FINANCIAL DICTIONARY - FINANCIAL GLOSSARY
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A - ACCOUNTANT'S OPINION: Is a signed
statement regarding the financial status of an entity
from an independent public accountant after examination
of that entities records and accounts. ACCOUNTING: Generally when someone says
"accounting" they are referring to the
department, activity or individuals involved in the
application of the accounting equation. ACCOUNTS PAYABLE-TRADE is open
accounts and note obligations due to the trade. ACCOUNT RECEIVABLE is a current asset
representing money due for services performed or
merchandise sold on credit. ACCRUAL BASIS OF ACCOUNTING is
wherein revenue and expenses are recorded in the period
in which they are earned or incurred regardless of
whether cash is received or disbursed in that period.
This is the accounting basis that generally is required
to be used in order to conform to generally accepted
accounting principles (GAAP) in preparing financial
statements for external users. ACCRUED ASSETS are assets from
revenues earned but not yet received. ACCRUED EXPENSES are expenses
incurred during an accounting period for which payment is
postponed. ACCRUED INCOME: is income earned
during a fiscal period but not paid by the end of the
period. ACCRUED INTEREST is interest earned
but not paid since the last due date. ACID-TEST RATIO is an analysis method used to
measure the liquidity of a business by dividing total
liquid assets by current liabilities.
ADVISING BANK is a bank in the exporter's
country handling a letter of credit. AICPA is the American Institute [of] Certified
Public Accountants ALL OTHER CURRENT ASSETS relates to
any other current assets. Does not include prepaid items.
ALL OTHER CURRENT LIABILITIES includes
any other current liabilities, including bank overdrafts
and accrued expenses. ALL OTHER EXPENSES (NET) includes
miscellaneous other income and expenses (net), such as
interest expense, miscellaneous expenses not included in
general and administrative expenses, netted against
recoveries, interest income, dividends received and
miscellaneous income. ALL OTHER NON-CURRENT ASSETS are
prepaid items and any other non-current assets. ALL OTHER NON-CURRENT LIABILITIES means
any other non-current liabilities, including subordinated
debt, and liability reserves. ALPHA is the premium an investment earns above
a set standard. This is usually measured in terms of the
Dow Industrials or the S&P 500. How the stock
performs independent of the market.
ANGEL INVESTOR is a private wealthy individual
that has no association with a venture capital firm,
investment fund, etc. The "angel" invests
private money into what he/she believes to be promising
opportunities i.e., normally startup companies. AMORTIZATION 1. is the gradual reduction of a
debt by means of equal periodic payments sufficient to
meet current interest and liquidate the debt at maturity.
When the debt involves real property, often the periodic
payments include a sum sufficient to pay taxes and hazard
insurance on the property. 2. is the process of spreading
the cost of an intangible asset over the expected useful
life of the asset. For example: a company pays $100,000
for a patent, they amortize the cost over the 16 year
useful life of the patent. ASEAN (Association of Southeast Asian Nations)
is a trading block of countries in SE Asia. Originally
formed as an anti-communist military alliance, it is now
focused on developing a free trade agreement among member
nations. ASSET is anything owned by an individual or a
business, which has commercial or exchange value. Assets
may consist of specific property or claims against
others, in contrast to obligations due others. (See also Liabilities).
Accountant's Equation The equation that is the basis of a
balance sheet. It is as follows: Assets = Liabilities +
Owners' Equity. ASSET EARNING POWER is a common profitability
measure used to determine the profitability of a business
by taking its total earning before taxes and dividing
that by total assets. ASSET TURNOVER RATIO is a general
measure of a firm's ability to generate sales in relation
to total assets. It should be used only to compare
firms within specific industry groups and in conjunction
with other operating ratios to determine the effective
employment of assets. AUDIT BUREAU OF CIRCULATION (ABC) is a
third-party organization that verifies the circulation of
print media through periodic audits. AUDIT STRATEGY is a game plan to attack audit
issues before they are raised. Reasons and justifications
for all positions must be understood and the foundation
laid for taking the position.
