Glossary
Every term, defined
All 2170 terms are fully defined, and each links back to the lesson where the concept lives. Terms you meet inside a lesson are clickable and land here.
- 1031 exchange
- Selling real property held for business or investment and reinvesting the proceeds in other real property, deferring the tax on the gain rather than paying it now.
- Taxes & Entities
- 13-week cash flow forecast
- A rolling, week-by-week projection of receipts and disbursements built from known invoices and payment dates rather than from the income statement.
- Capital & Financing
- 409A valuation
- An independent appraisal of a private company’s common stock that sets the legal floor for the strike price of every option the board grants.
- Equity & Ownership
- 5-percent shareholder
- For section 382 purposes, any person owning 5 percent or more of a loss corporation's stock — plus every small holder swept together into synthetic 'public groups'.
- Taxes & Entities
- 83(b) election
- A one-page statement filed within 30 days of receiving unvested stock, choosing to be taxed on it today rather than as it vests.
- Equity & Ownership
- A/B test
- An experiment that randomly assigns units to a control and a treatment so that the only systematic difference between them is the change you made.
- Quantitative Methods
- Abandonment option
- The right to exit a project and recover its salvage value — a put struck at the recoverable amount.
- Corporate Finance
- Absolute priority rule
- The bankruptcy principle that a junior class cannot keep anything over the objection of a senior class that has not been paid in full.
- Capital & Financing
- Absorption rate
- The pace at which the units available in a market are sold or leased, stated as units per month or as the share of standing supply taken up in a period.
- Real Estate Thinking
- Accelerated share repurchase
- Buying a large block of stock from a bank immediately, with the final price settled later against the average market price over the execution window.
- Corporate Finance
- Access economy
- The growing shift from owning things to accessing them — consumers increasingly prefer to rent, subscribe to, or borrow what they need rather than buy and own it, because access beats ownership for many uses.
- Rental Economy
- Accounting arbitrator
- The accounting firm named in the purchase agreement to decide working-capital or earn-out disputes as an expert rather than as a court.
- Selling a Business
- Accounting equation
- Assets = Liabilities + Owner’s Equity — the identity every balance sheet is a rearrangement of.
- Accounting & Reporting
- Accounting estimates
- The judgement calls baked into accrual accounting — the bad-debt rate, the useful life, the warranty reserve — where the number reported is a management opinion rather than a fact.
- Accounting & Reporting
- Accounts payable
- Money you owe suppliers for goods or services already consumed but not yet paid for — a liability.
- Accounting & Reporting
- Accounts receivable
- Money customers owe you for work already delivered and invoiced — an asset, not revenue.
- Accounting & Reporting
- Accrual accounting
- Recording revenue when you deliver the work and expenses when you consume the resource, regardless of when cash moves.
- Accounting & Reporting
- Accruals
- The gap between profit as booked and cash as collected — revenue recognized before the money arrives, or costs pushed into a later period.
- Corporate Finance
- Accumulated benefit obligation
- The present value of pension benefits earned to date measured on current salaries, ignoring expected future pay increases.
- Accounting & Reporting
- Accumulated earnings tax
- A 20% penalty tax a C corporation can owe on profits it keeps beyond the reasonable needs of its business instead of paying them out.
- Taxes & Entities
- Accumulated other comprehensive income
- The equity account holding gains and losses that bypass the income statement until a triggering event releases them.
- Accounting & Reporting
- Acquisition
- When one company buys another — the most common way founders and investors turn a private company into cash.
- Entrepreneurship
- Acquisition due diligence
- The full verification of a business before buying it — financial, legal, commercial, and operational — to price on evidence, not the seller's story.
- Due Diligence
- Acquisition method
- The required way to book a business you bought: everything acquired is remeasured to fair value on the closing date, and the excess price becomes goodwill.
- Accounting & Reporting
- Acquisition subsidies
- Below-cost pricing a company eats on purpose to win a new customer — the discount, free trial, or cheap intro offer is paid for by the profit the customer is expected to bring later.
- Hidden Economics
- Acquisition value versus chaos
- The synthesis of the whole category: an acquisition is a lever that multiplies a good business with discipline — or multiplies problems without it. 70–90% of deals fail to create value, almost always from overpaying, weak diligence, or botched integration.
