Deal Intelligence Glossary

Accounts Payable (AP)

Amounts a business owes vendors and other short-term creditors.

Accounts Receivable (AR)

Amounts customers owe the business for completed sales or services.

Earnings Add-Back

A supported expense adjustment used to estimate normalized earnings.

Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization

EBITDA modified for supported nonrecurring or owner-specific items.

Loan Amortization

The period and schedule used to repay principal through periodic payments.

After-Repair Value

The estimated market value of a property after planned improvements are completed.

Asset-Based Valuation Approach

A method based on the economic value of assets minus liabilities.

Asset Purchase Transaction

A transaction in which the buyer acquires selected assets and assumes specified liabilities.

Balance Sheet

A statement of assets, liabilities, and equity at a specific date.

Balloon Payment

A large remaining loan balance due at maturity.

Base-Case Scenario

The primary scenario based on the analyst's most supportable assumptions.

Break-Even Occupancy Ratio

The occupancy level required for income to cover operating expenses and debt service.

Bridge Financing

Short-term financing used until a property or transaction reaches a permanent financing or exit event.

Buy, Rehab, Rent, Refinance, Repeat

A strategy that seeks to improve and stabilize a property and recycle capital through refinancing.

Buy-and-Hold Investment Strategy

A strategy focused on ongoing income and long-term value creation.

Common Area Maintenance

Costs associated with operating and maintaining shared areas of a commercial property.

Capitalization Rate

The unlevered income yield implied by a property's NOI and value.

Capital Expenditure (CapEx)

Spending that improves, replaces, or extends the useful life of a major asset.

Statement of Cash Flows

A statement explaining cash generated and used by operating, investing, and financing activities.

Cash Remaining in the Investment After Refinance

Investor cash still tied up after net refinance proceeds are received.

Cash-on-Cash Return (CoC)

Annual pre-tax cash flow divided by total cash invested.

Cost of Goods Sold

Direct costs associated with producing or purchasing the goods and services sold.

Loan Collateral

Assets pledged to support repayment of a loan.

Project Cost Contingency

A reserve for unexpected cost, scope, or schedule changes.

Contingent Liability

A possible obligation that depends on a future event or unresolved condition.

Customer Revenue Concentration

The degree to which revenue depends on a small number of customers.

Discounted Cash Flow

A valuation method based on the present value of projected future cash flows.

Business Debt Schedule

A listing of outstanding balances, payments, rates, maturity dates, and collateral.

Debt Service

Required principal and interest payments on borrowed funds.

Debt Yield

Property NOI divided by the loan amount.

Deferred Maintenance

Repairs or replacements postponed beyond the period when they should normally occur.

Downside Scenario

A scenario that tests weaker performance or less favorable assumptions.

Debt Service Coverage Ratio

Cash flow available for debt service divided by required debt service.

Transaction Due Diligence

The process of verifying information, assumptions, assets, obligations, and risks before closing.

Contingent Earnout Consideration

Purchase consideration paid later if agreed performance or events occur.

Earnings Before Interest, Taxes, Depreciation, and Amortization

A measure of operating profitability before financing and certain accounting effects.

Effective Gross Income (EGI)

Potential property income after vacancy and collection loss, plus supportable other income.

Enterprise Value

The value of the operating business before considering how it is financed.

Borrower or Buyer Equity Injection

Cash or qualifying equity contributed to a transaction by the borrower or buyer.

Equity Multiple

Total cash distributions divided by total equity invested.

Equity or Stock Purchase Transaction

A transaction in which the buyer acquires ownership interests in the existing legal entity.

Equity Value

The value attributable to owners after debt and other claims are considered.

Exit Capitalization Rate

The cap rate assumed when estimating a property's future sale value.

Investment Exit Strategy

The planned method for realizing value or repaying capital at the end of an investment.

Fix-and-Flip Investment Strategy

A strategy of acquiring, improving, and reselling property for profit.

Value Creation Through Operational or Physical Improvement

An increase in value created by improving income, expenses, condition, or marketability.

Global Debt Service Coverage Ratio

A coverage analysis combining business and personal cash flow with relevant debt obligations.

Acquisition Capitalization Rate

The cap rate based on current or first-year NOI and acquisition price.

Business Goodwill

Intangible value associated with earnings capacity, reputation, relationships, systems, and other nonphysical advantages.

Gross Profit Margin

Gross profit divided by revenue.

Gross Profit

Revenue minus cost of goods sold.