- B - BALANCE OF PAYMENTS / BALANCE OF TRADE is the
difference between a country's total export dollar value
and its total import dollar value, generally or with
respect to a particular trading partner. A positive
balance means a net inflow of capital, while a negative
means capital flows out of the country. BALANCE SHEET is an itemized statement that
lists the total assets and the total liabilities of a
given business to portray its net worth at a given moment
of time. The amounts shown on a balance sheet are
generally the historic cost of items and not their
current values. BANK RECONCILIATION is the verification of a
bank statement balance and the depositor’s checkbook
balance. BARTER is a form of trading where the parties
are accepting goods as payment rather than cash. BASIC EARNINGS POWER (EBIT/TA) is useful for
comparing firms in different tax situations and with
different degrees of financial leverage. Basic Earning
Power measures the basic profitability of Assets because
it excludes consideration of interest and tax. BENEFICIAL OWNER is the person who enjoys the
benefits of ownership even though title is in another
name (often used in risk arbitrage). BENEFICIARY is the person in whose favor a
letter of credit is issued or a draft is drawn. BILL OF LADING is the contract between the
owner of the goods and the cargo carrier to move the
goods to a specified destination. A clean bill of lading
is issued by the carrier verifying receipt of the
merchandise in apparent good condition (without visually
apparent damage or defect). Bills of lading can sometimes
be made to cover the whole trip, or separate bills of
lading can be prepared for each carrier. Ocean shipments
generally require two, an Inland Bill of Lading covering
land transportation to the port and an Ocean Bill of
Lading covering the ship portion. Bills of lading are
negotiable while cargo is in transit. BONDED WAREHOUSE is a warehouse authorized by
customs officials for the storage of goods on which
payment of duty is deferred until the goods are removed. BONDING is generally used by service companies
as a guarantee to their clients that they have the
necessary ability and financial tracking to meet their
obligations. Bonds are also used to guarantee payment of
duty for U.S. Customs entry. BOOKING, in import / export, is an arrangement
with a shipping company to load and carry a shipment.
BOOKKEEPING is the art, practice, or labor
involved in the systematic recording of the transactions
affecting a business. BREAK-EVEN ANALYSIS is an analysis method used
to determine the number of jobs or products that need to
be sold to reach a break-even point in a business. BREAK-EVEN POINT is the volume point at which
revenues and costs are equal; a combination of sales and
costs that will yield a no profit/no loss operation. BUDGET is an itemized listing of the amount of
all estimated revenue which a given business anticipates
receiving, along with a listing of the amount of all
estimated costs and expenses that will be incurred in
obtaining the above mentioned income during a given
period of time. A budget is typically for one business
cycle, such as a year, or for several cycles (such as a
five year capital budget). BUSINESS PLAN is a written plan used to chart a
new or ongoing business' strategies, sales projections,
and key personnel in order to obtain financing and / or
to provide a strategic foundation under which a business
can grow. BUSINESS PUBLICATIONS AUDIT (BPA) is similar to
the Audit Bureau of Circulation; the BPA is a third-party
organization that verifies the circulation of print media
through periodic audits.
- C - CAPITAL is total amount of money or other
resources owned or used to acquire future income or
benefits. CAPITAL BUDGET is the estimated amount planned
to be expended for capital items in a given fiscal
period. Capital items are fixed assets such as facilities
and equipment, the cost of which is normally written off
over a number of fiscal periods. The capital budget,
however, is limited to the expenditures that will be made
within the fiscal year comparable to the related
operating budgets. CAPITAL EXPENDITURES is the amount
used during a particular period to acquire or improve
long-term assets such as property, plant or equipment CAPITAL GAIN OR LOSS is the difference between
the market or book value at purchase or other acquisition
and that realized from the sale or disposition of a
capital asset. CAPITAL IMPROVEMENT is the increase in the
total amount of money or other resources owned or capable
of being used to acquire future income or benefits. CAPITALIZATION is the statement of capital
within the firm - either in the form of money, common
stock, long-term debt, or in some combination of all
three. It is possible to have too much capital (in which
case the firm is overcapitalized) or too little capital
(in which case the firm is undercapitalized). CAPITAL LEASE is a lease obligation that has to
be capitalized on the balance sheet. It is characterized
by: it is non-cancelable; the life of lease is less than
the life of the asset(s) being leased; and, the lessor
does not pay for the upkeep, maintenance, or servicing
costs of the asset(s) during the lease period. CAPITAL STOCK is the ownership shares of a
corporation authorized by its articles of incorporation,
including preferred and common stock. CARNET is a customs document which permits you
to send or carry merchandise into a country duty and tax
free for a short period, for use as samples or as display
merchandise in a trade show, for example. CASH BASIS OF ACCOUNTING is the
accounting basis in which revenue and expenses are
recorded in the period they are actually received or
expended in cash. Use of the cash basis generally is not
considered to be in conformity with generally accepted
accounting principles (GAAP) and is therefore used only
in selected situations, such as for very small businesses
and (when permitted) for income tax reporting. See also
Accrual Basis. CASH & EQUIVALENTS means all
cash, marketplace securities, and other near-cash items.
