Absorption

See Fixed Coverage.

Accelerated Depreciation

A method of computing depreciation which provides greater depreciation allowances in the early years of an asset's use than in subsequent years. See Depreciation.

Accounts Payable

A liability on an open account to a creditor for purchases of merchandise and/or services.

Accounts Receivable

A claim against a debtor on an open account for the sale of merchandise and/or services.

Accrued Liability

The liability covering an expense recognized or incurred but not payable until some future date.

Acid Test Ratio

The ratio of the total current assets, less inventories and prepaid items, to current liabilities.

Add-On Interest

Interest charged on the amount of a loan. Payments are computed by adding the amount of the loan and interest then dividing by the number of months in the loan period.

Amortization

A systematic charge-off of an asset's cost to income over the period estimated to be benefited.

Balance Sheet

A statement of financial position as of a specific date; shown on page 1 of the Operating Report.

Bird Dog Fees

Commissions paid to a person, not regularly employed by a dealership, for a sales "lead" resulting in the sale of a vehicle.  This expense is considered a sales commission and is shown in Account 011, Vehicle Salespeople - Compensation & Other.

Break-Even Point

The volume point in terms of new unit sales at which a no-profit, no-loss situation would occur; this concept is intended for use in planning and setting objectives.

Budget Maintenance

Lease arrangement where a given amount is set aside for maintenance. Customer is responsible for all costs. If costs are under the allotted amount, the customer receives a refund; if over, the customer pays the overage.

Cadat (computer aided

dealership analysis tool)

A personal computer software analytical tool that provides graphical displays and key business management reports.

Capital Lease

A lease which qualifies as a sales transaction.  See Open-End Lease.

Capital Surplus

See Paid-In Surplus.

Cash Flow

Net profit plus amounts charged off for depreciation, depletion, amortization and extra-ordinary charges to reserves, which are non-cash expenses.

Cash Flow Forecast

A projection of the movement of funds of a certain future period for the planning cash needs.

Certificate Of Deposit

A negotiable or transferable interest bearing receipt payable to the depositor for funds deposited with a financial institution. The term is generally 30 days or longer.

Chargeback

An amount charged back to a dealership by finance or insurance companies as a result of the cancellation or early retirement of a finance or insurance company agreement with a customer.

Chattel

An item of tangible, moveable or immovable property, except real estate.

Closed-End Lease

Lessor furnishes the equipment and assumes depreciation risks. Closed-end leases are operating leases.

Compensating Balance

Minimum balance on deposit required by lending institutions for the privilege of borrowing money from them.

Compound Interest

Interest computed on principal plus interest.

Contract

An agreement between two parties for consideration to do a particular thing (e.g., the lease agreement).

Cost Of Sales

The total cost of merchandise and/or labor sold during a given accounting period; for recommended costing procedures.

Convenant Not To Compete

An agreement, where for consideration, the seller of a business agrees not to compete with the buyer for a period of time. Also called "Non Compete Agreement".

Current Assets

Unrestricted cash and other assets that are expected to be converted into cash, sold or consumed during the normal operating cycle of a business.

Current Liabilities

Short term debt, regardless of its source, including any accrued liability which is to be paid out of current assets.

Current Ratio

The ratio of current assets to current liabilities.

Curtailment

The reduction of an obligation

Customer Satisfaction Index (CSI)

The level of customer satisfaction as determined by surveys of dealership customers.

Daily Operating Control (DOC)

A report intended to keep management informed as to daily progress toward sales and profit goals.

DCES (Dealer Consultant

Expert System)

An artificial intelligence tool that provides a consistent and complete dealership analysis and makes recommendations.

Deferred Income

Income that will not be earned until a future period.

Delayed Payment Privilege

A privilege granted by a financial institution to a dealership whereby the pay off of the vehicle note is delayed after the sale. Customer vehicle sales on extended payment terms usually qualify for delayed payment privilege.

Departmental Profit

The amount by which the departmental gross profit exceeds the departmental total expenses.

Depreciation

An allowance for the wear and tear, exhaustion, and decline in value of business property.

Direct Costs

Costs directly allocable to the production of lease and rental income, that vary directly with the number of units in service. For example, interest paid by the dealership on a lease unit would be a direct cost relating to the income produced by that unit.

Discounted Finance Contract

An installment sales contract assigned by the dealer to a bank or finance company. The net proceeds from such a contract equal the face amount of the contract less amounts withheld by the finance institution such as finance charges.

Discounted Interest

Interest computed on the total amount of the loan and then deducted form the proceeds of the loan.

