"Business Plans Handbook _Glossary"
Business Plans Handbook Glossary of Small Business Terms Absolute liability Adaptation Liability that is incurred due to product defects The process whereby an invention is modified to meet or negligent actions. Manufacturers or retail the needs of users. establishments are held responsible, even though Adaptive engineering the defect or action may not have been intentional The process whereby an invention is modified to meet or negligent. the manufacturing and commercial requirements ACE of a targeted market. See Active Corps of Executives Adverse selection Glossary Accident and health benefits The tendency for higher-risk individuals to purchase Benefits offered to employees and their families in health care and more comprehensive plans, resulting order to offset the costs associated with accidental in increased costs. death, accidental injury, or sickness. Advertising A marketing tool used to capture public attention and Account statement A record of transactions, including payments, new influence purchasing decisions for a product or service. debt, and deposits, incurred during a defined period Utilizes various forms of media to generate consumer of time. response, such as flyers, magazines, newspapers, radio, and television. Accounting system System capturing the costs of all employees and/or Age discrimination The denial of the rights and privileges of employment machinery included in business expenses. based solely on the age of an individual. Accounts payable Agency costs See Trade credit Costs incurred to insure that the lender or investor Accounts receivable maintains control over assets while allowing the Unpaid accounts which arise from unsettled claims borrower or entrepreneur to use them. Monitoring and transactions from the sale of a company’s and information costs are the two major types of products or services to its customers. agency costs. Active Corps of Executives (ACE) Agribusiness A group of volunteers for a management The production and sale of commodities and products assistance program of the U.S. Small Business from the commercial farming industry. Administration; volunteers provide one-on-one America Online counseling and teach workshops and seminars An online service which is accessible by computer for small firms. modem. The service features Internet access, bulletin ADA boards, online periodicals, electronic mail, and other See Americans with Disabilities Act services for subscribers. 429 GLOSSARY OF SMALL BUSINESS TERMS Americans with Disabilities Act (ADA) Basket clause Law designed to ensure equal access and opportunity A provision specifying the amount of public pension to handicapped persons. funds that may be placed in investments not included on a state’s legal list (see separate citation). Annual report Yearly financial report prepared by a business that BBS adheres to the requirements set forth by the Securities See Bulletin Board Service and Exchange Commission (SEC). BDC Antitrust immunity See Business development corporation Exemption from prosecution under antitrust laws. Benefit In the transportation industry, firms with antitrust Various services, such as health care, flextime, day immunity are permitted under certain conditions to set care, insurance, and vacation, offered to employees as schedules and sometimes prices for the public benefit. part of a hiring package. Typically subsidized in whole Applied research or in part by the business. Scientific study targeted for use in a product or BIDCO process. See Business and industrial development company Asians Billing cycle A minority category used by the U.S. Bureau of the A system designed to evenly distribute customer Census to represent a diverse group that includes billing throughout the month, preventing clerical Aleuts, Eskimos, American Indians, Asian Indians, backlogs. Chinese, Japanese, Koreans, Vietnamese, Filipinos, Birth Hawaiians, and other Pacific Islanders. See Business birth Assets Blue chip security Anything of value owned by a company. A low-risk, low-yield security representing an interest Audit in a very stable company. The verification of accounting records and business Blue sky laws procedures conducted by an outside accounting A general term that denotes various states’ laws service. regulating securities. Average cost Bond Total production costs divided by the quantity A written instrument executed by a bidder or produced. contractor (the principal) and a second party Balance Sheet (the surety or sureties) to assure fulfillment of the A financial statement listing the total assets and principal’s obligations to a third party (the obligee or liabilities of a company at a given time. government) identified in the bond. If the principal’s obligations are not met, the bond assures payment to Bankruptcy The condition in which a business cannot meet its the extent stipulated of any loss sustained by the debt obligations and petitions a federal district court obligee. either for reorganization of its debts (Chapter 11) or Bonding requirements for liquidation of its assets (Chapter 7). Terms contained in a bond (see separate citation). Basic research Bonus Theoretical scientific exploration not targeted to An amount of money paid to an employee as a reward application. for achieving certain business goals or objectives. 430 B U S I N E S S P L A N S H A N D B O O K , Volume 11 GLOSSARY OF SMALL BUSINESS TERMS Brainstorming Business death A group session where employees contribute their The voluntary or involuntary closure of a firm or ideas for solving a problem or meeting a company establishment. The disappearance of an establishment objective without fear of retribution or ridicule. or enterprise from the Small Business Data Base (see Brand name separate citation). The part of a brand, trademark, or service mark that Business development corporation (BDC) can be spoken. It can be a word, letter, or group of A business financing agency, usually composed of words or letters. the financial institutions in an area or state, Bridge financing organized to assist in financing businesses unable to A short-term loan made in expectation of obtain assistance through normal channels; the risk is intermediateterm or long-term financing. Can be used spread among various members of the business when a company plans to go public in the near future. development corporation, and interest rates may vary somewhat from those charged by member institutions. Broker One who matches resources available for innovation A venture capital firm in which shares of ownership with those who need them. are publicly held and to which the Investment Act of 1940 applies. Budget Glossary An estimate of the spending necessary to complete a Business dissolution project or offer a service in comparison to cash-on- For enumeration purposes, the absence of a business hand and expected earnings for the coming year, with that was present in the prior time period from any an emphasis on cost control. current record. Bulletin Board Service (BBS) Business entry An online service enabling users to communicate with See Business birth each other about specific topics. Business ethics Business and industrial development company Moral values and principles espoused by members of (BIDCO) the business community as a guide to fair and honest A private, for-profit financing corporation chartered business practices. by the state to provide both equity and long-term debt capital to small business owners (see separate citations Business exit See Business death for equity and debt capital). Business expansions Business birth The number of establishments that added employees The formation of a new establishment or enterprise. during a specified time. The appearance of a new establishment or enterprise in the Small Business Data Base (see separate citation). Business failure Closure of a business causing a loss to at least one Business conditions Outside factors that can affect the financial creditor. performance of a business. Business format franchising Business contractions The purchase of the name, trademark, and an ongoing The number of establishments that have decreased in business plan of the parent corporation or franchisor employment during a specified time. by the franchisee. Business cycle Business license A period of economic recession and recovery. These A legal authorization issued by municipal and state cycles vary in duration. governments and required for business operations. B U S I N E S S P L A N S H A N D B O O K , Volume 11 431 GLOSSARY OF SMALL BUSINESS TERMS Business name received during a specified time period. Accumulated Enterprises must register their business names with goods devoted to production. Accumulated local governments usually on a "doing business as" possessions calculated to bring income. (DBA) form. (This name is sometimes referred to as a Capital expenditure "fictional name.") The procedure is part of the Expenses incurred by a business for improvements business licensing process and prevents any other that will depreciate over time. business from using that same name for a similar business in the same locality. Capital gain The monetary difference between the purchase price Business norms and the selling price of capital. Capital gains are taxed See Financial ratios at a rate of 28% by the federal