Glossary of Financial Terms
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CAPITAL - Money available for an organization’s use in business transactions. [Can also be referred to as what an organization has and how it is distributed: Assets, Liabilities, and Net Assets.] See working capital.
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CAPITAL CAMPAIGN - A fundraising drive that takes place outside of (and in addition to) annual operating fundraising, usually to raise funds for a facility (or capital project), an endowment, and/or reserves.
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CAPITAL IMPROVEMENT - A facility or equipment upgrade (as distinguished from maintenance or repair) that will have a life of more than one year, and that adds to an organization's asset base. While sometimes considered an “expense,” this item should not show up on the Statement of Activities. Instead it should be capitalized and depreciated over its useful life and show up on the Statement of Financial Position as an increase in fixed assets and therefore on the Statement of Cash Flows in the investing section.
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CAPITAL PROJECT - See facility project.
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CAPITALIZATION - The distribution, nature and magnitude of an organization’s assets, liabilities and net assets. Also known as capital structure. Healthy organizations make choices about how they are capitalized, understanding the relative risks and merits of various options—e.g., whether to buy a building or grow an endowment. Also, “capitalized” refers to the purchase of fixed assets which do not appear on the income statement, but on the balance sheets, where they are depreciated over their useful life.
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CASE STATEMENT - A case for support, written primarily for a capital campaign, that outlines an organization's history, current status, future plans, including facility plans, and fundraising objectives. The case statement helps align board members, funders, and supporters to a shared organizational vision.
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CASH FLOW - The receipt and disbursement of monies.
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CASH FLOWS FROM FINANCING ACTIVITIES - Payments and/or receipts from lines of credit, notes payable, term loans.
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CASH FLOWS FROM INVESTING ACTIVITIES - Payments and/or receipts from acquisitions or sales of marketable securities, as well as from fixed assets such as property & equipment.
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CASH FLOWS FROM OPERATING ACTIVITIES - Cash changes in working capital items, such as accounts and grants receivable, inventory, accounts payable, accrued liabilities and deferred revenue.
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CERTIFICATE OF INCORPORATION - A document usually issued by a government authority such as a secretary of state documenting that a legal entity has been formed, including when and where and its full legal name.
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CERTIFICATE OF OCCUPANCY (C OF O) - A document from a local government building department which authorizes use of a certain space for specified activities by a certain number of people. Often required on construction projects prior to the entity occupying the space being allowed to move in.
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CHANGE IN NET ASSETS - Net assets are calculated by taking total revenue (including restricted and non-operating) less total expenses (including non-operating). The change in total net assets is an overall representation of a “bottom line.”
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CHANGE ORDER - A written order to a facility project
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CLEAN-UP - Term used to describe the requirement by the lender that a line of credit be completely paid out for a pre-defined period, usually a minimum of 30 days, during a one-year cycle. Also known as annual clean-up period.
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CLOSING COSTS - Expenses involved in transferring real estate from a seller to a buyer, including lawyer's fees, survey charges, title searches and insurance, and fees to file deeds and mortgages.
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CLOSING FEE - A fee charged by a lender to provide a loan to a borrower. Considered compensation for the costs involved with underwriting the loan and holding the commitment available for a specified period of time until closing. The fee is often paid partially at application, partially at the acceptance of the commitment and partially at closing. Also known as commitment fee and facility fee.
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COLLATERAL - Asset pledged to a lender until a loan is repaid; also called security. If the borrower defaults, the lender has the legal right to seize the collateral and sell it to pay off the loan.
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COMMITMENT FEE - See closing fee.
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COMMITMENT OR COMMITMENT LETTER - A statement in writing outlining and acknowledging the terms of a lender
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COMPILATION - A financial report as of a certain date, usually covering a twelve-month period, put together, but not reviewed or audited, by a Certified Public Accountant (CPA) that includes a statement of position (balance sheet), a statement of activities (income statement), a statement of cash flows, and may or may not have notes. See audit and review. The CPA states no opinion about the accuracy of the statements.
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COMPOUND ANNUAL GROWTH RATE - A calculation that estimates average annual percentage growth over a specified period of time, e.g., an organization that had $100K in revenue in 2000 and $500K in revenue in 2004 has a CAGR of X%.
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CONSTRUCTION DOCUMENTS - Drawings, specifications and legal documents setting forth in detail the requirements for the construction of the project.
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CONSTRUCTION LOAN - A loan, usually short-term, which is made to finance construction. The funds are disbursed as needed or in accordance with a pre-arranged plan, and the money is repaid upon completion of the project, often from the proceeds of a long-term loan, e.g., a mortgage.
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CONSTRUCTION MANAGER - A licensed general contractor who provides pre-construction services, professional management and technical services, including helping identify cost-effective means of meeting facility requirements. See project manager.
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CONTINGENCY - An amount budgeted (usually a percentage of total construction costs) to cover unexpected hard costs or soft costs.
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CONTRIBUTED REVENUE/INCOME - Revenue or income received from individual, foundation, corporate, or government donations with no products or services provided by the organization in direct exchange for the funds. See earned revenue/income.
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CREDIT/FINANCIAL ANALYSIS - Process used to understand and analyze the financial history and future prospects of an organization. May be done to help the organization understand its financial underpinnings, determine the likelihood that an organization can complete a project successfully or the likelihood that an organization can repay a loan. See underwriting process.
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CURRENT ASSETS - Items that generally will be turned into cash, sold, or consumed within one year.
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CURRENT DEBT - Obligations due in one year or less from the date of a financial statement. It includes advances under lines of credit, notes with maturities of one year or less, and the current portion (amount due in the next twelve months) of long-term debt.
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CURRENT GRANTS & PLEDGES RECEIVABLE - Money owed to an organization within the upcoming twelve months for goods and services it has sold or that have been committed to the organization as a grant, donation or pledge.
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CURRENT LIABILITIES - Obligations that will usually be repaid within one year.
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CURRENT PORTION OF LONG-TERM DEBT - Amount of principal on long term debt due within one year. Interest is not included in this amount.
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CURRENT RATIO - Comparison of current assets to current liabilities, commonly used as a measure of short-run solvency. A ratio of 1:1 means an organization would have just enough cash to cover current liabilities if it ceased operations and converted its current assets to cash.
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