E

EARLY PAYMENT

To provide money (to pay) on a date sooner than the specified date.

EARNED INCOME

The amount received for goods or services delivered; income (especially wages and salaries) generated by providing goods and services.

EARNED SURPLUS

See RETAINED EARNINGS.

EARNEST MONEY

The cash deposit paid by a prospective buyer toward the total purchase price of a FIXED ASSET as evidence of a good-faith intention to complete the transaction. See also BINDER; DOWN PAYMENT; MONEY PUT DOWN.

EARNINGS

Profits derived from a business enterprise. See PROFIT.

EARNINGS AFTER TAXES

PROFIT available to the owners of the business.

EARNINGS BEFORE TAXES

Corporate profits after bondholders’ interest has been paid but before taxes have been paid. Same as PROFIT BEFORE TAXES.

EARNINGS CYCLE

The elapsed time required to convert raw materials into finished goods, finished goods into sales and receipt of money for goods sold. Since profit (sales less expenses) is built into selling price, the cash conversion cycle is sometimes called the earnings cycle. See CASH CONVERSION CYCLE.

EARNINGS PER SHARE (EPS)

The proportionate amount of a company’s profit (EARNINGS) for each outstanding share of common stock.

EARN OUT

A clause in a contract between a large company that is buying the entire business of a small company. The clause may specify the small entrepreneur will realize additional money from the sale if the small company earnings exceed a specified amount after the buyout has occurred.

EBIT

An acronym for EARNINGS Before Interest and Taxes. This calculation is sometimes made by the small business person in order to determine the earnings that would have resulted if the business had been financed entirely by equity without any outstanding loans.

EC

See EUROPEAN COMMUNITY.

ECONOMETRICS

The use of sophisticated analysis and modeling techniques to describe in mathematical terms, the relationship of economic factors such as labor, capital, interest rates and government policy, then the testing of changes in economic scenarios.

ECONOMIC

Of or having to do with the management of income and expenditures in a business; thriftiness.

ECONOMIC FACTORS

The basic elements affecting financial matters such as labor, interest rates, government policy, management and taxation.

ECONOMIC INDICATORS

Key statistics showing the direction of the economy, such as unemployment rate, inflation rate, consumer price index and gross domestic product.

ECONOMIC LIFE

The estimated period of time over which an asset will be used; the period of time used for depreciation. Also called SERVICE LIFE; USEFUL LIFE.

ECONOMIC RESOURCES

See FACTORS OF PRODUCTION.

ECONOMICS

The educational science that studies the system of producing, distributing and consuming wealth and evaluates contributing factors such as labor, finance, management, capital and taxation.

ECONOMIST

A professional person who practices the art and science of ECONOMICS.

ECONOMIZE

To avoid waste or needless expenditure; to reduce expenditures; to manage in a thrifty manner.

ECONOMY

The prudent and careful management of income and expenses by a business to avoid waste. The overall aggregate financial activity within a governmental unit and the system of producing, distributing and consuming wealth.

ECONOMY OF SCALE

Decrease in the long-term average total cost of production due to lower cost per unit for larger quantity produced; the efficiency of producing larger quantities.

EEOC

See EQUAL EMPLOYMENT OPPORTUNITY COMMISSION.

EFFECTIVE INTEREST RATE

The actual (true) rate or yield of a loan regardless of the value stated in the debt instrument.

ELAIN

See ELECTRONIC LICENSE APPLICATION INFORMATION NETWORK.

ELASTIC PRICE

A situation in the marketplace where a change in price will cause a change in DEMAND. As opposed to INELASTIC PRICE. See PRICE ELASTICITY.

ELECTRONIC BANKING

The use of computers, wires and telephone lines (electronic equipment) to perform transactions with a bank or with others through a bank. Thus electronic banking avoids using checks and currency.

ELECTRONIC LICENSE APPLICATION INFORMATION NETWORK (ELAIN)

A U.S. Department of Commerce, Bureau of Export Administration, computer-based system that allows on-line acceptance of export license applications for most overseas destinations.

ELECTRONIC MAILBOX

The address on a computer network where people pick up messages sent by other computer users.

ELECTRONIC RETAILING

Use of interactive computer technology to present a sales message and consummate the sale.

E-MAIL

Short for Electronic Mail, a means of communicating through computers.

EMBARGO

In international trade, a restriction or prohibition on exported or imported products.

