated earning power. Demonstrated earning power is the foremost test of the business risk in an application for a loan.
EASEMENT
A right or privilege that a person may have on another's land, as the right of a way or ingress or egress.
EBIT
Earnings before interest and taxes. Same as operating income.
EBITDA
Earnings before interest, taxes, depreciation and amortization.
EMPLOYER IDENTIFICATION NUMBER (EIN)
A number obtained by a business from the IRS by filing form SS-4. If you are a sole proprietorship, your EIN is your social security number.
ENTREPRENEUR
Someone who is willing to assume the responsibility, risk and rewards of starting and operating a business.
EQUITY
An ownership interest in a business.
EQUITY FINANCING
The provision of funds for capital or operating expenses in exchange for capital stock, stock purchase warrants or options in the business financed, without any guaranteed return, but with the opportunity to share in the company's profits. Equity financing includes long-term subordinated securities containing stock options and/or warrants. This involves "selling" a portion of your company to an outside investor. You have no obligation to repay the funds. In general, venture capital firms provide this type of funding.
EQUITY PARTNERSHIP
A limited partnership arrangement for providing start-up and seed capital to businesses.
ESCROW
Temporary monetary deposit placed in trust with an independent third party by agreement between two or more parties. The escrow money is released when certain agreed contingencies have been met or waived.
ESOP
Employee Stock Ownership Plan. A plan where employees have a vested interest (stock ownership) in the company.
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