I

IFB

See INVITATION FOR BID.

ILLIQUID

In finance, a business condition charterized by insufficient CASH FLOW (INCOME) to meet current and maturing obligations. Also, assets that cannot be easily converted into cash, such as real estate and specialized machinery. Illiquid assets may take a long time to sell, and the price at which others are willing to buy is often less than the market value or book value of the asset.

IMF

See INTERNATIONAL MONETARY FUND.

IMPLIED CONTRACT

An unwritten contract inferred from the actions of the parties. Such an agreement is created by neither words nor writing, rather it is inferred from the actions of the parties.

IMPORT

The purchase of goods or services from another country in exchange for money. Also, the inward movement of such goods.

IMPORT DUTY

See CUSTOMS DUTY.

IMPORT LICENSE

A document granting permission from the U.S. government for a person or company to IMPORT specified goods.

IMPORT SUBSTITUTION

A U.S. government policy that encourages companies in the United States to produce goods that are now imported.

IMPREST

Designation of a fund, such as a PETTY CASH FUND, that is replenished in exactly the amount expended from it.

IMPUTED INTEREST

Interest implied by law; an interest rate set by a governmental body that overrides an agreement of the parties, generally for taxing purposes.

INCOME

An accounting term defining the money received by a business in a given period of time as a result of operating the business; the goods and services sold. Also called REVENUE; SALES. Sometimes used to mean PROFIT or EARNINGS as a shortened form of NET INCOME.

INCOME PRODUCING ASSET

An item that is a vital ingredient to the operation of the business, such as an airplane for an airline or high-speed machinery for a manufacturing company.

INCOME STATEMENT

A detailed statement of income, expenses and taxes for a business, revealing the operating position of the business over a period of time. Thus the income statement displays whether the business has made a profit during the accounting period or sustained a loss during the accounting period. The income statement and the BALANCE SHEET at the end of an accounting period, together, constitute the primary FINANCIAL STATEMENTS for a company. Also called OPERATING STATEMENT; PROFIT & LOSS STATEMENT; P&L.

INCOME TAX

By law, the amount paid to a government (federal, state or local), calculated on the amount of earnings (INCOME) less expenses and deductions. Federal income taxes are required to be paid by individuals (FORM 1040) and corporations (FORM 1120). Separate income tax reporting is not required for a sole proprietorship, since the amount of earnings is reported by the individual on SCHEDULE C, FORM 1040 and also entered on the front of FORM 1040 as a profit or loss. Income taxes are not required for partnerships since PARTNERSHIPS prepare an INFORMATIONAL RETURN (FORM 1165) to report income to the individual on FORM K-1.

INCORPORATE

The act of forming a corporation by preparing the necessary articles of incorporation and filing them with the appropriate state governmental business-registration division.

INCORPORATION

The process by which a company receives a state CHARTER allowing it to operate as a CORPORATION. The act of incorporation must be acknowledged in the company’s name, using the word “incorporated,” the abbreviated “Inc.” or other acceptable variation. In the incorporation process, ARTICLES OF INCORPORATION are filed by the founders with the state. The state then formally recognizes the new corporate entity by issuing a CERTIFICATE OF INCORPORATION. Together, these two documents comprise the corporate CHARTER.

INCUBATION INVESTMENT

Money put into a new business struggling for survival.

INCUBATOR

A facility for encouraging entrepreneurs to start a business by housing, in one location, low-cost services such as rent, secretarial and business counseling. Incubators often promote development by new firms or firms attempting to market a new high technology product or service. Financing of incubators may be by state or local government as well as private financing.

INDEBTED

Under legal obligation to repay; a debt to another.

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT

See CERTIFIED PUBLIC ACCOUNTANT OR PUBLIC ACCOUNTANT. The word independent is added to emphasize that the professional work is performed by an unbiased source and is fair.

INDEPENDENT PUBLIC ACCOUNTANT

See CERTIFIED PUBLIC ACCOUNTANT OR PUBLIC ACCOUNTANT. The word independent is added to emphasize that the professional work is performed by an unbiased source and is fair.

INDEPENDENT CONTRACTOR

A person or company retained to perform work for another, often under a written contract, whereby control is subjected to the end result and not as to how the work is performed. As opposed to an EMPLOYEE who receives direction on what, when and, to some degree, how to do a job. Care must be used in the classification of workers as either employees or independent contractors. What distinguishes them is the degree of control the employer has over the activities being performed. Specific definitions of employee and independent contractor exist in IRS publications. After the fact, the IRS can determine that a person was actually an employee. Serious tax consequences may apply if incorrect classification is made. See EMPLOYEE; CONTRACTOR.