Effective Units

The average number of lease and rental units in service during the year. Month-end units are used in computing the average.

Escrow Account

Money deposited with a third party that is not to be delivered until the fulfillment of certain conditions.

Facts Dealer Number

The number by which each dealer is identified in the FACTS computer system. (This number is shown in the upper left-hand corner of the operating report.)

Fair Value

The selling price of the vehicle to the lease customer as if the transaction was a purchase at the current market price.

Finance Lease

The lessor furnishes the vehicle with the lessee assuming the risk of depreciation. See Open-End Lease.

Financial Statements

Statements that reflect the collection, tabulation and final summarization of the accounting data. The statements generally are the balance sheet, profit and loss statement, statement of changes in financial position and the statement of retained earnings.

Fixed Coverage

A measure of the fixed gross profit expressed as a percentage of total fixed overhead expense. The ratio is intended primarily as a measure of the effectiveness of the Service and the Parts and Accessories Departments in the context of the dealership's total expense structure.

Fixed Expenses

Operating expenses which do not vary materially in the short term with changes in sales volume.

Fixed Gross Profit

The combined gross profits of the Service and the Parts and Accessories Departments.

Fixed Net Loss

The excess of the total fixed overhead expense over the combined gross profits of the Service and the Parts and Accessories Departments. See Unabsorbed Overhead.

Fixed Overhead Expenses

Expenses that do not vary proportionately with vehicle sales. These include personnel, semi-fixed and fixed expenses.

Fixed Sales

Sales generated in the Service and Parts Departments.

Flat Rate Time

The time allowance to perform a particular service function based on time studies and specified in various service manuals used in the automotive industry.

Fleet Sales

Vehicle sales made to fleet customers such as leasing companies and commercial accounts holding fleet certificates.

Floor Plan

The financing of vehicle inventories.

Forecast

A projection of sales, expenses and profits for a specific future period for the purpose of setting objectives and planning.

GM Auction Vehicle

A used vehicle purchased for resale at a GM auction or from a GM division.

Goodwill

The amount paid for a business in excess of the fair market value of the net assets purchased. Also referred to as Blue Sky".

Gross Profit

Net sales less cost of goods and labor sold.

Guarantee

A written promise by one person (the co-signer) to be liable for the debt of another person in the event that the debtor fails to perform his obligation.

Guide Averages

Averages applicable to various elements of the business, derived from composites of dealership operating reports, which are intended for use in the comparative evaluation of the performance of individual dealerships.

Holdback

Amounts specified as Holdback on new vehicle invoices billed to the dealership. The amount of the holdback generally is 3% of the list price of the vehicle and the total of the list prices of optional equipment and accessories on the vehicle. Holdback is not part of the cost of the vehicle and should be handled as a receivable from the factory. Holdback amounts are accumulated by the factory and are intended to be paid or credited to the dealership on a quarterly or monthly basis at the option of the dealer.

Indirect Expense

An expense of a general nature not directly applicable to an operating department.

Insurance

A contractual relationship which exists when one party agrees to indemnify or guarantee another against loss from a contingent event.

Insurance - Additional Named Insured

Anyone other than the insured who is protected against loss by the terms of the policy.

Insurance - All Risk Insurance

A policy which covers against a loss caused by all perils except specific exclusions in the policy.

Insurance - Cancelable

A policy which may be terminated by an insurance company upon a 30-day written notice.

Insurance - Collision

Any act or instance of hitting or striking another object, regardless of fault, in which the insured's vehicle loss is covered.

Insurance - Combined Additional Coverage

Coverage which pays for direct and accidental loss of or damage to a vehicle caused by only those perils explicitly listed in the policy.

Insurance - Combined Single Limit

One total amount of coverage applicable to any one loss without restriction on the amount any one person may collect.

Insurance - Comprehensive

Coverage against a loss caused by all perils on an insured vehicle.

Insurance - Conversion

Any unauthorized act which deprives an owner of the use of his property permanently or for a period of time.

Insurance - Credit Disability

In the event of the disability of an insured individual, prior to the expiration of the contract, the insurer will pay to the named recipient (in accordance with policy provisions) the insured individual's monthly payment during the term of disability. Generally, benefits are payable after a 30-day waiting period.

Insurance - Credit Life

In the event of the death of an insured individual, prior to the expiration of a contract, the insurer will fulfill the insured's remaining contract obligations in accordance with policy provisions.

Insurance - Fire Insurance

Coverage insuring against direct loss by fire and lighting.

Insurance - Garage Liability

Insurance that protects the dealer on sales and service activities but may not cover the risks of a dealership's leasing activity.

