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J - JOINT RETURN is a US income tax filing
status that can be used by a married couple. The married
couple must be married as of the last day of their tax
year in order to qualify for this filing status. A
married couple can also elect to file as married, filing
separate returns. JOINT VENTURES & INVESTMENTS is
the total of investments and equity in joint ventures.
- K - KEOGH is a pension plan in the United States
that allows a business to contribute a portion of profits
into a tax-sheltered account. KEYNESIAN GROWTH MODELS are models in which a
long run growth path for an economy is traced out by the
relations between saving, investing and the level of
output. KEYNESIAN MACROECONOMICS is the theory that
shows how a market-based capitalist economy may reach
equilibrium with large scale unemployment and how
government spending may be used to raise it out of this
to a new equilibrium at the full-employment level of
output. KITING, when used in the context of
banking, refers to the practice of depositing and drawing
checks at two or more banks and taking advantage of the
time it takes for the second bank to collect funds from
the first bank. Can also refer to illegally increasing
the face value of a check by changing the
printed amount of the check. When used in the context
of securities, it refers to the manipulation and
inflation of stock prices.
- L - LARGE-CAP is a stock with a level of
capitalization of at least $5 billion market value. LEASEHOLD IMPROVEMENTS are those repairs and /
or improvements, usually prior to occupancy, made to a
leased facility by the lessee. LETTER
OF CREDIT (LOC) is a legal document issued by a buyer’s
bank that upon presentation of required documents payment
would be made. Usually confirmed by the seller's bank,
protection is given to the seller that payment will be
made if the goods are shipped correctly, and protection
is given to the seller that the goods will be shipped
before payment is made. LETTER
OF CREDIT, CONFIRMED is a letter of credit that is
guaranteed by a bank that is acceptable to a seller
(usually a local bank), regardless of buyer's bank. LETTER
OF CREDIT, IRREVOCABLE is a letter of credit where
payment is guaranteed as long as the seller meets all
conditions stipulated. A revocable letter of credit can
be cancelled or altered by the buyer without permission
of the seller. LEVERAGE is property rising or
falling at a proportionally greater amount than
comparable investments. For example, an option is said to
have high leverage relative to the underlying stock
because a price change in the stock may result in a
relatively large increase or decrease in the value of the
option. In general, in finance, leverage is the use of
debt financing. Leverage, within a corporation, is the
use of borrowed money to increase the return on
investment. For leverage to be positive, the rate of
return on the investment must be higher than the cost of
the money borrowed. LEVERAGE RATIOS measures the relative
contribution of stockholders and creditors, and of the
firm's ability to pay financing charges. Value of firm's
debt to the total value of the firm. LIABILITY,
in insurance, is a term used when analyzing insurance
risks that describes possible areas of financial exposure
/ loss. Presently, there are three forms of liability
coverage that insurers will underwrite: The first is
general liability, which covers any kind of bodily injury
to non-employees except that caused by automobiles and
professional malpractice. The second is product
liability, which covers injury to customers arising as a
direct result of goods purchased from a business. The
third is public liability, which covers injury to the
public while they are on the premises of the insured. LIABILITY,
in accounting, is a loan, expense, or any other form of
claim on the assets of an entity that must be paid or
otherwise honored by that entity. LIFO (last-in, first-out): An
inventory cost flow whereby the last goods purchased are
assumed to be the first goods sold so that the ending
inventory consists of the first goods purchased. LIKE KIND, in taxes, it refers to property that
is similar to another for which it has been exchanged:
real estate exchanged for real estate, for instance. The
definitions of like kind properties can be found in the
US Tax Code at Section 1031. LINE OF CREDIT is typically an informal
arrangement between a bank and a customer establishing a
maximum loan balance that the bank will permit the
borrower to maintain. LIQUIDITY is a company's ability to
meet current obligations with cash or other assets that
can be quickly converted to cash. LONG-TERM DEBT TO EQUITY expresses the
relationship between long-term capital contributions of
creditors as related to that contributed by owners
(investors). It expresses the degree of protection
provided by the owners for the long-term creditors. LONG-TERM LIABILITIES are liabilities of a
business that are due in more than one year. An example
of a long-term liability would be a mortgage payable.
