Glossary of financial terms

Used as a noun, Valuation is what a business is worth, as in "this company's valuation is €10 million." This would mean that a company is valued at €10 million, or worth €10 million. The term is used most often for discussions of sale or purchase of a company; its valuation is the price of a share times the number of shares outstanding, and the price of a share is the total valuation divided by the number of shares outstanding.

Some of the different valuation methods consider

Rate of return
Timing and form of return
Amount of control desired
Acceptable level of risk
Perception of risk
Standard new venture valuation methods may include

Asset-based valuation: the business is worth the sum of its assets. Not a popular valuation method for new businesses, because their future should be worth a lot more than their assets.
Book value: the book value of a company is the calculation of assets less liabilities.
Adjusted book value: this variation adjusts the assets - liabilities calculation for real value of assets, distinguished from the accounting value.
Liquidation value: what a business would yield in real money if its assets were liquidated.
Replacement value: what it would cost to replace the business if the replacement started from scratch.
Earnings Based Valuations: this is by far the most popular method for new businesses; they are valued based on future earnings.

The process by which investors fund early stage, more risk oriented business endeavours. A venture capital funding arrangement will typically entail relinquishing a sizeable percentage ownership and control of the business. Offsetting the high risk the investor takes is the promise of high return on the investment. The investment is usually in the form of stock or a convertible debenture. As the business matures, an initial public offering may take place, or the business merged or sold, or other sources of capital found. Any of these would occur with the intention of buying out the venture capitalists. Venture capitalists typically expect a high percentage annual return on their loan investment at the time they invest in the private company. Venture capitalists typically invest in high growth companies with the potential to generate revenues of €20 million in any one company, but typical investments range from between €500,000 and €5 million. Management experience is a major consideration in evaluating financing prospects.

A firm incorporated for the purpose of investing in private companies. The infusion of capital is expected to take the private company to the point of qualifying to do an Initial Public Offering, Usually; venture capitalists expect a high percentage equity interest in the private companies in which they invest.

Over a period of time an employee of a company earns rights to receive benefits (e.g. Stocks) as result of that employment, though until the rights are earned the employee may not be able to claim ownership of the related benefits and those potential benefits are forfeitable. Restricted stock or options, or warrants to purchase stock, that may not be sold or exercised, or that are subject to risk of forfeiture, for a period of time, are "unvested". That portion of the stock which is not subject to risk of forfeiture and which may be sold, or the options and warrants that may be exercised, are referred to as "vested".