Excludes sinking funds. CASH FLOW / CURRENT PORTION OF LONG TERM DEBT
is a measure of the firms ability to meet its obligations
with internally generated cash. CASH IN ADVANCE is when full payment is due
before the merchandise is shipped. Least risk to seller,
most risk to buyer. CERTIFICATE OF INSPECTION is certification,
generally by an independent third party, that the goods
were in good condition at the time of shipment. CERTIFICATE OF ORIGIN is a document that states
where the goods were made. This document is legally
required for many countries for the importation of
merchandise. CERTIFIED FINANCIAL PLANNER (CFP) is a
financial planner who has received a license from the
Institute of Certified Financial Planners, indicating
that he/she was trained in investments, budgeting, taxes,
banking, estate planning and insurance. Some CFPs work on
commission for the products they sell, and some work for
a flat hourly fee. C&F (COST & FREIGHT) includes all
shipping costs but insurance. Generally used in
statement of terms, stating cost and freight are paid by
the exporter from his warehouse to a port in the
importer's country. In this case, the buyer is
responsible for insurance. CHART OF ACCOUNTS is a systematic
listing of all accounts used by a company. CHATTEL MORTGAGE CONTRACT is a credit contract
used for the purchase of equipment where the purchaser
receives title of the equipment upon delivery but the
creditor holds a mortgage claim against it. C&I (COST & INSURANCE), in a price that
is quoted “C&I”, means that the cost of the
product and insurance are included in the quoted price.
In this case, the cost of shipping would be borne by the
buyer. CIF (COST, INSURANCE AND FREIGHT) is a shipment
where all shipping costs are paid by the exporter,
including insurance. CLOSELY HELD is a description of a corporation
whose voting stock is owned by a very small number of
shareholders. COLLATERAL is assets used as security for the
extension of a loan. COLLECTION PAPERS are those documents specified
as necessary for payment to be made, such as the
commercial invoice, certificate of inspection, and bill
of lading. COLLECTION PERIOD (Avg. Annual) is used to
appraise accounts receivable (AR). This ratio is
calculated by dividing Average Accounts Receivable during
last year by average daily sales. The result states the
average number of days' sales tied up in Receivables
during the entire period. See NOTE below. COLLECTION PERIOD (This Period) is used to
appraise current accounts receivable (AR). This ratio is
calculated by dividing accounts receivable at the end of
this period by daily sales. The result shows the number
of days' sales tied up in Receivables at the end of this
period. See NOTE above. COMMERCIAL ATTACHÉ is a business and trade
expert on the staff of a consulate or embassy. They are
responsible for promoting exports of their country's
goods and are an excellent source of help. COMMERCIAL LOAN is a short-term business loan
usually issued for a term of up to six months. COMMON SIZE PERCENTAGES - In the Income
Statement, each "Common Size %" is the field
amount expressed as a percent of "Net
Revenues." In the Balance Sheet, each "Common
Size %" is the amount in the category as a percent
of "Total Assets. "RATIO ANALYSIS" as
prepared by VentureLine presents several standard
"Key Ratios" to compare this firm to any of
several standards. This firm's ratios may be compared to
industry standards, to a single other firm of similar (or
different) type, or to this firm's past or anticipated
performance. In this analysis VentureLine uses industry
data based upon the SIC Code of that particular listing
(when available). COMMON STOCK is the most frequently issued
class of stock; usually it provides a voting right but is
secondary to preferred stock in dividend and liquidation
rights. COMPOUND JOURNAL ENTRY is a journal
entry that involves more than one debit or more than one
credit or both. CONDITIONAL SALES CONTRACT is a credit contract
used for the purchase of equipment where the purchaser
doesn't receive title of the equipment until the amount
specified in the contract has been paid in full. CONSIGNMENT is when goods are offered for sale
on behalf of another without the seller actually
purchasing or taking title to the goods. Only when there
is a subsequent sale does the owner receive any payment. CONSOLIDATED FINANCIAL STATEMENTS are
statements that report the combined operating results,
financial position, and cash flows of two or more legally
separate but affiliated companies as if they were one
economic entity. CONSULAR DECLARATION is a formal statement to
the consul of a foreign country declaring the merchandise
to be shipped. CONVERTIBLE CURRENCY is any national currency
that can be easily exchanged for that of another country. COOPERATIVE
ADVERTISING is a joint advertising strategy under which
costs are shared; e.g. by a manufacturer and another firm
that distributes its products. CONTRACT
REVENUES are the revenues recognized under % of
completion method. COPYRIGHT
is a form of legal protection used to safeguard original
literary works, performing arts, sound recordings, visual