- M - MANUAL TAG SYSTEM is a inventory tracking
system used in inventory management that tracks inventory
using tags removed at the point of purchase. MARGIN (Stocks) allows investors to buy
securities/assets by borrowing money from a
broker/banker. The margin is the difference between the
market value of a stock/asset and the loan a
broker/banker makes. MARGIN ACCOUNT (Stocks) is a leverageable
account in which stocks can be purchased for a
combination of cash and a loan. The loan in the margin
account is collateralized by the stock and, if the value
of the stock drops sufficiently, the owner will be asked
to either put in more cash, or sell a portion of the
stock. Margin rules are federally regulated, but margin
requirements and interest may vary among broker/dealers. MARGIN CALL (Stocks) is a demand for additional
funds because of adverse price movement is a stock. MARINE INSURANCE is insurance coverage
protecting against loss or damage of goods transported by
sea. MARKUP is the amount added to the cost of goods
in order to produce the desired profit. MATERIALS are physical goods (and their cost)
used in the manufacture of a product, often separated
into DIRECT MATERIAL (that which goes directly into the
product such as cream into ice cream, or steel into cars)
and INDIRECT MATERIAL (that which is used in maintaining
the manufacturing environment such as cleaning fluids or
oil for lubrication of manufacturing equipment). Indirect
materials are usually part of the overhead component of
cost. The term material, when used without the direct or
indirect qualifier, usually refers to direct materials. MEDIA PLAN, in advertising, is the plan that
details the usage of media in an advertising campaign
including costs, running dates, markets, reach,
frequency, rationales, and strategies. MID-CAP is a stock with a capitalization, total
equity value, between $500 million and $5 billion. MINIMUM WAGE is the lowest compensation you are
allowed to pay an employee for hourly work. It is defined
by Federal, state, and sometimes local laws. State or
local laws may be more restrictive than Federal law, and
certainly may differ. MODIFIED ACCELERATED COST RECOVERY SYSTEM (MACRS)
is a system used in accounting to define the rate and
method under which a fixed asset will be depreciated for
tax purposes.
- N - NET INCOME is the difference between a
businesses total revenue and its total expenses. This
caption and amount is usually found at the bottom of a
company's Profit and Loss statement. NET LEASES, typically, there are three net
leases: net lease, double-net lease, and triple-net
lease. A net lease is a base rent plus an additional
charge for taxes. A double-net lease is a base rent plus
an additional charge for taxes and insurance. A
triple-net lease is base rent plus an additional charge
for taxes, insurance, and common area expenses. NET OPERATING LOSS (NOL) is experienced by a
business when business deductions exceed business income
for the fiscal year. For income tax purposes, a net
operating loss can be used to offset income in a prior
year, or a taxpayer can elect to forego the carry back
and carry the net operating loss forward. NET PROFIT MARGIN (After Tax) measures
profitability after consideration of all revenue and
expense, including interest expenses, non-operating
items, and income taxes. NET PROFIT MARGIN (Pre-Tax) incorporates all of
the expenses associated with ordinary business (excluding
taxes) thus is a measure of the overall operating
efficiency of the firm. NET SALES TO GROSS SALES shows the percent of
all transactions that may be considered as
"good" net transactions. Differences may arise
from returns, bad product, or other sales concessions. NET WORTH is the difference between
Total Liabilities and Total Assets. Minority interest is
included here. NON-DISCRETIONARY means it is
mandatory, not up to the individual or company. NON-DISCRETIONARY ACCRUAL is a
mandatory expense/asset that is recorded within the
accounting system that has yet to be realized. An example
of this would be payroll taxes.
- O - OFFSET ACCOUNT is an account that is
setup for elimination of a long or short position by
making an opposite transaction. OPEN ACCOUNT is a non-guaranteed payment
arrangement, e.g. similar to department store credit.
