Entrepreneurship Chapter 12-14

asset valuation

A method of business valuation that simply totals all of the hard assets of the organization and adds in a goodwill value.

capitalization of earnings valuation

A method of valuation achieved by taking the earnings (net profit) of the organization; subtracting or adding any unusual items that the lender or investor feels are not customary, normal, or usual items and then dividing that figure by a capitalization rate.

initial public offering (IPO)

The initial listing of a firm as a public entity in the public equities market.

market estimation

A method of business valuation that involves taking the earnings of the business and multiplying that figure by the market premium of companies in its industry.

Perquisites

Benefits paid for by the company. Examples include vacations, vehicles, loans, gifts, financial contributions to retirement plans, and so on.

price/earnings (P/E) ratio

A value derived from public companies that divides the current earnings per share into the price per share.

Turnaround

The effort to reverse the decline of a business.

business brokers

Businesses that specialize in selling businesses.

franchise agreement

The basic contract generated by the franchisor for all franchisees; it usually contains clauses requiring the purchase of supplies, the displaying of marketing material, and the payment of fees that are based upon the sales of the branch operation.

franchise disclosure document (FDD)

The principal governing mechanism of the franchisor/franchisee.

Franchisee

The entrepreneur who buys the franchise from the franchisor.

Franchisor

The firm that originates the idea for the business and develops the operational methods, and then sells them to franchisees.

anchor stores

Major retail stores, such as department stores in a mall. They serve as the anchor for the retail establishment.

critical path chart

Chart that demonstrates how the activities necessary to start the firm fit together and build on each other. This chart allows you to understand which activities can occur concurrently and which must already be in place before the next activity can occur.

Legitimacy

The acceptance by key stakeholders, such as customers and suppliers, that you are a genuine business that will still be in operation next year.

production chart

A chart that provides a detailed understanding of a firm's production process.

Production Management System

Process that defines the steps that are involved in moving from the product or service offering to the point where money is received.

strategic alliances

Firms joining together of firms to form long-term, mutually beneficial relationships.

strip shopping center

A small retail center located typically along a major road. The center has only small businesses, and the center itself occupies only a small strip of land along the major street.