government. Business permit See Business license Capital intensity The relative importance of capital in the production Business plan process, usually expressed as the ratio of capital to A document that spells out a company’s expected labor but also sometimes as the ratio of capital to course of action for a specified period, usually output. including a detailed listing and analysis of risks and uncertainties. For the small business, it should Capital resource examine the proposed products, the market, the The equipment, facilities and labor used to create industry, the management policies, the marketing products and services. policies, production needs, and financial needs. Caribbean Basin Initiative Frequently, it is used as a prospectus for potential An interdisciplinary program to support commerce investors and lenders. among the businesses in the nations of the Caribbean Business proposal Basin and the United States. Agencies involved include: See Business plan the Agency for International Development, the U.S. Small Business Administration, the International Trade Business service firm Administration of the U.S. Department of Commerce, An establishment primarily engaged in rendering and various private sector groups. services to other business organizations on a fee or contract basis. Catastrophic care Medical and other services for acute and long-term Business start For enumeration purposes, a business with a name or illnesses that cost more than insurance coverage limits similar designation that did not exist in a prior time or that cost the amount most families may be expected period. to pay with their own resources. Cafeteria plan CDC See Flexible benefit plan See Certified development corporation Capacity CD-ROM Level of a firm’s, industry’s, or nation’s output Compact disc with read-only memory used to store corresponding to full practical utilization of available large amounts of digitized data. resources. Certified development corporation (CDC) Capital A local area or statewide corporation or authority (for Assets less liabilities, representing the ownership profit or nonprofit) that packages U.S. Small Business interest in a business. A stock of accumulated goods, Administration (SBA), bank, state, and/or private especially at a specified time and in contrast to income money into financial assistance for existing business 432 B U S I N E S S P L A N S H A N D B O O K , Volume 11 GLOSSARY OF SMALL BUSINESS TERMS capital improvements. The SBA holds the second lien Coinsurance is a payment of a fixed percentage of the on its maximum share of 40 percent involvement. cost of each service; copayment is usually a fixed Each state has at least one certified development amount to be paid with each service. corporation. This program is called the SBA 504 Collateral Program. Securities, evidence of deposit, or other property Certified lenders pledged by a borrower to secure repayment of a loan. Banks that participate in the SBA guaranteed loan Collective ratemaking program (see separate citation). Such banks must have The establishment of uniform charges for services by a a good track record with the U.S. Small Business group of businesses in the same industry. Administration (SBA) and must agree to certain conditions set forth by the agency. In return, the SBA Commercial insurance plan See Underwriting agrees to process any guaranteed loan application within three business days. Commercial loans Short-term renewable loans used to finance specific Champion capital needs of a business. An advocate for the development of an innovation. Commercialization Glossary Channel of distribution The final stage of the innovation process, including The means used to transport merchandise from the production and distribution. manufacturer to the consumer. Common stock Chapter 7 of the 1978 Bankruptcy Act The most frequently used instrument for purchasing Provides for a court-appointed trustee who is ownership in private or public companies. Common responsible for liquidating a company’s assets in order stock generally carries the right to vote on certain to settle outstanding debts. corporate actions and may pay dividends, although it Chapter 11 of the 1978 Bankruptcy Act rarely does in venture investments. In liquidation, Allows the business owners to retain control of the common stockholders are the last to share in the company while working with their creditors to proceeds from the sale of a corporation’s assets; reorganize their finances and establish better business bondholders and preferred shareholders have priority. practices to prevent liquidation of assets. Common stock is often used in firstround start-up Closely held corporation financing. A corporation in which the shares are held by a few Community development corporation persons, usually officers, employees, or others close to A corporation established to develop economic the management; these shares are rarely offered to the programs for a community and, in most cases, to public. provide financial support for such development. Code of Federal Regulations Competitor Codification of general and permanent rules of the A business whose product or service is marketed for federal government published in the Federal Register. the same purpose/use and to the same consumer Code sharing group as the product or service of another. See Computer code sharing Computer code sharing Coinsurance An arrangement whereby flights of a regional airline Upon meeting the deductible payment, health are identified by the two-letter code of a major carrier insurance participants may be required to make in the computer reservation system to help direct additional health care cost-sharing payments. passengers to new regional carriers. B U S I N E S S P L A N S H A N D B O O K , Volume 11 433 GLOSSARY OF SMALL BUSINESS TERMS Consignment claim of ownership by others. Copyrights may be A merchandising agreement, usually referring to acquired for works of art, sculpture, music, and secondhand shops, where the dealer pays the owner of published or unpublished manuscripts. All copyrights an item a percentage of the profit when the item is sold. should be registered at the Copyright Office of the Consortium Library of Congress. A coalition of organizations such as banks and Corporate financial ratios corporations for ventures requiring large capital The relationship between key figures found in a resources. company’s financial statement expressed as a numeric Consultant value. Used to evaluate risk and company An individual that is paid by a business to provide performance. Also known as Financial averages, advice and expertise in a particular area. Operating ratios, and Business ratios. Consumer price index Corporation A measure of the fluctuation in prices between two A legal entity, chartered by a state or the federal points in time. government, recognized as a separate entity having its own rights, privileges, and liabilities distinct from Consumer research those of its members. Research conducted by a business to obtain information about existing or potential consumer markets. Cost containment Actions taken by employers and insurers to curtail Continuation coverage rising health care costs; for example, increasing Health coverage offered for a specified period of time employee cost sharing (see separate citation), to employees who leave their jobs and to their widows, requiring second opinions, or preadmission divorced spouses, or dependents. screening. Contractions Cost sharing See Business contractions The requirement that health care consumers Convertible preferred stock contribute to their own medical care costs through A class of stock that pays a reasonable dividend and is deductibles and coinsurance (see separate citations). convertible into common stock (see separate citation). Cost sharing does not include the amounts paid in Generally the convertible feature may only be premiums. It is used to control utilization of services; exercised after being held for a stated period of time. for example, requiring a fixed amount to be paid with This arrangement is usually considered second-round each health care service. financing when a company needs equity to maintain Cottage industry its cash flow. Businesses based in the home in which the family Convertible securities members are the labor force and family-owned A feature of certain bonds, debentures, or preferred equipment is used to process the goods. stocks that allows them to be exchanged by the owner Credit Rating for another class of securities at a future date and in A letter or number calculated by an organization (such accordance with any other terms of the issue. as Dun & Bradstreet) to represent the ability and Copayment disposition of a business to meet its financial See Coinsurance obligations. Copyright Customer service A legal form of protection available to creators and Various techniques used to ensure the satisfaction of a authors to safeguard their works from unlawful use or customer. 