Goods are purchased and delivered without payment. Future
payment for delivered goods is dependent on the good
faith of the purchaser. OPEN TO BUY is the dollar amount budgeted by a
business for inventory purchases for a specific time
period. OPERATING EXPENDITURES is the amount
used during a particular period directly in support of
day-to-day operations such as wages, maintenance, office
supplies, etc. OPERATING EXPENSES is all selling and
general & administrative expenses. Includes
depreciation, but not interest expense. OPERATING EXPENSE TO SALES reports the
operating expenses as a percent of Net Revenues. This
then is a measure of the total overhead employed in the
firm per Net Sales Revenue Dollar. OPERATING LEASE is a short-term, cancelable
lease. OPERATING PROFIT is Gross Profit
minus Operating Expenses. OPERATING PROFIT TO SALES is a useful ratio
when evaluating value of a firm. It discounts the effect
of varying tax rates and benefits to give a more accurate
indication of the return associated with the firm. OPTION is the formal reservation of the right
to buy at a certain price and / or within a given time in
the future. ORIGINAL ISSUE DISCOUNT is when a long-term
debt instrument is issued at a price that is lower than
its stated redemption value; the difference is called
Original Issue Discount (OID). OSHA (OCCUPATIONAL SAFETY AND HEALTH ACT) is a
federal law in the United States that requires employers
to provide employees with a workplace that is relatively
free of hazardous conditions. OVERHEAD is the costs associated with providing
and maintaining the manufacturing or working environment.
For example: renting the building, heating and lighting
the work area, supervision costs and maintenance of the
facilities. Includes indirect labor and indirect
material.
-P - PARTNERSHIP is an unincorporated business that
has more than one owner. It is different from a sole
proprietorship in that a sole proprietorship can have
only one owner. PASSIVE ACTIVITY is one defined in the US Tax
Code as one or more trade, business or rental activity
that the taxpayer does not materially participate in
managing or running. All income and losses from passive
activities are grouped together on an income tax return
and, generally, loss deductions are limited or suspended
until the passive activity that generated them is
disposed of in its entirety. PATENT is a legal form of protection that
provides a person or legal entity with exclusive rights
to exclude others from making, using, or selling a
concept or invention for the duration of the patent.
There are three types of patents available: design,
plant, and utility. PERCENTAGE LEASE is a type of lease where the
landlord charges a base rent plus an additional
percentage of any profits realized by the business
tenant. PERCENTAGE OF COMPLETION METHOD OF ACCOUNTING is
instituted if your revenues exceed $10,000,000 (3-year
average) or your contracts will not be completed within a
two-year period, you are generally required to use the
percentage of completion accounting for contracts. There
are many advantages to using to percentage of completion
method including:
PERSONAL LOAN is a short-term loan that
is extended based on the personal integrity of the
borrower. POINTS are additional fee paid to a lender.
Points are generally stated as a percent of the total
amount borrowed and are in essence prepaid interest.
Points paid can be deducted over the life of the loan. PREDICTOR RATIOS - Most ratios are descriptive
in nature; that is, they describe the firm as it is now.
As you might expect, Predictor Ratios provide suggestions
about likely future conditions for the firm. VentureLine
provides two industry standard Predictor Ratios:
PREPAID EXPENSES are amounts that are paid in
advance to a vender or creditor for goods and services.