arts, original software code and renewals. CORPORATION is a type of business organization
chartered by a state and given many of the legal rights
as a separate entity. CORRESPONDENT BANK is a bank having
communications and business links with the seller's bank. COST ACCOUNTING is a managerial
accounting activity designed to help managers identify,
measure, and control operating costs. COST OF CAPITAL is the required
return for a capital budgeting project. COST OF GOODS SOLD (COGS) is the amount
determined by subtracting the value of the ending
merchandise inventory from the sum of the beginning
merchandise inventory and the net purchases for the
fiscal period. COST-OF-LIVING
LEASE is a lease where yearly increases are tied to the
cost of living index. COST
PER THOUSAND (CPM) is advertising terminology used in
buying media. CPM refers to the cost it takes to reach a
thousand people within your target market. CURRENT
ASSETS are those assets of a company that are reasonably
expected to be realized in cash, or sold, or consumed
during the normal operating cycle of the business
(usually one year). Such assets include cash, accounts
receivable and money due usually within one year,
short-term investments, US government bonds, inventories,
and prepaid expenses. CURRENT DEBT TO TOTAL DEBT shows Current
Liabilities as a percent of Total Debt. CURRENT LIABILITIES are liabilities to be paid
within one year of the balance sheet date. CURRENT MATURITIES-L/T/D is that
portion of long term obligations which is due within the
next fiscal year. CURRENT RATIO is a commonly used measure of
short-run solvency, the immediate ability of a firm to
pay its current debts as they come due. CUSTOMS
are the authorities charged with collecting duty and
controlling the entry of merchandise into a country. CUSTOMS
BROKER is an individual or firm licensed to process entry
and clear goods into the country for another.
- D - DATE DRAFT is a payment option draft that
matures in a specified number of days after the date
issued. DAYS' INVENTORY shows the average lengths of
time items are in inventory. DBA (doing business as) is a legal entity (sole
proprietorship, partnership, corporation) conducting
business under any chosen name for which a business
license has been issued. DEBENTURE is a corporate IOU that is
not backed by the company's assets and is therefore
somewhat riskier than a bond. DEBT TO EQUITY (also DEBT/WORTH) measures the
risk of the firm's capital structure in terms of amounts
of capital contributed by creditors and that contributed
by owners. It expresses the protection provided by owners
for the creditors. In addition, low Debt/Equity ratio
implies ability to borrow. While using Debt implies risk
(required interest payments must be paid), it also
introduces the potential for increased benefits to the
firm's owners. When Debt is used successfully (operating
earnings exceeding interest charges) the returns to
shareholders are magnified through financial leverage. DECLINING-BALANCE DEPRECIATION METHOD is an
accelerated depreciation method in which an asset's book
value is multiplied by a constant depreciation rate (such
as double the straight-line percentage, in the case of
double-declining-balance.). This depreciation method is
allowed by the U.S. tax code and gives a larger
depreciation in the early years of an asset. Unlike the
straight line and the sum of the digits methods, both of
which use the original basis to calculate the
depreciation each year, the double declining balance uses
a fixed percentage of the prior year's basis to calculate
depreciation. The percentage rate is 2/N where N is the
life of the asset. With this method, the basis never
becomes zero. Consequently, it is standard practice to
switch to another depreciation method as the basis
decreases. Usually the taxpayer will convert to the
straight line method when the annual depreciation from
the declining balance becomes less than the straight
line. DEFERRED PAYMENT CREDIT is a type of a letter
of credit where payment is made at a specified interval
after collection papers are submitted. DELINQUENCY RATIO is the ratio of past-due
loans to total number of loans serviced. DEMOGRAPHICS are the attributes such as income,
age, and occupation that best describe your target
market. DEPLETION is the process of cost
allocation that assigns the original cost of a natural
resource to the periods benefited. For example: a mining
company purchases mineral rights to a deposit for $5
million for a period of ten years. The cost of the
natural resource, $5 million, will be depleted over the
ten years of the benefit. DEPRECIATION is the amount of expense charged
against earnings by a company to write off the cost of a
plant or machine over its useful live, giving
consideration to wear and tear, obsolescence, and salvage
value. If the expense is assumed to be incurred in equal
amounts in each business period over the life of the
asset, the depreciation method used is straight line
(SL). If the expense is assumed to be incurred in
decreasing amounts in each business period over the life
of the asset, the method used is said to be accelerated.