Purchase Price Holdback

A portion of purchase consideration retained temporarily to protect against specified risks.

Property Holding or Carrying Costs

Costs incurred while owning a project before sale, refinance, or stabilization.

Income-Based Valuation Approach

A valuation approach that converts expected economic benefits into present value.

Income Statement or Profit and Loss Statement

A statement of revenue, expenses, and profit over a period.

Interest-Only Loan Period

A period during which scheduled payments do not reduce principal.

Internal Rate of Return

The discount rate that equates projected cash inflows with invested capital.

Key Person or Owner Dependency Risk

The risk that performance depends heavily on one owner, employee, producer, or relationship holder.

Commercial Lease Abstract

A structured summary of important lease terms and obligations.

Property Lease-Up Period

The period required to fill vacant or newly completed space with paying tenants.

Letter of Intent

A preliminary document outlining the principal terms of a proposed transaction.

Loan-to-Cost Ratio

The loan amount divided by total eligible project or acquisition cost.

Loan-to-Value Ratio

The proposed loan amount divided by supported collateral value.

Market-Based Valuation Approach

A valuation approach using evidence from comparable businesses or transactions.

Loan Maturity

The date when the remaining loan balance becomes due.

Net Income

Accounting profit after reported revenue, expenses, interest, taxes, and other items.

Triple Net Lease

A lease structure where the tenant pays specified property expenses in addition to base rent.

Net Operating Income

Property income after operating expenses and before debt service.

Normalized or Maintainable Earnings

Earnings adjusted to reflect expected ongoing economic performance.

Physical or Economic Occupancy

The proportion of space occupied or rent collected relative to total potential.

Operating Expenses (OpEx)

Recurring costs required to operate a business or property.

Personal Financial Statement (PFS)

A statement of an individual's assets, liabilities, income, and contingent obligations.

Personal Guarantee

An individual's contractual promise to repay a business or property obligation.

Potential Gross Income (PGI)

The income a property could produce at full occupancy before vacancy and collection loss.

Definitive Purchase Agreement

The binding contract governing the terms and conditions of an acquisition.

Purchase Price Allocation

The assignment of transaction consideration among acquired assets and goodwill.

Quality of Earnings Review (QoE)

An analysis of whether reported earnings are accurate, recurring, and supportable.

Recurring Revenue

Revenue expected to repeat through contracts, subscriptions, renewals, or durable customer behavior.

Refinancing Risk

The risk that replacement financing will be unavailable or less favorable when needed.

Rehabilitation or Renovation Budget

A line-item estimate of the cost to complete planned property improvements.

Property Rent Roll

A schedule of tenants, units, rent, lease dates, deposits, and occupancy.

Replacement Reserves

Funds set aside for future major repairs and component replacement.

Return on Investment

Profit or gain divided by capital invested.

Small Business Administration 504 Loan Program

An SBA-backed structure commonly used for eligible owner-occupied real estate and major fixed assets.

Small Business Administration 7(a) Loan Program

An SBA-guaranteed lending program used for eligible business purposes and acquisitions.

Seller's Discretionary Earnings

The financial benefit available to one full-time owner-operator.

Seller Financing Note

Debt provided by the seller as part of the purchase consideration.

Sensitivity Analysis

A comparison showing how results change when key assumptions change.

Sources and Uses of Funds

A schedule showing where transaction money comes from and how it will be spent.

Property or Business Stabilization

The point when operations, occupancy, income, and expenses reach a supportable recurring level.

Stabilized Net Operating Income

NOI expected after occupancy, rents, and expenses reach a supportable recurring level.

Transaction Stress Test

An analysis of performance under adverse but plausible conditions.

Supplier or Vendor Concentration

Dependence on a small number of suppliers or critical service providers.

Tenant Improvements (TI)

Construction or buildout performed for a tenant's occupancy.

Seller or Management Transition Period

The post-closing period when knowledge, relationships, and responsibilities are transferred.

Trailing Twelve Months

Financial results for the most recent twelve-month period.

Vacancy, Concession, and Collection Loss

The reduction from potential property income caused by vacant space and uncollected rent.

Earnings or Revenue Valuation Multiple

A pricing factor applied to a defined financial metric to estimate value.

Weighted Average Lease Term

The average remaining lease term weighted by rent, area, or another stated measure.

Working Capital

Current operating resources available after current obligations.

Target Working Capital Peg

The normalized working-capital amount expected to be delivered at closing.

Year to Date

Financial results from the beginning of the current fiscal year through a stated date.