Typically, insurance premiums are paid in advance of the
coverage contained in the policy. Prepaid Expenses is a
Current Asset for your business. This is because you have
paid for something and someone owes you the service or
the goods for which you prepaid. PRICE EARNINGS MULTIPLE: The price-earnings
ration (P/E) is simply the price of a company's share of
common stock in the public market divided by its earnings
per share. Multiply this multiple by the net income and
you will have a value for the business. If the business
has no income, there is no valuation. If the common stock
in not publicly traded, valuation of the stock is purely
subjective. This may not be the best method, but can
provide a benchmark valuation. PRIMARY DEALER is a designation given
by the Federal Reserve System to commercial banks or
broker/dealers who meet specific criteria, including
capital requirements and participation in Treasury
auctions. A primary dealer is entitled and obligated to
purchase and sell government securities with the Federal
Reserve directly. They serve as the conduits for Federal
Reserve open market activities. There are approximately
30-40 such dealers. PRIME BROKERS are providers of
back-office administration and stock lending for hedge
funds. PROFITABILITY is company's ability to
generate revenues in excess of the costs incurred in
producing those revenues. PROFIT AND LOSS STATEMENT (P&L) is also
known as an income statement. It shows your business
revenue and expenses for a specific period of time. The
difference between the total revenue and the total
expense is your business net income. A key element of
this statement, and one that distinguishes it from a
balance sheet, is that the amounts shown on the statement
represent transactions over a period of time while the
items represented on the balance sheet show information
as of a specific date (or point in time). PROFIT BEFORE TAXES is operating
profit minus all other expenses (net). PROFIT MULTIPLE: Profit and sales multiples are
the most widely used valuation benchmarks used in valuing
a business. The information needed are pretax profits and
a market multiplier, which may be 1, 2, 3, or 4 and
usually a ceiling of 5. The market multiplier can be
found in various financial publications, as well as
analyzing the sale of comparable businesses. This method
is easy to understand and use. The profit multiple is
often used as the valuation ceiling benchmark. PRO-FORMA is to provide in advance to a
prescribed form or to describe items <pro forma financial
statement or pro forma invoice>. PRO-FORMA INVOICE is a price quote. It is
written as an invoice, and, in effect, says: 'This is the
purchase price and terms we are offering.' PURCHASE MONEY INTEREST is that
interest associated with the purchase money mortgage. PURCHASE MONEY MORTGAGE (PMM) is
seller financing as a part of the purchase price.
- Q - QUALIFIED DOMESTIC RELATIONS ORDER (QDRO) is
when a state court allocates an interest in a qualified
retirement plan to a former spouse through a qualified
domestic relations order. Payments made to a former
spouse as the result of a QDRO will not result in the
taxpayer being assessed a penalty for early withdrawal
from the plan; the former spouse will be taxed on the
benefits when received, or the benefits can be rolled
over tax free into an IRS or another qualified retirement
plan. QUICK RATIO (or Acid Test Ratio) is a more
rigorous test than the Current Ratio of short-run
solvency, the current ability of a firm to pay its
current debts as they come due. This ratio considers
cash, marketable securities (cash equivalents) and
accounts receivable because they are considered to be the
most liquid forms of current assets. A Quick Ratio less
than 1.0 implies "dependency" on inventory end
other current assets to liquidate short-term debt.
- R - RABBI TRUST is a nonqualified deferred
compensation plan whereby an employer and employee agree
to defer payment for the employee's services until a
specified future date. The rabbi trust features an
irrevocable grantor trust that is set up by the employer
to hold the contributions set aside for the employee.
While this provides the employee some degree of safety
that the money will be available when desired, the terms
of the trust must be such that exposes the trust assets
to the claims of the employer's creditors. RATIO ANALYSIS involves conversion of financial
numbers for a firm into ratios. Ratios allow comparison
of one firm to another. Since ratios look at
relationships inside the firm, a firm of one size can be
directly compared to a second firm (or a collection of
firms) which may be larger or smaller or even in a
different business. Financial Ratios are a method of
comparison not dependent on the size of either firm.
Financial Ratios provide a broader basis for comparison
than do raw numbers. In the VentureLine database the
comparison is conducted against the industry (SIC Code)
in which each particular listing is associated. REACH, in advertising, is the total number of
people within a target market that will be reached
through an advertising campaign. REALIZED INCOME is the return or
profit that is actually earned or collected over a given
time period. RECAPITALIZATION: It is dependent upon how you
use the term. The term recapitalization in itself is,
dependent upon the scenario, simply an adjustment of the
relationships between the debt and equity that funds a
firms assets. However, it can become quite complex
dependent upon under what conditions or reasons the firm
is being recapitalized. This is specially true if
recapitalization is being pursued to ward off a hostile
takeover. RECONCILE is the process of balancing
records. An example is when an individual balances a
checking account record with the monthly bank statement.
