A/P - Accounts Payable
Invoices that are due vendors, employees, and government. They have been expensed for accounting purposes, but not yet paid.

A/R - Accounts Receivable
Outstanding customer invoices that have been recognized as revenue, but not yet collected.

Asset Value
Basically the current economic value of the company's tangible assets. It can also include intangible assets (e.g., start-up costs, software coding, etc.)

Business Value
Expressed monetarily, what your business or business opportunity is worth. Business Value can be different for buyer, seller, and management. Synonymous with Enterprise Value, Firm Value, and Company Value. If interest bearing debt is outstanding then the Equity Value will be less than the Business Value. For our analysis Business Value does not include any real estate the company may own.

CAN$
Canadian dollar.

CAPX - Capital Expenditures
Annual purchases of long term assets such as computers, machinery, vehicles, tools, leasehold improvements, etc.

Capitalized Lease Payments
Payments to a lender for long term use of equipment or machinery used in the business. We show capitalized lease payments as an operating expense as a simplifying assumption.

Cost of Capital
Expected rate of return used to evaluate your business or business opportunity. Represents the ability to finance with equity and debt capital based on the perceived business risk of the company. Also known as the WACC and Discount Rate.

COS - Cost of Sales
Represents the direct costs of service or production. These highly variable expenses track in direct proportion to company sales.

CY - Current Year
Like LTM often used when referring to financial statistics.

DCF - Discounted Cash Flow
This widely recognized valuation technique emphasizes the revenue and expenditure fundamentals of your company to estimate cash flow and value. It gives the best estimate of your company's Intrinsic Value. Other techniques include using sales prices for what other comparable businesses sold for, looking at stock market benchmarks for companies in your industry, tangible asset value, opportunity cost, make or buy, or simply gut instinct.

Discount for Lack of Control - DLOC
A reduction taken from the 100% pro rata business value to reflect the degree to which the specific shareholder is not able to influence or control the company's business plan and strategies, as well as day-to-dayoperations, as appropriate.

Discount for Lack of Marketability - DLOM
A reduction taken from the 100% prorata business value of a control ownership position to reflect the degree to which immediate liquidity of one's ownership interest is not possible (i.e., selling a share of stock on the NYSE).

D/K - Debt to Capital Ratio
Interest Bearing Debt (Total Capital or Debt plus Equity). This financial ratio represents the amount of leverage or debt used in the calculation of the discount rate used in your analysis.

EBITDA - Earnings before Interest Taxes Depreciation and Amortization
Fundamental measure of your company's operational health. A key measure in determining the amount of financing a lender can provide. Positive EBITDA allows the business to pay interest, taxes, dividends, and repay loans.

Equity Value
Equal to Business Value less Net Debt. If your business opportunity has debt outstanding it must be subtracted to determine what the owner is entitled to. Please note that any company owned real estate and related debthas been excluded from our analysis.

FMV - Fair Market Value
Simply put, what a willing, able, well-informed buyer would pay for a business and what a willing, able seller under no immediate duress would accept (there are much longer, more legal definitions of this term, but the above description captures the main elements).

Forecast Period
Equal to the number of years in your business projections.

FY - Fiscal Year
Represents the time period often used in a business valuation representative of the next twelve months after a new buyer takes over operation. A buyer will consider FY performance, especially if the business is growing or is highly seasonalin nature.

Going Concern
The designation of a business with operations expected to continue well into the future. It assumes the business is properly managed and company assets are properly maintained. The Going Concern and Intrinsic Value terminology can mean the same thing depending upon how the company's value is presented in the valuation report.

Goodwill
Excess of the purchase price over a company's acquired assets. Since it relates to a past purchase decision and has no tax benefit or value impact we do not reference it in the valuation calculation.

Gross Margin
Revenue less COS. Expressed as a percentage. This is the firs tmeasure of a company's financial performance.

Intrinsic Value
The value of your company based upon the forecasted cash flow fundamentals, plus the cash flow beyond your forecast (TV). Intrinsic Value (IV) is best thought of as what the projected cash flows of your business opportunity are worth to you. Helping others to understand your company's Intrinsic Value based upon its cash flow potential will facilitate a successful negotiation.

Liquidation Value
The amount of cash the business is able to generate aftertheorderly sale of company assets. The Net Liquidation Valuesubtracts the loans, A/P, andother liabilities that must be settled before any money is available to the currentshareholders.

LTM - Last Twelve Months
Generally referred to when in this manner when referencing a financial statistic such as Business Value as a Multiple of Sales (using LTM results).

Market Approach
A general way to determine the value of a specific business by using comparative sales statistics of similar companies that have previously sold. When possible this information is normalized to make it as similar as the subject company. Care must be used with this approach as finding comparable companies, especially of small businesses is very difficult.

NCF - Net Cash Flow
Equal to Revenues less Cash Expenses, Taxes, and Working Capital (OCF) less CAPX. The amount of cash generated or used by the business for a given year after net income, working capital, capital expenditures, and market adjusted owner’s compensation. NCF whether historical or projected represents the bottom line in business performance.