EMBEZZLE

To steal or take the property of another for one’s own use; particularly, a business theft by an employee. Often, it is the trusted employee who is discovered to be stealing (embezzling). The following three ways protect a business from theft (embezzlement): 1) select with care the people who are the best risk, 2) set up business procedures that make the practice difficult and 3) purchase insurance or bonding against a loss that may occur. Use all three, not just one or two.

EMPLOYEE

A person who does work for an employer under a verbal or written understanding where the employer gives direction as to what jobs are done, when jobs are done and, to some degree, how jobs are done. Care must be taken not to classify employees as INDEPENDENT CONTRACTORS. To the small business firm, the result may be crucial because withholding is required of employees but not for independent contractors. See INDEPENDENT CONTRACTOR.

EMPLOYEE BENEFITS

Things like health care insurance that are paid in part or in full by a company and not considered part of the employee’s salary or wages; free to the employees and paid by the company.

EMPLOYEE LEASING

A personnel management scheme whereby an Employee Leasing Firm hires the employee and pays the wages, withholding and benefits. Then the employee is leased to a small business under contract. Benefits to the small business include lower personnel costs, better employee benefits, avoidance of most employee reporting, less paperwork and reduced employer liability.

EMPLOYEE LEASING FIRM

A business established for the sole purpose of providing employees to other businesses. See EMPLOYEE LEASING.

EMPLOYER

A person or company that engages other people (EMPLOYEES) to perform work under a verbal or written agreement.

EMPLOYER’S TAX GUIDE

A publication by the U.S. government (and some states) that explains basic information concerning employment and employee-related taxes. This publication is especially helpful to the small business person and is free. Also called CIRCULAR E.

EMPLOYMENT RATE

The numerical value of employed persons as a percent of the TOTAL WORKFORCE.

ENDING BALANCE

The amount on hand at the end of a period as a result of operations during the period.

ENDORSE

To sign one’s name on the back of a document, such as a check; a signature on the back of an ownership document, such as a title for an asset. A signature on the back of an ownership document that transfers ownership of the asset to another party. Also, a recommendation or affirmation from a celebrity endorsing a product or service.

ENDORSEMENT

The act of signing one’s name or evidence of the signature, thus transferring title of a negotiable instrument.

ENDORSER

The person who signed his or her name; the individual to whom the signature belongs.

END USER

The customer; the consumer.

ENTERPRISE

A business firm; most often a newly-formed venture. Also in business, to show creativity, innovation or originality in a new concept or idea.

ENTERPRISE CENTER

Same as ENTERPRISE ZONE, except perhaps smaller, such as in a building.

ENTERPRISE ZONE

A geographical area, building or location established by a government for the encouragement of start-up businesses, often with free or reduced prices for services (lower rent, shared meeting rooms, office equipment or secretarial service) to permit the business to get started more easily.

ENTITY

For business definition, see LEGAL ENTITY.

ENTREPRENEUR

A person who undertakes the risks of starting a new business. Most often involves a new product or new service. Usually carries the connotation of creativity, vision, self-starting or venturesome. The founder of a business.

ENTREPRENEURIAL SHOCK

The psychological realization by a start-up business person that the “work-for-yourself” idea is accompanied by difficult decisions and disappointments. Entrepreneurial shock often occurs when a start-up business person has worked in the corporate environment and was not exposed to all the complications of operating a business.

EPS

See EARNINGS PER SHARE.

EQUAL CREDIT OPPORTUNITY ACT

Federal legislation passed in the mid-1970s prohibiting discrimination in granting CREDIT, based on race religion, sex, ethnic background, or whether a person is receiving public assistance or alimony. The FEDERAL TRADE COMMISSION enforces the act.

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION (EEOC)

An agency of the federal government established to ensure fair employment practices and prevent discrimination because of race, religion, sex, ethnic background or disability.

EQUIPMENT

Physical goods used in a business, such as machinery or furniture. Equipment is used in a business during the production of income. As opposed to real estate, material or supplies. In accounting, equipment is treated as PERSONAL PROPERTY.

EQUIPMENT EXPENSE

Money paid for the acquisition, installation operation and maintenance of personal property (equipment) used in the production of income. Sometimes an allowance for the depreciation of equipment that is shown on an Income Statement.

EQUITY

In business, the owner’s investment in the business; the amount owned by the owners; the owner’s interest or value remaining after payment of all debts and charges. In a start-up business, the amount of money provided by the owner at the outset; often in conjunction with the amount borrowed as a loan. Normally, with greater owner’s equity, the business is more stable. Same as NET WORTH in a business. In banking, the difference between the amount received from the sale of assets and the claims against the assets. Also an estimate of this difference prior to sale. In investment, ownership interest possessed by common and preferred shareholders in a corporation-stock ownership as opposed to bonds and loans that are liabilities. In general, fairness. For example, law courts try to be equitable in their judgment when splitting up corporations or estates.

