Investments, Assets, and Taxes

Investment

Committing money to assets or projects with the goal of generating long-term income or profit.

Financing

The process of obtaining money to fund operations, buy assets, or fuel company growth.

Debt Financing

Borrowing money that must be repaid over time with interest.

Equity Financing

Raising money by selling ownership stakes in the company.

Loans

Money borrowed from banks or the SBA that is paid back over time with interest.

Trade Credit

Credit extended directly by suppliers to buy raw materials now and pay later.

Bonds

Long-term loans from investors where regular interest is paid and principal is repaid at maturity.

Angel Investors

High-net-worth individuals providing early-stage business funding in exchange for equity.

Venture Capitalists (VCs)

Investors who fund companies past the start-up phase to fuel rapid growth.

Stocks

Shares representing fractional ownership of a company.

Dividends

Payouts made to stockholders based on company profits.

IPO (Initial Public Offering)

The first time a company offers its shares to the public on stock exchanges.

Start-Up Stage (Business Life Cycle)

New company phase relying on self-funding, family/friends, and angel investors.

Growth Stage (Business Life Cycle)

Phase where sales grow and product expands, using venture capital and equity financing.

Maturity Stage (Business Life Cycle)

Phase where sales slow down; debt or equity financing is easier to access.

Decline Stage (Business Life Cycle)

Phase where sales decrease and companies rely on internal revenue rather than external funding.

Tangible Assets

Physical assets with a specific, measurable cash value like cash, equipment, and inventory.

Intangible Assets

Non-physical assets without a fixed price tag, such as brand recognition and patents.

Inflation

Price increases that decrease the purchasing power of money over time.

Interest Rates

The cost of borrowing money expressed as a percentage of the principal.

Risk (Asset Value)

External factors outside company control that lower an asset's value when high.

Return (Asset Value)

The ratio of money invested vs. profit earned; higher returns increase asset value.

Depreciation

The loss of value in physical assets over time due to wear and tear.

Sole Proprietorship

A single-owner business structure subject to income, self-employment, and estimated taxes.

Partnership

A business with 2+ owners where partners pay personal income tax and the company pays self-employment/estimated taxes.

Corporation (C-Corp)

A separate legal taxpaying entity subject to corporate income, estimated, and employment taxes.

S Corporation

A corporate structure that passes income/losses directly to shareholders to avoid double taxation.

Cash Accounting

Accounting method where income is taxed only when cash is actually received.

Accrual Accounting

Accounting method where income is taxed on the date of purchase before payment changes hands.