Once the records accurately agree, the checking account
has been reconciled. REGISTERED INVESTMENT ADVISOR (RIA) is an
investment advisor registered with the SEC. No
certification is required. REPLACEMENT VALUE: This type of valuation is
similar to an adjusted book value analysis. Replacement
value is different than liquidation value in that is uses
the value of the replacement value of assets, which is
usually higher than book value. Liabilities are deducted
from the replacement value of the assets to determine the
replacement value of the business. REMITTING BANK is a bank that sends a draft to
the overseas bank for collection. RETAINED EARNINGS are profits of the business
that have not been paid out to the owners as of the
balance sheet date. The earnings have been
"retained" for use in the business. Retained
Earnings is an account in the equity section of the
balance sheet. RETURN ON ASSETS (After Tax) shows the after
tax earnings of assets. RETURN ON EQUITY measures the overall
efficiency of the firm in managing its total investments
in assets and in generating a return to stockholders.
Stockholders Equity as used in VentureLine includes all
owner claims on the firm. NOTE: ROE is sometimes based on
Common Equity only. This is NOT the method used in
VentureLine. RETURN ON INVESTMENT (ROI) is a profitability
measure that evaluates the performance of a business. ROI
can be calculated in various ways. The most common method
is Net Income as a percentage of Net Book Value (total
assets minus intangible assets and liabilities). REVOLVING COLLATERAL are accounts receivable or
inventory which change from day to day. REVOLVING CREDIT is a contract between a
company and a bank in which the bank makes loans up to a
specific amount for one year or longer. As the business
repays the loan each month, an amount equal to the
monthly payment can be borrowed again. Sometimes called
open-end credit or revolving loan, can be on a secured or
unsecured basis. REVOLVING FINANCING is financing secured by
collateral. REVOLVING FUND is money that is renewed as it
is used. REVOLVING LOAN is a loan that is automatically
renewed upon maturity. RISK ADJUSTED RETURN is when we subtract from
the rate of return on an asset a rate of return from ROI: Return on investment can be
calculated in various ways. The most common method is Net
Income as a percentage of Net Book Value (total assets
minus intangible assets and liabilities).
- S - SALES INVOICE is a document that records the
sale of goods or services from a vendor to a customer. SALES / RECEIVABLES (Receivables Turnover) This
ratio measures the number of times trade Receivables turn
over during the year. The higher the SALES/RECEIVABLES
Ratio (turnover of Receivables), the shorter the time
between sale and cash collection. SALES MULTIPLE: Sales and profit multiples are
the most widely used valuation benchmarks used in valuing
a business. The information needed are annual sales and
an industry multiplier, which is usually a range of .25
to 1 or higher. The industry multiplier can be found in
various financial publications, as well as analyzing
sales of comparable businesses. This method is easy to
understand and use. The sales multiple is often used as
the valuation benchmark. SEC is the Securities Exchange Commission SIC (STANDARD INDUSTRIAL CLASSIFICATION) is a
U.S. Government numerical coding system used in the U.S.
to group and classify basically all products and services
existing within the U.S. economy. SIGNATURE LOAN is a loan secured by the
borrower with nothing more than the signature of that
borrower. SIMPLE JOURNAL ENTRY is a journal
entry that involves only one debit and one credit in the
transaction. SMALL-CAP is a stock with a capitalization,
meaning a total equity value, of less than $500 million. SOES (Small Order Execution System)
trading is an electronic method of day trading the NASD
market. At present, SOES trading is at the center of
controversy between the NASD, SEC, individual traders,
and the courts. SOES is changing the way trading is done
on the NASD, and it may rewrite the rules of the game for
trading. Bandits is just a term being used for the
individuals using the SOES system for day trading. SOLE PROPRIETORSHIP is a form of business
organization. The distinguishing characteristics of a
sole proprietorship include: only one owner for the
business (hence, "sole") and the business is
unincorporated. SOLVENCY is a company's long-term
ability to meet all financial obligations. SPECIFIC RESEARCH is a method used when
gathering primary information for a market survey where
targeted customers / consumers are asked very specific
and in-depth questions geared toward resolving problems
found through prior exploratory research. STANDARD RATE AND DATA SERVICE (SRDS), in
advertising, is a company that produces a directory for
each different type of media; normally listing: rates,
