"Big Blue" is a nickname for IBM. According to IBM, the name "came about organically" and has no single source. The company says the first official reference to the company as Big Blue was in a Busi...
Microeconomics is a social science that examines the allocation of resources to produce goods and services, and the distribution of goods and services produced. In the modern era, this involves the s...
The objective of the 10-K and other SEC-required forms is to provide shareholders and prospective shareholders with accurate, relevant, and timely information about the financial and operating perfor...
A 10-Q is a report of a company's performance that must be submitted quarterly by all public companies to the Securities and Exchange Commission (SEC) A 10-Q contains similar information as a 10-K, ...
The Form 13-F must be filed by institutional investors who exercise discretion over at least $100 million in investments. Data reported on this form include the names of investment managers, the nam...
The 80-20 rule, also known as the Pareto Principle, states that 80% of outcomes arise from 20% of inputs. The idea is applied in business and economics to identify and prioritize the most productive ...
A. Michael Spence is an economist who won the 2001 Nobel Prize for his work in market-signaling theory. Born in New Jersey in 1943 and raised in Canada, Michael Spence attended Princeton University,...
An ABA transit number is a unique identifier assigned to banking institutions by the American Bankers Association (ABA). For those banks and banking institutions that qualify as account holders with...
In the business world, abandonment refers to the purposeful surrender of ownership of an asset. For example, let's assume that Company XYZ owns an oil processing facility in Nigeria. The government ...
An abandonment option is a clause in a contract that permits either party to leave the contract before obligations have been fulfilled. An abandonment option gives either party participating in a co...
Abandonment value refers to the value of a project or investment were it to be liquidated presently. Also called liquidation value, the abandonment value of a project or investment is the immediate ...
An abatement cost refers to the cost associated with the voluntary or compulsory removal of an undesirable result of a production process. In many instances, companies produce goods or services that...
In the strictest terms, abeyance means temporary inactivity. In the finance world, the term generally refers to unknown ownership.   Let's say John Doe owns an empty lot in City XYZ. He dies withou...
In the business world, abnormal spoilage refers to the unusual loss of goods or work in progress. Company XYZ is a restaurant chain that orders a lot of produce, which it keeps in walk-in refrigerat...
Above full-employment equilibrium occurs when a country's gross domestic product (GDP) is higher than normal. For example, let's say Country X's normal rate of GDP growth is 2% per year. Over the la...
In the business world, absenteeism refers to the rate at which employees do not arrive for work as scheduled. Company XYZ is a health care provider. It has 25 nurses who are each responsible for see...
Absolute advantage exists when a business can produce a good or service more efficiently than any other business. Famed economist David Ricardo coined the term in the early 1800s. Let's assume Com...
The Accelerated Cost Recovery System (ACRS) is a depreciation method that assigns assets periods of cost recovery based on specific IRS criteria. Since 1986, the Modified Accelerated Cost Recovery Sy...
Accelerated depreciation is a depreciation method whereby an asset loses book value at a faster rate than the traditional straight-line method. Generally, this method allows greater deductions in the...
Accord and satisfaction is a legal term that denotes accepting compensation in lieu of some contractual obligation from another party. An accord is an agreement with conditions. Satisfaction means t...
An account executive is a person responsible for managing a relationship with a customer. For example, let's say John Doe works for an advertising agency. The agency would like to have Company XYZ a...
An account history is a statement of all the activity that has occurred in an account for a given period of time. Monthly bank statements for common checking accounts often are account histories. Th...
An accountant is trained to compile, inspect, interpret, and/or report financial statements and tax returns that comply with governmental and regulatory authority requirements. Accountants often wor...
An accountant's letter, also called an auditor opinion, is a written statement describing an auditor’s independent, unbiased and qualified evaluation of the accuracy and completeness of a company...
An accountant's opinion is a concise written statement by a certified accountant concerning the accuracy of a company's financial records. An accountant's opinion is the first document in a company...
Accounting is the process of systematically recording, measuring, and communicating information about financial transactions. It’s a system of providing quantitative information about a business or...
Accounting conservatism is one of the four accounting conventions, which are standards, customs or guidelines regarding the application of accounting rules. There are four widely recognized accounti...
Accounting conventions are standards, customs or guidelines regarding the application of accounting rules. There are four widely recognized accounting conventions that guide accountants:1.  Be cons...
Accounting earnings, or net income, represent the amount of money gained or lost after all costs, depreciation, interest , taxes and expenses have been deducted from a company's total sales. A simpl...
An accounting error is an error in the process of systematically recording, measuring and communicating information about financial transactions. Mary is an accountant at Company XYZ. She is paying ...
An accounting period is the time interval reflected by the data in a financial statement. Firms prepare financial statements for publication and tax reporting based on an accounting period. Financia...
Accounting research bulletins (ARBs) are publications from the Accounting Principles Board of the American Institute of Chartered Public Accountants. ARBs recommend accounting procedures. The oldest...
The accounts payable turnover ratio is a company's purchases made on credit as a percentage of average accounts payable. The formula for accounts payable turnover ratio is: Accounts Payable Turnover...
Accounts receivable (AR) are the amounts owed by customers for goods or services purchased on credit. The money owed to the company is called “accounts receivable” and is tracked as an account in...
Accounts receivable aging is a report showing the various amounts customers owe a company and the length of time the amounts have been outstanding. Here is sample of an aging report:   Notice tha...
Accounts uncollectible, also called allowance for doubtful accounts (ADA), is a reduction in a company's accounts receivable. Accounts uncollectible equals the amount of those receivables that the co...
To be accretive is to increase earnings per share. This term is most often used in the context of acquisitions. Let's assume Company XYZ has EPS of 25 cents this year. Next year, it acquires Company...
An accretive acquisition is an acquisition that increases the acquirer's earnings per share. Let's assume Company XYZ has EPS of 25 cents this year. Next year, it acquires Company ABC. The cost of t...
Accrual accounting is an accounting method whereby revenue and expenses are recorded in the periods in which they are incurred. Accrual accounting is the opposite of cash accounting, which recognize...
Accruals are records of revenue and expenses in the periods in which they are incurred. They are a key component of the accrual method of accounting. Company XYZ must insure one of its buildings. Th...
To accrue is to record revenue and expenses in the periods in which they are incurred. Accruals, the result of accruing, are key components of the accrual method of accounting.   Company XYZ must ...
An accrued expense refers to any expense incurred and reported during an accounting period, but for which payment has not yet been made. There are certain expenses which a company may incur over the...
Accrued interest refers to interest that builds up on a company's outstanding payables and receivables.  This interest has been accounted for, but not yet transacted. Companies maintain accounts re...
Accrued liabilities are records of revenue and expenses in the periods in which they are incurred. They are a key component of the accrual method of accounting. For example, let's assume Company XYZ...
Accrued market discount refers to the steady increase in value of a discounted bond from the time of purchase until maturity. The accrued market discount is a discount bond's increase in value resul...
Accrued revenue is revenue recorded in the periods in which it is incurred. Let's assume Company XYZ is a widget consultancy that bills $100 an hour. In January, it performed 7,000 hours of consulti...
Accumulated depreciation is the sum total of the depreciation recorded for certain assets. Let's assume Company XYZ bought a MegaWidget for $100,000 three years ago. The MegaWidget depreciates by $1...
Accumulated earnings is the sum of a company's profits, after dividend payments, since the company's inception. It can also be called retained earnings, earned surplus, or retained capital. Let's lo...
The accumulated earnings tax is a charge levied on a company's retained earnings. Also called the accumulated profits tax, it is applied when tax authorities determine the cash on hand to be an exces...
An acquiree, also called a target, is a company that is purchased by an acquirer. Company XYZ has developed a powerful, new search-engine widget. Several search-engine companies may be interested in...
An acquirer is a person or company that purchases all or a portion of an asset or company. Company XYZ wants to acquire Company ABC. Company XYZ might just start buying ABC shares on the open market...
Activity based management (ABM) is an administrative method which examines how a company incurs costs from the standpoint of its activities rather than its final products. Companies have ordinarily ...
Adam Smith is one of the world's most famous economists. Modern capitalism owes its roots to Adam Smith and his Wealth of Nations, which many consider the single most important economic work in histo...
Additional paid-in capital (APIC), also called capital in excess of par value, is a measure of how much money investors have pumped into the company since inception in return for equity. The line ite...
Adjusted basis refers to the increase or decrease in an asset's value due to depreciation or capital enhancements. From the time an asset is acquired until the time it is sold, an asset experiences...
Adjusted present value (APV) refers to the net present value (NPV) or investment adjusted for the interest and tax advantages of leveraging debt provided that equity is the only source of financing....
An adverse opinion refers to the conclusion by an auditor that a company's financial statements inaccurately characterize the company's financial standing. An adverse opinion is an internal or indep...
The Affordable Care Act (ACA), typically referred to as "Obamacare" but formally known as the Patient Protection and Affordable Care Act (PPACA), is a bill signed into law on March 23, 2010, by Pres...
After-tax operating income (ATOI) is a company's operating income after taxes. ATOI is very similar to net operating profit after tax (NOPAT) The formula for ATOI is: ATOI = Gross Revenue - Operatin...
After-tax profit margin is the percentage of revenue remaining after all operating expenses, interest, taxes and preferred stock dividends (but not common stock dividends) have been deducted from a c...
Agency costs usually refers to the conflicts between shareholders and their company's managers. A shareholder wants the manager to make decisions which will increase the share value. Managers, instea...
Aggressive accounting refers to an accounting department's deliberate and purposeful tampering with its company's financials in order to outwardly characterize its revenues as higher than they truly ...
Alan Greenspan was the chairman of the Federal Reserve Board of Governors from 1987 to 2006. Alan Greenspan was born in 1926 in New York. His father was a stockbroker and his mother was a salesperso...
An allowance for doubtful accounts (ADA) is a reduction in a company's accounts receivable. The ADA equals the amount of those receivables that the company's management does not expect to actually co...
The Altman Z-Score (named after Edward Altman, the New York University professor who devised it) is a statistical tool used to measure the likelihood that a company will go bankrupt. Though Altman d...
The American National Standards Institute (ANSI) is a private, non-profit organization that oversees the development and enforcement of standards for products, services and personnel in both the Unit...
The American Rule, in law, is a rule by which each party pays its legal fees resulting from litigation.  This contrasts with the English Rule, which is the global norm, where the losing party pays t...
Amortization calculates how loans (like fixed-rate mortgages) are allocated towards principal and interest payments over the loan term.  It may also refer to an accounting method that expenses the c...
An analyst gathers and interprets data about securities, companies, corporate strategies, economies or financial markets. Analysts are sometimes called financial analysts, securities analysts, equity...
An angel investor is a person who invests in highly risky companies, typically before those companies have any revenue or profits. Usually these companies are start-ups and/or small businesses that t...
An annual general meeting (AGM) is an SEC-mandated gathering of a public company's senior management and shareholders for the purpose of exchanging important information. The Securities and Exchange...
An annual report is an audited corporate document that details the business activity and financial status of a publicly-held company over the previous year.  The Securities and Exchange Commission ...
An anti-dilution provision is a clause in an option, security, or merger agreement that gives the investor the right to maintain his or her percentage ownership of a company by buying a proportionate...
An anti-greenmail provision is a clause in a corporation's charter that deters the corporation's board from conducting a stock buyback. To understand an anti-greenmail provision, one must first unde...
An anti-takeover measure is a precautionary strategy used by companies to avoid being bought by another company. For a myriad of reasons, a company may not want to be taken over. Thus, if management...
An anti-takeover statute is a law designed to deter companies from launching hostile takeovers of other companies. Anti-takeover statutes exist in some places in order to protect the autonomy and in...
An appraiser is a person capable of providing an appraisal. An appraisal is a document that formally describes the value of a piece of property, usually exceeding $5,000. For example, let’s imagin...
Arbitration is a process in which impartial parties (arbitrators) help disagreeing parties resolve a dispute. Contracts, particularly financial ones, with disputes often go to arbitration. In the fi...
An asset is an economic resource that can be owned by an individual, company, or country. Assets are expected to provide future economic benefits like:  Increased value for a company or country I...
An asymmetric digital subscriber line (ADSL) is a modem technology that enables information and video to be transmitted over regular telephone lines. Though the mechanics of Internet access is highl...
In the tax world, an audit refers to the review of a taxpayer's tax return for accuracy.   In the accounting world, an audit is the examination and verification of a company's financial statements a...
An audit trail refers to the complete record of events that occurred in the execution of a transaction. When a transaction is executed (e.g. a business purchase), each documented step taken makes up...
In the accounting world, an auditor is a professional who examines and verifies a company's financial statements and records and in the United States examines a company's compliance with Generally Ac...
An auditor's opinion is a written statement describing an auditor's independent, unbiased and qualified evaluation of the accuracy and completeness of a company's financial statements and practices, ...
An auditor's report is a statement included in a company's annual financial report that certifies the validity of a company's financial statements according to an outside auditor. By law, companies ...
Average Revenue Per User (ARPU) is a measurement of profit in terms of customers. ARPU is generally applied for financial analysis at companies which offer subscriptions to customers. The formula fo...
Baby bells refer to the telephone companies that were created after the U.S. government required AT&T to divest assets in 1984 as part of a settlement for violating antitrust laws. In the early ...
Similar to how the U.S. Department of Justice forced the breakup of "Ma Bell" into seven "baby bells," Baby Bills refer to the companies that would have resulted from a breakup of Microsoft Corporati...
A baby boomer is a member of the generation born between 1946 and 1964. The term baby boom refers to the increase in births after the end of World War II. Today, America’s 75 million baby boomers ...
The baby boomer age wave theory, developed by economist Harry S. Dent, Jr., theorizes that the age of the baby boom generation can predict major changes in economic trends. A "baby boomer" is a memb...
A back charge is an unpaid bill attributable to a prior period. For example, let's say that Company XYZ sells $1,000 worth of auto parts to Store ABC every month. Store ABC forgets to pay for its Oc...
In the finance world, a back office processes the day-to-day paperwork and record-keeping associated with trades, confirmations, settlements and other financial transactions. For example, let’s as...
A back order is an order that cannot be filled in the usual time expected.   For instance, let’s assume John Doe purchases 10 tractors from a tractor dealer. The retailer has four on hand to ship...
A back stop is a person or entity that purchases leftover shares from the underwriter of an equity or rights offering. For example, let’s assume that Company XYZ is going public. It plans to issue...
A back up is an increase in a security’s price, yield, or spread before issuance. In other circles, back up means replacing a long-maturity security with a short-maturity security in order to capi...
Slang for a draft business model. Ideas often strike in odd places, and more than one entrepreneur has found himself jotting business ideas on any available surface -- including table napkins. Typic...
In the merger world, a backflip takeover occurs when an acquirer becomes a subsidiary of its target. For example, let's assume that Company XYZ is acquiring Company ABC, which is smaller. Company XY...
An accounting method whereby the costs associated with producing a good or service are recorded only after the good or service is actually produced, completed or sold. For example, let's assume that...
Frequently used in manufacturing industries, backlog refers to unfinished work or to customer orders that have been received but are either incomplete or in the process of completion. Let's assume X...
Backorder costs are associated with not being able to fill an order. Company XYZ sells widgets. On Black Friday, it offers 30% off all widgets online, and it receives an unprecedented number of o...
