Accounts Payable
An account in the general ledger representing the amount owed by the business to its
creditors on open purchased of goods and/or services.
Accounts Receivable
An account in the general ledger representing the amount due the business from its
customers for goods and/or services sold on credit.
Amortization
The gradual reduction of debt by periodic payment sufficient to pay current interest and to
eliminate the principal at maturity. This is also the term used for gradual reduction/writing
off over a period of time in the book value of fixed or intangible assets,
deferred charges and prepaid expenses, bond discount and bond premium, etc.
Assets
All of that which a business owns, including cash, merchandise inventories, real estate, equipment, supplies, copyrights, etc.
Balance Sheet
Statement of financial position of a business at a particular point in time;
lists what is owned and owed.
Bank Reconciliation
A formal comparison of the balance in the checking account as shown on the bank statement
with the balance of the cash account in the general ledger, at a given date.
Cash Flow
Projections based on analysis of past operating experience, payment of obligations,
and collection of receivables. This experience is applied to budgeted sales and costs
for a future periodi in order to allow for repayment of loan obligations and to assure
adequate working capital from earned income. Cash flow forecasts provide a fundamental
financial-management tool for planning cash needs and ensuring adquate liquidity.
Corporation
A legal entity created under the laws of a state to carry on some business or other
authorized activity. The principal distinction between a business corporation and other
forms of business organization (i.e., proprietorship or partnership) is the fact that the
liability of the owners is limited to the capital of the subject corporation.
Depreciation
The decline in value of a limited-life tangible asset, such as a building, machine, vehicle,
equipment, furniture, etc., due to age, and to the normal wear and tear of use. In general,
depreciation assigns to a fiscal period a portion of the original cost of the capital cost asset.
Equity
The value of an enterprise or property that is owned; the actual value of the
owner's financial interest in an enterprise.
Financing
The provision of operating funds to a business (by either loans or purchase
of debt securities or capital stock).
Hawaii Capital Loan Program (HCLP)
Authorized by state law, this loan program is administered by the State Department
of Business, Economic Development & Tourism to assist small businesses unable to
obtain adequate financing through other sources. Maximum HCLP loan amount is
$1 million per application at a low interest rate of 7.5 percent per year.
Investment Company
SBICs (Small Business Investment Companies) and MESBICs (Minority Enterprise Small
Business Investment Companies) are SBA-licensed, privately owned and operated
investment companies which provide equity capital and long-term loans to independent
business concerns. A MESBIC invests only in independent business concerns
having at least 50 percent ownership by minorities.
Lease
A contract between the owner (lessor) and the tenant/user (lessee> stating the
conditions under which the tenant/user may occupy or use a property, a vehicle,
equipment, etc.
Liablities
The sum of debts or obligations of a business. Normally, the liabilities appear on the
credit side of a balance sheet. This may be further broken down into current liabilities,
long-term liabilities, etc.
Market
A place where products and services and their competitive substitutes are brought and
sold, an opportunity to sell, or the demand for goods and services.
Marketing
Group of related business activities aimed at satisfying the demand for goods and services.
Mortgage
A deed, usually to real estate, given to secure the repayment of a loan made by the
mortgagee (lender).
Net Worth
Property owned (assets) minus debts and obligations (liabilities).
Obligations
Any kind of indebtedness; an encubance or commitment.
Proprietorship (See: Sole proprietorship)
Partnership
A legal relationship existing between two or more persons contractually associated as joint
principals in a business.
Ratio
Denotes the relationship of items within and between comparisons of balance sheet
items with profit-and-loss items; operating ratios are those derived from comparisons of
items of income and expense.
Return on Investments (ROI)
In general, a concept used in business planning to determine the profit earned in
relation to the value of the capital required to prduce the profit.
SBA Guaranteed Loan
Guaranteed loans are made by private lenders and then guaranteed by the SBA.
The SBA's share may not exceed $750,000.
SBIC (See: Investment Company)
Services Corps of Retired Executives (SCORE)
Retired successful business persons who volunteer to render assistance in counseling and
guiding struggling independent businesses. This program is sponsored by the SBA.
Sole Proprietorship
A business entity privately owned by a single individual.
Subchapter "S" Corporation
A private corporation of 35 or fewer stockholders who pay personal income rather
than corporate tax on net profits.
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