Business Terms “A”

Accounts Payable (AP) – Amount owing on open accounts to suppliers, vendors and other creditors for goods and services.

Accounts Receivables (AR) – Money owed to a business for merchandise or services sold on open account.

Acknowledgements – A declaration by someone that something is true.

Add-backs – Expensed items that are discretionary to the owner and added to net income in determining seller’s discretionary earnings.

Adjusted Book Value – The book value (equity) of a company after adjusting the values of assets and liabilities to reflect estimated market value rather than depreciated tax values and removing non-operating assets and liabilities from the balance sheet.

Allocation of Purchase Price – In an asset sale, the purchase price must be allocated to certain assets, the balance is goodwill.

Amortization – The writing off of Intangible Assets over their useful life.

Angels – An individual high-risk investor who likes to make investments in promising acquisitions. Angels often have valuable business experience and can be helpful as a member of the board of directors.

Appraisal Approach – A general way of determining the value, using one or more valuation methods.

Appraisal Method – Within an approach, the specific way of determining value.

Asset Approach – A way of estimating the value of a business ownership interest using on or more methods based on the value of the Adjusted Book Value of the company.

Asset Based Lenders – Commercial lenders who are willing to take on more risk than commercial banks lending against accounts receivable and inventory and being subordinate to commercial banks.

Asset Sale – A form of acquisition whereby a selling entity agrees to sell all or certain assets and liabilities of a company to a purchaser. The corporate entity is not transferred.

Auction – When the seller or its intermediary orchestrates the selling process by encouraging buyers to bid and re-bid until the highest and best offer is received.

Audit – Examination of the financial records and accounting books in order to verify their accuracy.