434 B U S I N E S S P L A N S H A N D B O O K , Volume 11 GLOSSARY OF SMALL BUSINESS TERMS Cyclical peak Deregulation The upper turning point in a business cycle. The lifting of government restrictions; for example, the lifting of government restrictions on the entry of Cyclical trough The lower turning point in a business cycle. new businesses, the expansion of services, and the setting of prices in particular industries. DBA See Business name Desktop Publishing Using personal computers and specialized software to Death produce camera-ready copy for publications. See Business death Disaster loans Debenture Various types of physical and economic assistance A certificate given as acknowledgment of a debt (see available to individuals and businesses through the separate citation) secured by the general credit of the U.S. Small Business Administration (SBA). This is the issuing corporation. A bond, usually without security, only SBA loan program available for residential issued by a corporation and sometimes convertible to purposes. common stock. Discrimination Debt The denial of the rights and privileges of employment Glossary Something owed by one person to another. Financing based on factors such as age, race, religion, or gender. in which a company receives capital that must be repaid; no ownership is transferred. Diseconomies of scale The condition in which the costs of production Debt capital increase faster than the volume of production. Business financing that normally requires periodic interest payments and repayment of the principal Dissolution within a specified time. See Business dissolution Debt financing Distribution See Debt capital Delivering a product or process to the user. Debt securities Distributor Loans such as bonds and notes that provide a specified One who delivers merchandise to the user. rate of return for a specified period of time. Diversified company A company whose products and services are used by Deductible A set amount that an individual must pay before any several different markets. benefits are received. Doing business as (DBA) See Business name Demand shock absorbers A term used to describe the role that some small firms Dow Jones play by expanding their output levels to accommodate An information services company that publishes the a transient surge in demand. Wall Street Journal and other sources of financial information. Demographics Statistics on various markets, including age, income, Dow Jones Industrial Average and education, used to target specific products or An indicator of stock market performance. services to appropriate consumer groups. Earned income Demonstration A tax term that refers to wages and salaries earned by Showing that a product or process has been modified the recipient, as opposed to monies earned through sufficiently to meet the needs of users. interest and dividends. B U S I N E S S P L A N S H A N D B O O K , Volume 11 435 GLOSSARY OF SMALL BUSINESS TERMS Economic efficiency Enterprise zone The use of productive resources to the fullest practical A designated area, usually found in inner cities and extent in the provision of the set of goods and services other areas with significant unemployment, where that is most preferred by purchasers in the economy. businesses receive tax credits and other incentives to entice them to establish operations there. Economic indicators Statistics used to express the state of the economy. Entrepreneur These include the length of the average work week, the A person who takes the risk of organizing and rate of unemployment, and stock prices. operating a new business venture. Economically disadvantaged Entry See Socially and economically disadvantaged See Business entry Economies of scale Equal Employment Opportunity Commission See Scale economies (EEOC) A federal agency that ensures nondiscrimination in the EEOC hiring and firing practices of a business. See Equal Employment Opportunity Commission 8(a) Program Equal opportunity employer A program authorized by the Small Business Act that An employer who adheres to the standards set by the directs federal contracts to small businesses owned and Equal Employment Opportunity Commission (see operated by socially and economically disadvantaged separate citation). individuals. Equity The ownership interest. Financing in which partial or Electronic mail (e-mail) The electronic transmission of mail via phone lines. total ownership of a company is surrendered in exchange for capital. An investor’s financial return E-mail comes from dividend payments and from growth in See Electronic mail the net worth of the business. Employee leasing Equity capital A contract by which employers arrange to have their See Equity; Equity midrisk venture capital workers hired by a leasing company and then leased back to them for a management fee. The leasing Equity financing company typically assumes the administrative burden See Equity; Equity midrisk venture capital of payroll and provides a benefit package to the Equity midrisk venture capital workers. An unsecured investment in a company. Usually a purchase of ownership interest in a company that Employee tenure The length of time an employee works for a particular occurs in the later stages of a company’s employer. development. Employer identification number Equity partnership The business equivalent of a social security number. A limited partnership arrangement for providing start- Assigned by the U.S. Internal Revenue Service. up and seed capital to businesses. Enterprise Equity securities An aggregation of all establishments owned by a See Equity parent company. An enterprise may consist of a single, Equity-type independent establishment or include subsidiaries and Debt financing subordinated to conventional other branches under the same ownership and control. debt. 436 B U S I N E S S P L A N S H A N D B O O K , Volume 11 GLOSSARY OF SMALL BUSINESS TERMS Establishment accident and health insurance, group legal services, A single-location business unit that may be dependent care assistance, and vacations. independent (a single-establishment enterprise) or FOB owned by a parent enterprise. See Free on board Establishment and Enterprise Microdata File Format franchising See U.S. Establishment and Enterprise Microdata File See Business format franchising; Franchising Establishment birth 401(k) plan See Business birth A financial plan where employees contribute a Establishment Longitudinal Microdata File percentage of their earnings to a fund that is invested See U.S. Establishment Longitudinal Microdata File in stocks, bonds, or money markets for the purpose of Ethics saving money for retirement. See Business ethics Four Ps Evaluation Marketing terms referring to Product, Price, Place, Determining the potential success of translating an and Promotion. invention into a product or process. Franchising Glossary Exit A form of licensing by which the owner-the See Business exit franchisor-distributes or markets a product, method, or service through affiliated dealers Experience rating See Underwriting called franchisees. The product, method, or service being marketed is identified by a brand name, Financial ratios and the franchisor maintains control over the See Corporate financial ratios; Industry financial ratios marketing methods employed. The franchisee is Financial statement often given exclusive access to a defined geographic A written record of business finances, including area. balance sheets and profit and loss statements. Export Financing A product sold outside of the country. See First-stage financing; Second-stage financing; Export license Thirdstage financing A general or specific license granted by the U.S. First-stage financing Department of Commerce required of anyone wishing Financing provided to companies that have expended to export goods. Some restricted articles need approval their initial capital, and require funds to start full-scale from the U.S. Departments of State, Defense, or manufacturing and sales. Also known as First-round Energy. financing. Failure Fiscal year See Business failure Any twelve-month period used by businesses for accounting purposes. Fair share agreement An agreement reached between a franchisor and a 504 Program minority business organization to extend business See Certified development corporation ownership to minorities by either reducing the Flexible benefit plan amount of capital required or by setting aside A plan that offers a choice among cash and/or certain marketing areas for minority business qualified benefits such as group term life insurance, owners. B U S I N E S S P L A N S H A N D B O O K , Volume 11 437 GLOSSARY OF SMALL BUSINESS TERMS Feasibility study Garment registration number A study to determine the likelihood that a proposed A number that must appear on every garment sold in product or development will fulfill the objectives of a the U.S. to indicate the manufacturer of the garment, particular investor. which may or may not be the same as the label under which the garment is sold. The U.S. Federal Trade Federal Trade Commission (FTC) Federal agency that promotes free enterprise and Commission assigns and regulates garment competition within the U.S. registration numbers. Federal Trade Mark Act of 1946 Gatekeeper See Lanham Act A key contact point for entry into a network. Fictional name GDP See Business name See Gross domestic product Fiduciary General obligation bond An individual or group that hold assets in trust for a A municipal bond secured by the taxing power of the beneficiary. municipality. The Tax Reform Act of 1986 limits the purposes for which such bonds may be issued and Financial analysis establishes volume limits on the extent of their The techniques