Financial Know-How equity option or interest
Multiple – A method used to determine the price of a business eg “Te business was sold for a multiple of 5 x EBITDA”
Net Assets – Te excess of assets over liabilities
in a business, shareholders’equity
Post-money value – Te value of a business immediately aſter an injection of capital occurs
Generally Accepted Accounting Principles (GAAP) – Best practice principles in relation to accounting policies and disclosures in financial statements
Go Public – To float on a stock exchange, creating public ownership of shares
HNWI – High Net Worth Individual
IPO – Initial Public Offering. Going public and offering shares to the public for the first time
IRR – Internal Rate of Return. A tool to help investors calculate returns on actual or prospective investments, indicating whether an investment has been successful or is worth pursuing.
JV – Joint Venture. A project where two or more parties join together with a view to generating profit
LBO – Leveraged Buy-Out. A Buy-Out that is financed by borrowings
LIBOR – London Inter Bank Offered Rate. Te rate at which banks are willing to lend funds to each other in the London interbank market, oſten used as a benchmark for loans to businesses by lenders, who then
30 entrepreneurcountry
add their own margin Liquidation Preference – A right
to
receive a preferred amount at the time of a liquidity event (eg an exit). Typically used by external investors to protect their investment returns
Loan Stock – Unsecured debt provided by a lender to a borrower
LTIP – Long Term Incentive Performance arrangements,
Plan. oſten
involving the issue of shares or options, to focus and encourage senior management
MBI – Management Buy-In. Tis is where an external management team, oſten purpose built, buys into a business. Seen as riskier than a Management Buy-Out, where the management team already understand and operate the business
MBO – Management Buy-Out. Te buy out of a business by the existing management team, oſten from a founder or from a corporate that wishes to exit from the business
Mezzanine Finance – A type of loan
finance that sits between equity and senior debt, carrying higher risks and rewards than senior debt and oſten involving an
Preference Shares – Shares issued by a company that rank ahead of ordinary shareholders, generally receiving preferential rights in terms of dividends and repayment
Pre-money value – Te value of a business immediately before an injection of capital occurs
Price/Earnings Ratio (P/E) – A measure of value. Te Price/Earnings Ratio is generally used to compare the value of a business with that of other businesses, where the share price is known or quoted on a stock exchange. Te ratio is calculated by dividing the price by the earnings
Put Option – A right, but not an obligation, to sell at a predetermined price at some time in the future
Senior Debt – Debt, typically provided by a bank, that has priority over all other classes of debt or shares issued by a company
Subordinated Debt – A debt that has lower priority than a senior debt
Shareholders’ Equity – Tis is the interest of the owners in the business, represented by its ordinary share capital and reserves.
Written by Guy Rigby C M Y CM MY CY CMY K equating to
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