Insurance - Liability Insurance

Coverage insuring the loss for any damages caused by the insured's negligence.

Insurance - Loss Payee

A clause providing for payment of a loss for which the insurer is liable to the insured and to someone other than the insured.

Insurance - Medical Payments

Coverage that pays for medical, surgical or dental services due to an accident. Coverage is limited and applies without regard to negligence.

Insurance - Non-Cancelable

Coverage guaranteed for the term of the contract and cannot be cancelled with or without cause.

Insurance - Occasional Operator

One who is not the principal driver of the vehicle.

Insurance - Physical Damage

Covers loss sustained on the insured vehicle.

Insurance - Proof of Insurance

Written document (Certificate of Insurance) from an insurance company which attests that the vehicle is insured for certain coverages and limits.

Insurance - Theft

Coverage which pays for loss or damage caused by theft, larceny, robbery or pilferage.

Insurance - Umbrella

A contract that covers losses over and above the limits stipulated on the primary insurance policy.

Insurance - Underage Driver

For insurance purposes, this means anyone with a valid driver's license but under a certain age set by each state.

Insurance - Uninsured Motorist

This is a protection against loss from being involved in an accident with a motorist who is not protected by insurance. It will cover losses caused by the uninsured motorist.

Internal Control

The system of control adopted by a business to safeguard its assets, check the accuracy and reliability of its accounting data, and promote operational efficiency.

Internal Sales

Sales of vehicles, services or materials by the New Vehicle Department, Service Department or the Parts and Accessories Department to an operating or administrative department of the business. Such sales provide a means of charging the department benefited and reimbursing the selling department with the prime cost of the items sold plus an amount (reflected in the gross profit generated) sufficient to cover a pro rata share of the departmental overhead.

Inventories

Merchandise available for sale

Investment Turnover Ratio

The ratio of net sales to net worth.

Lease

A contract between an owner and a user of property. The owner turns over the use of his property to the user in return for periodic rental payments.

Leasehold Improvements

The cost of improvements made to leased facilities.

Lease Term

The duration of a lease

Leesee

The user of leased property

Lessor

The party who leases the property to the user or lessee.

Letter Of Credit

An instrument issued on behalf of a buyer of a buyer by a financial institution certifying that a third party is entitled to draw upon its credit with the financial institution up to a certain sum.

Lien

A legal right on the property of another for payment of a debt.

LIFO (Last-In, First-Out)

A cost flow assumption method that matches the last costs for items in inventory with current revenue, with the ending inventory value computed using the first costs incurred. Under LIFO, it is assumed that goods are sold in the reverse order of their acquisition. Thus, cost of sales is based upon the most recent costs.  Ending inventory is based upon  the costs of the earliest purchase made.

Long Term Liabilities

Debts, including mortgages payable and any accrued or contingent liabilities, which are not to be paid during the current operating cycle.

Maintenance Lease

Lessor furnishes the vehicle and pays for maintenance according to the terms of the lease.

Month-End Units

The number of vehicles in inventory or lease and rental units in service at the month end.

Motor Vehicle Report

A report which is available through a state's Motor Vehicle Agency to indicate a driver's violations, accidents and suspensions.

Net Lease

The lessor furnishes the vehicle and assumes the depreciation risks; commonly referred to as an operating lease.

Net Sales

Total sales after all returns, allowances and discount.

Net Worth

Total assets less total liabilities, representing the owner's equity in the business.

New Vehicle Inspection Labor Sale

A labor sale chargeable to the factory dealing with the preparation of new vehicles for delivery.

Non-Recourse Finance Contracts

An installment sales contract assigned by the dealer to a bank or finance company for which the dealer is not liable for customer contract defaults.

Open-End Lease

The lessor furnishes the vehicle and the lessee assumes the risk of depreciation. An open-end lease usually referred to as a capital lease. See Capital Lease.

Operating Lease

A lease which does not qualify as a sales transaction (usually segregated between maintenance and non-maintenance operating leases). See Closed-End Lease.

Operating Profit

The aggregate of all departmental gross profits less total expense.

Operating Report

A financial reporting form specifically intended for use by General Motors dealers, consisting of a balance sheet, a departmentalized income and expense statement and additional statistical data derived from accounting records.

Other Assets

Assets not used or not intended for use in the automotive business.

Out-Of-Trust

A term used to describe the situation when a vehicle has been sold but the related note payable is still outstanding.

Paid-In Surplus

Capital contributed by stockholders in excess of par or stated value of capital shares. (No additional shares are issued to represent this increase inequity.)