Backward integration refers to a company buying or internally producing parts of its supply chain. For example, let's assume that Company XYZ manufactures widgets. It needs 10 pounds of punched plas...
A bad bank is a new company created to buy poorly-performing assets from another bank. For example, let's assume that Bank XYZ has made an extraordinary number of loans to borrowers who can't pay th...
Bad debt expense is the portion of accounts receivable that became uncollectable during a given period. Let's assume that Company XYZ sells $1,000,000 worth of goods to 10 different customers.  Com...
Bad debt recovery is when a company is able to collect a payment that was previously classified as a bad debt.  Let's assume that Company XYZ sells $1,000,000 worth of goods to 10 different custome...
Bad debt reserve, also called an allowance for doubtful accounts (ADA), is a reduction in a company's accounts receivable. The bad debt reserve is the amount of receivables that the company does not ...
A bag man is a person who solicits contributions to political parties or political causes on behalf of someone else. Let's say that Company XYZ wants to fight the passage of a new law that would reg...
Baidu is a large search engine in China. The word translates to "hundreds of times." Its ticker symbol is BIDU. Founded in 2000, Baidu is tailored to Chinese users. Similar to Google, the site offer...
A bailee is a person who has been entrusted with custody of a piece of property. A bailee does not have ownership of the property. Let's say John Doe owns a big piece of farmland on the eastern shor...
Bailee's customers insurance covers any damage or destruction that a bailee might do to a bailor's property. Bailment is a transfer of custody of property rather than a transfer of ownership of prop...
Bailment is a transfer of custody of a piece of property rather than a transfer of ownership of a piece of property. For example, let's say John Doe owns a big piece of farmland on the eastern shore...
A bailout is financial help for ailing companies. Company XYZ is in the newspaper industry and has seen a dramatic downturn in its advertising sales. The company's board believes that if it can laun...
Bait and switch is a sales tactic that tricks consumers into buying something other than an advertised item. John Doe sees an ad in the paper for $1 orange juice at a local retailer. He goes to the ...
A bait record is a fake file on a computer that is used to see whether anyone is improperly accessing data. Let's assume Company XYZ's magazine covers keep leaking to the competition before they are...
The balance of payments (BOP) reflects all payments and obligations to foreigners vs. all payments and obligations received from foreigners. It's a record of all financial flows in and out of a count...
Balance sheet reserves, also known as "claims reserves", are accounting entries that reflect money a company sets aside to pay future obligations. Let's assume Company XYZ has to recall one of its p...
A balanced budget exists when a household's (or country's) revenues are equal to its expenses. For example, let's assume that John Doe and his wife Jane Doe earn $100,000 a year. Jane analyzes the c...
A balanced scorecard is a way to measure business performance. To make a balanced scorecard, company leaders select a set of measurements. These measurements evaluate a variety of things, all of whi...
A ballot reflects a shareholder's vote on a corporate decision. Most corporations have an annual shareholders meeting in which shareholders come to listen to presentations by the company's managemen...
The Baltic Dry Index (BDI)  is a leading economic indicator that measures demand for dry bulk shipping services worldwide relative to supply.   Every business day, researchers for the London-based...
A bank deposit involves the placement of funds into an account with a bank. There are two general types of bank deposits: demand deposits and time deposits. Demand deposits are the placement of fu...
A bank draft is a check that a bank guarantees. Bank drafts are not common in the United States; they are more popular in Britain. The concept is similar to that of a cashier's check. To obtain a ba...
A bank endorsement is an assurance that it will stand behind a check or other negotiable instrument that one of its customers creates. Let's say you want to buy 1,000 cars from a Canadian wholesaler...
A bank examination is a regular process of ensuring that a bank or lending institution is financially stable and obeying regulations while avoiding excessive risk. The CAMELS is a system used to rate...
Based in Basel, Switzerland, the Bank for International Settlements (BIS) acts as a bank for central banks around the world. The BIS's main role is setting capital adequacy requirements and ensuring...
A bank holiday is a day on which a bank or banking system is closed. In the United States, banks and financial markets generally cannot be closed for more than four calendar days in a row, which put...
A bank reserve is a portion of a bank's deposits that are set aside in a liquid account to ensure that the bank has enough cash on hand to fulfill withdrawal requests. Reserve requirements are Feder...
A bank run occurs when a flood of depositors withdraws funds from a bank within a short time frame. It’s important to remember one thing about banks: They don’t keep your money in cash in a vaul...
Bankmail is a bank's promise that it will finance a company's takeover bid and not help the other bidders. Let's say Company XYZ wants to buy Company ABC. Three other companies are also interested i...
Bankruptcy is a legal process under which a borrower protects and/or liquidates assets in order to repay debts. In general, there are three "types" of bankruptcy, each named after a section of U.S. ...
Also called negative goodwill, a bargain purchase occurs when a company buys an asset for less than its fair market value. Negative goodwill is the opposite of goodwill. For example, let’s assume ...
A barter (or bartering) is an exchange between two parties using goods and services for payment instead of currency. The barter system enables two parties to exchange goods or services based on mutu...
In economics, a basket of goods is a group of items used for price comparisons or other analytical purposes. The consumer price index (CPI) is the most common measure of price levels. The CPI measur...
Beginning inventory refers to the value of goods that a company has for its use or sale at the start of an inventory accounting period. Say Company XYZ produces 5,000 units during the course of a ye...
The Beige Book is the informal name for the Federal open Market Committee's (FOMC) ongoing reports titled Summary of Commentary on Current Economic Decisions by Federal Reserve District. The purpose...
In the finance world, a company goes belly up when it declares bankruptcy or goes out of business. Let’s assume Company XYZ’s stock falls from $10 per share to 50 cents per share due to a series...
Ben S. Bernanke is the chairman of the United States Federal Reserve (the Fed). As Fed chairman, Bernanke also chairs the Board of Governors of the Federal Reserve and the Federal Open Market Committ...
Best efforts is a legal agreement between a securities underwriter (usually an investment bank) and a securities issuer, whereby the underwriter agrees to do the best it can to sell as many of the is...
The Better Business Bureau (BBB) was born out of so-called ‘vigilance committees’ which arose in the early 1900s to correct advertising abuses and help facilitate consumer trust in the marketplac...
A big box store is a large company that is more efficient but less specialized than other firms in a particular niche or industry. Wal-Mart is a classic example of a big box store. By being cheaper,...
A bill of lading is like a receipt -- it is an acknowledgement of the receipt of goods. A carrier often gives a shipper a bill of lading and an invoice when it is moving goods for the shipper. Compa...
Black is slang for profit. Profit, also called net income, is the amount remaining after all costs, depreciation, interest, taxes, and other expenses have been deducted from total sales. Profit is al...
A black market is the illegal purchase and sale of goods and services. Drug dealing is one of the most prominent black markets in the United States. In this black market, people buy and sell drugs k...
A blue chip is a nationally recognized, well-established and financially sound company. The term comes from blue poker chips, which have the highest value in the game. Blue chip companies have sever...
Blue sky laws require the registration of brokers, brokerage firms and investment professionals in order to provide transparency of financial offerings and protect investors from investment fraud. Ea...
Consisting of elected individuals who serve as advisors to a corporation, a board of directors acts as a proxy (representative or substitute) for shareholders. For-profit and nonprofit corporations ...
The Board of Governors is the decision-making body at the Federal Reserve. The Federal Reserve system is the United States' central bank. It manages the economy's money supply, regulates the banking...
A boardroom is a place in which a board of directors meets. A board of directors is a team of people elected by a corporation's shareholders to represent the shareholders' interests and ensure that ...
When referring to assets, the term book value means the original cost of an asset minus accumulated depreciation. The book value of a company is the company’s total assets minus its outstanding li...
Book-entry securities are securities issued in electronic form rather than in paper form. The commercial book-entry system is a system whereby the investor's ownership of the security is reflected o...
Bootstrapping refers to the efforts of an entrepreneur to start a business using his own assets as the source of capital. Bootstrapping can also refer to a highly-leveraged transaction when an invest...
The bottom line represents the number of sales dollars remaining after all operating expenses, interest, taxes and preferred stock dividends (but not common stock dividends) have been deducted from a...
Break even analysis is a calculation of the quantity sold which generates enough revenues to equal expenses. In securities trading, it is the point at which gains are equal to losses.  In other word...
In accounting, economics, and business, the break-even point is the point at which cost equals revenue (indicating that there is neither profit nor loss). At this point in time, all expenses have bee...
The break-even price is when the money received from the sale of a product covers the expenses associated with producing that product. The basic idea behind a break-even price is to calculate the po...
Under the Bretton Woods Agreement of 1944, the world's allied industrial countries established a fixed currency exchange rate based on the gold standard.    The Bretton Woods Agreement also led to...
Brick and mortar is a term used to describe physical locations or outlets, typically in retail or other consumer facing businesses. The use of the term “brick and mortar” has evolved over the las...
The Bureau of Labor Statistics (BLS) of the U.S. Department of Labor is a Federal agency that measures and reports labor market activity, working conditions and price changes in the economy. The Bur...
/*-->*/ The Bureau of Public Debt is responsible for borrowing the money needed to run the U.S. government. They are also responsible for tracking the total amount of U.S. soverign debt. /*-...
The business cycle refers to an economy's periodic patterns of growth, recession, and recovery. An expanding economy is characterized by low unemployment, high productivity, and high consumer spendi...
Business development company (BDC) is a designation specific to public firms that invest in small, upcoming businesses. BDCs hope their stakes in the businesses will increase in value as the business...
A business model helps shape a company's marketing and sales plans, its growth potential, and its ability to attract investors. Investors use business models to assess a company’s profit potential ...
A buyer's market exists when there are more sellers than buyers in the market for a certain good or service. Housing is a common place to find a buyer's market. Let's say that ABC Town has 100,000 h...
In the financial world, the phrase "buying power" has two meanings. One is the amount of money a person can use to invest in securities (and that can include money the investor borrows in order to b...
A buyout is the purchase of at least 51% of a company. Under a buyout, the previous ownership loses control of a company in exchange for compensation. The buyout process usually begins when an inte...
A calendar year is the period between January 1 and December 31. If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December 31, then Company XYZ's fiscal year is said to...
A call report is a quarterly report that banks and all regulated financial institutions must file with the Federal Financial Institutions Examination Council (FFIEC). The formal name of the call rep...
Camouflage compensation is compensation that is not fully disclosed or is hard to identify. Let's say Company XYZ needs a new CEO. CEOs in the industry typically earn at least $1 million a year in c...
Capital is anything a business uses to generate income. In simple terms, capital is the potential for any item to create wealth. In the economic sense, capital comes in many forms: currency, equi...
A capital account is a national account that shows the changes in a nation's assets. These assets can be physical or financial. The capital account essentially is the left-hand side of a country's b...
Capital accumulation occurs when a company acquires assets. Capital accumulation also occurs when an institutional investor or other financial institution acquires a large position in a company over ...
For firms, a capital asset is an asset that has a useful life longer than one year and is not intended for sale during the normal course of business. For individuals, capital asset typically refers t...
Capital budgeting is the process of figuring out which projects are financially worth an investment. Let's assume Company XYZ is deciding whether to purchase a piece of factory equipment for $300,00...
Capital decay occurs when a company's revenue suffers due to its use of old technology or processes. Let's say John Doe opens an ice cream stand. He buys a basic cash register at the office supply s...
A capital dividend account is a special account that companies use to pay tax-free dividends to shareholders. Let's say five people pool their capital to form a company. They each contribute $10,000...
Capital expenditures, or capex, is money used to purchase, upgrade, improve, or extend the life of long-term assets. Long-term assets are typically property, infrastructure, or equipment with a usefu...
In general, a capital improvement is a one-time expenditure for physical assets such as buildings, land, construction, landscaping or major equipment. Let's say Town XYZ wants to refurbish ABC Eleme...
A capital injection is an inflow of cash, stock or even debt into a company. Let's say Company XYZ is a private company and it wants to open 15 more stores in its retail chain. It raises money from ...
Capital intensive refers to the degree that a company must invest money in physical or financial assets in order to produce a profit. Airlines, auto manufacturers, and drilling operations are often ...
Capital IQ is a research division of Standard & Poor's. Essentially, Capital IQ provides research and analysis on companies. It also sells software and data feeds to investors and analysts. Crea...
Capital stock is the number of shares that a company's charter authorizes for issuance. A corporate charter is a legal document that sets forth a corporation's basic information, such as its locatio...
Capital structure refers to the blend of debt and equity a company uses to fund and finance its operations. If Company XYZ has completed an initial public offering and a bond offering, we could ther...
Capitalism is an economic and social system in which participants privately own the means of production -- called capital. Free market competition, not a central government or regulating body, dictat...
In the business world, capitalization has two meanings. The first meaning, also called market capitalization, refers to the value of a company's outstanding shares. The formula for market capitalizat...
Capitalizing refers to the accounting practice of characterizing the costs of an asset purchase as a long-term asset on the balance sheet instead of an expense on the income statement.  Companies c...
Designed to facilitate the sharing of stolen credit card information, a carding forum is an illegal website where fraudsters also share info, tips and techniques about obtaining credit card informati...
A cartel is a group of companies, countries or other entities that agree to work together to influence market prices by controlling the production and sale of a particular product. Cartels tend to s...
Cash is an asset that is in currency form. Although there is some leeway for judgment in particular situations, common examples of cash at the corporate level typically include bank accounts and mon...
Under cash accounting, a business records revenue and expenses in the period in which they are actually received or paid, rather than in the period in which they are incurred. Let's assume Company X...
Cash and cash equivalents (CCE) are company assets in cash form or in a form that can be easily converted to cash. The balance sheet shows the amount of cash and cash equivalents at a given point in...
Cash budget is a review or projection of cash inflows and outflows. It can be used as a tool for analyzing the revenues and costs of a company or individual. A cash budget is a planning tool used by...
Cash equivalents are company assets that are easily converted to cash. Although there is some leeway for judgment in particular situations, examples of cash equivalents include marketable securities...
Cash flow is simply the cash expected to be generated by an investment, asset or business.  As an investor, you buy a dividend-paying stock. You purchase the stock for $10 and the company pays you ...
Cash flow after taxes (CFAT) is a measure of a company's ability to generate positive cash flow after deducting taxes. The general formula for CFAT is: CFAT = Net Income + Depreciation + Amortizatio...
The section of the cash flow statement titled Cash Flow from Financing Activities accounts for inflows and outflows of cash resulting from debt issuance and financing, the issuance of any new stock, ...
Cash from investing activities is a section of the cash flow statement that provides information regarding a company's purchases or sales of capital assets. A statement of cash flows typically break...
Cash flow from operating activities measures the cash-generating abilities of a company's core operations (rather than its ability to raise capital or buy assets).  Put another way, cash flow from o...
Cash flow per share represents the portion of a company's cash flow allocated to each share of common stock. Cash flow per share can be calculated by dividing cash flow earned in a given reporting p...
Cash flow plans are strategic documents companies make in order to forecast their cash inflows and outflows over several periods. In the insurance world, cash flow plans refer to coordinating the pay...
A cash flow statement is the financial statement that measures the cash generated or used by a company in a given period. A cash flow statement typically breaks out a company's cash sources and uses...
A cash market is a market for securities or commodities in which the goods are sold for cash and delivered immediately. In some cases, "immediate" means one month or less. For example, foreign exchan...