INDEX

A statistical measure expressed in terms of numbers or percentages with a base value at a point in time so that future values are relative to the base value.

INDEXING

A method of correlating the price of one item to that of another item or to an economic factor (the INDEX), such as the CONSUMER PRICE INDEX.

INDIRECT

See OVERHEAD.

INDIRECT BUSINESS TAXES

Sales, excise and business property taxes.

INDIRECT COST

See OVERHEAD.

INDIRECT EXPORTING

A situation where a small company desires to export its products but does not have the ability to do so. Therefore, the company hires an intermediary company to handle all phases of exporting, including shipping.

INDIRECT LABOR

Personnel assigned to tasks other than producing products. Indirect labor is included as part of OPERATING EXPENSES. As opposed to DIRECT LABOR.

INDIRECT MATERIAL

Materials, purchases and supplies used in the operation of the business, not directly associated with production and are part of OPERATING EXPENSES. As opposed to DIRECT MATERIAL.

INDIRECT OVERHEAD

See OVERHEAD.

INDIRECT TAX

A tax levied on commercial transactions rather than on income. Such indirect taxes include sales tax, excise tax, and value-added tax. Opposite of DIRECT TAX.

INDIVIDUAL INCOME

The earnings, wages, salary, dividends and interest of a person.

INDIVIDUAL INCOME TAX

By law, the amount paid to the federal government (and most states) by a person, and is calculated on the amount of earnings (INCOME) less some expenses and deductions. Individual income taxes are required to be paid by persons on an INDIVIDUAL INCOME TAX RETURN, FORM 1040.

INDIVIDUAL INCOME TAX RETURN

Federal government FORM 1040 used for reporting the amount of income taxes due to be paid. Many states also require individual income tax returns.

INDUSTRY

A collective description of all businesses with similar types of products or services, such as manufacturing industry, service industry, paper industry and banking industry.

INDUSTRY AVERAGE

The normal or nominal value for all the companies in an industry. A company owner should compare the values from its company to those for all companies in the industry (the industry average) as a measure of the financial health of the company. Trade associations, publishers and some firms collect, analyze and publish these statistics. ROBERT MORRIS & ASSOC. and DUN & BRADSTREET specialize in this information.

INDUSTRY POOL

Joining of companies to improve profits by reducing competition. In the United States, such pools are generally unlawful, violating ANTITRUST LAW. See CARTEL; PRICE FIXING.

INDUSTRY PRACTICE

A commonly accepted method of operation within a business similar to other businesses in the same line of work or industry. Practices may differ in other industries.

INELASTIC PRICE

A situation in the marketplace where a change in price will not affect DEMAND. As opposed to ELASTIC PRICE. See PRICE ELASTICITY.

INFANT INDUSTRY

A new industry; a line of business, products or services that has not been available for a very long time. Usually, a fragile area of economic activity.

INFLATION

A rise in prices for goods and services; the price for a product is higher as measured today than at a time in the past. Moderate inflation is a common result of economic growth and therefore perceived as good for society.

INFORMATIONAL INCOME TAX RETURN

A federal government document used to provide data to others that may have tax consequences. FORM 1165 is used to report earnings (INCOME) for a partnership; although the partnership itself pays no tax, the proportionate share of the earnings is reported to each partner on FORM K-1. FORM 1099 reports amounts paid to contractors, interest paid and other amounts.

INFORMATIONAL RETURN

A federal government document used to provide data to others that may have tax consequences. FORM 1165 is used to report earnings (INCOME) for a partnership; although the partnership itself pays no tax, the proportionate share of the earnings is reported to each partner on FORM K-1. FORM 1099 reports amounts paid to contractors, interest paid and other amounts.

INFORMATIONAL TAX RETURN

A federal government document used to provide data to others that may have tax consequences. FORM 1165 is used to report earnings (INCOME) for a partnership; although the partnership itself pays no tax, the proportionate share of the earnings is reported to each partner on FORM K-1. FORM 1099 reports amounts paid to contractors, interest paid and other amounts.

INFORMATION FOR BUSINESS TAXPAYERS

See PUBLICATION 583.

INFORMATION HIGHWAY

The concept of a communications network that can deliver vast amounts of information directly to consumers’ homes and businesses. Transmission means consist of cable, telephone lines, fiber optic lines and microwave.

