BizBen Glossary Terms About Business Valuation

  • All
  • A
  • B
  • E
  • G
  • R

For our purposes, “adjusted net income” means something different than in a tax (IRS) context; it is a factor in determining how much a business would be worth to new owners. Adjusted net income (also referred to as cash flow or “SDE”, seller’s discretionary earnings, income, or cash) is the amount of money an owner actually receives from their business, a figure that may be substantially different from the net income - also called profit or net earnings - shown on the profit and loss statements and tax returns for the business. The difference results from adjustments (“add-backs”) made to net income shown on the books to demonstrate actual earnings to prospective buyers of the business.

The Assets of a business are all that is owned by the business, both tangible and intangible. Tangible assets include the physical assets of a business, such as the furniture, fixtures, and equipment ("FF&E"), machinery, raw materials, finished goods, inventory, buildings, and real estate. Tangible assets can further be broken down into two categories called current assets and fixed assets. Current assets are comprised of the physical products and inventory that a business has produced to ultimately be sold over time. Fixed assets, however, are the physical items such as the business equipment and machinery that produce the current assets. These fixed assets are not sold in the normal course of business like current assets and are only sold when the business as a whole sells. Intangible assets have no physical form. Examples of intangible assets are copyrights, trademarks, trade names, logos, websites and domain names, patents, phone numbers, email addresses, software, trade secrets, and goodwill that a business may possess. SEE ALSO: Goodwill, FF&E