Chapter 6
ESOP
Employee stock option plan: a method for employees to purchase the business for which they work
spin-off
a business that is created by separating part of an operating business into a separate entity
synergy
a combination in which the whole is greater than the sum of its component parts
heuristic
a common-sense rule, a rule-of-thumb
revolving credit
a credit agreement that allows the borrower to pay all or part of the balance at any time; as the loan balance is paid off, it becomes available to be borrowed again
franchise
a legal agreement that allows a business to be operated using the name and business procedures of another firm
start-up
a new business that is started from scratch
business format franchising
an agreement that provides a complete business format, including trade name, operational procedures, marketing, and products or services to sell
conversion franchising
an agreement that provides an organization through which independent businesses may combine resources
product distribution franchising
an agreement that provides specific brand name products which are resold by the franchisee in a specified territory
trade name franchising
an agreement that provides to the franchisee only the rights to use the franchisor's trade name and/or trademarks
intangibles
assets, such as patents or trademarks, and liabilities, such as accounts payable, that have no physical existence
discounted cash flows
cash flows that have been reduced in value because they are to be received in the future
caveat emptor
latin: let the buyer beware
founder
people who create or start a new business
takeover
seizing of control of a business by purchasing its stock to be able to select the board of directors
asset
something the business owns that is expected to have economic value in the future
cash flows
the actual receipt and spending of cash by a business
net realizable value
the amount for which an asset will sell, less the costs of selling
replacement value
the cost to acquire an essentially identical asset
book value
the difference between the original acquisition cost and the amount of accumulated description
point of indifference
the price at which a buyer is indifferent about buying or not buying the business
due diligence
the process of investigating a business to determine its value
buyout
the purchase of substantially all of an existing business
buy-in
the purchase of substantially es than 100 percent of a business
earnings multiple
the ratio of the value of a firm to its annual earnings