circulation, contacts, markets serviced, etc. STATUTORY ACCOUNT is an involuntary account,
which is created by law rather than by business need. An
example of a statutory account would be taxes. STATUTORY LIEN is an involuntary lien, which is
created by law rather than by contract. Statutory liens
include tax liens, judgment liens, mechanic's liens, etc. STEAMSHIP CONFERENCE is an agreement between
multiple shipping companies to provide common freight
rates. Some shipping lines will state that they are
“non-conference”, i.e., they charge an
independent and likely lower rate. STEP LEASE is type of lease that outlines or
stipulates the expected annual increases in the tenant's
base rent based on an approximation of what the landlord
believes what the landlord’s expenses may be. STRATEGIC PLANNING is the activity of defining
what you want to accomplish in your business and then
identifying the path that will allow you to reach your
goal in the most efficient and sensible manner. STRIPPED BOND is a bond that can be
subdivided into a series of zero-coupon bonds. SUBCHAPTER S is a legal corporate entity
organized under the United States Federal Tax Code that
allows Subchapter S Corporations to distribute all income
/ loss proportionately to its shareholders, who then
claim that income / loss on their personal income taxes;
thereby avoiding the payment of corporate taxes. SUBLET, in real estate, refers to the leasing
of space within a leased facility by the original lessee. SUBORDINATED DEBT is where there is a pecking
order determining the sequence in which a company will
pay off its debt instruments, subordinate (or junior)
issues will not be repaid until unsubordinated (or
senior) debt has been repaid in full. SUM-OF-THE-YEARS DIGITS (SYD) is the
accelerated depreciation method in which a constant
balance (cost minus salvage value) is multiplied by a
declining depreciation rate.
- T - TANGIBLE normally refers to assets that can be
held or seen and that are capable of being appraised at
an actual or approximate value (e.g. inventory, land
& buildings, etc.). TANGIBLE BOOK VALUE is different than book
value in that it deducts from asset value intangible
assets, which are assets that are not hard (e.g.,
goodwill, patents, capitalized start-up expenses and
deferred financing costs). TARE WEIGHT is the weight of packing container
and packaging material without the weight of the goods
contained therein. TARIFF,
usually, a country's tax on imports. May sometimes refer
to the rate of tax; and, is used interchangeably with the
term “duty”. TARIFF,
AD VALOREM is a tariff determined as a percentage of the
value of the goods. TERM DEBT (as in Term Bonds) is debt
that mature in one lump sum at a specified future date.
Term debt is usually carried as one type of long-term
debt. TERM LOAN is a bank loan, typically with a
floating interest rate, for a specified amount that
matures in between one and ten years and requires a
specified repayment schedule. TESTIMONY is evidence given by a competent
witness under oath. TIMES INTEREST EARNED (TIE) measures the extent
to which operating income can decline before the firm is
unable to meet its annual interest costs. A value of 1.0
or less suggests that the firm is not earning sufficient
amounts to cover interest charges. Note: EBIT is used as
the numerator because interest is a deductible cost, the
ability to pay current interest is not affected by taxes. TOTAL ASSETS is the total of all
assets; both current and fixed. TOTAL ASSET TURNOVER measures management's
efficiency in managing all of a firms assets -
specifically the generation of revenues from the firm's
total investments in assets. This ratio is extremely
important in high asset firms such as manufacturers.
Generally the higher this ratio, the smaller the
investment required to generate sales, thus the more
profitable the firm. TOTAL CURRENT ASSETS is total of cash
& equivalents, trade receivables, inventory and all
other current assets. TOTAL CURRENT LIABILITIES is the
total of notes payable-short term, current
maturities-LTD, trade payables, income taxes payable, and
all other current liabilities. TOTAL LIABILITIES & NET WORTH is
the sum of all liability items and Net Worth. TRADE PAYABLES are open accounts due
to the trade. TRADE RECEIVABLES (NET) are all
accounts from trade, net of allowance for doubtful
accounts. TRIAL BALANCE is a listing of the accounts in
your general ledger and their balances as of a specified
date. A trial balance is usually prepared at the end of
an accounting period and is used to see if additional
adjustments are required to any of the balances. Since
the basic accounting system relies on double-entry
bookkeeping, a trial balance will have the same total
debit amount as it has total credit amounts. TRUE VALUE is the amount that a buyer is
finally willing to pay.
