New(er) Business Law Words and Phrases – Definitions of Critical Business Law/Finance Terms

By January 30th, 2023

Blog No 160

January 31, 2023
By Mack W. Borgen

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General Business Planning

or Corporate, Business or Real Property Law Matters


New(er) Business Law Words and Phrases


Most of us have long ago given up trying to keep up with the alphabet soup names of our many federal and state agencies and other economic terms or references, but here is a quick list of some terms and phrases which should be noted. 

“Ban the Box” and “Fair Chance Acts:” State or local legislation which limits employers access to a job applicant’s criminal history pre-offer. 

Clawback Rules: SEC or other laws or regulations requiring corporations to recover incentive-based compensation wrongly received by a current or former executive officer during a defined prior period of time (usually the three (3) years prior to the triggering event or finding of liability). 

DEI:    Diversity, equity, and inclusion. Many major US companies are seeking to enhance their “DEI” through various methodologies and strategies relating to, for example, recruiting and through the use of ERGs.

ERGs: Employee resource groups. ERGs are networks of employees formed around common interests. It is argued by some that such ERGs have been effectively used by corporations to improve morale and performance of employees. 

ESG:   Environmental, Social, and Governance (e.g., corporation’s ESG criteria now sometimes required to be disclosed by investment companies and advisors). A short-phrased reference to this increasingly important set of criteria used by investors in their evaluation of the prospective investments in various corporations or industries.

Greenwashing: When an organization or corporation makes false, unsubstantiated, or misleading statements or claims about the ESG sustainability of a product or service (e.g. “sustainable” practices or low carbon emissions or “ethically sourced” products) or even about its business operations which such statements or claims may give rise to the initiation of false advertising or fraud actions by a class of consumers or, for example, environmental or some other ESG organization. 

PAGA: California’s “Private Attorneys General Act.” Enacted in 2004, PAGA authorizes aggrieved employees to file lawsuits against their employers to recover penalties on behalf of themselves, other employees, and the State of California for Labor Code violations. The statute was originally seen as a way to “deputize” citizens to act as private attorneys general, and it arguably has been a useful tool especially for low wage workers to enforce their labor rights. In recent years, there has been a significant increase in the number of PAGA lawsuits – 6,502 PAGA notices in 2021 alone. However, this increase is largely the work of a select small group of law firms which specialize in PAGA lawsuits and which receive 33% of the workers’ total recovery. To date, small and mid-size businesses and hospitals have faced the brunt of these cases.

Pay Scale: The salary or hourly range that an employer reasonably expects to pay for an advertised employment position. This range would normally not include bonuses, tips, or other benefits. If the hourly or salary range is based upon a piece rate or commission, then the piece rate or commission range which the employer reasonably expects to pay must be included in the subject job posting.

Transparency Laws: Laws requiring a corporation (or other business entity) to disclose information either to its shareholders or other owners or, in certain cases, to the public. 

WARN Act: (Federal) Workers Adjustment and Retraining Notification Act. Enacted in 1988, the WARN Act protects workers, their families, and communities by requiring most employers with 100 or more employees to provide notification 60 calendar days in advance of any plant closing or mass layoff. 

Zombie Foreclosure. A horrific situation whereby a bank initiates a normal foreclosure by the delivery of a notice of default to the homeowner, but then the bank knowingly and intentionally does not complete the foreclosure. As a result, the homeowner (sometimes unknowingly) remains the title owner and can be later pursued by cities and counties, homeowner associations, and even utilities for property taxes, property insurance, past due utility bills, and property maintenance obligations. This horrendous practice by banks became a major issue after the 2008 mortgage crisis in which it was estimated that more than 300,000 homes became, de facto, (a) abandoned via zombie foreclosures and, (b) the problems of local communities and the mortgagee-defaulting property owners. During the tricky housing market in which the U.S. is in, it is feared that banks will again sometimes use this practice to avoid the responsibility attendant to owning a piece of property via its own foreclosure.

Recommended Article of the Month: Wood, Robert W., “Tax Myths about IRS Statute of Limitations, Business Law News (December 2022), p. 34.

 Quick-Reference List

  • Business and Financial Accounting Terms and Phrases – 

Most business owners and their attorneys routinely use, review, or incorporate data from a businesses’ income statement and from other associated accounting statements. Set forth below is a quick-reference list of some of the primary financial accounting terms used in or in association with such financial statements and reports. 

COGS: Cost of Goods Sold (Direct costs that can be easily matched to revenue such as cost of raw materials and production costs). 

Earning Before Tax: Operating Income less interest expense.

EBIT: Earnings before Interest and Taxes (i.e., Operating Income).

EBITDA: Earnings before interest, taxes, depreciation, and amortization.

EPS: Earnings Per Share (i.e., Net Income divided by number of common shares).

Basic EPS: Denominator is the company’s total number of common shares outstanding.

Fully Diluted EPS: The denominator is both (a) the company’s total number of common shares outstanding plus (b) the additional shares that could be available from the conversion of stock options, warrants, and other convertible securities). 

Financial Statements: Basically, there are three (3) types: income statement, balance sheet, and statement of cash flow. 

Gross Profit: Revenue less COGS. 

Net Income: Operating Income less Net Interest and Income Tax Expense

Net Income Margin: A percentage (%) – Net Income/Revenue.

Net Interest Expense: Interest Expense less Interest Income.

Net Revenue: Gross revenue less adjustments such as sales discounts, returns, delayed payments, and expected uncollectible amounts. 

Operating Income: Gross Profit less SG&A (Measure of company’s profits from normal operations).

Operating Margin: A percentage (%) – Operating / Revenue. 

SG&A: Selling, General and Administrative Costs (Costs which cannot easily or directly matched to revenue and can include costs such as marketing and advertising, professional services, R&D, and office expenses). 

Tax Expense: Income taxes required to be paid to various tax authorities.

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