A category killer is a large, dominant company that is more efficient but less specialized than other merchants in a particular niche or industry. Wal-Mart is a classic example of a category killer....
Caveat emptor is Latin for let the buyer beware, meaning the buyer assumes the risk in a transaction. Garage sales are great examples of caveat emptor. Buyers purchase goods as is and have little or...
A central bank is an institution responsible for determining the monetary policy of a nation or group of nations.  Exact duties vary by country, but generally a central bank's main goals are to mai...
The certified public accountant (CPA) designation is a professional designation granted by the American Institute of Certified Public Accountants (AICPA). It is given to individuals who pass the Unif...
Chapter 10 (formally referred to as Chapter X) is a former portion of the bankruptcy code that dictated bankruptcy processes and procedures for companies and individuals. Chapter X was originally pa...
The chief executive officer (CEO) oversees the entire operation of a company or organization. A CEO is responsible for coordinating effective operating, marketing, financial, cultural and legal strat...
The chief financial officer (CFO) oversees the financial operation of a company or organization. The CFO's job is to coordinate effective financial, accounting and tax strategies to maximize shareho...
The chief operating officer (COO) is responsible for executing and implementing the operational directives set by the CEO and the board of directors. Whereas the CEO is responsible for the overall le...
Class action is a type of civil lawsuit brought by a group of people who are "similarly situated" -- that is, they have been harmed in a similar way. In the business world, this group is most often s...
Also called tag-along rights, co-sale rights allow minority shareholders to sell their stakes in a company if a majority shareholder wishes to sell its stake in a company. Let's say Company XYZ is a...
Collusion, also known as price rigging or price fixing,  occurs when several individuals and/or businesses agree to set the price for something.  For example, let’s assume that there are four ma...
A command economy (also known as a “planned economy”) occurs when decisions about the production and allocation of all goods and services are made by one central government authority. Command ec...
Commerce is the exchange of goods, services or commodities on a large scale. Nearly every business transaction is a form of commerce: purchasing food at a restaurant, buying stocks on the stock mark...
A common-size balance sheet is a balance sheet in which each line item is expressed as a percentage of assets. For example, let's assume that Company XYZ's balance sheet looks like this: The right-...
A common-size financial statement is an income statement or balance sheet in which each line items are expressed as a percentage of sales or assets, respectively. For example, let's assume that Comp...
A common-size income statement is an income statement in which each line item is expressed as a percentage of sales. For example, let's assume that Company XYZ’s income statement looks like this: ...
A firm's comparative advantage is its ability to produce a good or service at a lower opportunity cost than another entity. Famed economist David Ricardo first coined the term "comparative advantage...
A conglomerate is a corporation made up of several smaller, independently-run companies which may operate across several sectors and industries. Conglomerates are generally formed for two reasons: t...
In the accounting world, to consolidate means to combine the financial statements of a company and all of its subsidiaries, divisions or suborganizations. Let's assume Company XYZ is a holding compa...
Consolidated financial statements are the combined financial statements of a company and all of its subsidiaries, divisions, or suborganizations. Let's assume Company XYZ is a holding company that o...
Consolidated Reports of Condition are reports that are filed quarterly by banks and all regulated financial institutions with the Federal Financial Institutions Examination Council (FFIEC) Consolida...
In business, consolidation refers to the merger of several companies in a specific industry, which typically concentrates market share in the hands of a few large companies. Perhaps one of the most...
Also called real GDP, constant-price gross domestic product (GDP) is inflation-adjusted GDP. Gross domestic product (GDP) is the broadest quantitative measure of a nation's total economic activity. ...
The Consumer Confidence Index (CCI) is an index based on the monthly Consumer Conference Board survey that measures consumer sentiment regarding current and future economic conditions. note that the ...
Consumer cyclical refers to a stock or group of stocks that are affected by changes in the economic cycle. Consumer cyclicals perform well when the economy grows and suffer when the economy stagnate...
Consumer durables are a category of consumer products that do not have to be purchased frequently because they last for an extended period of time (typically more than three years). Consumer goods a...
Created by President Obama’s Administration in 2010, the Consumer Financial Protection Bureau (CFPB) serves as a federal watchdog over the consumer financial industry. Responsible for regulating fi...
The consumer price index (CPI) measures changes in consumer prices. The Bureau of Labor Statistics (BLS) calculates and publishes CPI data monthly. The CPI is the most recognized inflation measure in...
Consumer staples are household necessities -- products that most of us use on an everyday basis and would continue to use with little regard to their cost or the overall economy. Examples of consume...
Contribution margin is a measure of profit per unit; it is used to tell a business how profitable each of their products is by calculating how much each product can contribute to revenues. The contri...
Core earnings are the net income a company generates from the principle products and services it provides. The concept of core earnings was developed by Standard & Poor's (S&P) in order to m...
Also called "articles of incorporation" or a "certificate of incorporation," a corporate charter is a legal document that sets forth a corporation's basic information, such as its location, profit/n...
Corporate governance is the process and rules under which a company is managed on the behalf of shareholders and stakeholders. The board of directors is primarily responsible for applying and maintai...
Corporate inversion is practice by U.S.-based companies of exchanging their registration with a subsidiary outside the U.S. in order to pay lower taxes. Many large companies in the U.S. have smaller...
Corporate profit, also called net income, is the amount remaining after all costs, depreciation, interest, taxes, and other expenses have been deducted from total sales. Profit is also referred to as...
A corporation is one of many ways to formally organize a business. Structuring a business as a corporation has a number of important legal requirements and consequences that impact investors. A corp...
Cost of capital can best be described as the ability to cover both asset and liability expenditures while generating a profit.  In a nutshell, it’s a rate of return that helps companies decide whe...
Cost of goods sold (COGS) is an accounting term to describe the direct expenses related to producing a good or service. COGS is listed on the income statement. For goods, COGS is primarily composed ...
Cost per thousand (CPM) is a marketing term referring to the cost of a media vehicle reaching 1,000 members of an audience. The M in CPM is the Roman numeral for 1,000. The formula for cost per thou...
Cost per unit is a measure of a company's cost to build or create one unit of product. For example, let's assume it costs Company XYZ $10,000 to purchase 5,000 widgets that it will resell in its ret...
Cottage industry is a production system that relies on producing goods, or parts of goods, by craftsmen at home, or small workshops, by individuals, small teams or family units instead of large facto...
/*-->*/ Country risk is the risk that a foreign government will default on its bonds or other financial commitments. Country risk also refers to the broader notion of the degree to which politic...
The Credit Card Accountability, Responsibility, and Disclosure Act is better known as the Credit CARD Act. The law's main purpose is to prevent certain business practices in the credit card industry ...
Critical mass refers to the size a company needs to reach in order to efficiently and competitively participate in the market. This is also the size a company must attain in order to sustain growth a...
The crowding out effect describes the idea that large volumes of government borrowing push up the real interest rate, making it difficult or close to impossible for individuals and small companies to...
Currency is a medium of exchange for goods or services within an economy. Currency can be either fiat or tied to an underlying asset. Fiat money has no intrinsic value and is backed by the full fait...
Current assets (sometimes called current accounts) are any company assets that can be converted into cash within one fiscal year. There are multiple ways these assets can be converted, including sale...
A current liability is a liability due in less than one year. A liability is a claim on a company's assets. Technically, a liability is a required transfer of assets or services that must occur on o...
A cyclical industry is an industry whose performance (revenues, profits, etc.) is tied to the business cycle. Thus, when the economy is grows quickly, the industry does well and vice versa. Cyclical...
Cyclical unemployment is the fluctuating rate of unemployment resulting from swings in the business cycle. This type of unemployment increases during a recession and decreases during an expansion. B...
DAGMAR is a marketing term that stands for "define advertising goals, measure advertising results." For example, let's assume that Company XYZ wants to measure the effectiveness of the marketing cam...
In finance, a daisy chain is an investment scam whereby a group of fraudulent investors inflate the price of a security and then sell it at a profit. In a daisy chain scenario, an investor or group ...
A dangerous asset is an asset (usually a physical asset rather than a security) that carries a high degree of liability for its owner. For example, let's say John Doe has a 10-foot-deep pool in his ...
Data mining refers to the systematic software analysis of groups of data in order to uncover previously unknown patterns and relationships. So called because of the manner in which it explores infor...
Data warehousing is an electronic method of organizing information. A data warehouse essentially combines information from several sources into one comprehensive database. For example, in the busine...
A date certain is a legal term identifying a date on which an action or process must occur or complete. For example, let's say that John Doe rents a house from Jane Smith. The lease is for 12 months...
A day cycle is a period of time for sending ACH debits and credits for settlement.   The Automated Clearinghouse (ACH) network allows companies and consumers to send payments from one account to an...
A day rate is the daily cost of a good, service or operating a business. Let's say that John Doe is a consultant to media companies. He charges $200 an hour, making his day rate (8 x $200) = $1,600....
A daylight overdraft occurs when a bank transfers out more in a day than it has in its reserves. Let's say Bank XYZ has assets of $100 million. The Federal Reserve requires the bank to maintain 10% ...
Days payable outstanding (DPO) is the ratio of payables to the daily average of cost of sales. The formula for DPO is: Days Payables Outstanding = Accounts Payable/(Cost of Sales/360) For example, l...
Days sales of inventory is a ratio of inventory to sales. The formula is: Days Sales of Inventory = (Inventory/Cost of Sales) x 365 For example, let's say that XYZ Company had $15 million cost of sa...
Days sales outstanding (DSO) is the ratio of receivables to the daily average of credit sales. The formula for daily sales oustanding is: DSO = Receivables / (Net Annual Sales on Credit / 360) If a ...
Days working capital is the ratio of working capital to sales. The formula is: Days Working Capital = (Average Working Capital x 365)/Annual Sales Working capital is money available to a company for...
A de-merger is the partial or full sale of an asset or business segment. Let's assume Company XYZ is the parent of a food company, a car company and a clothing company. If for some reason Company XY...
In the finance world, dead presidents are slang for U.S. currency. The term comes from the pictures of the former U.S. presidents, all of whom are deceased, that appear on the face of American curre...
When supply and demand are out of equilibrium, the market inefficiency created and the societal cost is known as deadweight loss. When used in economics, deadweight loss will be applied to the defici...
A debit is an accounting record that represents either an increase in assets or a decrease in liabilities or net worth. A debit is the opposite of a credit. For example, let's say that Company XYZ s...
Debt load is the total amount of debt that a company has on its balance sheet. All publicly traded companies must file financial statements, including balance sheets, every quarter. Let's look at a ...
Decoupling refers to instances in which security prices behave contrary to normally-occurring correlations. Movements in the price of different securities may be directly or indirectly correlated. I...
A defensive company is a company that does well or at least remains stable during economic contractions and expansions. Defensive companies are most famous for their ability to weather economic dips...
Deferred revenue is money that a company receives in advance for products and services. This means that these products and services will, at a later date, be delivered or performed. Deferred revenue ...
Deferred tax liability (DTL) is a balance sheet line item that accounts for the temporary difference between taxes that will come due in the future and taxes paid today.  Because of accrual account...
A deficit occurs when expenses exceed revenues, imports exceed exports, or liabilities exceed assets. A deficit is the opposite of a surplus. Fiscal deficits occur when an entity's (usually a govern...
Deficit spending is spending that reduces or offsets a surplus. In the business world, the term often refers to situations where expenses exceed revenues, imports exceed exports, or liabilities excee...
Deflation describes the general decline in the prices of goods and services in an economy, which in turn increase the purchasing power of money. It is the opposite of inflation, but is not the same a...
Demand elasticity is a measure of how sensitive the demand for a product or service is to changes in the price of that product or service. The formula for demand elasticity is: Elasticity = % Chang...
Demonetization is the act of removing a currency from use as legal tender. Demonetization occurs when a governing body cancels the legal tender status of a currency unit in circulation. This can occ...
Usually associated with currency, a denomination is the value specified on a monetary instrument. Denomination values are graduated and usually divisible by some common denominator (hence, 'denomina...
A depletion allowance is a tax deduction allowed in order to compensate for the depletion or "using up" of natural resource deposits such as oil, natural gas, iron, timber etc.  The allowance is a f...
Depreciated cost is the cost of an asset minus its accumulated depreciation. Another term for this concept is net book value. The formula for depreciated cost is: Depreciated Cost = Original Asset Pr...
Depreciation is an accounting method that measures the reduction in an asset’s value over the course of its useful life. It also represents how much of an asset’s value is depleted due to usage, ...
A depression is a sustained downturn in economic activity characterized by high unemployment, decreased output and reduced levels of trade.  Low levels of consumer confidence during times of depres...
Deregulation occurs when there is a significant decrease or elimination of government regulation over an industry, market, or economy. The transportation industry is one of the most famous industrie...
Diluted earnings per share is a measure of profit. The formula for diluted earnings per share is: Fully Diluted Earnings Per Share = (Net Income - Preferred Stock Dividends) / (Common Shares Outstand...
A direct cost is any cost related to the production method of a good or service. It is the opposite of an indirect cost. Direct costs are variable costs associated with the inputs and labor require...
A disclosure statement is an official document that outlines the terms, conditions, risks and rules of a financial transaction, such as a loan or an investment. In the case of a loan, the disclosure...
The discount rate, also known as the Fed discount rate, is the interest rate charged to commercial banks and other institutions on loans from a Federal Reserve bank. This process is a key tool of Fed...
The discount window is the method that banks use to borrow money from a central bank on a short-term basis, named after an actual teller window at the Federal Reserve where such transactions used to ...
Diseconomies of scale lead the marginal cost of a product to increase as a company grows. This is the opposite of economies of scale which cause the marginal cost for a product to decrease as a resul...
A double-dip recession occurs when the economy experiences a recession followed by a brief recovery and then another period of recession. Recessions occur when the gross domestic product (GDP) decl...
The Dow Jones Transportation Average (DJTA) is the most widely recognized gauge of the transportation sector. It is also the oldest index used today, even older than its more famous brother, the Dow ...
The Dow Jones Utilities Average (DJUA) is the most widely cited utilities index in the United States and the most widely recognized gauge of the utilities sector. The Dow Jones Utilities Average is ...
Downsizing is a strategy used to reduce the size and scope of a business in order to improve its financial performance, usually by laying off employees or closing less-profitable divisions. Downsizi...
Downstream refers to the benefits (or costs) that will ultimately result from decisions made today. In finance, a series of investments might be made with the anticipation that at a point in time in...
Dual-class ownership is a type of stock structure in which a company issues different classes of stock, each with different privileges. Let's say Company XYZ issues Class A and Class B shares. The C...
A duopoly is a form of oligopoly occurring when two companies (or countries) control all or most of the market for a product or service. There are two kinds of duopolies. In the first, the Cournot d...
Durable goods are a category of tangible (physical) products that last three years or longer. Typically, these goods are a bit more expensive because they tend to last for long periods of time. Durab...
Duress is pressure that one person or entity puts on another person to do something that he or she would normally not do. Let's say Artie owns a restaurant called Vesuvio. One day, a big bald guy co...
An e-meeting is simply an electronic meeting. Let’s say John Doe is working with 15 people on a project. Many of the people are in other states, but John Doe needs to get them all in a room to ta...