used to determine money needs in a issuance. business. Techniques include ratio analysis, calculation of return on investment, guides for measuring GNP profitability, and break-even analysis to determine See Gross national product ultimate success. Good Housekeeping Seal Financial intermediary Seal appearing on products that signifies the A financial institution that acts as the intermediary fulfillment of the standards set by the Good between borrowers and lenders. Banks, savings and Housekeeping Institute to protect consumer interests. loan associations, finance companies, and venture Goods sector capital companies are major financial intermediaries All businesses producing tangible goods, including in the United States. agriculture, mining, construction, and manufacturing Free on board (FOB) businesses. A pricing term indicating that the quoted price GPO includes the cost of loading goods into transport See Gross product originating vessels at a specified place. Gross domestic product (GDP) Frictional unemployment The part of the nation’s gross national product (see See Unemployment separate citation) generated by private business using FTC resources from within the country. See Federal Trade Commission Gross national product (GNP) Fulfillment The most comprehensive single measure of aggregate The systems necessary for accurate delivery of an economic output. Represents the market value of the ordered item, including subscriptions and direct total output of goods and services produced by a marketing. nation’s economy. Full-time workers Gross product originating (GPO) Generally, those who work a regular schedule of more A measure of business output estimated from the than 35 hours per week. income or production side using employee 438 B U S I N E S S P L A N S H A N D B O O K , Volume 11 GLOSSARY OF SMALL BUSINESS TERMS compensation, profit income, net interest, capital determine the optimal use of labor to increase consumption, and indirect business taxes. production, thereby increasing profit. HAL Idea See Handicapped assistance loan program An original concept for a new product or process. Handicapped assistance loan program (HAL) Import Low-interest direct loan program through the U.S. Products produced outside the country in which they Small Business Administration (SBA) for handicapped are consumed. persons. The SBA requires that these persons Income demonstrate that their disability is such that it is Money or its equivalent, earned or accrued, resulting impossible for them to secure employment, thus from the sale of goods and services. making it necessary to go into their own business to make a living. Income statement A financial statement that lists the profits and losses of Health maintenance organization (HMO) a company at a given time. Organization of physicians and other health care professionals that provides health services to Incorporation The filing of a certificate of incorporation with a Glossary subscribers and their dependents on a prepaid basis. state’s secretary of state, thereby limiting the business Health provider owner’s liability. An individual or institution that gives medical care. Under Medicare, an institutional provider is a Incubator A facility designed to encourage entrepreneurship and hospital, skilled nursing facility, home health agency, minimize obstacles to new business formation and or provider of certain physical therapy services. growth, particularly for high-technology firms, by Hispanic housing a number of fledgling enterprises that share A person of Cuban, Mexican, Puerto Rican, Latin an array of services, such as meeting areas, secretarial American (Central or South American), European services, accounting, research library, on-site financial Spanish, or other Spanish-speaking origin or ancestry. and management counseling, and word processing HMO facilities. See Health maintenance organization Independent contractor Home-based business An individual considered self-employed (see separate A business with an operating address that is also a citation) and responsible for paying Social Security residential address (usually the residential address of taxes and income taxes on earnings. the proprietor). Indirect health coverage Hub-and-spoke system Health insurance obtained through another A system in which flights of an airline from many individual’s health care plan; for example, a spouse’s different cities (the spokes) converge at a single airport employersponsored plan. (the hub). After allowing passengers sufficient time to Industrial development authority make connections, planes then depart for different The financial arm of a state or other political cities. subdivision established for the purpose of financing Human Resources Management economic development in an area, usually through A business program designed to oversee recruiting, loans to nonprofit organizations, which in turn pay, benefits, and other issues related to the provide facilities for manufacturing and other company’s work force, including planning to industrial operations. B U S I N E S S P L A N S H A N D B O O K , Volume 11 439 GLOSSARY OF SMALL BUSINESS TERMS Industry financial ratios IPO Corporate financial ratios averaged for a specified See Initial public offering industry. These are used for comparison purposes Job description and reveal industry trends and identify differences The duties and responsibilities required in a particular between the performance of a specific company position. and the performance of its industry. Also known as Industrial averages, Industry ratios, Job tenure A period of time during which an individual is Financial averages, and Business or Industrial continuously employed in the same job. norms. Joint marketing agreements Inflation Agreements between regional and major airlines, often Increases in volume of currency and credit, generally involving the coordination of flight schedules, fares, resulting in a sharp and continuing rise in price levels. and baggage transfer. These agreements help regional Informal capital carriers operate at lower cost. Financing from informal, unorganized sources; includes informal debt capital such as trade credit or Joint venture Venture in which two or more people combine efforts loans from friends and relatives and equity capital in a particular business enterprise, usually a single from informal investors. transaction or a limited activity, and agree to share the Initial public offering (IPO) profits and losses jointly or in proportion to their A corporation’s first offering of stock to the public. contributions. Innovation Keogh plan The introduction of a new idea into the marketplace in Designed for self-employed persons and the form of a new product or service or an unincorporated businesses as a tax-deferred pension improvement in organization or process. account. Intellectual property Labor force Any idea or work that can be considered proprietary Civilians considered eligible for employment who are in nature and is thus protected from infringement by also willing and able to work. others. Labor force participation rate Internal capital The civilian labor force as a percentage of the civilian Debt or equity financing obtained from the owner or population. through retained business earnings. Labor intensity Internet The relative importance of labor in the production A government-designed computer network that process, usually measured as the capital-labor ratio; contains large amounts of information and is i.e., the ratio of units of capital (typically, dollars of accessible through various vendors for a fee. tangible assets) to the number of employees. The Intrapreneurship higher the capital-labor ratio exhibited by a firm or The state of employing entrepreneurial principles to industry, the lower the capital intensity of that firm or nonentrepreneurial situations. industry is said to be. Invention Labor surplus area The tangible form of a technological idea, which An area in which there exists a high unemployment could include a laboratory prototype, drawings, rate. In procurement (see separate citation), extra formulas, etc. points are given to firms in counties that are 440 B U S I N E S S P L A N S H A N D B O O K , Volume 11 GLOSSARY OF SMALL BUSINESS TERMS designated a labor surplus area; this information is Limited partnerships requested on procurement bid sheets. See Venture capital limited partnerships Labor union Liquidity An organization of similarly-skilled workers who The ability to convert a security into cash promptly. collectively bargain with management over the Loans conditions of employment. See Commercial loans; Disaster loans; SBA direct Laboratory prototype loans; SBA guaranteed loans; SBA special lending See Prototype institution categories Local Area Network (LAN) Computer networks contained within a single building LAN See Local Area Network or small area; used to facilitate the sharing of information. Lanham Act Refers to the Federal Trade Mark Act of 1946. Protects Local development corporation registered trademarks, trade names, and other service An organization, usually made up of local citizens marks used in commerce. of a community, designed to improve the economy of the area by inducing business and industry to Large business-dominated industry locate and expand there. A local development Glossary Industry in