Two commonly used variations of the accelerated method of
depreciating an asset are the sum-of-years digits (SYD)
and the double-declining balance (DDB) methods.
Frequently, accelerated depreciation is chosen for a
business' tax expense but straight line is chosen for its
financial reporting purposes. DEVALUATION, in economics, is the lowering in
value of one currency in relation to other currencies. DILUTED EARNINGS PER SHARE are
earnings per share, including common stock, preferred
stock, unexercised stock options, and some convertible
debt. Diluted earnings per share are usually a more
accurate reflection of the company's real earning power. DISABILITY INSURANCE, in the United States, is
a payroll tax required in some states that is deducted
from employee paychecks to insure income during periods
where an employee is unable to work due to an injury or
illness. DISCLOSURE DOCUMENT PROGRAM, in the United
States, is a form of legal protection that safeguards
intellectual property while it is in its development
stages. DISCOUNTED CASH FLOW is a valuation method
best used to evaluate a business established for the
purpose of fulfilling a specific project, in certain
startup and other companies where cash flow is more
important than net income, and when a certain time frame
is set where an investor wishes to see his investment
returned over a specific period of time. In discounted
cash flow, the present value of liabilities is subtracted
from the combined present value of cash flow and tangible
assets, which determines the value of the business. DISCOUNTED EARNINGS determines the value of a
business based upon the present value of projected future
earnings, discounted by the required rate of return
(capitalization rate). Usually, the question is how well
earnings are projected. DISCOUNT RATE is the interest rate
that the Federal Reserve of the U.S. Government charges a
U.S. bank to borrow funds when a bank is temporarily
short of funds. Collateral is necessary to borrow, and
such borrowing is quite limited because the Fed views it
as a privilege to be used to meet short-term liquidity
needs, and not a device to increase earnings. DISCREPANCY, in import / export, is a situation
relating to official documents that are presented that do
not conform to what is required within the Letter of
Credit. DISCRETIONARY means it is not mandatory, it is
up to the individual or company. DISCRETIONARY ACCRUAL is a
non-mandatory expense/asset that is recorded within the
accounting system that has yet to be realized. An example
of this would be management bonus'. DISTRIBUTIONS are payments from fund or
corporate cash flow. May include dividends from earnings,
capital gains from sale of portfolio holdings and return
of capital. Fund distributions can be made by check or by
investing in additional shares. Funds are required to
distribute capital gains (if any) to shareholders at
least once per year. Some corporations offer Dividend
Reinvestment Plans (D.R.P.). DIVIDEND CAPITALIZATION: Since most closely
held companies do not pay dividends, when using dividend
capitalization valuators must first determine dividend
paying capacity of a business. Dividend paying capacity
based on average net income and on average cash flow are
used. To determine dividend paying capacity, near term
capital needs, expansion plans, debt repayment, operation
cushion, contractual requirements, past dividend paying
history of a business and dividends of a comparable
company should be investigated. After analyzing these
factors, percent of average net income and of average
cash flow that can be used for the payment of dividends
can be estimated. What also must be determined is the
dividend yield, which can best be determined by analyzing
comparable companies. As with the price earnings ratio
method, this usually produces a subjective result. DOCK RECEIPT is a document issued by the ocean
carrier of a shipment acknowledging receipt of the goods
to be shipped. DOCUMENTARY
CREDIT is an arrangement by banks for settling
international business transactions. A letter of credit
is a form of documentary credit. DOLLAR
CONTROL SYSTEMS are systems used in inventory management
that reveals the cost and gross profit margin on
individual inventory items. DOLLAR-WEIGHTED
RATE OF RETURN is also called the internal rate of
return; the interest rate that makes the present value of
the cash flows from all the sub-periods in an evaluation
period plus the terminal market value of the portfolio
equal to the initial market value of the portfolio. DOUBLE-ENTRY ACCOUNTING is a system of
recording transactions in a way that maintains the
equality of the accounting equation. The accounting
technique records each transaction as both a credit and a
debit. DR,
in accounting, is an acronym for Debit Record. DRAFT,
in import / export, is a contract between buyer and
seller that the buyer will pay a certain amount of money,
within a specified period of time, for the goods
purchased. DRAFT,
DEMAND OR SIGHT, in import / export, is a draft payable
upon presentation to the drawee. It may be used when the
exporter wishes to retain control of the shipment for
credit or title retention reasons. The buyer must pay the
bank before receiving the documents to take custody of
the goods. A COD shipment is similar. DRAWEE
is the buyer of a draft instrument. DUMPING
is the selling of merchandise in a foreign country at
below cost in order to seize market share. DUN
& BRADSTREET is a United States based for profit
agency that furnishes subscribers with marketing
statistics and the financial standings and credit ratings
of businesses. DUTY
is a tax imposed by a customs authority on imported
goods. Often used interchangeably with the term
"tariff."