EQUITY BUILD-UP

Adding to the amount of ownership interest in a business (EQUITY or NET WORTH) by accumulation of retained earnings. In the financing of real property, the gradual reduction of outstanding principal due on a mortgage that results in an increase in the ownership amount, usually through periodic payments, which decrease the amount of the loan.

EQUITY CAPITAL

The initial investment in a start-up business; money invested in a business by the owner. As opposed to money loaned to the business (BORROWED CAPITAL). See EQUITY; CAPITAL.

EQUITY FINANCING

In a corporation, raising money by issuing and selling shares of common or preferred stock or taking on a partner in a partnership, as opposed to incurring debt or borrowing (DEBT FINANCING). Obtaining needed additional money to operate or expand a business by surrendering part of the ownership of the business in exchange for the invested capital. Small businesses must exercise care in obtaining money in this manner because control of the business could be lost, or earnings may be reduced (diluted) by payments to the other owners.

EQUITY TURNOVER

See CAPITAL TURNOVER.

EQUIVALENT UNITS OF PRODUCTION

A measure of the number of production units being manufactured including completed units and partially manufactured units. Partial units are stated proportionally in terms of completed units; for example, 1000 half completed units would be stated as 500 equivalent fully completed units.

ERISA

Employee Retirement Income Security Act enacted to safeguard “the interest of participants in employee benefit plans and their beneficiaries . . . by establishing standards of conduct, responsibility and obligations” for fiduciaries of such plans.

ERRORS AND OMISSIONS INSURANCE

A form of INSURANCE that covers liability for mistakes, negligence or errors, as well as unintentional things left out, judgmental omissions or other factors. However, it does not cover fraudulent behavior. This type of insurance can be purchased by businesses engaged in buying and selling activities involving contracts.

ESCALATOR CLAUSE

A statement in a contract that provides for increasing one amount in proportion to a change in another amount. For example, in a labor contract, wage rates of employees may be periodically increased to keep pace with the rising cost of living.

ESCROW

Money set aside or deposited with a neutral third party that is to be used later for a specific purpose.

ESOP

Employee Stock Ownership Plan, which gives to an employee shares of stock in the company as a deferred compensation benefit.

ESTATE TAX

A tax by a government on the value of property transferred at death.

ESTIMATE

To calculate in advance the value or cost of producing a product or performing a service, based on a description, performance requirements and assumptions. Also, the document stating the amount of such calculations. In business this often means the same as a BID.

ESTIMATED TAX

A preliminary accounting approximation (ESTIMATE) of taxes due during a period of time. May be required by law to make partial payments toward the total amount due at the end of the accounting period.

 ET AL.

A Latin abbreviation adopted into English meaning “and others.”

ETHICS

Moral standards or codes of conduct.

ETHNIC GROUP

People belonging to the same race having a common heritage of language, culture and customs. See DISCRIMINATION.

EUROPEAN COMMUNITY

The alliance formed by several European countries to minimize the business and economic barriers between the countries, thus permitting freedom of people movement and freedom to conduct business across country borders.

EXCHANGE RATE

The price at which the money of one country is converted into the money of another country.

EXCISE TAX

A federal or state tax on the sale or manufacture of a commodity, usually a luxury item. Examples: alcohol and tobacco. EXCLUSIVE AGREEMENT An agreement between two parties (businesses) that restrict purchase, sale or use of competing products such as the geographical territory each party may control for a specific business interest.

EXECUTE

To make a document legally valid, such as by signing a contract or acknowledging receipt of an order.

EXECUTIVE

A top-level member of the management team of a company; one with the title of PRESIDENT, VICE-PRESIDENT, SECRETARY or TREASURER.

EXECUTIVE SUMMARY

A brief synopsis of a document that highlights the important facts, issues and conclusions. The executive summary usually precedes the body of the document.

EXEMPTION

A subtraction from income allowed by the IRS in computing the income that is taxable.

EXHIBIT

A display; a trade show where a public offering by many companies and products in one location attracts a large potential base of customers.

EXIMBANK

See EXPORT-IMPORT BANK.

EXISTING BUSINESS

A business that is not a start-up, often used when purchasing the business of another. Also, the product line of business currently engaged in.

EXPANSION

An increase in the capacity of a business, such as more operating space, additional inventory or new product line.

EXPENDITURE

Money paid out for purchase of goods or services.