An early adopter is a person who purchases or tries new products -- typically technology -- before most other consumers. Early adopters are one of five types of consumers (the others are innovators,...
The early majority is a group of people who purchase or try new products -- typically technology -- after a much smaller population of innovators and early adopters have done so. The early majority ...
Earmarking refers to the act of setting aside funds for special purposes or specific projects. Companies and governments earmark funds frequently. Note: Earmarking may also be referred to as pork bar...
Earned surplus is the sum of a company's profits, after dividend payments, since the company's inception. It can also be called retained earnings, retained capital, or accumulated earnings. Let's lo...
Earnings are the corporate profits of a company over a specific time period after taxes and other expenses have been paid. The net (after-tax) earnings of a company are calculated by deducting such ...
The earnings allowance is the minimum amount a bank requires a customer to have available in a checking account in order to avoid monthly service charges. Let's say Company XYZ has a cash account wi...
An earnings announcement is a public statement of a company's profits, usually on a quarterly basis. For example, let's say Company XYZ is a public company. As such, it must file a 10-Q every quarte...
Earnings before interest after taxes (EBIAT) is a measure of a company's operating performance. EBIAT is a measure of how profitable a company would be if it paid taxes on its operating profit withou...
Earnings before interest and depreciation (EBID) are a post-tax measure of a company's operating performance. The formula for EBID is: EBID = EBIT + Depreciation - Taxes EBID can be easily derived f...
Earnings Before Interest and Taxes (EBIT) measures the profitability of a company without taking into account its cost of capital or tax implications. EBIT is calculated using information provided o...
Earnings before interest, tax, depreciation, and amortization (EBITDA) is a measure of a company's operating performance. It's a way to evaluate a company's performance without having to factor in fi...
Earnings before tax (EBT) measures a company's operating and non-operating profits before taxes are considered. It is the same as profit before taxes. Simplifying things a bit, revenue minus expense...
An earnings credit rate (ECR) is a discount a bank gives a depositor on the depositor's bank fees. Let's say Company XYZ has $950,000 in combined deposits with Bank ABC. Bank ABC normally charges Co...
Earnings momentum is a term to describe accelerating or slowing growth in earnings per share (EPS).   Let's assume that Company XYZ has reported the following EPS: Q1: $0.25 Q2: $0.27 Q3: $0.30...
The earnings multiplier, also called the price-to-earnings ratio (P/E), is a valuation method used to compare a company’s current share price to its per-share earnings. The market value per share ...
The term earnings per share (EPS) represents the portion of a company's earnings, net of taxes and preferred stock dividends, that is allocated to each share of common stock. The figure can be calcul...
Earnings power is the ability to generate profits. Company XYZ is a start-up that sells pet rocks. At first, the company sells 40,000 units after a celebrity is photographed taking hers to a movie s...
An earnings restatement, also called an earnings recast, is the act of disclosing amended financial statements. Let's assume Company XYZ sells its pharmaceutical division to Company ABC. The pharmac...
An earnout is an agreement between the buyer and seller of a business whereby the buyer agrees to pay the seller additional money based on the performance of the business. Let's say Jane Smith buys ...
Easy money is a phrase that often refers to the presence of low interest rates. In the context of the Federal Reserve, easy money is a method of helping the economy expand by increasing the money sup...
The term "eat your own dog food" means a company uses its own products and services. Let's say Company XYZ manufactures laptop computers. It eats its own dog food by making everyone who works in the...
Eating someone's lunch is a business strategy where a company gains market share by aggressively taking it away from a competing company. Eating someone's lunch can be carried out in a number of way...
Earnings before Interest, Depreciation, and Amortization (EBIDA) is a post-tax measure of a company's operating performance. The formula for EBIDA is: EBIDA = EBIT + Depreciation + Amortization - T...
Earnings before interest, tax and depreciation (EBITD) is a pre-tax measure of a company's operating performance. Essentially, it's a way to evaluate a company's performance without having to factor ...
EBITDA margin is a measurement of a company's EBITDA (its earnings before interest, taxes, depreciation, and amortization) as a percentage of its total revenue.   The formula for EBITDA margin is...
Earnings before interest, taxes, depreciation, amortization and exceptional items (EBITDAE) are a measure of a company's operating performance. The formula for EBITDAE is: EBITDAE = EBIT + Depreciat...
Earnings before interest, taxes, depreciation, amortization, and special losses (EBITDAL) is a measure of a company's operating performance. Essentially, it's a way to evaluate a company's performanc...
EBITDAR, which stands for earnings before interest, tax, depreciation, and either restructuring or rent costs (depending on what you're measuring) measures a company's profitability without taking i...
A variation of EBITDA, EBITDAX is a measure used by natural resource exploration companies to reflect ongoing or core profitability. The acronym stands for earnings before interest, taxes, depreciati...
Econometricians are economists who use math and statistics to measure economic data. Econometricians measure things such as gross domestic product, inflation, or to predict changes in the economy. T...
Econometrics is the use of math and statistics to measure economic data. Econometricians use econometrics to measure things such as gross domestic product, inflation, or to predict changes in the ec...
Economic blight occurs when an area of a town shows visible signs of age, disrepair, and crime. For many people, thinking about the "bad side of town" is to think about economic blight. Often, bligh...
Economic exposure is the risk that a company's cash flow, foreign investments, and earnings may suffer as a result of fluctuating foreign currency exchange rates. The extent to which a company may b...
An economic indicator is an index or other data that suggests whether the economy is expanding or contracting. For example, the U.S. Department of Commerce reports the amount of new factory orders e...
An economic moat is a competitive advantage that is difficult to copy or emulate, thereby creating a barrier to competition from other firms. Common economic moats include patents, brand identity, te...
Economic profit is a measure of performance that compares net operating profit to total cost of capital Economic profit is also referred to as economic value added (EVA), which is a trademarked conc...
An economic recovery is a period of economic expansion, typically after a recession. Let's assume that there has been a significant decline in industrial production, employment, and wholesale or ret...
An economic refugee is a person who moves to another country in search of a higher standard of living. Let's say John Doe lives in Cyprus. The country is undergoing tremendous economic upheaval: Not...
Economic rent is the minimum amount of money that an owner of land, labor or capital must receive in order to let someone else use that land, labor or capital. For example, your economic rent is the...
Economic risk is the chance that macroeconomic conditions like exchange rates, government regulation, or political stability will affect an investment, usually one in a foreign country. For example,...
An economic stimulus occurs when a federal government attempts to use targeted monetary or fiscal policies to stimulate an economy (especially when it enters a recession or depression). Sometimes re...
An economic tsunami is a set of circumstances that produce an event that triggers considerable distress in the financial markets and/or the economy. In the meteorology world, a tsunami is a wave or ...
Economic value added (EVA) is an internal management performance measure that compares net operating profit to total cost of capital. Stern Stewart & Co. is credited with devising this trademarke...
Economics is the academic study of the production, distribution, and consumption of goods and services. Economics can be broken down into two main disciplines: macroeconomics and microeconomics. Mac...
Economies of scale is a term that refers to the reduction of per-unit costs through an increase in production volume. This idea is also referred to as diminishing marginal cost. Let's assume that it...
Economies of scope is a term that refers to the reduction of per-unit costs through the production of a wider variety of goods or services. Let's assume Company XYZ strictly manufactures vacuum clea...
An economist is a social scientist devoted to the study of the relationship between human behavior and supply and demand. The study of economics is generally divided into two areas: microeconomics a...
In its broadest sense, the economy is the organized system of human activity involved in the production, consumption, exchange, and distribution of goods and services. Derived from the Greek word o...
The EDGAR Public Dissemination Service (PDS) System is an electronic system that receives SEC filings. Keane Federal Systems operates the EDGAR Public Dissemination Service (PDS) System. Subscribers...
Something is elastic when its price varies with the price of another item. It the business world, the term most often refers to how much the price of a good or service changes when the supply of that...
Elasticity is a measure of the change in one variable in response to a change in another. In economics, elasticity generally refers to variables such as supply, demand, income, and price. The degree ...
The elasticity of supply, also known as price elasticity of supply, measures the responsiveness of the quantity supplied to a change in the price of a good, with all other factors remaining the same...
Electronic commerce is a way of doing business over large electronic networks such as the Internet. Also called e-commerce, electronic commerce greatly facilitates transactions between companies and ...
EDGAR, the Electronic Data Gathering, Analysis and Retrieval system, is an automated system of submission used by public companies required to file forms with the U.S. Securities and Exchange Commiss...
Elephants are large institutions that make big trades. CalPERS (the California Public Employees' Retirement System) is the nation's largest pension fund. More than 1.6 million people there are emplo...
An elevator pitch is a quick explanation of a business idea or other proposal. The term reflects the idea that in the time it takes to ride an elevator, the speaker should be able to summarize the ke...
An employee contribution fund is a company-sponsored plan where employees deposit (contribute) their own money towards a charity. In an employee contribution fund, a company sets up a program where ...
Employee Share Ownership Trust (ESOT) refers to a plan that assists in acquiring and allocating a company's stock for employees. A company uses an ESOT to sell its stock to its employees. ESOT's are...
Employee stock options (ESOs) are  call options on a company's common stock granted to a select group of its employees. Certain restrictions on the option provide a financial incentive for employee...
An employee stock ownership plan (ESOP), also known as a stock purchase plan, is a defined contribution plan whereby an employer invests the fund's assets in its own stock. To establish an ESOP, a c...
The employment cost index, or ECI, is a quarterly report compiled by the Bureau of Labor Statistics within the U.S. Department of Labor that offers wage and benefit information and provides a leading...
Ending inventory is the book value of inventory at the end of a financial or accounting reporting period. Ending inventory equals the beginning inventory balance plus the cost of any inventory pur...
An endowment is any asset donated to and for the perpetual benefit of a non-profit institution. The donation is usually made with the requirement that the principal remain intact and money earned fro...
Enterprise multiple is a financial indicator used to determine the value of a company. It is equal to a company’s enterprise value divided by its EBITDA (Earnings Before Interest, Taxes, Depreciati...
  Enterprise value represents the entire economic value of a company. More specifically, it is a measure of the theoretical takeover price that an investor would have to pay in order to acquire a p...
Enterprise value to cash flow from operations (EV/CFO) is the ratio of the entire economic value of a company to the cash it produces. The formula for EV/CFO is: EV/CFO = (Market Capitalization + Tot...
An enterprise zone is a geographical area (often a few blocks or miles in a town) with a 0% tax on gains from the sale of assets and property sold in an enterprise zone. For example, let's say that ...
The Equal Credit Opportunity Act (ECOA) is legislation designed to ensure that all qualified people have access to credit. It prevents lenders from rejecting credit applicants based on race, gender, ...
Equivalent annual cost (or EAC) is the cost per year of owning, operating, and maintaining an asset over its lifetime. EAC is often used as a tool in capital budget decision making for evaluating in...
An evergreen option is an employee incentive offered by many companies as a way for the employee to accumulate company shares. Evergreen options offers employees the opportunity to accumulate owners...
An exceptional item is an unusually large and uncommon transaction charge that must be disclosed on the balance sheet in accordance with GAAP. Let's assume Company ABC is experiencing poor business....
Existing home sales is an economic indicator released by the National Association of Realtors. The data reflect the number of homes that have previously been constructed (and therefore accounted for ...
Expansionary policy, or expansionary monetary policy, is when the Federal Reserve uses tools at its disposal in order to increase the money supply for the purpose of stimulating or growing the econom...
External debt, otherwise known as "foreign debt," is the component of total debt held by creditors of foreign countries, i.e. non-residents of the debtor's country. To meet the definition of extern...
An extraordinary item is an accounting term used to describe expenses that are infrequent, unusual and significant in size. Let's assume that Company XYZ, an American company, operates a chain of be...
F. Duane Ackerman is the former CEO of BellSouth Corporation from 1997 to 2006. He was also chairman of BellSouth from 1998 to 2006. Born in Florida in 1943, Ackerman joined the BellSouth custom...
A fabless company is a company that designs, develops and markets but does not manufacture silicon wafers. "Fab" is short for "fabrication." Fabless facilities do not have fabrication facilities. F...
A face-amount certificate company is a company that borrows from investors and offers its assets or other securities as collateral. For example, let's assume that Company XYZ is a privately held inv...
A factor is a financial institution that purchases receivables from a company. Let's say Company XYZ sells widgets. It has about $1 million in receivables from customers who have not paid for their ...
In economics, the term factors of production refers to land, labor, and capital: the three inputs that make all commerce possible. Some economists also include entrepreneurship a factor of production...
Factory orders are the dollar value of orders for goods from factories. The U.S. Department of Commerce reports the amount of new factory orders every month. The information is divided into four par...
The Fair Labor Standards Act (FLSA) contains well-known American labor law standards regarding minimum wage, overtime pay and child labor, among others. The FLSA is enforced by the U.S. Department o...
Fair market value is the price at which a willing seller sells a good or service to a willing buyer. Let's assume John Doe wants to sell his house. He lists it for $750,000. Jane Dale wants to buy a...
Fair trade investing is an investment strategy whereby the investor only buys and sells companies that promote fair trade with suppliers in developing nations. For example, if John Doe wanted to ado...
The federal discount rate is the interest rate at which a bank can borrow from the Federal Reserve. To understand the federal discount rate, it is important to understand that banks derive income fr...
The federal funds rate is the interest rate banks charge each other on loans used to meet reserve requirements. The federal funds rate is often confused with the discount rate, which is the interest...
Federal Reserve Bank refers to any of the 12 branches of the Federal Reserve System overseeing the implementation of U.S. monetary policy.  As the country's central banking authority, the Federal R...
The Federal Reserve Board (FRB), officially called the Federal Reserve Board of Governors, is the Federal Reserve System's primary decision-making body. There are seven members on the FRB, each appo...
A Federal Reserve note is the formal name of U.S. currency. Founded in 1862, the U.S. Bureau of Engraving and Printing creates and produces Federal Reserve notes. It does not produce coins (that's t...
The Federal Reserve System (FRS) is the U.S.'s central bank. The Federal Reserve manages the economy's money supply, regulates the banking industry, acts as a clearinghouse for checks and other payme...
The Federal Trade Commission (FTC) protects consumers and businesses from practices that can cause markets to become unfair and anti-competitive. The Federal Trade Commission is divided into three b...
Fiat money refers to any currency lacking intrinsic value that is declared legal tender by a government.  As valid currency solely by virtue of a government declaration, fiat money is not backed by...
A fiduciary is a person or entity responsible for managing a qualified retirement plan in accordance with the Employee Retirement Income Security Act (ERISA). In a broader sense, a fiduciary is a pe...
The Financial Accounting Standards Board (FASB) is an independent non-profit body responsible for the institution and interpretation of Generally Accepted Accounting Principles (GAAP). FASB was for...
A financial analyst gathers and interprets data about securities, companies, corporate strategies, economies, or financial markets. Financial analysts are sometimes called securities analysts, equity...
Financial engineering is the quantitative, technical development of financial strategies and products. Financial engineers design, create and implement new financial instruments, models and processe...
In general, a financial guarantee is a promise to take responsibility for another company's financial obligation if that company cannot meet its obligation. The entity assuming this responsibility is...
The Financial Industry Regulatory Authority (FINRA) is an independent non-profit corporation that regulates the actions of securities firms in the United States.  In order to deal in securities in t...
