Business Terms Glossary

What Is an Acid Test?

An acid test is a business’s short-term assets minus accounts receivable and inventory, divided by short-term liabilities. This is a test of a company’s ability to meet its immediate cash requirements. It is one of the more common business ratios used by financial analysts. To learn more about how to manage your cash, check out...

By Bplans Glossary |

What Is Accumulated Depreciation?

Total accumulated depreciation reduces the formal accounting value (called book value) of assets. Each month’s accumulated balance is the same as last month’s balance plus this month’s depreciation. Be sure to read up on depreciation, and check out the entry on EBITDA (earnings before interest, taxes, depreciation, and amortization) as well.

By Bplans Glossary |

What Is Accrual-Based Accounting?

Accrual-based accounting is standard business accounting, which assumes there will be accounts payable (Bills to be paid as part of the normal course of business) and/or sales on credit (sales made on account; shipments against invoices to be paid later), as opposed to cash basis only. For example, most businesses have regular bills such as rent,...

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What Is Accounts Receivable (AR)?

Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid. The standard procedure in business-to-business sales is that when goods or services are delivered the come with an invoice, which is to be paid...

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What Is Accounts Payable (AP)?

Accounts payable (AP) are bills to be paid as part of the normal course of business. This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive goods or services from a vendor, receive an invoice, and until that invoice is paid the...

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What Is Equity?

Equity is business ownership—capital. Equity can be calculated as the difference between assets and liabilities. See Bplans’ articles on angel investment and venture capital for more.

By Bplans Glossary |

What is Compound Average Growth Rate (CAGR)?

Compound Average Growth Rate (CAGR) – The standard formula is: (last number/first number)^(1/periods)-1 For more detailed examples, CAGR is explained in the Market Analysis chapter of the online book Hurdle: the Book on Business Planning and in the Market Forecast section of the online book On Target: the Book on Marketing Plans.

By Eliav Cohen |

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