which a minimum of 60 percent of corporation establishes a capability to finance local employment or sales is in firms with more than 500 growth. workers. Long-haul rates LBO Rates charged by a transporter in which the distance See Leveraged buy-out traveled is more than 800 miles. Leader pricing A reduction in the price of a good or service in order Long-term debt An obligation that matures in a period that exceeds to generate more sales of that good or service. five years. Legal list A list of securities selected by a state in which certain Low-grade bond A corporate bond that is rated below investment grade institutions and fiduciaries (such as pension funds, by the major rating agencies (Standard and Poor’s, insurance companies, and banks) may invest. Securities Moody’s). not on the list are not eligible for investment. Legal lists typically restrict investments to high quality securities Macro-efficiency meeting certain specifications. Generally, investment is Efficiency as it pertains to the operation of markets limited to U.S. securities and investment-grade blue and market systems. chip securities (see separate citation). Managed care Leveraged buy-out (LBO) A cost-effective health care program initiated by The purchase of a business or a division of a corporation employers whereby low-cost health care is made through a highly leveraged financing package. available to the employees in return for exclusive patronage to program doctors. Liability An obligation or duty to perform a service or an act. Management Assistance Programs Also defined as money owed. See SBA Management Assistance Programs License Management and technical assistance A legal agreement granting to another the right to use A term used by many programs to mean business (as a technological innovation. opposed to technological) assistance. B U S I N E S S P L A N S H A N D B O O K , Volume 11 441 GLOSSARY OF SMALL BUSINESS TERMS Mandated benefits Medicare (Title XVIII) Specific treatments, providers, or individuals required A nationwide health insurance program for disabled by law to be included in commercial health plans. and aged persons. Health insurance is available to Market evaluation insured persons without regard to income. Monies The use of market information to determine the sales from payroll taxes cover hospital insurance and potential of a specific product or process. monies from general revenues and beneficiary premiums pay for supplementary medical insurance. Market failure The situation in which the workings of a competitive MEL market do not produce the best results from the point See Master Establishment List of view of the entire society. MESBIC Market information See Minority enterprise small business investment Data of any type that can be used for market corporation evaluation, which could include demographic data, MET technology forecasting, regulatory changes, etc. See Multiple employer trust Market research Metropolitan statistical area (MSA) A systematic collection, analysis, and reporting of data A means used by the government to define large about the market and its preferences, opinions, trends, population centers that may transverse different and plans; used for corporate decision-making. governmental jurisdictions. For example, the Market share Washington, D.C. MSA includes the District of In a particular market, the percentage of sales of a Columbia and contiguous parts of Maryland and specific product. Virginia because all of these geopolitical areas Marketing comprise one population and economic operating Promotion of goods or services through various unit. media. Mezzanine financing Master Establishment List (MEL) See Third-stage financing A list of firms in the United States developed by the Micro-efficiency U.S. Small Business Administration; firms can be Efficiency as it pertains to the operation of individual selected by industry, region, state, standard firms. metropolitan statistical area (see separate citation), county, and zip code. Microdata Information on the characteristics of an individual Maturity business firm. The date upon which the principal or stated value of a bond or other indebtedness becomes due and payable. Mid-term debt An obligation that matures within one to five years. Medicaid (Title XIX) A federally aided, state-operated and administered Midrisk venture capital program that provides medical benefits for certain low See Equity midrisk venture capital income persons in need of health and medical care Minimum premium plan who are eligible for one of the government’s welfare A combination approach to funding an insurance plan cash payment programs, including the aged, the blind, aimed primarily at premium tax savings. The the disabled, and members of families with dependent employer self-funds a fixed percentage of estimated children where one parent is absent, incapacitated, or monthly claims and the insurance company insures unemployed. the excess. 442 B U S I N E S S P L A N S H A N D B O O K , Volume 11 GLOSSARY OF SMALL BUSINESS TERMS Minimum wage Multiple employer trust (MET) The lowest hourly wage allowed by the federal A self-funded benefit plan generally geared toward government. small employers sharing a common interest. Minority Business Development Agency NAFTA Contracts with private firms throughout the nation to See North American Free Trade Agreement sponsor Minority Business Development Centers NASDAQ which provide minority firms with advice and See National Association of Securities Dealers technical assistance on a fee basis. Automated Quotations Minority Enterprise Small Business Investment National Association of Securities Dealers Corporation (MESBIC) Automated Quotations A federally funded private venture capital firm Provides price quotes on over-the-counter securities as licensed by the U.S. Small Business Administration to well as securities listed on the New York Stock provide capital to minority-owned businesses (see Exchange. separate citation). National income Minority-owned business Aggregate earnings of labor and property arising from Businesses owned by those who are socially or Glossary the production of goods and services in a nation’s economically disadvantaged (see separate citation). economy. Mom and Pop business Net assets A small store or enterprise having limited capital, See Net worth principally employing family members. Net income Moonlighter The amount remaining from earnings and profits after A wage-and-salary worker with a side business. all expenses and costs have been met or deducted. Also known as Net earnings. MSA See Metropolitan statistical area Net profit Money earned after production and overhead Multi-employer plan expenses (see separate citations) have been A health plan to which more than one employer is deducted. required to contribute and that may be maintained through a collective bargaining agreement and Net worth required to meet standards prescribed by the U.S. The difference between a company’s total assets and its Department of Labor. total liabilities. Multi-level marketing Network A system of selling in which you sign up other people A chain of interconnected individuals or organizations to assist you and they, in turn, recruit others to help sharing information and/or services. them. Some entrepreneurs have built successful New York Stock Exchange (NYSE) companies on this concept because the main focus of The oldest stock exchange in the U.S. Allows for their activities is their product and product sales. trading in stocks, bonds, warrants, options, and rights that meet listing requirements. Multimedia The use of several types of media to promote a Niche product or service. Also, refers to the use of several A career or business for which a person is well-suited. different types of media (sight, sound, pictures, text) Also, a product which fulfills one need of a particular in a CD-ROM (see separate citation) product. market segment, often with little or no competition. B U S I N E S S P L A N S H A N D B O O K , Volume 11 443 GLOSSARY OF SMALL BUSINESS TERMS Nodes Owner’s capital One workstation in a network, either local area or Debt or equity funds provided by the owner(s) of a wide area (see separate citations). business; sources of owner’s capital are personal savings, sales of assets, or loans from financial Nonbank bank A bank that either accepts deposits or makes loans, but institutions. not both. Used to create many new branch banks. P&L See Profit and loss statement Noncompetitive awards A method of contracting whereby the federal Part-time workers government negotiates with only one contractor to Normally, those who work less than 35 hours per supply a product or service. week. The Tax Reform Act indicated that part-time workers who work less than 17.5 hours per week may Nonmember bank A state-regulated bank that does not belong to the be excluded from health plans for purposes of federal bank system. complying with federal nondiscrimination rules. Part-year workers Nonprofit Those who work less than 50 weeks per year. An organization that has no shareholders, does not distribute profits, and is without federal and state tax Partnership liabilities. Two or more parties who enter into a legal relationship to conduct business for profit. Defined by Norms the U.S. Internal Revenue Code as joint ventures, See Financial ratios