EXPENDITURE FORECAST

An estimate of future EXPENDITURES; planning for the times when bills are due to be paid; a written plan of expenses. EXPENSE Money paid out or identified for payment at a future date. Financial costs of material purchases, wages paid, fees and charges. Also a cause of spending; a drain on business finances. Money paid out for the purchase of goods or services.

EXPENSE BUDGET

An estimate of money to be paid out in a future period. See BUDGET; EXPENSE.

EXPENSE RATE

A measure of efficiency in a business, especially measuring the efficiency of operating expenses (overhead) in relation to sales; divide operating expenses by gross sales and express as a percent. When comparing similar periods, it shows trends of increasing or decreasing overhead expenses.

EXPENSE REPORT

A document that records the money paid to an employee for incidental items and the cost of travel or trips while conducting business.

EXPENSES

An accounting term for the sum of all money paid out for goods and services during a given period of time; they are the cost of goods and services used up in the process of obtaining revenue. They are sometimes referred to as “the cost of doing business” Expenses deducted from INCOME result in a PROFIT or LOSS for the business during a given period. See INCOME STATEMENT. Sometimes used interchangeably with the portion of overall expenses entitled OPERATING EXPENSES (OVERHEAD), especially when determining percentage relationships to sales.

EXPENSE STATEMENT

An accounting presentation of the money paid out over a period or a forecast of the money to be paid out in a future period.

EXPIRED POLICY

An INSURANCE POLICY (or other business policy) that no longer is in force, one on which the term has concluded or a policy that has been canceled.

EXPORT

To sell products or services for delivery to a customer in another country. Opposite of IMPORT.

EXPORT BROKER

A person or company that brings together, for a fee, buyers and sellers from different countries but does not take part in actual overseas sales transactions.

EXPORT DECLARATION

A federal government document listing products or services that have been sold and delivered to another country.

EXPORT DOCUMENTS

Of the many export documents that may be used, the ten most commonly used are ocean bill of lading, delivery instructions, letter of credit, commercial invoice, insurance certificate, dock receipt, export declaration, consular invoice, certificate of origin and transmittal letter. Each of these documents is defined in this dictionary.

EXPORTER

A company that sells and delivers goods to a destination in a foreign country. See EXPORT.

EXPORT-IMPORT BANK (EXIMBANK)

A U.S. government-sponsored bank that provides loans to finance exports by companies unlikely to find a commercial lender for the products to be exported. Eximbank also guarantees commercial loans to exporters, with loan rates below current market rates.

EXPORTING SERVICE COMPANY

A company that provides some type of EXPORT consulting services.

EXPORT LICENSE

A U.S. government document, required for all exporters that permits the LICENSEE to engage in the EXPORT of designated goods to certain approved destinations.

EXPORT MANAGEMENT COMPANY

A private company that serves as the EXPORT department for several manufacturers, soliciting and transacting export business on behalf of its clients in return for a retainer, salary or commission. See also EXPORT TRADING COMPANY.

EXPORT QUOTA

A restraint by the U.S. government on the quantity of an item that may be exported. See also EXPORT RESTRAINT.

EXPORT RESTRAINT

A restriction by the U.S. government on exports to a specific country. See also EXPORT QUOTA.

EXPORT SUBSIDY

Any form of government payment or benefit that is given to an exporter or producer contingent upon the export of goods.

EXPORT TRADING COMPANY

A private company that provides EXPORT services for manufacturers. It provides more services than an EXPORT MANAGEMENT COMPANY including taking title of goods.

EXPOSURE

In finance, the maximum amount of financial liability attributable to an incident; the greatest amount of loss following a specific event. In marketing, the number of people who will potentially be able to see or hear the advertisement.

EXTENDED COVERAGE

In insurance, additional financial protection for hazards not covered by the basic policy.

EXTERNAL AUDIT

A detailed financial review of the books of a company by an independent auditor, accountant or CPA.

EXTERNAL SOURCES OF WORKING CAPITAL

See WORKING CAPITAL.

EXTRADE

To sell goods or services for delivery to a customer in another city, county or state in exchange for money; i.e., to sell to a customer that is located in a government entity different from the home government entity. Similar to EXPORT but within a single country. Also, the outward movement of such goods or services from a city, county or state. By selling outside the seller’s locality, money is brought into the seller’s locality in exchange for the goods or services that were delivered. The influx of these monies causes an economic expansion of the entire seller’s locality that is several times greater than the amount brought in due to the economics of scale. Opposite of INTRADE.

 

All definitions were taken from www.small-business-dictionary.org.