- Acquisitions
- Activity-based costing
- A costing method that prices out activities like setups, inspections, and order processing, then charges each product for the activities it actually consumes.
- Corporate Finance
- Ad cost per order
- What you pay for advertising — per click or per view — and, per order, how much ad money ends up inside each sale (ad spend ÷ orders).
- Unit Economics
- Add-backs
- Adjustments that restate reported profit as owner's discretionary earnings (SDE) — legitimate (owner salary, true one-time costs) or aggressive (disguised recurring/personal costs) that inflate the price.
- Acquisitions
- Add-on acquisition
- A smaller company bought to be folded into an existing platform company that a private equity firm already owns.
- Selling a Business
- Additional insured
- Being named on somebody else’s liability policy so their insurer defends and pays for you directly, rather than you suing them for an indemnity.
- Risk
- Adequate disclosure
- Reporting a gift on a gift tax return in enough detail that the three-year period for the IRS to challenge its value actually starts running.
- Succession & Estate
- Adequate protection
- What a debtor must give a secured creditor to keep the stay in place — periodic payments, a replacement lien, or the indubitable equivalent — compensating for post-petition decline in the collateral’s value.
- Distress & Turnarounds
- Adjusted EBITDA
- Reported EBITDA rebuilt to show what the business would earn under a normal owner, by removing one-off, personal, and non-recurring items.
- Selling a Business
- Adjusting entry
- A journal posted at period end to record economics the transaction systems never saw — accruals, prepaid releases, depreciation, and reserve movements.
- Accounting & Reporting
- Administrative agent
- The bank appointed by a syndicate to run the mechanics of a loan - draws, payments, notices, and amendment voting.
- Capital & Financing
- Administrative expense
- A cost of running a bankruptcy case — professionals, post-petition suppliers, employee wages after filing — which ranks ahead of every pre-petition unsecured claim.
- Distress & Turnarounds
- Adoption curve
- The order in which a market takes up a new product — innovators and early adopters first, the mainstream much later.
- Entrepreneurship
- Advance pricing agreement
- A negotiated agreement with one or more tax authorities fixing in advance how a company will price transactions between its own affiliates.
- Taxes & Entities
- Adverse selection
- The tilt in who accepts an offer when the other side knows something you do not — the people most eager to accept are the ones you least wanted.
- Strategic Economics
- Adverse selection in hiring
- The tilt in a candidate pool caused by the fact that the people most available are not a random sample.
- Organization Design
- Adverse-selection cost
- The part of the spread that compensates a liquidity provider for systematically losing to better-informed counterparties.
- Strategic Economics
- Advisory board
- A group of outside advisers who meet regularly to counsel the owner, without the legal authority or duties of a board of directors.
- Succession & Estate
- Advisory shares
- Small equity stakes (a fraction of a percent to a low single digit) given to advisors for part-time guidance rather than cash or full-time work. Keep them proportionate, vested, documented, and cumulatively small to avoid dilution creep.
- Equity & Ownership
- Affiliate businesses
- Earning commissions by promoting other companies' products to an audience you own — sending customers to a merchant through a tracked link and earning a cut on the sales you drive, without making or fulfilling the product. Asset-light and scalable, but its entire success rests on the audience's trust.
- Business Models
- Affiliate systems
- A performance-based channel where partners earn a commission for each sale they refer — you pay only for results.
- Distribution
- Affirmative covenant
- Things the borrower promises to do - deliver financials, maintain insurance, pay taxes, keep the collateral perfected.
- Capital & Financing
- Agency-to-software
- Turning a repeatable service into software — converting linear, capacity-capped, labor-margin revenue into scalable, high-margin, recurring revenue. The agency has real edges (domain knowledge, customers, cash flow), but the transition between two very different businesses is genuinely hard.
- Business Models
- Agentic AI operations
- Running autonomous AI agents to do real work as a managed service for clients who can't operate them reliably. Its deeper lesson: value goes to whoever makes a hard technology usable, not the raw technology — operating a powerful but finicky capability for others is the business.
- Emerging Opportunities
- Aggregate deemed sale price
- The constructed purchase price used in a deemed asset sale — the seller's version is ADSP, the buyer's is AGUB, and they are computed separately.
- Selling a Business