INITIAL PUBLIC OFFERING (IPO)

A company’s first offering of stock for sale in the market to anyone (the public) who wishes to buy, reflecting the expectations for the company’s future growth. From that point on, the shares of stock have a market value controlled by supply and demand for the shares. See GOING PUBLIC.

INJURY

Physical harm to an individual person. In business and insurance, the financial loss to a company inflicted by an event.

INNER CITY

An urban area that is generally recognized as a central business or commercial part of the city.

INSIDE DIRECTORS

Members of a BOARD OF DIRECTORS who are also top corporate executives. See BOARD OF DIRECTORS.

INSOLVENCY

A state of bad financial condition wherein debts and obligations cannot be repaid when due or a business that ceases to operate. As opposed to SOLVENCY. See also BANKRUPTCY; CASH FLOW.

INSTALMENT NOTE

A PROMISSORY NOTE providing for payment of the principal in two or more definite stated amounts at different times. SEE INSTALLMENT SALE.

INSTALMENT SALE

 

A sale of a large dollar value item wherein the payments are made over a period of time, usually also incurring an interest charge. Sales are recorded in the books as payments are made, as opposed to the entire amount recorded at the time of delivery. Title of the property is usually retained by the seller (as collateral) until all payments are made.

INSTITUTIONAL LENDER

Any organization (financial institution) that lends money for an interest fee and whose loans are regulated by law, such as a bank, an insurance company or a savings and loan organization. These organizations may lend money that was received from depositors as opposed to a private lender who lends his or her own money.

INSTRUMENT

A legal document in which some contractual relationship is given formal expression or by which some right is granted. For example: notes, contracts or agreements. See also NEGOTIABLE INSTRUMENT.

INSUFFICIENT FUNDS

An action by a bank whereby the bank refuses payment of a check that has been presented for payment. This usually means that the issuer of a check did not have enough money in the account to honor payment of the check. The check is boldly stamped NSF, returned to the payee’s bank where the amount of the check is debited from the payee’s account, a fee is charged to the payee and the NSF check is returned to the payee.

INSURANCE

Indemnification against (reimbursement for) financial loss resulting from a specific risk, hazard or peril. In a broad sense, insurance transfers risk from individuals to a larger group that is better able to pay individual losses from a pool of money collected from all members of the group.

INSURANCE AGENCY

A group of insurance agents representing one or more specified insurance companies. The agency sells insurance policies offered only by those companies.

INSURANCE AGENT

A person who is authorized to represent an insurance company and acts on behalf of the insurance company, such as a salesperson for an insurance company. See AGENT.

INSURANCE BROKER

A person or firm that represents and sells for more than one insurance company. An insurance broker often, has knowledge of several insurance companies’ policies and reputations, allowing selection of the optimum policy for an individual business situation. See BROKER.

INSURANCE CERTIFICATE

See CERTIFICATE OF INSURANCE.

INSURANCE CLAIM

A request by the INSURED for reimbursement from the INSURER following a loss; a LIABILITY CLAIM.

INSURANCE COMPANY

A business engaged solely in the protection against financial loss; a business as an INSURER. See INSURER; INSURANCE POLICY. An insurance company may be a source of money for a small business to borrow using real property as collateral since the insurance company desires to earn interest income.

INSURANCE COVERAGE

The amount of INSURANCE purchased to protect a financial risk, hazard or peril. See INSURANCE POLICY.

INSURANCE PLAN

A document or estimate of the amount of insurance needed in a small business for the desired coverage.

INSURANCE POLICY

A document describing risks, hazards or perils of an individual or business (the INSURED) covered by the INSURER (INSURANCE COMPANY) including the conditions of coverage, amount of coverage and PREMIUM to be paid for such coverage.

INSURANCE POOL

A group of INSURERS who share the premiums and losses in order to spread the risk of unique situations. Thus a group of insurance companies can take on larger risks than any individual company could bear alone, thus permitting small insurance companies to collectively compete with larger companies.

INSURANCE PROTECTION

The act or fact of having purchased an insurance policy. Assurance of financial reimbursement for a loss.

INSURED

The person or business covered by insurance; the POLICY HOLDER; the one who purchased the insurance policy. See INSURANCE POLICY; POLICY HOLDER.

INSURER

The one who insures against financial loss-e.g., an INSURANCE COMPANY.

