Business terms E-N
 

Employee churn    Also known as employee turnover. The rate at which employees leave a company.

Employers’ liability insurance    Insurance that pays out in the event that an employee suffers an illness or accident in the course of their work. Employers’ liability insurance is a legal requirement for employers.

Enterprise Zone    Government-specified areas in which businesses may receive more favourable tax treatment, and other benefits like high speed internet.

Entrepreneur    One who starts and/or runs a business.

Equity    In finance, equity refers to an ownership interest in an asset. Some business owners choose to sell equity in their business in order to raise capital.

Factoring    A process by which a company sells their accounts receivable to a third party, known as a ‘factor’. The factor then collects payment from the debtors.

Flat rate scheme    A simplified VAT accounting scheme whereby businesses pay VAT as a proportion of their turnover.

Franchise    A business arrangement whereby an individual or business is given a licence to sell another business’s products or services. Many well-known chains are operated as franchises.

Franchisee    One who runs a franchise.

Franchisor    One who sells a licence to franchise.

Freedom of Information Act    Legislation governing the treatment of personal data by businesses and public bodies.

Freelance    An individual who works for a number of different clients.

Goodwill    May refer to intangible assets like the strength of a brand. Commonly heard in mergers and acquisitions.

Gross    Before deductions.

Inhouse    Within a business. Contrast with ‘outsourcing’.

Incorporation    The process by which a business takes on a legal identity separate to that of its owners – for example as a limited company. Incorporation is handled by Companies House.

Inflation    A rise in the general price of goods and services. For measures of inflation see RPI and CPI.

Information Commissioner’s Office    The body responsible for enforcing the Freedom of Information Act, Data Protection Act, and Environmental Information Regulations.

Initial Public Offering    The first public sale of shares in a company that had previously been limited. Some businesses choose to sell shares in order to raise capital.

Insolvency    Being unable to meet financial obligations. Not to be confused with bankruptcy.

Internship    On the job training. Commonly unpaid. Internships are the subject of some controversy, with many businesses unwittingly operating illegal schemes.

IPO    See Initial Public Offer

IR35    Controversial tax rules originally designed to prevent individuals avoiding tax through the use of intermediary companies. The imposition of IR35 can mean that contractors are invidiously treated as employees for tax purposes.

Key Performance Indicator    A metric giving an insight into an important aspect of a business. KPIs might include revenue, customer numbers, customer lifecycle time, and so on. KPIs vary from business to business.

KPI    See Key Performance Indicator

Libor    London Interbank Offered Rate. The rate at which banks borrow money from each other.

Limited company     A legal structure in which the company is considered to be a legal entity in its own right, separate from its directors, and in which the directors’ liability is limited to their initial investment.

Limited liability partnership    A legal structure in which the business is run as a partnership, but in which each partner’s liability is limited to their initial investment.

Liquidity    In practical terms, liquidity refers to a business’s ability to honour its short-term financial obligations. Some assets are considered ‘illiquid’ – meaning that they are not easy to convert into cash.

LLP    See limited liability partnership

Loan-to-value    Used in mortgages. Refers to the amount being borrowed as a proportion of the property’s total value. So, if a borrower has a 25 per cent deposit, the loan-to-value ratio would be 75 per cent.

LTV    See loan-to-value

Markup    The difference between what it costs a business to provide a product or service, and the amount they sell it for. Not to be confused with profit margin.
Micro business    A business with fewer than 10 employees, and a turnover or balance sheet total of no more than €2 million.

Monetary Policy Committee    The Bank of England’s rate-setting body. Responsible for setting the base rate and for quantitative easing.

MPC    See Monetary Policy Committee

National Employment Savings Trust    A state-run occupational pension scheme, designed to help very small businesses comply with auto-enrolment.

National Insurance Contributions    Contributions made to a national scheme designed to pay out in the event of illness, unemployment, or retirement. NICs are paid at different levels, known as ‘Classes’.

NEST    See National Employment Savings Trust

Net    After deductions