An angel investor is a person who invests in a business venture, providing capital for start-up or expansion. These individuals are looking for a higher rate of return than would be given by more traditional investments (typically 25 percent or more).
cash, accounts receivable, inventory, land, buildings, vehicles, furniture, and other things the company owns are assets. Assets can usually be sold to somebody else. One definition is anything with monetary value that a business owns.
Debts, notes payable, accounts payable, amounts of money owed to be paid back.
Capital (also called equity)
Ownership, stock, investment, retained earnings. Actually there’s an iron-clad and never-broken rule of accounting: Assets = Liabilities + Capital. That means you can subtract liabilities from assets to calculate capital.
Exchanging goods or services for money. Most people understand sales already. Technically, the sale happens when the goods or services are delivered, whether or not there is immediate payment.
Cost of Sales (also called Cost of Goods Sold (COGS), Direct Costs, and Unit Costs)
The raw materials and assembly costs, the cost of finished goods that are then resold, the direct cost of delivering the service. This is what the bookstore paid for the book you buy, it’s the gasoline and maintenance costs of a taxi ride, it’s the cost of printing and binding and royalties when a publisher sells a book to a store for resale.
Expenses (usually called operating expenses)
Office rent, administrative and marketing and development payroll, telephone bills, Internet access, all those things a business pays for but doesn’t resell. Tax and interest are also expenses.
Profits (also called Income)
Sales less cost of sales less expenses.
Ownership interest in a corporation in the form of common stock or preferred stock.
Initial Public Offering (IPO) – The first sale of stock by a company to the public.
A long-term, tangible asset held for business use and not expected to be converted to cash in the current or upcoming fiscal year, such as manufacturing equipment, real estate, and furniture.
An itemized forecast of an individual’s or company’s income and expenses expected for some period in the future.
For a company, this is the total amount of money received by the company for goods sold or services provided during a certain time period
Calculated as sales minus all costs directly related to those sales. These costs can include manufacturing expenses, raw materials, labor, selling, marketing and other expenses.
Often referred to as the bottom line, net profit is calculated by subtracting a company’s total expenses from total revenue, thus showing what the company has earned (or lost) in a given period of time (usually one year). also called net income or net earnings.
Return on Investment
More generally, the income that an investment provides in a year.
Money spent to acquire or upgrade physical assets such as buildings and machinery. This tends to be a very large expense for companies with significant manufacturing facilities, and usually much less of an expense in the services sector. also called capital spending or capital expense.
A taxable payment declared by a company’s board of directors and given to its shareholders out of the company’s current or retained earnings, usually quarterly.
Venture Capital (VC)
Funds made available for startup firms and small businesses with exceptional growth potential. Managerial and technical expertise are often also provided. also called risk capital.
Certificate representing one unit of ownership in a corporation, mutual fund, or limited partnership.
The gradual elimination of a liability, such as a mortgage, in regular payments over a specified period of time.
One who owns shares of stock in a corporation or mutual fund.
To build a business out of nothing, with minimal outside capital.
The value of an asset as it appears on a balance sheet, equal to cost minus accumulated depreciation.
Business Broker or Intermediary
Professionals who arrange mergers, acquisitions and various funding of companies with most of their transactions in the under R1 million market. Business Brokers or Intermediaries do not have their own fund to invest. At nvst.com, Business Intermediaries are classified as Advisors.
There are many definitions of cash flow. The reader should demand that an explanation of how cash flow was computed accompany the result.
A company seeking acquisitions that provide more than the profits and cash flow of the acquisition target and may include the desire to acquire operational economies, additional market share, technology or some other synergy. At nvst.com, Corporate Acquirers are classified as Investors.
A. The reasonable investigation performed by the Underwriter and mandated by the SEC to protect the investing public who may fairly rely on an Underwriter’s conduct.
B. The reasonable investigation performed by the Acquirer prior to the purchase of a business.
Earnings Before Interest, Taxes, Depreciation and Amortization. This level of earnings is utilized to communicate the earnings of a company prior to the current corporate tax planning or capitalization considerations.
An individual, investment group or investment company seeking acquisitions that provide favorable the profits and cash flow. At nvst.com, Financial Buyers are classified as Investors.
Investment Letter Stock
Unregistered (restricted) stock in which the issuer usually receives a letter from the purchaser stating that the purchase of the securities is for investment purposes only and is not being purchased with the intent of reselling.
In an Initial Public Offering, Underwriter(s) will purchase some of the stock of a privately held company which may then be sold in the public market. The source of funding for the company is the discounted price that the Underwriter(s) are willing to pay. The Underwriter takes the risk of the public market pricing, and this subsequent trade of the stock does not provide any additional source of funding for the company. This is how a company’s stock becomes publicly traded.
Here is a general list of the various aspects that underwriters target, but the reader should note that there are many exceptions:
Annual Growth Potential of 20%+
Proven Management Team
Earnings of R1 million+
Company Valuation post IPO of R20 million+
Industry in Favor
Market Niche or Lead Position
Professionals who arrange mergers, acquisitions and various funding of companies with most of their transactions in the R1 million+ market. Intermediaries do not have their own fund to invest. At nvst.com, Intermediaries are classified as Advisors.
Professional who raises capital and arranges mergers & acquisitions of companies with most of their transactions in the R10 million+ market. Investment Bankers do raise their own fund to invest. At nvst.com, Investment Bankers are classified as Investors and Advisors.
Investment Companies seek business investments that return favorable profits and cash flow. They may participate in venture, mezzanine, or leverage buyout stages and equity or debt financing. They do not usually provide advisory services during the term of their investment. At nvst.com, Investment Companies are classified as Investors.
LOI – Letter of Intent
A. The agreement signed by a Company and their Underwriter to document their understanding of expected offering price, Underwriter’s discount and the responsibility for expenses while pursuing the IPO.
B. The agreement signed by a Company and an Acquirer to document their understanding of expected purchase price, purchase terms, time line and what is expected of the parties prior to drafting a definitive purchase and sale agreement.
The document substantially similar to a prospectus used for offerings that are exempt from SEC registration.
A part of the SEC registration statement that contains a discription of the company issuing the securities and contains information about the securities being sold.
Red Herring Prospectus
A preliminary prospectus relating to a registration statement filed with the Securities and Exchange Commission that has not yet become effective.
Small Business Investment Companies are licensed and regulated by the Small Business Administration to provide provide funding for businesses. They may borrow funds from the government at low interest rates. They prefer debt lending over equity so that their loan repayments can cover their borrowing from the government. At nvst.com, SBICs are classified as Investors.
Any note, stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, reorganization certificate or subscription, transferable share, investment contract, voting trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, or, in general,, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing .
Underwriters raise capital for a business, arrange mergers and acquisitions, and provide advisory services such as business valuations. The capital raised may be in the form of debt or equity and may be from private or public sources. Underwriters have the ability to sell securities and may focus on institutional sales or may pursue retail sales through their own retail brokerage operations. At nvst.com, Underwriters are classified as Investors and Advisors.
An IPO will generally be lead by one or more managing Underwriters who form a group called a syndicate to share in the risk and to increase potential for distribution of the securities.
Venture Capitalists raise capital (commonly known as risk capital) for a business and provide advisory services during the term of their investment. The capital raised may be in the form of debt or equity and may be from private or public sources. They usually specialize in specific stages of investment and/or specific industries that they know well. At nvst.com, Venture Capitalists are classified as Investors and Advisors.