INTANGIBLE

Something that cannot be seen, touched or evaluated. As opposed to TANGIBLE. See INTANGIBLE ASSET.

INTANGIBLE ASSET

Something owned, other than physical property, that represents an advantage to a company in the marketplace. Such assets include copyrights, patents, trademarks, goodwill, computer programs, organization costs, licenses, leases, franchises, exploration permits, import/export permits, customer lists and know-how. The value of these items generally cannot be substantiated but represent assets on the company’s balance sheet. See ASSET; TANGIBLE ASSET.

INTELLECTUAL PROPERTY

Trade secrets; information that is proprietary to a company; assets owned by the business that are patented, copyrighted or trademarked.

INTEREST

The cost of using money borrowed from another; expressed as a rate per period of time, usually one year and more precisely called the ANNUAL INTEREST RATE or ANNUAL RATE OF INTEREST. See also SIMPLE INTEREST; COMPOUND INTEREST. Also the share, right or title in property, expressed as “an interest in the property.”

INTEREST CHARGE

The amount of INTEREST payment due in terms of money, as opposed to a percent.

INTEREST EARNED

An amount of INTEREST credited to an account but may not yet have been recorded to the account.

INTEREST EXPENSE

An income statement entry that means payment of interest to another party.

INTEREST IN ADVANCE

In lending, a loan on which interest is paid at the beginning of the period; as opposed to paid INTEREST IN ARREARS (the end of the period).

INTEREST IN ARREARS

In lending, a loan on which interest is paid at the end of the period; as opposed to paid INTEREST IN ADVANCE (the beginning of the period). Also means interest due and payable but not yet paid.

INTEREST INCOME

An income statement entry that means receipt of interest from another party.

INTEREST RATE

The percentage value that is multiplied by the PRINCIPAL of a LOAN to determine the amount of money (interest) due or paid in a given period of time.

INTERIM FINANCING

A short-term loan obtained for a short period, when money is needed, prior to securing a long-term loan. Example: a construction loan to finance construction of a building.

INTERMEDIATE TERM

A term (period of time) longer than short-term but not long-term. The length of intermediate term depends on the context. Most common small business usage is in banking for loans of more than one year but less than ten years.

INTERNAL RATE OF RETURN (IRR)

The discount rate at which the present worth of future cash flows is exactly equal to the initial capital investment. In capital budgeting, it is called the HURDLE RATE. The advantage of using internal rate of return as a measurement of an investment’s worth is that all types of investments can be analyzed or compared on an equivalent basis and in an objective manner. The results, however, are no better than the projections made by the preparer since risk factors and assumptions may outweigh the mathematical calculation.

INTERNAL REVENUE CODE

The body of statutes relating to the federal tax laws and administered by the Internal Revenue Service (IRS).

INTERNAL REVENUE SERVICE (IRS)

The agency of the federal government charged with interpreting, administering and enforcing the federal tax laws (INTERNAL REVENUE CODE).

INTERNAL SOURCES OF WORKING CAPITAL

See WORKING CAPITAL.

INTERNATIONAL MARKETING

Using a marketing program and selling products, both of which are tailored to fit the country where sales are anticipated. As opposed to GLOBAL MARKETING wherein the same product is sold in the same way everywhere in the world.

INTERNATIONAL MONETARY FUND

An international organization, with members from most countries in the world, whose purpose is to lower trade barriers and stabilize currencies. While helping developing countries pay their debts, they usually impose tough guidelines aimed at lowering inflation, cutting imports and raising exports.

INTERNATIONAL TRADE

Buying from or selling to a business in another country. See EXPORT; IMPORT.

INTERNET

An enormous international computer information network that links government agencies, universities, corporations and individuals. Thus individuals can tap information from any of the sources on-line.

INTRADE

To purchase goods or services from a supplier in another city, county or state in exchange for money, i.e., to purchase from a supplier that is located in a governmental entity different from your governmental entity. Also, the inward movement of such goods into a city, county or state. Similar to IMPORT but within a single country. Opposite of EXTRADE.

IN TRIPLICATE

To make three copies, often by pen or pencil, using carbon paper or similar paper.

INVENTORY

The collective quantity of goods, property or products on hand in a company; an itemized list or catalog of goods. Also the value of such goods or products. In manufacturing, inventory includes raw materials, work in process, finished goods and supplies. In retail or wholesale, inventory includes the products available for sale and may include supplies and personal property. Also, the act of counting the quantity of products on hand, called taking inventory or inventorying.