There are two parts to FP&A: financial planning and financial analysis. Financial planning is the process of creating a complete account of an individual’s or business’s plan for long-term se...
First in, first out (FIFO) is an accounting method for inventory valuation that assumes that goods are sold or used in the same chronological order in which they are acquired. The accounting method...
Fiscal deficits occur when a government's expenditures exceed its revenue. A deficit is the opposite of a surplus. In the business world, the term often refers to situations where expenses exceed re...
Fiscal policy refers to a government's spending and taxation policies intended to maintain economic stability, which is indicated by levels of unemployment, interest rates, prices and economic growth...
A fiscal quarter is a consecutive three-month period within a company’s fiscal year (also referred to as a financial year). Fiscal quarters are used by publicly-traded companies to schedule the rel...
A fiscal year is an accounting period of 365(6) days that does not necessarily correspond to the calendar year beginning on January 1st. The fiscal year is the established period of time when an orga...
A fiscal year-end is the end of a 12-month, 365-day, or 13-period (or other measure) period of time. Let's say Company ABC has a fiscal year that begins Jan. 1 and ends Dec. 31, just like the calend...
The Fisher Effect is an economic hypothesis stating that the real interest rate is equal to the nominal rate minus the expected rate of inflation. In the late 1930s, U.S. economist Irving Fisher wro...
A fixed asset is anything that has commercial or exchange value, generates revenue, has a life longer than one year and has a physical form. Let’s assume XYZ Company intends to purchase an office ...
Fixed costs are independent expenses that companies must pay, regardless of what their business does. Because they cover expenses that help keep the business up and running, they are sometimes referr...
A fleet card is a type of plastic payment card, either debit or credit, that is issued to employees to pay for expenses related to vehicle operations, notably fuel and maintenance. Payment of vehicl...
/*-->*/ A flight to quality is the act of moving capital away from "risky" investments and toward "safer" investments due to uncertainty about the overall economy. /*-->*/ Anything that incr...
A follow-on offering, also called a secondary offering, is a sale of stock by a company or by an existing shareholder of a company that is already publicly held. Let's say Company XYZ is a public co...
Forensic accounting is a form of investigative accounting which examines financial records in order to find evidence for a lawsuit or criminal prosecution. Forensic Accounting is sometimes referred ...
Forensic auditing examines individual or company financial records as an investigative measure that attempts to derive evidence suitable for use in litigation. Forensic auditing can sometimes be ref...
The Fortune 100 is an annual list of the 100 largest companies in the United States. Fortune magazine publishes the list. Companies that report their financial data to a United States government age...
The Fortune 1000 is an annual list of the 1,000 largest companies in the United States. Fortune magazine publishes the list. Companies that report their financial data to a United States government ...
The Fortune 500 is an annual list, published by Fortune magazine, of the 500 largest companies by revenue in the United States. /*-->*/ Any company that reports financial data to a United State...
Forward earnings are the profits a company (or companies) expect to generate during a future period of time. Companies and/or analysts calculate forward earnings using a variety of techniques that g...
The forward price-to-earnings ratio (forward P/E) is a valuation method used to compare a company’s current share price to its expected per-share earnings. The market value per share is the curren...
Free cash flow (FCF) is a measure of how much cash a business generates after accounting for capital expenditures such as buildings or equipment. This cash can be used for expansion, dividends, redu...
Free cash flow to the firm (FCFF) is the cash available to pay investors after a company pays its costs of doing business, invests in short-term assets like inventory, and invests in long-term assets...
A free market is a type of economy with little to no interference from a central government. Instead, a free market is based on supply (from producers) and demand (from consumers).   The term free ...
Free on board (FOB) is a contractual term that refers to the requirement that the seller deliver goods at the seller's cost via a specific route to a destination designated by the buyer. To understa...
Frictional unemployment refers to the portion of the unemployment rate that results from labor market turnovers. This unemployment is ongoing and includes job transitions and communication lags betwe...
A full-service broker executes trades for clients, but also provides research, advice, retirement planning and tax assistance. There are two general categories of brokers: discount and full-service....
With a fully depreciated asset, the accumulated depreciation equals the original cost of the asset. Let's assume Company XYZ bought a MegaWidget for $100,000 10 years ago. The MegaWidget depreciates...
Fundamental analysis attempts to understand and predict the intrinsic value of stocks based on an in-depth analysis of various economic, financial, qualitative, and quantitative factors. Fundamental...
Funds from Operations (FFO) is a measure of cash generated by a real estate investment trust (REIT). It is important to note that FFO is not the same as Cash from Operations, which is a key component...
Funds from operations per share (FFOPS) is a measure of cash generated by a real estate investment trust (REIT). It is important to note that FFOPS is not the same as Cash from Operations Per Share, ...
Future value (FV) refers to a method of calculating how much the present value (PV) of an asset or cash will be worth at a specific time in the future. One dollar put into a savings account today m...
A gadfly is a shareholder who publicly criticizes a company's executives at the annual shareholders meeting.   The term gets its name from the insect, which bites and annoys animals (usually live...
A game changer is a person or thing that radically changes an industry or a company.   For instance, when Apple introduced the iPod, the product was a game changer. It revolutionized the way in whi...
Game theory is a tool used to analyze strategic behavior by taking into account how participants expect others to behave. Game theory is used to find the optimal outcome from a set of choices by anal...
Also called wage execution, a garnishment is a process under which money owed or paid to a borrower is given to a creditor instead. Let's say John Doe has stopped paying child support to his ex-wife...
GDP gap refers to the disparity between an economy's actual total output and its possible total output. A country's GDP gap is mathematically expressed in the following way and serves as an indicato...
GDP per capita is a country's gross domestic product (GDP) per person. Essentially, this measures the amount of goods and sales a country produced per person, on average. The formula for GDP per ca...
G&A expenses appear on the income statement. They are not part of the cost of goods sold but can constitute a significant portion of a company's expenses. Because this category often houses the s...
A general ledger (GL) is a consolidated record of a company's accounting entries. The general ledger is the central place, usually electronic, that stores every accounting entry a company makes. The...
A general partner is a member of a partnership that can incur debt or obligations on behalf of the partnership and is personally liable for those debts or obligations. In some partnerships, all the ...
Generally Accepted Accounting Principles (GAAP) is a framework of accounting standards, rules and procedures defined by the professional accounting industry, which has been adopted by nearly all publ...
A generation gap is a difference in philosophies between generations. The most famous generation gap is the baby boomers, many of whom came of age in the 1960s, and their parents, who grew up around...
A generic brand is a nondescript brand of product that does not have a widely recognizable logo and is sometimes called the "house brand." For example, let's say John Doe wants to buy some cola. He ...
The Glass Steagall Act was passed by Congress in 1933. It prohibited commercial banks from conducting brokerage or investment banking activities. The act was largely a product of the Great Depression...
Global Investment Performance Standards (GIPS) are ethical standards for asset-management companies. They were established by the Association for Investment Management Research. The CFA Institute, f...
A global recession occurs when global gross domestic product growth is 3% or less. The International Monetary Fund (IMF) identifies global recessions, which have some things in common with national ...
Countries have built economic partnerships that include trade, investment, capital flow, labor migration, and technology. Globalization is a term used to describe the integration of national economie...
A go shop period is a window of time during which public companies can solicit competing purchase offers. Let's say Company XYZ is for sale. It receives an offer of $25 per share from Company ABC. C...
A godfather offer is a tender offer that is so generous that turning it down would be a breach of fiduciary duty. Let's say Company XYZ wants to buy Company ABC. Company ABC is trading at $10; Compa...
Going concern refers to the assumption that a company has the resources to continue operating in the foreseeable future. A bankrupt company or a company near bankruptcy is the opposite of a going con...
The term going private refers to a company's departure from listing shares on any exchange. It is the opposite of going public. The primary activity involved in going private is deregistering a comp...
The gold standard is a monetary system in which the representative currency is based on a fixed amount of gold held by the central government. Paper currency is actually a "legal note," i.e. a debt ...
Goldbricker refers to coating something with gold so as to pass it off for something valuable, though colloquially, the term refers to an unproductive person. For example, assume John comes to work ...
A golden boot is a financial package meant to encourage an employee to retire early. For example, assume that John is 60 years old and has been working at Company XYZ for 30 years. The company is un...
A golden bungee is part of an executive's agreement that provides significant financial benefits to the executive upon termination as well as the opportunity to "spring back up" into a new position a...
A golden coffin is slang for the portion of an executive contract that goes into effect should the executive die. For example, let's assume that John is the CEO of Company XYZ. He earns $2 million p...
A golden hammer is a rule of thumb that people depend on too much. For example, when it comes to marketing, we often assume that the 18-34 demographic is the "holy grail" and that we should gear pro...
Golden handcuffs are financial incentives designed to keep talented employees from leaving a company. Golden handcuffs may come in the form of lucrative commissions, generous bonuses, employee stock...
A golden handshake is essentially a severance agreement between an employee and employer. A golden handshake is similar to a golden boot, which is an incentive package sometimes offered to older wor...
A golden hello is slang for a signing bonus. For example, let's assume that John works for Company XYZ. Company ABC really wants to hire him, too, but John is happy at Company XYZ and is paid well t...
A golden life jacket is a compensation package offered by an acquirer to executives of the company it is acquiring. It is the same as a stay bonus. For example, let's assume that John is the CFO of ...
A golden parachute is an agreement between a company and an employee (usually a high level executive) that provides significant financial benefits to the employee upon termination. For example, upon...
The golden rule is very simple: treat people the way you want to be treated. In the business world, it also refers to fundamental principles of government spending: cover current spending with existi...
A golden share gives the holder the right to veto changes to a company's charter. Golden shares exist primarily in U.K.-based companies. For example, let's say that Company XYZ wants to sell itself ...
A Goldilocks Economy is one which enjoys sustained economic growth and low inflation.  This balance is attractive to investors because it allows for a market-friendly monetary policy from the Federa...
Goldman 360 is an online portal to Goldman Sachs's investment management system. Goldman 360 allows investment managers, institutions, and advisors to conduct and obtain research, place orders, and ...
Also known as work in process (WIP), goods in process are the component of a company's inventory that is partially completed.  Goods in process = (operating inventory goods in process + raw materia...
Goodwill is the excess of purchase price over the fair market value of a company's identifiable assets and liabilities.  Goodwill is created when one company acquires another for a price higher tha...
Generally, a goodwill impairment occurs when a company A) pays more than book value for a set of assets (the difference is the goodwill), and B) must later adjust the book value of that goodwill. Go...
Gordon Gekko is a character from the 1987 Oliver Stone movie Wall Street and the 2010 sequel, Wall Street: Money Never Sleeps. Michael Douglas played Gordon Gekko in both movies. In the original mov...
A gorilla is a company that controls most of the market for a product or service. For example, in the 1990s, Microsoft was a gorilla in the market for operating systems. Sure, there were  competito...
The Government Accountability Office (GAO) investigates, with congressional approval, the federal government's spending. The GAO started in 1921, when the Budget and Accounting Act transferred the g...
Founded in 1921, the Government Accounting Office (GAO) is an independent, nonpartisan agency that studies how the federal government spends taxpayer money. The head of the GAO is the Comptroller Ge...
In the US, government sponsored enterprises, or GSEs, are quasi-governmental, privately-held entities established to improve, and at times make possible, the flow of credit to specific sectors of the...
A grandfather clause is a clause that is included as part of a new law that exempts specific parties from the law due to practices that were in place prior to the law's implementation. For example, ...
In the business world, a grant usually refers to a stock option grant. However, the term can also refer to federal funding for research, business ventures or partnerships. Let's assume that John Doe...
In the legal world, a grantee is a person who receives something. In real estate, a grantee is a person who receives property after a sale or other transfer of title. In business, a grantee could be...
In the legal world, a grantor is a person or entity creating a trust. A trustee is a person or entity that has a fiduciary duty to another person or entity, called the beneficiary. The trustee holds...
Greenback is a slang term for the U.S. dollar. This name is derived from the green color of U.S. paper currency. Since U.S. currency notes were first introduced in the early 1800s, their color has c...
Greenmail is an acquisition tactic whereby the acquirer attempts to obtain a controlling interest in a target by buying shares at a premium from the target's shareholders. Let's assume an entity tha...
Greenwashing is the act of misleading customers and potential customers into believing that a product or service is environmentally friendly. Let's say Company XYZ produces a new line of plastic foo...
Gross Domestic Product (GDP) is a quantitative measure of how much an economy produces. It includes the monetary value of both goods and services within a specific nation’s borders. From cars to ma...
Gross margin is a required income statement entry that reflects total revenue minus cost of goods sold (COGS).  Gross margin is a company's profit before operating expenses, interest payments and ta...
Gross national product (GNP) is the sum of all domestic and foreign output created by citizens of a given country. It can be measured by spending or by income. GNP includes activities by citizens and...
Gross profit – also referred to as gross income or sales profit – is the total sales of a company minus the total cost of goods (COGS) sold. Gross profit margin is an important indicator of a com...
Gross sales, also called "gross receipts", refers to a company's revenue before subtracting discounts and returns. Assume restaurant chain XYZ made $1 million in sales for the year. The company wou...
Groupthink is a psychological phenomenon whereby pressure within a group to agree results in failures to think critically about an issue, situation or decision. Let's say John, Jane, and Jeff are fu...
In general, a guarantee is a promise to take responsibility for another company's financial obligation if that company cannot meet its obligation. The entity assuming this responsibility is called th...
In the stock world, guidance refers to public communication from a company regarding earnings expectations. The world of earnings guidance is large and fluid, whereby the management of publicly trad...
A haircut is a reduction in an asset's value. For example, let's say the Greek government borrowed about $483 billion from banks, investment funds and other groups. Now it can't pay it back. So if ...
The halo effect is a phenomenon whereby consumers perceive the products or services from a certain company to be better than they really are. Let's say Company XYZ makes the "Xphone." The Xphone has...
A hard asset is a physical, or tangible, asset. It is the opposite of an intangible asset. Hard assets include financial instruments, property, deposit and savings accounts, and commodities (for exa...
A hard inquiry is a lender's investigation of an applicant's credit history for the purpose of approving or declining a loan or extension of credit. A hard inquiry helps a bank or credit card compan...
A hard landing refers to an abrupt downward shift in economic growth resulting from monetary policy. Inflation historically accompanies periods of economic expansion. In the U.S., the Federal Reserv...
A hard sell is an aggressive sales tactic used to persuade customers to make an immediate purchase. It is the opposite of a soft sell. In a hard sell, a salesperson tries to sell a product or servic...
Hardening refers to stabilization or steady increases in a price level. Financial instruments and derivatives frequently experience volatile market-price fluctuations. Hardening is the process of ma...
Harry Markowitz is a famous economist who won the Nobel Prize in Economics in 1990. Born in Chicago in 1927, Markowitz earned his bachelor's degree in economics at the University of Chicago and then...
Harvesting, also known as an exit or liquidity event, is the act of cashing out of an ownership position in a company. For example, let’s say John Doe and Jim Smith sink their life savings into op...
A hawk is a person, usually in a politically oriented profession, who favors government efforts to control inflation or who favors reducing the federal budget deficit. Let's assume John Doe works fo...
Head traders have to be licensed, which means they have to pass at least one relevant exam administered by FINRA. There are several exams that can make a person eligible to become a head trader, and ...
