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Accrual Basis Accounting

A method of accounting wherein income and expenses are recognized, within the statements, when the business first acquires the right to receive the income, or the obligation to pay the expense. Companies with inventories are required to use the accrual method for tax purposes. (Also see Cash Basis Accounting.)


One company taking over controlling interest in another company. More about Acquisitions from Why Make an Acquisition? Companies acquire other companies for various reasons. They may seek economies of scale, diversification, greater market share, increased synergy, cost reductions, or new niche offerings. Other reasons for Acquisitions include those listed below. As a Way to… Read More »Acquisition

Add backs

All or a portion of expenses that are added back to net income in an effort to place the figures as close as possible to the economic earnings that were actually derived from the business.   from “The theory behind these add backs is that these expenses are purported to be extraneous, one-time,… Read More »Add backs

Add-On Acquisition

Refers to a company that is added by a private equity firm to one of its platform companies, or by a strategic buyer pursuing a consolidation investment strategy.

Adjusted Book Value

The measure of a company’s valuation after liabilities, including off-balance sheet liabilities, and assets are adjusted to reflect true fair market value.

Adjusted Book Value Method

A valuation method within the Asset Approach category whereby all assets and liabilities (including off-balance sheet, intangible, and contingent) are adjusted to their fair market values. (NOTE: In Canada on a going concern basis.)

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

Adjusted earnings before taxes, interest income or expense, nonoperating and non-recurring income/expenses, depreciation and other non-cash charges and prior to deducting an owner’s/officer’s compensation, but after replacing that owner’s/officer’s compensation and benefits with the market rate compensation and benefits to replace that owner’s/officer’s functions. This is a measure of a… Read More »Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

Aging Accounts Receivable

An snapshot of the accounts receivable, usually alphabetized, as of the date of the balance sheet you are using, wherein each account receivable is shown in columnar form as either current, over 30 days, over 60 days, over 90 days, or over 120 days delinquent. The aging report is the… Read More »Aging Accounts Receivable


Amortization – This is an accounting technique, used for tax planning purposes, to periodically lower the book value of a loan or an intangible asset over a set period of years. This is accomplished by monthly lowering the intangible asset value on the balance sheet by a specific amount and… Read More »Amortization