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Glossary Of Automotive Terminology


Accounts payable A liability to a creditor, carried on open account, usually for purchases of goods and services.
Accounts receivable A claim against a debtor, carried on open account, usually limited to debts due from the sale of goods and services.
Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting.
Advertising To give information to the public about; announce publicly in a newspaper, on radio or television, etc
Aftermarket The market for replacement parts, service, accessories, and equipment for the care or enhancement of the original product, esp. an automobile, after its sale to the consumer
Assets Items of ownership convertible into cash; total resources of a person or business, as cash, notes and accounts receivable, securities, inventories, goodwill, fixtures, machinery, or real estate
Average repair order (ARO) Gross sales divided by the number of invoices in a given period, expressed in dollars
Balance sheet A statement of the financial position of a business on a specified date.
Break even Having income exactly equal to expenditure, thus showing neither profit nor loss
Capital Assets remaining after deduction of liabilities; the net worth of a business.
Cash flow The sum of the after-tax profit of a business plus depreciation and other non-cash charges: used as an indication of internal funds available for purchase of tools and equipment, etc.
Corporations A body that is granted a charter recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of its members.
Cost of goods The total price paid for products sold plus the cost of labor and overhead associated with the sale
Current liability A debt due within a year. Current liabilities include accounts payable, short-term loans from financial institutions and expenses incurred but not paid. 
Customer service index (CSI) General customer survey used to evaluate company operations, may also be tied with salary bonus
Dealership A sales agency, franchise or distributor having such authorization to sell specified vehicles in a particular area
Demographics The statistical data of a population showing average age, income, education, etc.
Depreciation Decrease in value due to wear and tear, decay, decline in price, etc.
Direct costs Those costs that can be identified specifically with a particular job or that can be directly assigned to such activities
Distribution to owner Money paid to owners as a cash return on their investment in the company
Door rate Posted hourly labor rate used to compute estimates and for tracking purposes
Economy The management of the resources of a community, country, etc., particularly with a view to its productivity.
Effective labor rate The actual dollar per hour labor income after calculating productivity 
Efficiency The actual time a technician takes to complete a job as compared to book time or sold time
Entrepreneur A person who organizes and manages any enterprise or a business, usually with considerable initiative and risk.
Equity The monetary value of a property or business beyond any amounts owed on it in mortgages, claims, liens, etc.
Expense The general costs of overhead and administration associated with running a business.
Flat rate The use of a published labor guide to set labor times (charged to the customer) to complete a particular job
Franchise The right or license granted by a company to an individual or group to market its products or services in a specific territory.
Gross profit Total receipts less the cost of goods or production but before the deduction of such other costs as rent or salaries. 
Income tax A tax levied on incomes such as an annual government tax on personal incomes.
Independent repair shop Private auto repair and service facility with no legal ties to carmakers, franchises or other corporations
Indirect costs Indirect costs represent the expenses of doing business that are not readily identified with a particular activity, but are necessary for the general operation of the company
Interest A sum paid or charged for the use of money or for borrowing money.
Inventory The items and parts represented on a list stating a company’s stock of goods
Inventory turns The number of times that a companies inventory cycles or turns over per year.
Labor cost That part of the cost of goods and services attributable to wages, especially for direct labor.
Labor mix The ratio between labor sold and parts sold
Labor rate Posted hourly labor rate used to compute estimates and for tracking purposes
Liability Moneys owed; debts or financial obligations
Loans A sum of money lent at interest
Long term debt Loans and obligations with maturity of longer than one year; usually accompanied by interest payments. 
Mark up To set the selling price  of a part by adding to the seller's cost an amount to cover expenses and profit
Marketing The total of activities involved in the transfer of goods from the producer or seller to the consumer or buyer, including advertising, shipping, storing, and selling
Menu pricing A set bundled price, including parts and labor
Mortgage A conveyance of an interest in property as security for the repayment of money borrowed.
Net income The excess of revenues and gains of a business over expenses and losses during a given period of time.
Net worth The amount by which a company or individual's assets exceed their liabilities.
Operating income The amount left over after subtracting the company's operating expenses from the gross profit
Partnerships A legal contract entered into by two or more persons in which each agrees to furnish a part of the capital and labor for a business enterprise, and by which each shares a fixed proportion of profits and losses. 
Parts matrix A part pricing system that allows higher margins for lower priced parts and lower margins for higher priced parts
Productivity The relationship between hours sold versus the technician's available billable hours.
Profit and loss Statement Also know as an income statement. A financial statement that indicates income and expenses and shows weather a company made or lost money for a given period. 
Profit Margin Net profit margin of a business, which is calculated by deducting operating expenses and cost of goods sold and dividing the result by net sales.
Repair mix The ratio between repair work and preventive maintenance work
Retained earnings The accumulated net income retained for reinvestment in a business, rather than being paid out in dividends to stockholders.
Service Consultant A company's representative responsible for customer’s needs and coordinating workflow, up selling jobs and maintaining productivity
Short term debt Debt due to be paid off at a date less than one year in the future.
Sole proprietorships A type of business entity which legally has no separate existence from its owner.
Total Quality Management (TQM) TQM is a set of practices geared to ensure the organization consistently meets or exceeds customer requirements by placing strong focus on process measurement as means of continuous improvement.
Up sell A sales technique to sell additional items or services