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EARNINGS PER SHARE (EPS) is the amount of net
income (earnings) related to each share of stock;
computed by dividing net income by the number of shares
of common stock outstanding during the period. EBITDA means Earnings Before Interest, Taxes,
Depreciation and Amortization, but after all product /
service, sales and overhead (SG&A) costs are
accounted for. Sometimes referred to as Operating Profit. E.C. (EUROPEAN COMMUNITY or EUROPEAN COMMON MARKET)
is a trading block of countries in Europe that have
agreed on common regulations on cross-border trade. ECONOMIC VALUE (EV) is the value of an asset
deriving from its ability to generate income. EMC (EXPORT MANAGEMENT COMPANY) is a private
company that serves as the export agent for
manufacturers, being paid by commission or retainer.
Merchandise is not normally purchased by the EMC. ENTERPRISE VALUE is the market value of a
corporation's total capitalization: equity plus debt,
less the value of assets peripheral to the firm's core
businesses. ENTERPRISE ZONE is a depressed neighborhood,
usually in an urban area, where businesses are given tax
incentives and are not subject to some government
regulations. These advantages are designed to attract new
business in the zone. EPS (earnings per share) is the amount of net
income (earnings) related to each share of stock;
computed by dividing net income by the number of shares
of common stock outstanding during the period. EQUIPMENT LOAN is a loan used for the purchase
of capital equipment. EQUITY
is, normally, ownership or percentage of ownership in a
company or items of value. EQUITY
CAPITAL is a form of financing where equity in a business
is sold to private investors. ESTATE is the entire group of assets owned by
an individual at the time of his or her death. The estate
includes all funds, personal effects, interests in
business enterprises, titles to property-real estate and
chattels, and evidences of ownership such as stocks,
bonds and mortgages owned, notes receivable, etc. All
claims against an estate must be duly filed with the
Executor or Administrator of the estate, and approved by
the court of law under which the will is being probated
or the line of heritage is being determined before the
indebtedness may be satisfied. ESTATE TAXES are the Federal taxes levied on
the transfer of property from the deceased to his or her
heirs, legatees or devisees. ETC (EXPORT TRADING COMPANY) is a private
company that usually purchases items from domestic
manufacturers, then sells them to foreign markets. The
difference between an EMC and an ETC is sometimes
insignificant, i.e., an EMC may occasionally take title
of goods, while an ETC may sometimes work strictly on
commission without purchasing the goods. The difference
is what the company normally does. EV (economic value) is the value of an asset
deriving from its ability to generate income. EVENT RISK is the risk that the
ability of an issuer to make interest and principal
payments will change because of rare, discontinuous, and
very large, unanticipated changes in the market
environment such as (1) a natural or industrial accident
or some regulatory change or (2) a takeover or corporate
restructuring. EXECUTOR is a legal entity, frequently an
individual, known before death to a testator, who is
named in the testator's will to carry out the desires of
the deceased after his death as designated in the will.
Executors must be approved by the court of law probating
the will. An executor pays all indebtedness as claimed by
creditors of the estate, with the approval of the court
of law, and then carries out or executes the will
according to the terms set forth by the testator. EX-FACTORY is where a seller's responsibility
ends when the buyer at point of origin, i.e., factory,
accepts merchandise. This can also be written as
Ex-Warehouse, Ex-works, etc. EXPLORATORY
RESEARCH is a method used when gathering primary
information for a market survey where targeted consumers
/ customers are asked very general questions geared
toward eliciting a lengthy answer. EXPORT
BROKER is an entity that brings together foreign buyers
with domestic manufacturers for a fee, generally
providing little other services. An EMC, who is also a
middleman, often provides extensive services to complete
the transaction as well. EXPORT
DECLARATION is the official paperwork required of
exporters so trade transactions and goods can be tracked.
