A Practical Guide to Angel Investing (2nd Edition)

Founders’ Shares Shares owned by a company’s founders upon its establishment.

Free Cash Flow The cash flow of a company available to service the capital structure of the firm. Typically measured as operating cash flow less capital expenditures and tax obligations. Fully Diluted Earnings Per Share Earnings per share expressed as if all outstanding convertible securities, options and warrants have been exercised. Fully Diluted Outstanding Shares The number of shares representing total company ownership, including common shares and current conversion or exercised value of the preferred shares, options, warrants and other convertible securities. Golden Handcuffs This occurs when an employee is required to relinquish unvested shares when terminating his employment contract early. Golden Parachute Employment contract of upper management that provides a large payout upon the occurrence of certain control transactions, such as a certain percentage share purchase by an outside entity or when there is a tender offer for a certain percentage of a company’s shares. Holding Company A corporation that owns the securities of another, in most cases with voting control. Holding Period The amount of time an investor has held an investment. The period begins on the date of purchase and ends on the date of sale, and determines whether a gain or loss is considered short-term or long-term, for the purposes of capital gains tax.

112 A Practical Guide to Angel Investing

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