Headline earnings are a measurement of a company's earnings based solely on operational and capital investment activities. It specifically excludes any income that may relate to staff reductions, sal...
A headline effect is an adverse effect on a company's stock price brought on by media coverage. For example, let's say that Company XYZ makes a line of sweets and snacks that are sweetened with the ...
Headline risk is the risk that media coverage of an event will have an adverse effect on a company's stock price. Let's say Company XYZ makes a line of sweets and snacks that are sweetened with the ...
The Health Insurance Portability and Accountability Act (HIPAA) is a federal law that promises continued health insurance coverage and ensures health information privacy for those covered by health i...
A healthcare power of attorney (HCPA) is a document that legally authorizes someone to make health-related decisions on someone else's behalf. Individuals sometimes become too unwell or unfit to mak...
Heavy industries often sell their products to other industries rather than to end users and consumers. In other words, they usually make products that are used to make other products. Accordingly, wh...
Hedge accounting is a portfolio accounting method that combines the values of both a security and its offsetting hedge instrument. If investors purchase a security that comprises a high level of ris...
A hedge clause is a disclaimer found in financial documents that protects a financial reports' authors from liability for errors within the report. A hedge clause simply absolves the authors of wron...
Held-to-maturity securities refer to debt securities which an investor holds until maturity. When investors purchase debt securities such as bonds, they have two choices: to hold the security until ...
The Herfindahl Index, also known as the Herfindahl-Hirschman Index (HHI), measures the market concentration of an industry's 50 largest firms in order to determine if the industry is competitive o...
A High Street Bank is a retail bank in the United Kingdom that has many locations. The term gets its name from the British equivalent of "Main Street" in the United States. In turn, a High Street Ba...
A hiring freeze is a temporary cessation in hiring new employees. Let's say Company XYZ is running out of cash and needs to conserve in every way it can. To avoid laying off employees, it institutes...
A holder of record is the registered owner of a stock, bond or other security. Let's say John Doe buys 100 shares of Company XYZ. His brokerage firm executes the trade and makes him the holder of re...
A holding company owns controlling interest in another company or owns enough stock to control the company's management and operations. Different legal jurisdictions have different rules about what t...
The term home office has two definitions. First, a company's home office is its headquarters. Second, a home office is a place of business within a person's home. Let's say John Doe is a freelance b...
Horizontal integration occurs when a company purchases a number of competitors. It is the opposite of vertical integration, whereby the parent purchases businesses in each stage of a product's life c...
A hostile takeover is a type of corporate acquisition or merger which is carried out against the wishes of the board (and usually management) of the target company. In a hostile takeover, the target...
A hostile takeover bid is a type of acquisition or merger offer that is made against the wishes of the board (and usually management) of the target company. In a hostile takeover bid situation, the ...
Housing starts is a measure of new private homes built during a given month.  This statistic is viewed as a key economic indicator reflecting the state of the economy. Homes are usually purchased f...
Human capital is the skill, talent, and productivity that employees bring to a company. Coined by University of Chicago economist Theodore Schultz in 1964, the term refers to capital produced by inve...
Human resources is an organizational function related to the procurement and retention of talented employees. All companies deal with human resources in some form or another, even if they don't have...
A hurdle rate is an investor's minimum rate of required return on an investment. Let's assume Company XYZ is deciding whether to purchase a piece of factory equipment for $300,000. The equipment wou...
Hyperinflation is a period of extremely high inflation. Imagine if $30,000 -- money that could buy you a car today -- was only enough to buy you dinner tomorrow. You're imagining hyperinflation -- a...
In business, the Icarus factor describes what happens when companies become overly dedicated or overly enthusiastic about a project or initiative, and that enthusiasm and dedication becomes a detrime...
Ideation is the act of forming ideas. For example, let's say Company XYZ makes widgets, and it wants to get into the children's widget market. Its product development team starts brainstorming ideas...
An identifiable asset is anything that has commercial or exchange value and can provide future economic benefits. Identifiable assets can be tangible or intangible. Let’s assume XYZ Company intend...
Identity theft is the crime of using another person's personal information, credit history or other identifying characteristics in order to make purchases or borrow money without that person's permis...
Also called down time, idle time is when employees or machines are not working but are being paid. Let's say Company XYZ manufactures autos. The machine that installs windshields breaks, which holds...
Real estate developers pay an impact fee to cities or other municipalities to offset the town's cost of building the infrastructure to support a private real estate development. Let's say Company XY...
Generally, an impaired asset is an asset whose market value is below book value. Generally, an asset impairment occurs when a company (1) pays more than book value for a set of assets and (2) later ...
The term impairment refers to assets that are no longer of the same value as in a prior period. An impairment charge is used and the asset is revalued downward and a "charge" is made to net assets. ...
An implementation lag is the time elapsed between an adverse macroeconomic shock and an effort to counter the shock. Let's say the United States experiences a huge increase in unemployment and huge ...
An implied warranty is an unwritten guarantee that a product or service works as expected. An implied warranty is a lot like an assumption. For example, when you buy a new car from a car dealer, the...
In the tax and import/export world, an import duty (or customs duty) is money collected under a tariff. A duty is a federal tax on imports (or exports). For example, Americans who travel abroad can ...
A stock is in play when it is widely believed to be a takeover target. Let's say Company XYZ has a ton of cash on its balance sheet, and activist investors have been pressuring it for nine months to...
In specie is a Latin term describing the provision of an asset in its physical form rather than in the cash value of the asset. Let's say Company XYZ wants to purchase Company ABC for $10 million. C...
Inchoate is a legal term indicating that a transaction or activity has been discussed or even agreed upon but is not final or is still incomplete. Let's say Company XYZ wants to buy Company ABC. The...
Income from operations is income that is generated by the normal operations of a business. Income from operations is also referred to as operating income or operating earnings. According to t...
An income statement is a financial statement detailing a company’s revenue, expenses, gains, and losses for a specific period of time that is submitted to the Securities and Exchange Commission (SE...
Incorporation means to form a corporation. A corporation is a legal form of business organization. It is sometimes referred to as a "C Corp" in reference to a section of the IRS code governing corpor...
In economic terms, an inefficient market is a market in which securities prices are random and not influenced by past events. The idea is also referred to as weak form efficient-market hypothesis or ...
Something is inelastic when its price does not vary with the price of another item. It the business world, the term most often refers to how little the price of a good or service changes when the sup...
Infant Industry Theory promotes an economic policy that protects young industries in less developed economies until they become established, financially stronger, and capable of withstanding competit...
An inferior good is a product for which demand goes down as income goes up. As opposed to demand for "normal goods," which goes up as income increases, demand for inferior goods goes down as income ...
Inflation is the rate at which prices rise and purchasing power falls. It is why something that cost $1 in 1980 cost $2.37 in 2005. Two general theories explain inflation. The first, the demand-pull...
Initial Jobless Claims is a report issued by the U.S. Department of Labor every Thursday at 8:30am EST.  The data in the Initial Jobless Claims report reflect how many people filed for unemployment...
Injunctions are an alternative to monetary judgments, in which the court might order a party to pay damages to another party. In some cases, they are much better for defendants to deal with; in Jane'...
An insider is an employee, director or any other person who is privy to confidential, nonpublic information about a company. Given their position, managers and executives within a company are privy ...
The Institute for Supply Management (ISM) is a professional association for individuals and companies with an interest in supply management. The ISM publishes two important monthly surveys, the Manu...
An intangible asset is an asset that lacks a physical substance.  For example, goodwill, patents, trademarks and copyrights are intangible assets. None of these assets can be physically touched, b...
An interchange is an electronic transfer of information. In the business world, this usually involves financial data. Banks are common users of interchange data because they issue credit cards and d...
Interest expense is the cost of money. Interest expense is recorded on the income statement. Let's assume you need $500,000 to buy a house. The "price" of borrowing that money is interest, and it is...
An interest rate is the cost of borrowing money, or conversely, the income earned from lending money. Interest rates are expressed as percentage of the principal per period. The formula to find an i...
An interest rate swap is a financial contract between two parties (such as companies or investors) that want to exchange interest rates. These could be interest rates they’re paying on loans or rat...
An interim CEO is a temporary chief executive officer. A CEO oversees the entire operation of a company or organization. In some organizations, the CEO is called the president, the executive directo...
Internal controls are the methods and processes through which a company ensures that the organization is adhering to important policies and obligations. A company's board of directors, management and...
The International Monetary Fund (IMF) is the central institution embodying the international monetary system and promotes balanced expansion of world trade, reduced trade restrictions, stable exchang...
Anyone who has ever worked in retail has heard the term inventory. For businesses, inventory is not only how stores keep customers happy, but it’s also how they keep supply chains moving (and ensur...
Inventory management is the process of ensuring that a company always has the products it needs on hand and that it keeps costs as low as possible. Inventories are company assets that are intended f...
An inventory reserve is an accounting entry that reflects a reduction in the market value of a company's inventory. For example, let's say that Company XYZ bought 1,000,000 widgets for $4 each. Comp...
The inventory turnover ratio measures the rate at which a company purchases and resells products to customers. There are two formulas for inventory turnover:           Sales           ...
Investment banking is a category of financial services that specializes primarily in selling securities and underwriting the issuance of new equity shares to help companies raise capital. Investment ...
In The Theory of Moral Sentiments, Adam Smith theorized that as every individual intends to seek out his own gains, he is “led by an invisible hand to promote an end which was no part of his intenti...
IPO Lockup refers to the period of time after a company initially goes public during which company insiders are not allowed to sell company shares. In an initial public offering (IPO) often receive ...
The phrase irrational exuberance was coined by Alan Greenspan, chairman of the Federal Reserve, in a December 5, 1996, speech to the American Enterprise Institute. In the speech, Greenspan asked, ...
The J curve represents a hypothetical short-term increase in a country's trade deficit that occurs immediately following a decline in the value of its currency. When a country experiences a sustaine...
The J-curve effect refers to a "J" shaped section of a time-series graph in which the curve falls into negative territory and then gradually rises to a higher level than before the decline. The J-cu...
The annual Jackson Hole Economic Summit focuses on prominent economic issues that face the U.S. along with the rest of the world. The Jackson Hole Economic Summit is also referred to as the Jackson ...
The Jackson Hole Economic Symposium, held in Jackson Hole, Wyoming, is a conference focusing on important economic issues that face the United States and the rest of the world. The Jackson Hole Econ...
JAJO stands for January, April, July, and October -- the four months in which companies are likely to declare dividends. A dividend declaration is an announcement of an upcoming dividend payment, u...
A jitney is an illegal scheme in which two brokers trade a stock back and forth in order to increase the trading volume and earn commissions. In some circles, a jitney is also scheme in which a broke...
A job footprint describes the variety and scope of functions for a given role in an organization. For example, a nurse's job footprint may include administering medication, recording vital signs, an...
The job market is the group of individuals seeking employment within an economy. As with any market, there is a supply and a demand for employment opportunities that directly affects wage and salary...
The Job Openings and Labor Turnover Survey (JOLTS) is the name of a detailed report on the U.S. job market published each month by the Bureau of Labor Statistics. Each month, the U.S. Bureau of Labo...
Jobless claims refer to the unemployment benefits claims filed by unemployed individuals each week. People who have lost their jobs or have been unemployed for some length of time are entitled to re...
A jobless recovery refers to a sustained economic upturn accompanied by persistent or increasing unemployment levels. The New York Times first used the term "jobless recovery" in the 1930s to expres...
The Jobs and Growth Tax Relief Reconciliation Act of 2003 was a bill passed by the U.S. Congress in 2003 as an economic stimulus measure. Often abbreviated JGTRRA, the Job and Growth Tax Relief Reco...
Jobs growth is a U.S. economic indicator that represents the number of new jobs created in a given month. The U.S. Bureau of Labor Statistics publishes its jobs growth number each month as part of i...
Joint and several liability means an obligation to make a payment either together or individually. For example, let's say John and Jane Doe buy a car. They take out a loan from Company XYZ for the p...
Joint liability refers to the individual and collective obligation of more than one party on a loan. Joint liability is best illustrated by two married people who apply jointly for a credit card to ...
A joint stock company is a company whose stockholders have the same privileges and responsibilities as an unlimited partnership.  A joint stock company issues shares similar to a public company tha...
A joint venture (JV) is a project or enterprise in which multiple companies or individuals invest. Participants usually share equally in the project's direction and profits. If two or more parties t...
Jointly and severally is a legal phrase that means two or more persons are fully responsible equally for the liability. Jointly means that both parties have joint liability, giving responsibility fo...
A Jonestown defense is a tactic to prevent hostile takeovers. It often results in the death of the target. Let's say Company ABC makes a bid to buy Company XYZ. Company XYZ's founder, who is the cha...
In the finance world, journal is short for journal entry. It is also short for The Wall Street Journal. Journal entries are records of individual financial transactions in a company's accounting sys...
A judgment is a court order to pay someone else a sum of money or other remedy. Let's say John Doe owns a pit bull he hasn't trained very well. One day, John's dog jumps the fence and mauls Jane Smi...
A junior accountant is an entry-level accountant. An accountant is a trained, knowledgeable person who performs functions necessary to compile, inspect, interpret, and/or report financial statements ...
A junior capital pool is a Canadian entity that goes public before going into business. Let's say Company XYZ has a new design for widgets. It has not produced anything beyond a prototype, and it ne...
Junior equity is an issuance of stock that is subordinate to other stock issued by a company. For example, if Company XYZ issues preferred stock, those shares are senior to Company XYZ's common stoc...
A junior issue is an issuance of securities that are subordinate to other securities issued by a company. Junior issues can be debt or equity. For example, if Company XYZ issues preferred stock, tho...
A junior security is subordinate to other securities issued by a company. For example, if Company XYZ issues preferred stock, the shareholders of that stock are senior to Company XYZ's common stock ...
A Juris Doctor (JD) is a law degree. The term first came into use in 1969. It usually takes three years of law school to obtain a JD. The designation is often a requirement for taking the bar exam t...
Just In Case (JIC) is an inventory-management method whereby materials, goods and even labor are on hand so they are there when needed in the production process. The method is generally the opposite ...
In the manufacturing and logistics world, just in time (JIT) inventory management helps companies reduce storage costs and improve quality. Originated by the Toyota Motor Company, just in time practic...
The K-percent rule is a monetary theory that states that the Federal Reserve should grow the money supply by a set amount per year ("K percent"). Economist Milton Friedman developed the theory. Ofte...
Kaizen is a Japanese philosophy of continuous improvement. Kaizen does not have a set of steps, as it is a philosophy. The idea is that the status quo is not sufficient. Accordingly, companies that ...
A kamikaze defense is a method for deterring a potential acquirer from purchasing a company. The kamikaze defense is named after the suicide tactics of Japanese pilots during World War II. Let's say...
Kanban is a Japanese term that refers to the  "just-in-time" inventory method's signal to a supplier to send more inventory.  Just in time (JIT) is an inventory management method whereby materials...
A Katie Couric clause was a proposed provision of SEC executive compensation disclosure rules that would have required public companies to disclose compensation paid to several non-executive employee...
A keepwell agreement is a legal agreement between a parent company and a subsidiary to ensure solvency and financial stability for the duration of the agreement. For example, let's assume that Compa...
