Contingent Liability​

A contingent liability provides coverage for losses to a third party for which the insured is vicariously liable. There are three types of contingent liabilities: 

  1. Probable – can be reasonably estimated to occur (and must be reflected within financial statements).
  2. Possible – are as likely to occur as they are to not occur (and need only be disclosed in the financial statement footnotes)
  3. Remote – are extremely unlikely to occur (and do not need to be included in financial statements at all). 

Amendment (Contract) 

An amendment is a change that is made to a contract. It is mutually agreed to by both of the parties and is used to add or delete sections or phrases, or change sections or phrases within it. With an amendment, the original contract remains intact, with typically only minor adjustments. 

Conversion Rights

Conversion rights give investors the right to convert their preferred stock into common stock in the business. There are two forms of conversion rights—optional and mandatory. Mandatory conversion rights force investors to convert their shares in an exit or liquidation event.

Convertible Note

A convertible note is a debt vehicle used by early-stage investors to invest in a startup that doesn’t have a valuation—it starts as debt and transforms into equity upon certain milestones being achieved. The four main terms of a convertible note include its: interest rate, discount rate, maturity date, and valuation cap.

Convertible Preferred Stock

The term ‘convertible preferred stock’ refers to the class of shares that give the holder the right to convert their shares into a fixed number of common shares after a predetermined date.

Corporate Bond

A corporate bond is a form of debt issued by a company to raise capital. An investor who buys a corporate bond lends them money in exchange for a series of fixed interest payments.

Cost of Capital

The cost of capital refers to the expenses related to a company’s raised funding. For revenue based financing the cost of capital is straightforward, it’s a fixed dollar amount. For convertible debt vehicles, such as SAFEs or convertible notes and equity financing, the total cost of capital is much 

less straightforward, because it depends on the ultimate exit valuation of the business and the provisions contained in the agreement.


The term ‘covenant’ refers to the provisions in a debt agreement that protect lenders from borrowers defaulting on their obligations due to financial actions—when breached, covenants trigger compensatory and other legal actions. There are two forms of covenants: affirmative covenants and negative covenants—negative covenants force borrowers to refrain from certain actions that could result in their inability to repay existing debt; affirmative covenants force borrowers to perform specific actions or maintain certain balances.

Credit Facility

A credit facility, also known as a line of credit, refers to the amount of debt capital available to a business. The longer the credit history, the larger the available credit facility is for the business.

Credit History

The credit history of a business, also known as its repayment history, refers to its ability to repay its debts over time. The longer the period of consistent repayments, the better the credit history of a business appears.


A creditor is a wealthy individual or institution that issues credit (debt) to another company. Creditors typically require collateral or personal guarantees to issue loans.


The term ‘crowdfunding’ refers to a form of raising capital from a large group of individuals, typically through the internet. There are three types of crowdfunding including: donation-based, rewards-based, and equity crowdfunding. Unlike raising capital from traditional funds and groups, the individuals who provide capital via crowdfunding do not have to be accredited investors.

Cumulative Dividends

The term ‘cumulative dividends’ refers to the amount of required dividend payments that a company has agreed to pay to its preferred shareholders. Cumulative dividends must be paid, even if they are paid at a later date than originally stated.

Current Asset

The current assets of a company include all of the assets that a company reasonably expects to use or exhaust within one year, which may include: its cash, accounts receivable, and inventory.

Current Liability

The current liabilities of a company include all of the debts or obligations that a company expects to pay back to its creditors within one year, which may include its: accounts payable, short-term debt, dividends, and notes payable.

Customer Acquisition Cost

The amount of money that a company is willing to spend on converting a customer is called its ideal customer acquisition cost.

Customer Lifetime Value (LTV or CLTV

The term ‘customer lifetime value’ is a dollar figure that describes what a customer is worth to the company. The higher the LTV of a customer, the more a company is willing to pay to acquire them.