New Funding
If your business opportunity has negative NCF, based upon your projections, then additional equity investment or loans will be required to finance the business. The New Funding amount can also be referred to as the New Money Requirement.

Net Debt
Interest bearing debt minus cash balance. Used in the calculation of Equity Value (Business Value less Net Debt).

n.a.
Not Available.

n.m. - Not Meaningful. Used when a calculation produces an erroneous result.

NOL - Net Operating Loss
Equals negative earnings before taxes on the income statement. The NOL is carried forward to a year or years where this historical loss can be offset against current year earnings. Doing so reduces the current year tax liability and provides a positive impact to cash flow and value.

Normalized
To place on a comparable basis. Historical results have been adjusted to remove interest expense, goodwill amortization, and any taxes paid. Both historical and future financial results have been adjusted to remove any excess owner’s compensation. We have also added back any discretionary expenses that would not be paid to a non-owner. Normalizing financial results allows for a better comparison of company results over time.

OCF - Operating Cash Flow
Cash flow generated from business operations prior to CAPX. Usually calculated as Revenues less Cash Expenses, Taxes, and Working Capital. OCF is another key measure of financial performance that illustrates the financial health of a business. Company’s with positive OCF can more easily invest in machinery and equipment to grow the business.

Other Income/(Expense)
Not considered part of the core business operations. Should only be included if expected to continue into the future. Prospective owners will likely completely ignore any projections in this category.

PPE
Balance sheet amount of Gross Property Plant and Equipment. After accumulated depreciation is subtracted, it is referred to as Net PPE. The balance sheet PPE amount excludes any company owned real estate.

Present Value
Value of future cash flows as if they were available today. A simple example is that an individual might be willing to receive $100 per year for the next ten years for a total of $1,000 as an alternative to receiving $600 (the present value of $1,000) today. The $600 is less than the total of $1,000, but it is a “bird in the hand”—and the investor doesn’t have to wait for ten annual payments. Buying or selling a business is much the same way. What are you willing to pay or receive now for a company in exchange for its future cash flows?

SDE - Seller's Discretionary Earnings
A comparative statistic often used by business brokers to estimate what a business might be purchased or sold for based on comparative multiples of similar businesses. SDE equals Revenues less Cash Operating Expenses, but adds back Owners Compensation. Various forms of this calculation may take into consideration Working Capital requirements, Capital Expenditures (CAPX), and Discretionary Owner Expenses (DOE) dependent upon specific circumstances. SDE is very useful in showing how much money the owner/operator expects to cash flow from the business before income taxes and capital expenditures are paid. If this value is negative, then operations must improve significantly within one to two years to avoid bankruptcy (timeframe depends upon the owner’s access to interim financing).

SGA - Sales General & Administrative
General overhead and fixed expenses of the business that typically must be paid in a given year regardless of sales volume. FYI, many companies split their labor expense between production (COS) and administration/management (SGA) to allocate the variable versus fixed labor charges.

Straight Line Depreciation
Depreciation expense evenly amortized over an asset's useful life.

Tax Effect
Tax payments or benefits are assumed to calculate the cash flow of your business opportunity. This is an important assumption in estimating the economic value of your business opportunity, whether taxes are paid at the company level or personal level (i.e., C-Corp, Sub-S, Sole Proprietorship).

TV - Terminal Value
Equals the present value of your company's cash flows beyondyour forecast projection (e.g., if forecast length is 3 years and the business life is 20 years+, then the TV represents year - 4 forward). The TV is combined with the PV of your forecast to determine the Business Value. Interchangeable with the term: Residual Value.

Unlevered
Refers to the calculation of cash flow without the effects of debt financing (e.g., no interest expense, issuance or repayment of debt). This shows the pure operating performance of a company. Our unlevered financial analysis provides a true picture ofyour business opportunity's fundamental performance.

USD
United States Dollar

Volatility
Refers to the movement of both your business and your company's industry in relation to the economy as a whole. If your business moves up and down in the same fashion as the economy, then your business has an average level of volatility. However, if your business either performs much better or much worse than the economy, your business has greater volatility. In general, more volatile businesses require a promise of greater financial returns to compensate their investors for greater uncertainty.

Working Capital
Represents the current assets and current liabilities of your company - most significantly accounts receivable (A/R), Inventory, and Accounts Payable (A/P). Increases or decreases in current assets and current liabilities create a cash flow source or use of funds. Inclusion of your company's working capital source or use offunds is necessary when calculating your company's Operating Cash Flow (OCF). For example when A/R increases as sales grow from year to year, a use of funds will occur because revenues are greater than the actual cash collected. Similarly if your operating expenses increase, the company's A/P balance will increase and create a source of funds because recorded expenses are greater than cash payments made to creditors. For retailers changes in the inventory balance can require cash funding to support higher inventory levels or provide a source of funds if inventory balances are lowered, while still maintaining current sales volume levels.