Personnel Turnover Rate

The ratio of the number of personnel terminated and replaced to the average number of personnel employed during the accounting period.

PNUS

Per new unit sold

PNUSR

Per new unit sold retail

Policy Work

The internal selling price of labor and materials for which neither the customer nor manufacturer will be charged.

Policy Work - Vehicles

The repair or adjustment of vehicles previously sold or leased (except under a lease maintenance agreement).

Policy Work - Parts and Service

The repair or adjustment of defective service work and the replacement of defective parts and accessories sold.

Power Of Attorney

The legal delegation of authority to act on behalf of another.

Prepaid Expenses

Assets representing expenditures for future benefits which will be expensed as such benefits accrue.

Prepaid Interest

The excess of the face value of a loan over the proceeds of the loan.

Productive Personnel

Dealership personnel who directly create gross profits by their primary activity. For example, service technicians and salespeople.

Profit and Loss Statement

A statement of revenue and expenses for a specific period of time.

Protection Plan

Mechanical breakdown insurance or what is commonly referred to as an extended service contract.

Purchase Allowances

Discounts allowed to a dealer by the factory for the purchase of certain parts and accessories.

Reconditioning Cost

The cost incurred to restore a used vehicle to salable condition.

Recourse Finance Contract

An installment sales contract assigned by the dealer to a bank or finance company for which the dealer is liable for losses to the lending institutions resulting from customer contract default.

Rental Unit

A vehicle made available by one party for use by another party on a short-term basis for a fee.

Residual Value

The value of an asset at the end of its useful life.  In leasing, an estimate made of the wholesale value of the vehicle.

Return on Investment

A ratio of profit to investment, expressed as a percentage, applying to a given accounting period.

Return on Sales

A ratio of profit to net sales, expressed as a percentage, applying to a given accounting period.

Sales and Profit Forecast

A projection of sales, expenses and profits for a specific future period for the purpose of setting objectives and planning.

Security Deposit

An amount collected by the owner from the user at the beginning of a contract to provide a measure of protection for the owner against non-compliance with contract stipulations.  If not used, this deposit is refundable at the end of the contract term.

Self-Insurance

A practice whereby a company underwrites its own insurance protection.

Selling Ratio

The ratio of used vehicle unit sales to new vehicle unit sales.

Semi-Fixed Expenses

Operating expenses which vary with, but not in direct proportion to, sales volume.

Service Absorption

Also called Fixed Coverage.

Simple Interest

Charges for a loan of money computed by applying a rate against the amount of the loan outstanding for a given period.

Smart Lease

A name given to a type of lease handled by GMAC.

Stock Order Allowance

Discounts allowed to a dealer for the purchase of certain parts and accessories submitted via a stock order pad as specified by the factory.

Subrogation

The right on an insurance company to recover the amount of a loss under a policy from a third party.

Subsidiary

A company controlled by a parent company owing substantial interest.

Supportive Personnel

All employees other than productive personnel.

Total Fixed Overhead

Total operating expenses of the building less Variable Selling Expenses.

Transport Claim

A claim made for reimbursement of the cost of repairs to vehicles damaged in transit.

Treasury Stock

A purchase by a corporation of its own capital stock that is not retired.

Unabsorbed Overhead

The excess of the total fixed overhead expense over the combined gross profits of the Service and the Parts and Accessories Departments.

Unapplied Time

The cost of technician's compensation for productive time which is not applied as cost on repair orders.

Variable Gross Profit

The combined gross profits of the New and Used Vehicle Departments and the Lease and Rental Department.

Variable Net Profit

The combined gross profits of the New and Used Vehicle Departments and Lease and Rental Department less Variable Selling Expenses.

Variable Sales

Sales made by the New, Used and Lease and Rental Departments.

Variable Selling Expense

Operating expenses which are directly related to vehicle sales and tend to vary in direct proportion to vehicle sales volume.

Vehicle Delivery Receipt

An acknowledgement of receipt of a vehicle by the buyer or user.

Vehicle Return Receipt

A form completed at the end of lease contract where the lessor acknowledges return of the vehicle and agrees with the vehicles condition.

Warranty Claim Sales

A sale chargeable to the manufacture under the warranty claims provision of a selling agreement.

Without Sheet

A record detailing the total gross profit derived from an original vehicle sale after all trade-ins resulting from that sale have been disposed.

Working Assets

Non-current assets other than fixed and other assets, used in the automobile business.  Driver training vehicles and lease and rental units are categorized as such.

Working Capital

Same as dealer net working capital.

Working Capital Standard

The amount established by the vehicle division as to the minimum amount of working capital the dealership should have.