EXPORT
LICENSE is the governmentally issued legal permit to
export merchandise. In the U.S., it is either a general
license requiring no additional paperwork or a validated
license for certain federally controlled items.
- F - FACTORING is the practice of buying debt at a
discount, e.g., if somebody owes you $10,000 payable
within a year, a factoring lender may pay you $9,000 for
the debt. You receive $9,000 cash quickly, but at the
cost of the $1,000 discount. FAIR LABOR STANDARDS ACT is a U.S. federal law
that enforces a group of minimum standards that employers
must abide by when hiring employees. FAIR MARKET VALUE is the price at which a
willing seller will sell and a willing buyer will buy, in
an arms- length transaction, when neither is under
compulsion to sell or buy and both have reasonable
knowledge of relevant facts. F.A.S. (FREE ALONG SIDE), e.g. “F.A.S.
New York”, means that, for instance, if goods
are shipped from the State of Nevada in the U.S. to
Madrid, Spain, no charges for shipment are made to the
importer until the goods are "free alongside the
vessel" in New York. After this point, charges may
be applied to the importer. FASB is the Financial Accounting Standards
Board FCIA (FOREIGN CREDIT INSURANCE ACT) is an
ExImBank program that offers credit insurance against
losses due to political conflict or buyer default. FICA (FEDERAL INSURANCE CONTRIBUTIONS ACT) is
the U.S. law requiring U.S. employers to match the amount
of Social Security tax deducted from an employee's
paycheck. FICTITIOUS NAME is often referred to as a DBA,
"Doing Business As," a fictitious name is
frequently used by sole proprietors or partnerships to
provide a name, other than those of the owners or
partners, under which the business will operate. FFO - FUNDS FROM OPERATIONS: Is used by real
estate and other investment trusts to present the cash
flow from trust operations i.e., earnings plus
depreciation and amortization. FINANCIAL RESULTS usually refers to the summary
financial results provided in compliance to the GAAP
guidelines. They can cover any period(s), but usually
cover either: single month, quarter, or annual periods. FISCAL YEAR is an accounting period of exactly
twelve months that does not necessarily coincide with the
calendar year. FIXED ASSETS (NET) is all property,
plant, leasehold improvements and equipment, net of
accumulated depreciation or depletion. FIXED ASSETS (NET) / NET WORTH measures the
extent to which the owner's equity has been invested in
plant and equipment (net fixed assets). A lower ratio
indicates proportionately smaller investment and a better
"cushion" for creditors in case of liquidation.
This may be important if the fixed assets are not easily
used in other businesses. The presence of substantial
leased fixed assets (not shown on the balance sheet) may
deceptively lower this ratio. This ratio is also referred
to as FIXED/WORTH. FIXED ASSET TURNOVER measures management's
ability to generate revenues from investments in fixed
assets. Fixed Asset Turnover considers only the firm's
investment in property, plant and equipment and is
extremely important in high asset firms such as
manufactures. Generally, the higher this ratio, the
smaller the investment required to generate sales, thus
the more profitable the firm. FIXED COSTS are operating expenses that are
incurred to provide facilities and organization that are
kept in readiness to do business without regard to actual
volumes of production and sales. Fixed costs remain
relatively constant until changed by managerial decision.
Within general limits they do not vary with business
volume. Examples of fixed costs consist of rent, property
taxes, and interest expense. FIXED EXPENSES are those expenses that must be
paid each month and do not fluctuate with the sales
volume. FLAT LEASE is a lease where the cost is fixed
for a specific period of time. F.O.B.
(FREE ON BOARD), e.g. “F.O.B New York”,
is where the importer would pay all costs for shipping
from one point (New York) on to the final destination. F.O.R.
(FREE ON RAILROAD) is where goods will be delivered by
the exporter to a railway station. The importer is
responsible from this point on. FOREIGN
SALES AGENT or REPRESENTATIVE is an entity that works to
sell your merchandise in a foreign country. Equivalent to
the “Manufacturer's Representative” in the U.S.
