compound interest – n: finance/accounting term; in the
case of a loan or bond where interest accrues but is not paid, the interest
accrued is added to the principal amount of the loan or bond. This increases the
principal amount, and interest now accrues on the new higher amount. Simply
put, compound interest is interest you pay on interest you have been charged.
For the startup manager, you may see this concept in the form of compounding
dividends on preferred stock that has a set dividend rate.
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Adapted from "The CompanyCrafters Entrepreneur's Dictionary"
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