Frequently Used Business Terminology

The Difference Between Leasehold & Freehold

For many people purchasing a business here in Spain they will encounter leasehold and freehold opportunities, and when walking down any street you will notice signs in business premises "Traspaso", which is Spanish for a leasehold sale. A leasehold purchase you are buying the "business" and the fixtures and fittings and a freehold purchase you are buying the building, the land it sits on plus the business.

What's S.A.V.?

S.A.V. is stock at valuation. Normally when a business is purchased the vendor does a stock take on the day of sale and the stock is paid for on top of the business sale, discussions prior will give the purchaser an indication of the approximate value (cost price)

What is Gross Profit and Net Profit?

Gross profit is the difference in value between the revenue generated by a product or service and the cost of producing it and generally includes things such as materials, distribution costs and labour costs. To sum up, gross profit represents the amount of value gained from the sale of a product or service.

However, gross profit doesn’t account for other costs, such as operating expenses (which are deducted to give operating profit) or other overheads, taxation, interest and payroll (which are deducted to give net profit).

Net Profit is the profit after all other expenditure has been deducted and is the money the business has actually made for the financial year.