- 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.

Back to Top

- 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.

Back to Top

- 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.

LEVERAGED BUY-OUT (LBO) is a transaction used for taking a public corporation private, financed through the use of debt funds: bank loans and bonds. Because of the large amount of debt relative to equity in the new corporation, the bonds are typically rated below investment grade, properly referred to as high-yield bonds or junk bonds. Investors can participate in an LBO through either the purchase of the debt (i.e., purchase of the bonds or participation in the bank loan) or the purchase of equity through an LBO fund that specializes in such investments.

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.

LIQUIDATION VALUE: This type of valuation is similar to an adjusted book value analysis. Liquidation value is different than book value in that it uses the value of the assets at liquidation, which is often less than market and sometimes book. Liabilities are deducted from the liquidation value of the assets to determine the liquidation value of the business. Liquidation value can be used to determine the bare bottom benchmark value of a business, since this should be the funds the business may bring upon valuation.

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 is all senior debt, including bonds, debentures, bank debt, mortgages, deferred portions of long term debt, and capital lease obligations.

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.

Back to Top

- 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.

Back to Top

- 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.

NOTES PAYABLE-SHORT TERM are all short term note obligations, including bank and commercial paper. Does not include trade notes payable.

Back to Top

- 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.

Back to Top

-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:

  • It is the best measurement of income.
  • Percentage of completion normally needs to be computed for financial statement purposes eliminating confusing timing differences from tax to financial statements.
  • There is no increase in alternative minimum taxable income.
  • Losses can be recognized on contracts before the job is complete.
  • It is useful in leveling taxable income, permitting use of lower tax brackets each year.
  • When using the percentage of completion method, it is important to carefully compute the percent complete, for it may have a great impact on your taxable income. 
  • Estimated costs to complete the contract, a component of calculating the percent to complete, determine what your taxable income will be. Also, carefully reviewing the over-head allocation may result in lower tax.

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:

  1. Altman's "Z-Score" (a valid predictor of bankruptcy), and
  2. Sustainable Growth Rate (showing the degree to which a company can grow using retained earnings to fund growth).

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.

PRIMARY MARKET is the first sale of a newly issued security. Those securities are purchased in the primary market. All subsequent trading of those securities is done in the secondary market.

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.

Back to Top

- 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.

Back to Top

- 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
another asset that has similar risk. This gives an abnormal rate of return that shows how the asset performed over and above a benchmark asset with the same risk. We can also use the beta against the benchmark to calculate an alpha which is also risk adjusted performance.

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).

Back to Top

- 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

SECURITIZATION is the process of creating a pass-through, such as the mortgage pass-through security, by which the pooled assets become standard securities backed by those assets. Also, refers to the replacement of non-marketable loans and/or cash flows provided by financial intermediaries with negotiable securities issued in the public capital markets.

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.

SUSTAINABLE GROWTH RATE: Growth can be a major dilemma because with growth comes spontaneously generated needs for increased working capital. VentureLine calculates a Sustainable Growth Rate from the data entered into the Income Statement and Balance Sheet. The Sustainable Growth Rate is the rate at which the firm may grow the Stockholder's Equity Account (Net Worth) using only increases in Retained Earnings (Net Profit's contribution to retained earnings) to fund the growth. Growth beyond this amount will force the firm to obtain additional financing from external sources to finance growth.

Back to Top

- 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.

Back to Top

- 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.

Back to Top

- 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.

 Back to Top

- 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
price of which reflects the value of the underlying stock. Warrants are issued by corporations and often used as a "sweetener" bundled with another class of security to enhance the marketability of the latter. Warrants are like call options, but with much longer time spans -- sometimes years. In addition, warrants are offered by corporations whereas exchange traded call options are not issued by firms.

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.

WITNESS is an individual who testifies at a trial on what he has seen, heard, or otherwise observed.

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.

Back to Top

- X -

X-INEFFICIENCY is the failure to minimize costs or maximize returns. (Sometimes referred to as X-efficiency, but carrying the same meaning.)

Back to Top

- 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%). 

Back to Top

- 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.


Back to Top

- # -

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.

10-Q is a report filed quarterly to the Securities Exchange Commission (SEC) by most reporting companies. It includes unaudited financial statements and provides a continuing view of the company's financial position during the year. The report must be filed for each of the first three fiscal quarters of the company's fiscal year and is due within 45 days of the close of the quarter.

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.