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.