syndicates, groups, pools, and other associations of North American Free Trade Agreement (NAFTA) two or more persons organized for profit that are not Passed in 1993, NAFTA eliminates trade barriers specifically classified in the IRS code as corporations among businesses in the U.S., Canada, and Mexico. or proprietorships. NYSE Patent See New York Stock Exchange A grant made by the government assuring an inventor Occupational Safety & Health Administration the sole right to make, use, and sell an invention for a (OSHA) period of 17 years. Federal agency that regulates health and safety PC standards within the workplace. See Professional corporation Optimal firm size Peak The business size at which the production cost per See Cyclical peak unit of output (average cost) is, in the long run, at its minimum. Pension A series of payments made monthly, semiannually, Organizational chart annually, or at other specified intervals during the A hierarchical chart tracking the chain of command lifetime of the pensioner for distribution upon within an organization. retirement. The term is sometimes used to denote the OSHA portion of the retirement allowance financed by the See Occupational Safety & Health Administration employer’s contributions. Overhead Pension fund Expenses, such as employee benefits and building A fund established to provide for the payment of utilities, incurred by a business that are unrelated to pension benefits; the collective contributions made by the actual product or service sold. all of the parties to the pension plan. 444 B U S I N E S S P L A N S H A N D B O O K , Volume 11 GLOSSARY OF SMALL BUSINESS TERMS Performance appraisal agencies). Also known as Private financing or Private An established set of objective criteria, based on job offering. description and requirements, that is used to evaluate Pro forma the performance of an employee in a specific job. The use of hypothetical figures in financial statements Permit to represent future expenditures, debts, and other See Business license potential financial expenses. Plan Proactive See Business plan Taking the initiative to solve problems and anticipate Pooling future events before they happen, instead of reacting An arrangement for employers to achieve efficiencies to an already existing problem or waiting for a difficult and lower health costs by joining together to purchase situation to occur. group health insurance or self-insurance. Procurement PPO A contract from an agency of the federal government See Preferred provider organization for goods or services from a small business. Preferred lenders program Prodigy Glossary See SBA special lending institution categories An online service which is accessible by computer modem. The service features Internet access, bulletin Preferred provider organization (PPO) A contractual arrangement with a health care services boards, online periodicals, electronic mail, and other organization that agrees to discount its health care services for subscribers. rates in return for faster payment and/or a patient Product development base. The stage of the innovation process where research is translated into a product or process through Premiums The amount of money paid to an insurer for health evaluation, adaptation, and demonstration. insurance under a policy. The premium is generally Product franchising paid periodically (e.g., monthly), and often is split An arrangement for a franchisee to use the name and between the employer and the employee. Unlike to produce the product line of the franchisor or parent deductibles and coinsurance or copayments, corporation. premiums are paid for coverage whether or not Production benefits are actually used. The manufacture of a product. Prime-age workers Production prototype Employees 25 to 54 years of age. See Prototype Prime contract Productivity A contract awarded directly by the U.S. Federal A measurement of the number of goods produced Government. during a specific amount of time. Private company Professional corporation (PC) See Closely held corporation Organized by members of a profession such as Private placement medicine, dentistry, or law for the purpose of A method of raising capital by offering for sale an conducting their professional activities as a investment or business to a small group of investors corporation. Liability of a member or shareholder is (generally avoiding registration with the Securities and limited in the same manner as in a business Exchange Commission or state securities registration corporation. B U S I N E S S P L A N S H A N D B O O K , Volume 11 445 GLOSSARY OF SMALL BUSINESS TERMS Profit and loss statement (P & L) Includes markets for both regularly traded and The summary of the incomes (total revenues) and costs nonregularly traded securities. of a company’s operation during a specific period of Public offering time. Also known as Income and expense statement. General solicitation for participation in an investment Proposal opportunity. Interstate public offerings are supervised See Business plan by the U.S. Securities and Exchange Commission (see Proprietorship separate citation). The most common legal form of business ownership; Quality control about 85 percent of all small businesses are The process by which a product is checked and tested proprietorships. The liability of the owner is unlimited to ensure consistent standards of high quality. in this form of ownership. Rate of return Prospective payment system The yield obtained on a security or other investment A cost-containment measure included in the Social based on its purchase price or its current market price. Security Amendments of 1983 whereby Medicare The total rate of return is current income plus or payments to hospitals are based on established prices, minus capital appreciation or depreciation. rather than on cost reimbursement. Real property Prototype Includes the land and all that is contained on it. A model that demonstrates the validity of the concept Realignment of an invention (laboratory prototype); a model that See Resource realignment meets the needs of the manufacturing process and the user (production prototype). Recession Contraction of economic activity occurring between Prudent investor rule or standard the peak and trough (see separate citations) of a A legal doctrine that requires fiduciaries to make business cycle. investments using the prudence, diligence, and Regulated market intelligence that would be used by a prudent person in A market in which the government controls the forces making similar investments. Because fiduciaries make of supply and demand, such as who may enter and investments on behalf of third-party beneficiaries, the what price may be charged. standard results in very conservative investments. Until recently, most state regulations required the Regulation D fiduciary to apply this standard to each investment. A vehicle by which small businesses make small Newer, more progressive regulations permit offerings and private placements of securities with fiduciaries to apply this standard to the portfolio taken limited disclosure requirements. It was designed to as a whole, thereby allowing a fiduciary to balance a ease the burdens imposed on small businesses utilizing portfolio with higher-yield, higher-risk investments. In this method of capital formation. states with more progressive regulations, practically Regulatory Flexibility Act every type of security is eligible for inclusion in the An act requiring federal agencies to evaluate the portfolio of investments made by a fiduciary, provided impact of their regulations on small businesses before that the portfolio investments, in their totality, are the regulations are issued and to consider less those of a prudent person. burdensome alternatives. Public equity markets Research Organized markets for trading in equity shares such as The initial stage of the innovation process, which common stocks, preferred stocks, and warrants. includes idea generation and invention. 446 B U S I N E S S P L A N S H A N D B O O K , Volume 11 GLOSSARY OF SMALL BUSINESS TERMS Research and development financing appropriated specifically for this purpose. In general, A tax-advantaged partnership set up to finance SBA direct loans carry interest rates slightly lower than product development for start-ups as well as more those in the private financial markets and are available mature companies. only to applicants unable to secure private financing Resource mobility or an SBA guaranteed loan. The ease with which labor and capital move from firm SBA 504 Program to firm or from industry to industry. See Certified development corporation Resource realignment SBA guaranteed loans The adjustment of productive resources to Loans made by lending institutions in which the U.S. interindustry changes in demand. Small Business Administration (SBA) will pay a prior Resources agreed-upon percentage of the outstanding principal The sources of support or help in the innovation in the event the borrower of the loan defaults. The process, including sources of financing, technical terms of the loan and the interest rate are negotiated evaluation, market evaluation, management and between theborrower and the lending institution, business assistance, etc. within set parameters. Glossary Retained business earnings SBA loans Business profits that are retained by the business See Disaster loans; SBA direct loans; SBA guaranteed rather than being distributed to the shareholders as loans; SBA special lending institution categories dividends. SBA Management Assistance Programs Revolving credit Classes, workshops, counseling, and publications An agreement with a lending institution for an offered by the U.S. Small Business Administration. amount of money, which cannot exceed a set SBA special lending institution categories maximum, over a specified period of time. Each time U.S. Small Business Administration (SBA) loan the borrower repays a portion of the loan, the amount program in which the SBA promises certified banks a of the repayment may be borrowed yet again. 