INVENTORY AGING

An accounting procedure used to evaluate the purchase dates of the inventory on hand and inventory turnover rate.

INVENTORY COMPOSITION

The mix of various products; an identification of those items which sell fast and those which sell slower. In manufacturing, inventory composition can involve identification of raw materials, work-in-process and finished goods.

INVENTORY CONTROL

The process whereby the company knows where everything is located at all times and efficiently moves inventory (materials) from one station to another as needed. Accountability of goods on hand can prevent loss or theft.

INVENTORY FINANCING

Loans collateralized by unsold inventory. The loan is repaid when the goods are sold.

INVENTORY TURNOVER

A measurement of the rate at which products are purchased by a business then resold to customers. Inventory turnover is often expressed as the ratio of annual sales divided by ending inventory. Small companies should compare their inventory turnover with industry averages. A low turnover rate might indicate excess stock is on hand, tying up cash, indicating sluggish sales, ineffective buying or vulnerability to falling prices.

INVENTORY TURNOVER RATE

A measurement of the rate at which products are purchased by a business then resold to customers. Inventory turnover is often expressed as the ratio of annual sales divided by ending inventory. Small companies should compare their inventory turnover with industry averages. A low turnover rate might indicate excess stock is on hand, tying up cash, indicating sluggish sales, ineffective buying or vulnerability to falling prices.

INVEST

The process of acquiring ownership in a company; to purchase equity interest in a company. The objective of investing is to obtain income from the profits made in the business.

INVESTMENT

The use of CAPITAL to create more money as a financial gain with the connotation that safety of principal is important. As opposed to SPECULATION that involves greater risk.

INVESTMENT BANKER

A firm, acting as an underwriter or agent, which serves as an intermediary between a company that issues securities and the investing public.

INVESTMENT COMPANY

A firm that invests in the equity of other companies and may sell shares to the public.

INVESTMENT INTEREST

The amount of interest paid as a result of a purchase; the amount of interest necessary to make an investment worthy of purchase.

INVESTMENT POOL

A combining of the resources of several persons or companies for a common purpose, such as to finance a large research project. Also, a group of investors who contribute to a common investment purpose; as an investment club. Care must be exercised not to gain control of a market by manipulating prices, which is illegal.

INVESTMENT TAX CREDIT (ITC)

A federal government tax provision for reduction of tax liability as an incentive to encourage investment in a specific financial transaction. One such incentive for the small business is the reduction of tax liability when the business purchases new equipment.

INVESTOR

Any person who provides equity capital to a company; a person who INVESTS; a person who buys shares of stock in a company in return for anticipated company profitability and payment of dividends to the investor.

INVISIBLES

The non-merchandise areas of trade, such as freight, insurance and most types of services and investments.

INVITATION FOR BID (IFB)

An announcement of contract work open for submission of BIDS. The IFB documents the specific requirements of the intended purchase.

INVITATION TO BID (ITB)

A request by a buyer for a BID from a seller to perform work or provide a service.

INVOICE

A notification of amount due for goods that were delivered or services that were performed. The invoice is prepared by the seller and submitted to the purchaser. In small business an invoice is most often called a BILL.

INVOLUNTARY BANKRUPTCY

A legal proceeding of bankruptcy when a creditor brings the petition to a court to force insolvency of a person or business. The objective is an orderly and equitable settlement of obligations of the debtor so the creditor can be paid. See BANKRUPTCY; VOLUNTARY BANKRUPTCY.

INWOOD TABLE

A set of interest tables, commonly used by appraisers, for computing the PRESENT VALUE for an annuity. See NET PRESENT VALUE; INTERNAL RATE OF RETURN.

IPO

See INITIAL PUBLIC OFFERING.

IRR

See INTERNAL RATE OF RETURN.

IRS

See INTERNAL REVENUE SERVICE.

ISSUED AND OUTSTANDING

The term used on a BALANCE SHEET to identify those AUTHORIZED SHARES of stock in a corporation that have been sold (issued) to the owners. The sale of the stock acquires Capital investment in the corporation. Shares of stock repurchased by the corporation are not outstanding and are called TREASURY STOCK. Issued and outstanding is the opposite of UNISSUED STOCK. See AUTHORIZED SHARES.

ISSUED STOCK

See ISSUED AND OUTSTANDING.

ITB

See INVITATION TO BID.

ITC

See INVESTMENT TAX CREDIT.

 

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