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Business Broker Glossary

A. P. A.: Asset Purchase Agreement


COST OF GOODS: Direct costs incurred in manufacturing a product or providing a service (usually materials and labour).


COST OF SALES: Includes the expenses involved in marketing, selling and delivering the product or service, plus the cost of goods.


DUE DILIGENCE: A period of 5 to 15 working days (sometimes longer) where a buyer can verify information supplied in the Confidential Information Memorandum and review material or documents not previously supplied due to commercial sensitivity.


EBIT: Earnings before interest and tax.


EBITDA: Earnings before interest, tax, depreciation and amortization.


F, F & E: Furniture, Fixtures and Equipment


GROSS PROFIT: Revenue generated by the business minus the cost of sales.


CIM - CONFIDENTIAL INFORMATION MEMORANDUM: A document providing a detailed overview of a business.


INTANGIBLE ASSETS: Non-physical assets such as a customer/client list, supplier relationships, intellectual property (IP), patents, trademarks, brand name(s) and goodwill.


IP: Intellectual property – intangible business value that’s the result of creativity, such as patents, copyrights, etc.


MPSP: Most Probable Sale Price of your business.


NET PROFIT: Total revenues minus total expenses.


EQUITY: Owned assets minus liabilities.


RETAINED EARNINGS: Profits kept in the business and not paid to owners or shareholders.


RETURN ON INVESTMENT (ROI): An indicator of profitability shown as a percentage, calculated by dividing net profit by equity, and then multiplying by 100.


SDE: Seller’s Discretionary Earnings


SWOT: An analysis of the Strengths, Weaknesses, Opportunities and Threats associated with the business.

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