72-hour turnaround period in giving its approval for a Risk capital loan, and in which preferred lenders in a pilot See Venture capital program are allowed to write SBA loans without seeking prior SBA approval. Risk management The act of identifying potential sources of financial SBDB loss and taking action to minimize their negative See Small Business Data Base impact. SBDC Routing See Small business development centers The sequence of steps necessary to complete a product SBI during production. See Small business institutes program S corporations SBIC See Sub chapter S corporations See Small business investment corporation SBA SBIR Program See Small Business Administration See Small Business Innovation Development Act of 1982 SBA direct loans Scale economies Loans made directly by the U.S. Small Business The decline of the production cost per unit of output Administration (SBA); monies come from funds (average cost) as the volume of output increases. B U S I N E S S P L A N S H A N D B O O K , Volume 11 447 GLOSSARY OF SMALL BUSINESS TERMS Scale efficiency Self-employment income The reduction in unit cost available to a firm when Income covered by Social Security if a business earns a producing at a higher output volume. net income of at least $400.00 during the year. Taxes are paid on earnings that exceed $400.00. SCORE See Service Corps of Retired Executives Self-employment retirement plan SEC See Keogh plan See Securities and Exchange Commission Self-employment tax SECA Required tax imposed on self-employed individuals See Self-Employment Contributions Act for the provision of Social Security and Medicare. The tax must be paid quarterly with estimated income tax Second-stage financing statements. Working capital for the initial expansion of a company that is producing, shipping, and has growing accounts Self-funding receivable and inventories. Also known as Second- A health benefit plan in which a firm uses its own round financing. funds to pay claims, rather than transferring the financial risks of paying claims to an outside insurer in Secondary market exchange for premium payments. A market established for the purchase and sale of outstanding securities following their initial Service Corps of Retired Executives (SCORE) distribution. Volunteers for the SBA Management Assistance Program who provide one-on-one counseling and Secondary worker teach workshops and seminars for small firms. Any worker in a family other than the person who is the primary source of income for the family. Service firm See Business service firm Secondhand capital Previously used and subsequently resold capital Service sector equipment (e.g., buildings and machinery). Broadly defined, all U.S. industries that produce intangibles, including the five major industry divisions Securities and Exchange Commission (SEC) Federal agency charged with regulating the trade of of transportation, communications, and utilities; securities to prevent unethical practices in the investor wholesale trade; retail trade; finance, insurance, and market. real estate; and services. Securitized debt Set asides A marketing technique that converts long-term loans See Small business set asides to marketable securities. Short-haul service A type of transportation service in which the Seed capital Venture financing provided in the early stages of the transporter supplies service between cities innovation process, usually during product where the maximum distance is no more than development. 200 miles. Self-employed person Short-term debt One who works for a profit or fees in his or her own An obligation that matures in one year. business, profession, or trade, or who operates a farm. SIC codes See Standard Industrial Classification codes Self-Employment Contributions Act (SECA) Federal law that governs the self-employment tax (see Single-establishment enterprise separate citation). See Establishment 448 B U S I N E S S P L A N S H A N D B O O K , Volume 11 GLOSSARY OF SMALL BUSINESS TERMS Small business Small business investment corporation (SBIC) An enterprise that is independently owned and A privately owned company licensed and funded operated, is not dominant in its field, and employs through the U.S. Small Business Administration and fewer than 500 people. For SBA purposes, the U.S. private sector sources to provide equity or debt capital Small Business Administration (SBA) considers to small businesses. various other factors (such as gross annual sales) in Small business set asides determining size of a business. Procurement (see separate citation) opportunities Small Business Administration (SBA) required by law to be on all contracts under $10,000 or An independent federal agency that provides a certain percentage of an agency’s total procurement assistance with loans, management, and advocating expenditure. interests before other federal agencies. Smaller firms Small Business Data Base For U.S. Department of Commerce purposes, those A collection of microdata (see separate citation) files firms not included in the Fortune 1000. on individual firms developed and maintained by the SMSA U.S. Small Business Administration. See Metropolitan statistical area Small business development centers (SBDC) Glossary Socially and economically disadvantaged Centers that provide support services to small Individuals who have been subjected to racial or businesses, such as individual counseling, SBA advice, ethnic prejudice or cultural bias without regard to seminars and conferences, and other learning center their qualities as individuals, and whose abilities to activities. Most services are free of charge, or available compete are impaired because of diminished at minimal cost. opportunities to obtain capital and credit. Small business development corporation Sole proprietorship See Certified development corporation An unincorporated, one-owner business, farm, or Small business-dominated industry professional practice. Industry in which a minimum of 60 percent of Special lending institution categories employment or sales is in firms with fewer than 500 See SBA special lending institution categories employees. Standard Industrial Classification (SIC) codes Small Business Innovation Development Act of 1982 Four-digit codes established by the U.S. Federal Federal statute requiring federal agencies with large Government to categorize businesses by type of extramural research and development budgets to economic activity; the first two digits correspond to allocate a certain percentage of these funds to small major groups such as construction and manufacturing, research and development firms. The program, called while the last two digits correspond to subgroups such the Small Business Innovation Research (SBIR) as home construction or highway construction. Program, is designed to stimulate technological innovation and make greater use of small businesses in Standard metropolitan statistical area (SMSA) meeting national innovation needs. See Metropolitan statistical area Small business institutes (SBI) program Start-up Cooperative arrangements made by U.S. Small A new business, at the earliest stages of development Business Administration district offices and local and financing. colleges and universities to provide small business Start-up costs firms with graduate students to counsel them without Costs incurred before a business can commence charge. operations. B U S I N E S S P L A N S H A N D B O O K , Volume 11 449 GLOSSARY OF SMALL BUSINESS TERMS Start-up financing Tax number Financing provided to companies that have either A number assigned to a business by a state revenue completed product development and initial marketing department that enables the business to buy goods or have been in business for less than one year but without paying sales tax. have not yet sold their product commercially. Taxable bonds Stock An interest-bearing certificate of public or private A certificate of equity ownership in a business. indebtedness. Bonds are issued by public agencies to finance economic development. Stop-loss coverage Insurance for a self-insured plan that reimburses the Technical assistance company for any losses it might incur in its health See Management and technical assistance claims beyond a specified amount. Technical evaluation Strategic planning Assessment of technological feasibility. Projected growth and development of a business to Technology establish a guiding direction for the future. Also used The method in which a firm combines and utilizes to determine which market segments to explore for labor and capital resources to produce goods or optimal sales of products or