- U - UNEARNED REVENUE represents money that you have
received in advance of providing the goods or services to
your customer. Unearned revenue is a liability of your
business until you provide the goods or services you
agreed to provide to the customer. UNIT-CONTROL SYSTEM is an accounting system
used in inventory management that tracks inventory using
bin tickets and physical inventory checks. UNREALIZED INCOME (paper profit) is
profit which has been made but not yet realized or
collected through a transaction, such as a stock which
has risen in value but is still being held. also called
unrealized gain or unrealized profit or paper gain or
book profit.
- V - VALUE is a term that defines the worth of a
thing. The term is usually preceded by the word, or words
such as 'Fair" or "Fair Market", and it is
usually defined in the document where it is found. Not
all value for an item is the same, i.e. value is usually
perceived. VARIABLE EXPENSES are those business costs that
usually fluctuate dependent upon manufacturing or sales
volume. VENTURE CAPITAL is capital committed to an
unproven venture. The initial, start-up money is referred
to as "seed money" and entails the greatest
risk. If the project gets off the ground it may require
additional financing at additional "rounds" or
the "mezzanine level" before the company is
finally brought to the market and the venture capitalist
can enjoy handsome rewards. Experienced investors in
venture capital situations typically plan on turning away
a minimum of 9 out of every 10 proposals which are
brought to them, and then they expect as many failures as
successes from their selected investments.
- W - WARRANT is a security entitling the holder to
buy a proportionate amount of stock at some specified
future date at a specified price, usually one higher than
current market. This "warrant" is then traded
as a security, the WHOLLY OWNED SUBSIDIARY is an entity whose
parent owns virtually 100% of its common stock. WINDOW DRESSING is the act or an instance of
making something appear deceptively attractive or
favorable. Usually using something, e.g. inflated sales
projections, to create a deceptively favorable or
attractive impression. WORKER’S COMPENSATION is, usually, a state
or privately managed insurance fund in the United States
that reimburses employees for injuries suffered on the
job. WORKING CAPITAL TURNOVER shows how efficiently
Working Capital (WC) is employed. It measures the amount
of Net Revenue generated per dollar of Working Capital. WORKING CAPITAL (WC) (the difference between
current assets and current liabilities) measures the
margin of protection for current creditors. It reflects
the ability to finance current operations. WORLD TRADE ORGANIZATION (WTO) is the
international trade body formed by the agreement of
member nations. The WTO is an evolution of the GATT
process designed to resolve trade disputes and work for
the lowering of tariff and non-tariff trade barriers.
- X - X-INEFFICIENCY is the failure to minimize costs
or maximize returns. (Sometimes referred to as
X-efficiency, but carrying the same meaning.)
- Y - YANKEE BOND is a dollar bond issued by a
non-U.S. borrower in the United States. YEN is the currency of Japan. Its subdivisions
are 100 sen and 1000 rin. YIELD is the annual return on an investment,
expressed as a percentage. The yield to redemption or
maturity (the same thing) combines the running yield with
the "pull to redemption"; thus a bond which has
a 10% coupon and exactly one year of remaining life will
sell at $98.2% when interest rates are at 12.0%, that
12.0% being composed of 10.2% running yield and 1.8% pull
to redemption ($100.0 - 98.2%).
- Z - ZERO COUPON BONDS are bonds priced at a large
discount from face value. The bonds mature at full face
value so the difference between the original issue price
and the face value represents interest income. The issuer
of the zero coupon bond saves on cash flow since the
interest isn't paid out until the end of the bond holding
period. "Z-SCORE" see ALTMAN'S
"Z-SCORE"
- # - 10-K is the audited annual report
that most reporting companies file with the Securities
Exchange Commission (SEC). It provides a comprehensive
overview of the registrant's business. The report must be
filed within 90 days after the end of the company's
fiscal year. 401 (K) PLAN is a retirement plan in the United
States that allows qualified employees to contribute
money from their paychecks into a tax-sheltered account. |