Keidanren is the abbreviation for Keizai Dantai Reng?kai or the Japanese Business Federation, which is a Japanese association of businesses. Established in 1946, Keidanren has absorbed and merged wi...
Keiretsu is a Japanese term that refers to a small, integrated supplier group. Just in time (JIT) is an inventory management method whereby materials, goods and even labor are scheduled to arrive o...
Losing key executives, particularly founders, can be very traumatic for companies. Their talent is usually hard to come by, and their roles are often more than just symbolic—in many cases these exe...
Key performance indicators (KPIs) are written goals for companies, departments within companies and often individual employees. Let's say John Doe is the CEO of Company XYZ, and he wants the company...
A kickback is a method of bribery in which something of value is exchanged for a favorable decision. A kickback can take many forms, all of which are illegal.  For example, a building contractor mi...
Killer applications kill the competition and are so novel that they require an entirely new platform to work. They can be incredibly lucrative, especially if patented, though often they spawn knock-o...
Killer bees are people or companies that help other companies avoid takeovers. The term gets its name from a type of bee that aggressively attacks perceived threats. Let's assume that Company ABC w...
Knowledge capital, also called intellectual capital, is the intangible asset that represents valuable ideas, methods, processes and other intuitive talents that belong to a company. Some of the most...
Because a KSOP is a combination plan, it has features of both ESOPs and 401(k)s. Companies can match contributions and reduce the expenses involved in running separate ESOPs and 401(k)s. KSOPs also i...
An L-shaped recovery refers to substantial losses in economic growth followed by a period of stagnation. Represented graphically, GDP data looks like the letter "L." For example, suppose country ABC...
Labor intensive is used to describe any production process that requires higher labor input than capital input in terms of cost. The production of goods and services requires labor and capital in va...
Labor market flexibility is the degree to which a company is able to modify its labor force to maximize productivity. A company is constantly adjusting its labor force via variables like staff size,...
Labor productivity measures the hourly productive output for a country's economy during a period of time.  A country's labor productivity is a function of technological innovation, labor resources ...
The labor theory of value says that the value of a finished good correlates solely with the number of labor hours required to produce it. Economist Adam Smith, the founder of the idea of modern capi...
A labor union is an organization that advocates for workers' rights and benefits through collective bargaining. Labor unions represent workers in both the public and private sector. Individual labor...
Labor-sponsored venture capital corporations (LSVCCs) are Canadian venture capital companies established by labor unions. Labor-sponsored venture capital corporations (LSVCCs) issue labor-sponsored ...
Lady Godiva accounting principles (LGAP) are informal, unofficial accounting principles under which companies make disclosures beyond what generally accepted accounting principles (GAAP) require. La...
A Lady Macbeth strategy is a merger strategy in which a company betrays a target company by first appearing as a friendly alternative to an unfriendly acquirer and then later joining forces with the ...
The Laffer curve is a graphic representation of the relationship between an increasing tax rate and a government's total revenues. The relationship suggests that revenues decline beyond a peak tax ra...
Lagged reserves are currency reserves banks are required to hold with the Federal Reserve. Lagged reserves must be equal to the sum of all demand deposits from two weeks in arrears.  The United Sta...
A lagging indicator is a financial gauge that becomes measurable only after an economic shift has taken place. There are certain economic indicators that rely on changes in productivity or economic ...
Laissez faire is a capitalist precept that states that market economies function at optimal efficiency in the absence of government regulation. The term laissez faire is French for "leave to do," or...
The Lanchester strategy is a marketing strategy named after Frederick W. Lanchester, who wrote about World War II war strategies. Originally a way to calculate losses during World War II, many compa...
A lapping scheme is a fraudulent accounting practice that hides stolen cash by overlapping successive receivables. A lapping scheme begins when someone -- a clerk, for example -- steals money that w...
Last fiscal year (LFY) refers to a company's most recent completed fiscal year. A fiscal year is a company's 12-month accounting cycle. The cycle begins on the first of any month (not necessarily Ja...
In telecommunications, the last mile refers to the final step in the process that connects the end customer to a network. In the broader business world, last mile refers to the final, often expensive...
Last twelve months (LTM), also known as trailing twelve months (TTM), is the 12-month interval occurring before a given point in time.  For example, an analyst who is issuing a report on October 15...
Last-in, first-out (LIFO) describes a method for accounting for inventories. Under this system, the last unit added to an inventory is the first to be recorded as sold. Let's assume you own the XYZ ...
Late majority refers to the last large group of people to adopt a new product or technology. Analysts estimate that the late majority, roughly 34% of a given population, adopts new technology only ...
The law of 29 is a marketing theory that claims that individuals will purchase a new product or service after having been exposed to related advertising 29 times. The law of 29 is based on the idea ...
The law of large numbers states that as additional units are added to a sample, the average of the sample converges to the average of the population. Applied to finance, the law of large numbers imp...
The law of supply is the microeconomic theory stating that all else being equal, as the price of a good or service increases, the number of goods or services offered will also increase. The law of su...
Layaway is an arrangement in which a retailer agrees to reserve a piece of merchandise for a customer who cannot immediately pay for it in full. Layaway is a delayed payment method. A customer depo...
A layoff is a temporary or permanent termination of employment by an employer. Let's say John Doe works for Company XYZ. He has worked there for 15 years. Company XYZ begins having cash flow problem...
Lead time is a crucial part of managing a manufacturing business or any business that involves waiting for supplies or products to arrive. Generally, the lower the lead time, the more flexible a comp...
A leadership grid, also known as a management grid, is a tool for determining leadership style. The idea dates to the 1960s and was developed by Robert Blake and Jane Mouton. Leadership behavior, as...
A leading indicator is an index, stock, report or other measurement that signals the economy or market's direction in advance.  Popular leading indicators include average weekly hours worked in man...
Leakage occurs when money leaves an economy. In the investor relations world, leakage also refers to the unauthorized or unanticipated dissemination of information. Let's say interest rates in Count...
There are many kinds of leases. Some allow the lessee to buy the asset at the end of the lease term, some do not, for example. Regardless, a lease is a legal contract, and violating a lease can resul...
There are many kinds of leases and thus many ways to calculate and record lease payments. Some allow the lessee to buy the asset at the end of the lease term, some do not, for example. For example, t...
Lease-to-own contracts can be very helpful in the case of musical instruments and children, but they can also be very costly. Furniture, for example, is a popular thing to lease-to-own. Often, custom...
Leaseholds designate which assets aren't really the lessee's property. Accordingly, these are assets that companies must account for them in particular ways. For example, let's say that Company XYZ ...
Legacy assets became a hot topic during the financial downturn of 2008, because many struggling banks had them on their balance sheets and were having trouble attracting the capital they needed to st...
The term "Lender of Last Resort" refers to financial institutions or individuals that provide credit and/or liquidity to other financial institutions and/or individuals who have exhausted their remai...
In general, a letter of guarantee is a written promise to take responsibility for another company's financial obligation if that company cannot meet its obligation. The entity assuming this responsib...
A letter of intent is a non-binding document detailing a planned action on the part of an organization or individual. A letter of intent is often drafted by companies in relation to a deal or transa...
A leveraged buyout (LBO) is a method of acquiring a company with money that is nearly all borrowed. The basic idea behind an LBO is that the acquirer purchases the target with a loan collateralized ...
A levy is the seizure of property in order to repay debt. In the U.S., the IRS has the authority to levy. (For everybody else, this is called foreclosure or repossession.) Let’s assume John Doe ow...
Limited liability is limited exposure to financial risk by investors of a company or a partnership. This exposure is usually limited to the individual's investment.  In certain cases where an inves...
A limited liability company (LLC) is a type of business entity formed that can be taxed like a partnership but protects its shareholders from liability beyond their investment. Investors can decide ...
A limited partner is a member of a partnership who cannot incur debt or obligations on behalf of the partnership and is not personally liable for those debts or obligations. Limited partners contrast...
A limited partnership is a business formation that limits the liability of certain owners. A limited partnership is made up of partners. In most cases, some of the partners are general partners and ...
A limited partnership unit is a piece of ownership in a limited partnership. A limited partnership is a business formation that limits the liability of certain owners. Shares of ownership are referr...
A liquid asset is cash or securities that can be converted to cash quickly. Let's assume Company XYZ has $1 million of cash on its balance sheet and $300,000 of marketable securities. We could say C...
Liquidation value refers to the value of a project or investment if it were to be sold or abandoned immediately. Also called abandonment value, the liquidation value of a project or investment is th...
Liquidity risk is the risk that a company or individual will not be able to meet short-term financial obligations due to the inability to convert assets into cash without incurring a loss. This most ...
Liquidity trap describes the macroeconomic conditions under which interest rates cannot be pushed any lower, rendering monetary policy ineffective.  Named in reference to the associated overabundan...
Logistics is the integration and management of the product value chain from suppliers to the customer.  It includes all aspects of the chain of production, including design, suppliers, financing, in...
Long-run average total cost (LRATC) represents the average cost per unit of production over the long run. In this calculation, all inputs are considered to be variable, because, over the long term, n...
A long-term asset is an asset that a company expects to sell or otherwise recognize the economic value of after more than one year. An asset is anything that has commercial or exchange value. Accord...
A long-term liability is a liability due in more than one year. A liability is a claim on a company’s assets. Technically, a liability is a required transfer of assets or services that must occur ...
A ma and pa shop is a family-owned independent business. For example, franchises and big-box stores such as Target and Wal-Mart are not ma and pa shops. However, the small store down the street, wit...
Companies adopt a macaroni defense by issuing bonds that are redeemable at a high price in the event of a change in control. For example, let's assume that Company ABC wants to buy Company XYZ. Comp...
Macro accounting, also called national accounting, is a method of calculating the economic activity of a country or region. In the United States, federal government agencies typically use macro acco...
A macro environment is a wide, broad set of economic conditions rather than the conditions in a specific sector or industry within an economy. The macro environment in the American economy, for exam...
A macroeconomic factor is a characteristic, trend or condition that comes from or applies to a broad aspect of an economy rather than a certain population. Common macroeconomic factors include gross...
Macroeconomics involves the study of aggregate factors such as employment, inflation, and gross domestic product, and evaluating how they influence the economy as a whole. The Great Depression and i...
Macromarketing describes how marketing affects an entire society's demand for goods and services. In many first-world countries, marketing is not just another occupation. It is woven into the fabric...
Macroprudential analysis is analysis of the stability of an economy's financial institutions. In the United States, stress tests are the most common example of macroprudential analysis. In that anal...
In the business world, a mad hatter is a leader, usually a CEO, who makes unusual or impulsive decisions. In Lewis Carroll's book Alice's Adventures in Wonderland, the main character, Alice, meets t...
Made to Order (MTO) is a production and inventory strategy in which companies manufacture products or provide services according to each customer's specifications rather than according to a homogenou...
Made to Stock (MTS) is a production and inventory strategy in which companies manufacture products or provide services according to their forecast of customer demand. Let's say Company XYZ produces ...
A magnet employer is an employer to which people are attracted or especially interested in working for. For example, let's say Company XYZ is located in Anywhere, USA. It routinely appears on lists ...
Maintenance expenses are the costs associated with keeping an asset in working order and good condition. For example, let's assume that Company XYZ is a restaurant chain. Its regular maintenance exp...
Make to Assemble (MTA) is a manufacturing strategy whereby the manufacturer creates or obtains all of the components of its products but does not assemble the product until a customer places an order...
Malfeasance is the legal term for intentionally doing something that is illegal. Let's say John Doe is Jane Smith's broker. John really wants to keep Jane Smith as a client, and he is in charge of h...
A man-year is a measure of how much work one person does in a calendar year. For example, let's say the Facilities Maintenance Department of the University of XYZ bills the other departments of the ...
A management audit is an assessment of how an organization applies its resources and its strategies. Let's say that Company XYZ wants to conduct a management audit. It decides that good management r...
In the financial world, a management discussion and analysis (MD&A) is a written explanation of a public company's performance for the reporting period. The explanation appears in the company's d...
A mancession is a situation in which the employment rate of men is lower than the employment rate for women. Let's say the employment rate for women is 95%. Meanwhile, the employment rate for men is...
A manufacturer's suggested retail price (MSRP) is a price that a product manufacturer tells retailers to charge for their products. Let's say Company XYZ manufactures the "Hot Stuff" line of men's c...
The term margin has two main definitions. The first refers to the ratio of profit to revenue. The second refers to money borrowed from a brokerage firm in order to leverage an investment. Let's ass...
Marital property is property owned by a married couple. Let's say John Doe and Jane Smith get married. On the day of the wedding, John owns a 1988 Camaro, 10 sets of speakers, and his clothes. Jane ...
Mark-to-management is an accounting practice that prices an asset based on what management estimates its potential value to be under normal market conditions. It is the opposite of mark-to-market. M...
Mark-to-market (MTM) is an accounting method that records the value of an asset according to its current market price. For example, the stocks you hold in your brokerage account are marked-to-market...
Mark-to-market losses are losses in an asset's value caused solely by a decline in market price. Mark-to-market losses appear when an asset is priced according to a mark-to-market (MTM) accounting m...
Mark-to-model is an accounting method where asset prices are assigned using the results of a financial model. The mark-to-model pricing method puts a value on assets based on the outcome of a financ...
A market is a location where buyers and sellers meet to exchange goods and services at prices determined by the forces of supply and demand. A market may be a physical location or a virtual one over...
A market basket is a group of items that simulate the overall price movements in a market. At an economic level, a market basket is a permanent set of goods and services that are bought and sold as ...
Market cannibalization refers to a reduction in sales volume or market share of a product as a result of the introduction of a new product made by the same company.  Market Cannibalization is also ...
The market capitalization rule is a regulation that places a floor on the total value of a company's stock for 30 consecutive days. The market capitalization rule was established by the New York Sto...
Market cycles are the periods of growth and decline in a market, sector or industry. In a quantitative sense, market cycles are visible in price movements that rise, fall, and return to their point ...
Market discipline refers to the obligation by banks and financial institutions to manage their stakeholders' risk in the course of their day-to-day operations. Banks and other financial institutions...
A market disruption is a sharp, rapid weakening of market performance in response to external forces. A market disruption often occurs as a result of an event or group of events that are widely perc...
A market distortion occurs as a result of a government's involvement in a market through monetary or fiscal policies. Governments frequently intervene in a country's economy and implement policy mea...
Market dynamics are the interaction of supply and demand as the basis for setting prices. A fundamental concept of macroeconomics is the relationship between supply and demand as the principle force...
A market economy is structured to allow market forces to determine prices with little or no government involvement. In theory, a market economy's functions are based on fluctuations in supply and de...
A market failure occurs when the supply of a good or service is insufficient to meet demand. This results in an inefficient distribution of resources among market participants. Under free market con...
Market indicators are quantitative factors that predict the future behavior of market indices. Market indicators are used in technical analysis to forecast market trends. Market indicators are ratio...
Market jitters refers to apprehension among buyers and sellers resulting in choppy and unpredictable market performance. Unfavorable news regarding economic indicators, earnings reports, interest ra...
Market orientation focuses on providing products that respond to both the needs and wants of a target audience. A company using market orientation invests time researching current trends in a given ...
A market out clause is a provision that allows an underwriter to withdraw from a stock underwriting contract. When an investment bank serves as an underwriter for an initial public offering (IPO), i...