services. services; the application of science for commercial or Structural unemployment industrial purposes. See Unemployment Technology transfer Sub chapter S corporations The movement of information about a technology or Corporations that are considered noncorporate for tax intellectual property from one party to another for purposes but legally remain corporations. use. Subcontract Tenure A contract between a prime contractor and a See Employee tenure subcontractor, or between subcontractors, to furnish Term supplies or services for performance of a prime The length of time for which a loan is made. contract (see separate citation) or a subcontract. Terms of a note Surety bonds The conditions or limits of a note; includes the interest Bonds providing reimbursement to an individual, rate per annum, the due date, and transferability and company, or the government if a firm fails to complete convertibility features, if any. a contract. The U.S. Small Business Administration guarantees surety bonds in a program much like the Third-party administrator An outside company responsible for handling claims SBA guaranteed loan program (see separate citation). and performing administrative tasks associated with Swing loan health insurance plan maintenance. See Bridge financing Third-stage financing Target market Financing provided for the major expansion of a The clients or customers sought for a business’ company whose sales volume is increasing and that product or service. is breaking even or profitable. These funds are used Targeted Jobs Tax Credit for further plant expansion, marketing, working Federal legislation enacted in 1978 that provides a tax capital, or development of an improved product. credit to an employer who hires structurally Also known as Third-round or Mezzanine unemployed individuals. financing. 450 B U S I N E S S P L A N S H A N D B O O K , Volume 11 GLOSSARY OF SMALL BUSINESS TERMS Time deposit Trend A bank deposit that cannot be withdrawn before a A statistical measurement used to track changes that specified future time. occur over time. Time management Trough Skills and scheduling techniques used to maximize See Cyclical trough productivity. UCC Trade credit See Uniform Commercial Code Credit extended by suppliers of raw materials or UL finished products. In an accounting statement, trade See Underwriters Laboratories credit is referred to as "accounts payable." Underwriters Laboratories (UL) Trade name One of several private firms that tests products and The name under which a company conducts business, processes to determine their safety. Although various or by which its business, goods, or services are firms can provide this kind of testing service, many identified. It may or may not be registered as a local and insurance codes specify UL certification. trademark. Underwriting Glossary Trade periodical A process by which an insurer determines whether or A publication with a specific focus on one or more not and on what basis it will accept an application for aspects of business and industry. insurance. In an experience-rated plan, premiums are based on a firm’s or group’s past claims; factors other Trade secret Competitive advantage gained by a business through than prior claims are used for community-rated or the use of a unique manufacturing process or formula. manually rated plans. Trade show Unfair competition An exhibition of goods or services used in a particular Refers to business practices, usually unethical, such as industry. Typically held in exhibition centers where using unlicensed products, pirating merchandise, or exhibitors rent space to display their merchandise. misleading the public through false advertising, which give the offending business an unequitable advantage Trademark over others. A graphic symbol, device, or slogan that identifies a business. A business has property rights to its Unfunded accrued liability The excess of total liabilities, both present and trademark from the inception of its use, but it is still prospective, over present and prospective assets. prudent to register all trademarks with the Trademark Office of the U.S. Department of Commerce. Unemployment The joblessness of individuals who are willing to work, Translation who are legally and physically able to work, and who See Product development are seeking work. Unemployment may represent the Treasury bills temporary joblessness of a worker between jobs Investment tender issued by the Federal Reserve Bank (frictional unemployment) or the joblessness of a in amounts of $10,000 that mature in 91 to 182 days. worker whose skills are not suitable for jobs available Treasury bonds in the labor market (structural unemployment). Long-term notes with maturity dates of not less than Uniform Commercial Code (UCC) seven and not more than twenty-five years. A code of laws governing commercial transactions Treasury notes across the U.S., except Louisiana. Their purpose is to Short-term notes maturing in less than seven years. bring uniformity to financial transactions. B U S I N E S S P L A N S H A N D B O O K , Volume 11 451 GLOSSARY OF SMALL BUSINESS TERMS Uniform product code (UPC symbol) stage of expansion. Funding is obtained through A computer-readable label comprised of ten digits and public or private pension funds, commercial banks stripes that encodes what a product is and how much and bank holding companies, small business it costs. The first five digits are assigned by the investment corporations licensed by the U.S. Small Uniform Product Code Council, and the last five Business Administration, private venture capital firms, digits by the individual manufacturer. insurance companies, investment management Unit cost companies, bank trust departments, industrial See Average cost companies seeking to diversify their investment, and investment bankers acting as intermediaries for other UPC symbol See Uniform product code investors or directly investing on their own behalf. U.S. Establishment and Enterprise Microdata Venture capital limited partnerships (USEEM) File Designed for business development, these partnerships A cross-sectional database containing information on are an institutional mechanism for providing capital employment, sales, and location for individual for young, technology-oriented businesses. The enterprises and establishments with employees that investors’ money is pooled and invested in money have a Dun & Bradstreet credit rating. market assets until venture investments have been selected. The general partners are experienced U.S. Establishment Longitudinal Microdata (USELM) File investment managers who select and invest the A database containing longitudinally linked sample equity and debt securities of firms with high growth microdata on establishments drawn from the U.S. potential and the ability to go public in the near Establishment and Enterprise Microdata file (see future. separate citation). Venture capital network (VCN) U.S. Small Business Administration 504 Program A computer database that matches investors with See Certified development corporation entrepreneurs. USEEM WAN See U.S. Establishment and Enterprise Microdata File See Wide Area Network USELM Wide Area Network (WAN) See U.S. Establishment Longitudinal Microdata File Computer networks linking systems throughout a VCN state or around the world in order to facilitate the See Venture capital network sharing of information. Venture capital Withholding Money used to support new or unusual business Federal, state, social security, and unemployment taxes ventures that exhibit above-average growth rates, withheld by the employer from employees’ wages; significant potential for market expansion, and are in employers are liable for these taxes and the corporate need of additional financing to sustain growth or umbrella and bankruptcy will not exonerate an further research and development; equity or equity- employer from paying back payroll withholding. type financing traditionally provided at the Employers should escrow these funds in a separate commercialization stage, increasingly available prior account and disperse them quarterly to withholding to commercialization. authorities. Venture capital company Workers’ compensation A company organized to provide seed capital to a A state-mandated form of insurance covering business in its formation stage, or in its first or second workers injured in job-related accidents. In some 452 B U S I N E S S P L A N S H A N D B O O K , Volume 11 GLOSSARY OF SMALL BUSINESS TERMS states, the state is the insurer; in other states, Yield insurance must be acquired from commercial The rate of income returned on an investment, insurance firms. Insurance rates are based on a expressed as a percentage. Income yield is obtained by number of factors, including salaries, firm history, dividing the current dollar income by the current and risk of occupation. market price of the security. Net yield or yield to Working capital maturity is the current income yield minus any Refers to a firm’s short-term investment of current premium above par or plus any discount from par in assets, including cash, short-term securities, accounts purchase price, with the adjustment spread over the receivable, and inventories. period from the date of purchase to the date of maturity. Glossary B U S I N E S S P L A N S H A N D B O O K , Volume 11 453