FREE
TRADE AGREEMENT is an agreement between countries that
will result, over an agreed period of time, in an
elimination of duties for goods flowing between the
signatories. FREE
TRADE ZONE (FTZ) is an area, usually a port of entry,
designated by the country for duty-free entry of goods.
As long as the goods do not go into the country from the
FTZ, no duty is assessed. While in the FTZ, goods may be
processed, packaged, serviced or displayed. FREIGHT
FORWARDER is an individual or firm that provides for the
packing and shipping of merchandise. Generally they also
assist with export and other documentation. FREQUENCY,
in advertising, is the number of times you hope to reach
your target audience through your advertising campaign.
- G - GASB is the Governmental Accounting Standards
Board GATT (GENERAL AGREEMENT ON TARIFFS AND TRADE)
is a multilateral treaty that aims to reduce trade
barriers and increase trade. The GATT was an interim
treaty process that has now culminated in the World Trade
Organization (WTO). GROSS PROFIT is net sales minus cost
of sales. GROSS PROFIT MARGIN ON SALES shows the
relationship between sales and the direct cost of
products/services sold. It measures the ability of both
to control costs and to pass along price increases
through sales to customers. GROSS WEIGHT is the weight of a shipment
including packing material.
- H - HARMONIZED SYSTEM is an internationally agreed
upon classification system for trade. It provides code
numbers to specify a goods classification; thereby making
customs duty determination more predictable. HEAD OF HOUSEHOLD is a US income tax filing
status that can be used by an unmarried person who
maintains a home for a dependent (or nondependent
relative) during the tax year. HISTORICAL COST is an accounting principle
requiring all financial statement items to be based on
original cost. It is usually based upon the dollar amount
originally exchanged in an arm's-length transaction; an
amount HYBRID INSTRUMENT is a package
containing two or more different kinds of risk management
instruments that are usually interactive.
- I - IMPUTED COSTS refer to the cost of an asset,
service, or company that is not physically recorded in
any accounts but is implicit in the product. INCOME TAXES PAYABLE is income taxes
due including current portion of deferred taxes. INCOME CAPITALIZATION: First you must determine
the capitalization rate - a rate of return required to
take on the risk of operating the business (the riskier
the business, the higher the required return). Earnings
are then divided by that capitalization rate. The
earnings figure to be capitalized should be one that
reflects the true nature of the business, such as the
last three years average, current year or projected year.
When determining a capitalization rate you should compare
with rates available to similarly risky investments. INDENTURE is an agreement between
lender and borrower which details specific terms of the
bond issuance. Specifies legal obligations of bond issuer
and rights of bondholders. There is usually a indenture
document spelling out the specific terms of a bond as
well as the rights and responsibilities of both the
issuer of the security and the holder. INDUSTRIAL REVENUE BOND (I.R.B.) is a
bond issued by local government agencies in favor of
corporations. INFLATION is an increase in the
general price level of goods and services; alternatively,
a decrease in the purchasing power of the dollar or other
currency. INTANGIBLES (NET) are intangible
assets, including goodwill, trademarks, patents,
catalogs, brands, copyrights, formulas, franchises, and
mailing lists, net of accumulated amortization. INTERNAL RATE OF RETURN (IRR) is also
called the dollar-weighted rate of return; the interest
rate that makes the present value of the cash flows from
all the sub-periods in an evaluation period plus the
terminal market value of the portfolio equal to the
initial market value of the portfolio. INVENTORY is anything constituting
inventory for the firm. INVENTORY LOAN is loan that is extended based
upon the, usually, discounted / factored value of a
business' inventory. INVENTORY TURNS (Avg. Annual) measures the
average efficiency of the firm in managing and selling
inventories (INV) during the last period. Turns must
balance efficiency needs with service levels by the
number of times the firm can fulfill customer orders
using current inventory. INVESTMENT
TAX CREDIT is a tax credit in the United States that
allows businesses to write-off a portion of the cost of
purchasing equipment for business use. INVESTMENT
TURNOVER is a profitability measure used to calculate the
number of times per year an investment or assets revolve. INVOICE is an itemized list of goods shipped
usually specifying the price and the terms of sale. INVOICE,
COMMERCIAL is a legal document that functions
internationally as a bill of sale. It usually contains
the exporting company, contents of the shipment, amount
charged, name of carrying vessel, order number and
payment terms. INVOICE,
CONSULAR is an invoice stamped or endorsed by the
consulate of the country requiring such.
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