Market penetration is the percentage of a target market that consumes a product or service. Market penetration can also be a measure of one company's sales as a percentage of all sales for a product....
The Market Performance Committee is responsible for maintaining effective and organized trading operations on the New York Stock Exchange (NYSE). The Market Performance Committee consists of several...
Market power refers to a single company's ability to control the market price of a good or service. The macroeconomic concept of perfect competition assumes that no one producer can set a price for ...
Market price is the price of an asset or product as determined by supply and demand. In the broadest sense, an item's market price lies at the point of intersection between the available supply of t...
Market saturation is the maximum sales volume for a product or service under current market conditions assuming a constant level of demand. When the number of units of a given product or service has...
A market segment is a discrete group of individuals who bear a number of similar characteristics. A market segment is characterized as a homogeneous population within a given market whose members di...
Market segmentation is a marketing strategy that separates individuals in a market into discrete groups based on certain criteria. Market segmentation is predicated on the notion that a given produc...
Market segmentation theory posits that the behavior of short-term and long-term interest rates are mutually exclusive. Market segmentation theory suggests that the behavior of short-term interest ra...
Market share refers to a company's portion of sales within the entire market in which it operates. This metric indicates a company's size within its market. The formula for market share is: Market S...
Market Surveillance is a unit of the NASDAQ stock exchange whose function is to ensure that all trading is conducted in a compliant manner. The Market Surveillance unit of the NASDAQ stock exchange ...
Market Value Added is the difference between the capital contributed to the company by bondholders and shareholders and the final market value of the product. The formula used to find market value ...
Market value of equity is the total market value of all of a company's outstanding shares. A company's market value of equity -- also known as market capitalization -- is the current market price of...
Marketable securities are financial instruments that can be sold or converted into cash (at reasonable value) within one year. They are highly liquid investments that are generally issued by business...
The meaning of marketing mix can best be referred to as the combination of elements that are used to promote products or services. These elements vary and are based upon the analysis of the four main...
Material insider information is material, nonpublic information about a security or its issuer. Information is material if it might reasonably influence the users of the issuer’s financial statemen...
A mature industry has passed the rapid growth stage and has an established pattern of market share, earnings, and profits. All industries pass through various stages of growth, stability and decline...
The mean is the average of a series of numbers.  The formula for calculating a mean is: Mean = (X1 + X2 + X3 + ... +XN) / N where X1, X2, X3, XN are the values of the observations being averaged an...
Mean reversion is the theory that interest rates, security prices, or various economic indicators will, over time, return to their long-term averages after a significant short-term move. Mean revers...
A merger (or buyout) refers to two companies willingly joining together to create a single entity. The two companies are typically the same size, and through a merger strategy, there is one “surviv...
Mergers & acquisitions (M&A) refer to the management, financing, and strategy involved with buying, selling, and combining companies. A merger or an acquisition usually starts out with a ser...
Mineral rights are a landowner's rights regarding natural resources located on his or her land. When an individual buys or owns a piece of land, there is the possibility that the land may contain va...
A mini-tender is an offer from an outside buyer for up to 5% of a company's stock. In a traditional tender offer, a company offers to repurchase shares of stock from its investors at a certain price...
Minimum wage is the lowest hourly amount an employer may legally pay an employee. In the United States, the amount varies from state to state. If an employer compensates employees on an hourly basis...
Minimum-interest rules are federal regulations requiring that all loans bear interest. Many companies and individuals make loans. These loans can occur in any amount and carry a range of repayment t...
A Minsky moment refers to a sharp decline in prevailing market sentiment and economic productivity after a long period of widespread optimism. Times of robust economic growth, like that experienced ...
A "mom and pop" business is a colloquial reference to a small, independently owned and operated business with few employees and relatively low sales volume.   "Mom and pop" investors are typically u...
Monetarism is a well-known macroeconomic school of thought developed by Milton Friedman. The Great Depression and its resulting high unemployment greatly influenced the development of macroeconomics...
Monetary policy is the means by which the Federal Reserve manipulates the U.S. money supply in order to influence the U.S. economy's overall direction, particularly in the areas of employment, produc...
To "monetize" something is to convert non-revenue generating assets into sources of revenue. In economic terms, monetize means to convert any event, object or transaction into a form of currency or...
Money is a medium of exchange for goods or services within an economy. Philosophically, anything can be money, but coins and paper notes are the most generally accepted forms. In most cases, each co...
A monopoly is a market environment where there is only one provider of a certain economic good or service. For a true monopoly to be in effect, each of the following characteristics would typically ...
Moore's law describes the computing hardware trend that transistors on an integrated circuit will double every two years. In 1965, Gordon E. Moore, the co-founder of Intel published a paper predicti...
A mortgage forbearance agreement is a contractual arrangement between a mortgage lender and a borrower to help the borrower catch up on payments when he/she is behind schedule. A borrower makes mont...
Mortgage fraud refers to an applicant's untruthful representation of information on a mortgage application. Mortgage applications ask for a variety of details concerning an applicant's financial pos...
A mortgage putback is a mandatory buyback of a mortgage by its original lender. Once a lender completes a mortgage, the lender often sells it to another investor in the secondary mortgage market. Un...
In the finance world, the mosaic theory refers to a research approach whereby the analyst arrives at a conclusion by piecing together bits of publicly available information. For example, let's assum...
The Nakahara Prize is an award from the Japanese government to Japanese economists under age 45 who have made significant contributions to the world of economics. The board of directors of the Japan...
A named fiduciary is a person or entity responsible for managing a qualified retirement plan in accordance with the Employee Retirement Income Security Act (ERISA). For example, let's say Company XY...
Narrow moat refers to the size of a company's competitive advantage. The term is an adaptation of the term "economic moat." Long ago, castles were traditionally part city and part defensive fortress...
Narrow money is a colloquial term for the total of a country's physical currency plus demand deposits and other liquid assets held by the central bank. The economic term for narrow money is M1. Narr...
NASD Rule 2790 is a rule prohibiting FINRA members from buying IPO shares for personal gain. The rule is now just called Rule 2790, because NASD became FINRA in 2007.   For example, let's say John...
In economics, a Nash equilibrium occurs when two companies in a duopoly react to each other's production changes until their prices reach an equilibrium. The term is named after John Nash, who is an ...
National accounting, also called macro accounting, is a method of calculating the economic activity of a country or region. In the United States, federal government agencies typically use national a...
The National Association of Securities Dealers (NASD) was a regulatory organization that oversaw the securities industry. The Financial Industry Regulatory Authority (FINRA) superseded NASD in 2007. ...
The National Automated Clearinghouse Association (NACHA) operates the Automated Clearinghouse (ACH) network, which allows companies and consumers to send payments from one account to another. NACHA ...
A national bank is a bank that is a member of the Federal Reserve system and the Federal Deposit Insurance Corp. In global terms, a national bank is a country's central bank. In this context, the Fe...
The National Bank Surveillance System is a computer system that collects financial information about banks. The U.S. Office of the Comptroller of the Currency established the NBSS in 1975. It produc...
The National Bureau of Economic Research (NBER) is a private, nonprofit, nonpartisan research organization that studies the economy. Founded in 1920, the NBER undertakes and distributes unbiased eco...
The National Credit Union Administration (NCUA) is an agency of the United States government that charters and oversees federal credit unions. It was created by Congress in 1970. A credit union is a...
A national currency is simply the currency issued by a country's central bank. Currency is a medium of exchange for goods or services within an economy. For example, in the United States, the nation...
National income accounting is a government accounting system to measure economic activity. For example, national income accounting measures the revenues earned in the nation's companies, wages paid,...
The National Retail Federation (NRF) is a trade group that represents retailers. The NRF represents retailers in the United States and 45 countries. The retailers in the NRF operate more than 3.6 mi...
The national savings rate is the percentage of gross domestic product that households, governments and businesses save rather than spend. There are only two things to do with money: spend it or save...
Nationalization occurs when a country's government seizes the assets of corporations or resources without paying for those assets. Let's say Country XYZ elects John Doe. A year before he is due for ...
Natural capital is a term that describes an economy's natural resources such as water, timber or oil. Let's say Company XYZ is a paper manufacturer. It owns 50,000 acres of forestland in various sta...
Natural unemployment is the level of unemployment always present in an economy as industries expand and contract, as technological advances occur, as new generations enter the labor force and as work...
Negative amortization occurs when the principal balance on a loan (usually a mortgage) increases because the borrower's payments don't cover the total amount of interest that has accrued. For exampl...
A negative amortization limit is a clause in a loan that restricts the amount of negative amortization that can occur during the contract. Negative amortization occurs when the principal balance on ...
Negative amortizing loans are loans in which the loan's principal balance increases even though the borrower is making payments on the loan. For example, let's assume that John wants to borrow $100,...
A negative assurance is an auditor's written statement that an audit did not uncover any signs of fraud or violations of accounting rules. For example, let's assume that Company XYZ hires an auditor...
Negative authorization is the term for a credit card system that approves or disapproves a credit card transaction based on whether the card appears on lists of stolen, canceled, closed, or lost acco...
Negative carry means that the price of borrowing money is higher than the returns earned on borrowed money. It is the opposite of positive carry. For example, let's assume John borrows $10,000 from ...
A negative confirmation occurs when entities that have a relationship with an auditor's client indicate they have financial discrepancies or disagreements regarding their accounts with the client. F...
A negative covenant is a promise a company makes to not exceed certain financial ratios or not conduct certain activities. Negative covenants are almost always found in loan or bond documents. For e...
Negative equity occurs when liabilities exceed the value of assets. For example, let's assume that Company XYZ has $20 million of total assets and $40 million of total liabilities. Company XYZ has n...
Negative float is the amount of time between when a person writes a check and when that check clears the account. In banking, the formula for negative float is: Negative Float = Account's Ledger Ba...
Negative goodwill, also called a bargain-purchase amount, occurs when a company buys an asset for less than its fair market value. Negative goodwill is the opposite of goodwill. For example, let's a...
In economics, negative growth usually refers to shrinking gross domestic product (GDP). For example, if the United States' GDP falls from $14.4 trillion to $14.1 trillion, we would say that the U.S....
Negative verification is a bank method for verifying bank records. For example, let's assume Bank XYZ is performing an internal audit of the computer system that generates customers' monthly bank st...
Negotiable refers to an item that can be sold or transferred to another party as a form of unconditional payment. Negotiable also means that the terms of an agreement can be adjusted.   A negotiabl...
A negotiable instrument is a signed document that gives the bearer of the document permission to obtain a certain amount of money.   Checks are the most common negotiable instrument. They are esse...
Negotiation is a process in which two or more parties resolve a dispute or come to a mutual agreement. Negotiations occur all the time in the business world, and they are often strategic in nature. ...
Nellie Mae is a subsidiary of Sallie Mae (SLM), the largest originator, funder and servicer of student loans in the United States. Specifically, it is responsible for originating Federal Stafford Loa...
Net Advantage to Leasing (NAL) refers to the money a company or individual saves from leasing an asset rather than buying it. Under a lease agreement, the user (the lessee) agrees to make periodic p...
  Net assets are what a company owns outright, minus what it owes. Net assets provide a rough guide for the value of company resources. Typically, the higher a company's net asset value, the higher...
Net book value is the net value of an asset carried on its balance sheet.  Net book value results from the accounting technique of depreciating or amortizing the value of an asset: a company gradual...
Net borrowed reserves are a measure of the difference between what a bank has borrowed from the Federal Reserve and the cash reserves it holds above the required minimum. The opposite of net borrowed...
Net cash flow is the difference between a company’s cash inflows and outflows within a given time period. After paying for all operating costs and debt payments, a company has a positive cash flow ...
The net current asset value per share (NCAVPS) equals a company's current assets divided by its number of shares outstanding. The formula for NCAVPS is: NCAVPS = (Current Assets - Current Liabilitie...
Net debt is a company's total debt less cash on hand. The formula for net debt is: Net Debt = Short-Term Debt + Long-Term Debt - Cash and Cash Equivalents For example, let's assume that Company XYZ ...
Net debt per capita is a government's total debt (less cash on hand) per person.  The formula for net debt per capita is: Net Debt per Capita = (Short-Term Debt + Long-Term Debt - Cash and Cash Eq...
Net domestic product (NDP) represents the net book value of all goods and services produced within a nation's geographic borders over a specified period of time. Gross domestic product (GDP) is the ...
Net earnings represent the amount of sales revenue left over after all operating expenses, interest, taxes and preferred stock dividends (but not common stock dividends) have been deducted from a com...
A net exporter is a country that sells more to other countries than it buys from other countries. Countries are often net exporters in some industries (natural gas, for example) but net importers in ...
Net exports are the difference between a country's total value of exports and total value of imports. Depending on whether a country imports more goods or exports more goods, net exports can be a po...
Net free reserves is a measure of how much cash a bank holds above the Federal Reserve's required minimum. The opposite of net free reserves is net borrowed reserves. The formula for net free reserv...
A net importer is a country that buys more from other countries than it sells to other countries. Often, countries are net importers in some industries (natural gas, for example) but net exporters in...
For businesses, net income indicates how well a company is managing its profit (both earnings and expenses). For individuals, this number is defined more loosely: it can refer to your gross income ne...
Net income after taxes (NIAT) is the number of sales dollars remaining after all operating expenses, interest, depreciation, taxes and preferred stock dividends have been deducted from a firm's total...
Net interest cost (NIC) is a way to compute the average annual interest expense for a bond issue.  The formula for net interest cost is: Net Interest Cost = (Total Interest Payments + Discount - P...
Net interest income is the difference between interest received from assets and interest paid on liabilities.  The formula for net interest income is: Net Interest Income = Interest Received - Inte...
In banking, the net interest rate spread is the difference between interest earned on loans, securities, and other interest-earning assets and the interest paid on deposits and other interest-bearing...
Net investment is the measure of a company's investment in capital assets, such as the property, plants, software and equipment that it uses for operations. The formula for net investment is: Net I...
Net investment income is what an investment company receives in capital gains, dividends and interest payments, less administrative fees.  The formula for net investment income is: Net Investment I...
Net lending is an economic measure of whether governments are either providing financial resources to other sectors of the economy or using resources from other sectors of the economy (the latter is ...
A company reports a net loss when its expenses exceed revenues during a specific period of time. A net loss is the opposite of net income or net profit, which is when a organization's revenue is gr...
Net margin is the percentage of revenue remaining after all operating expenses, interest, taxes and preferred stock dividends (but not common stock dividends) have been deducted from a company's tota...
Net national product (NNP) is the market value of a nation's goods and services minus depreciation (often referred to as capital consumption). The formula for NNP is: NNP = Market Value of Finished ...
The net operating cycle, also called the "cash conversion cycle," is the number of days it takes a company to generate revenues with assets. Analysts can calculate the length of the cycle with the ...
A net operating loss (NOL) is a negative profit for tax purposes. It usually occurs when a company's tax deductions exceed its taxable income, making the company unprofitable. Net operating losses c...
One key indicator of a business success is net operating profit after tax (NOPAT). Considered an “apples-to-apples” measure, NOPAT helps investors determine how well one company is performing ver...
Net operating profit less adjusted taxes (NOPLAT) is a measure of profit that includes the costs and tax benefits of debt financing. put another way, NOPLAT is earnings before interest and taxes (EBI...
Net Present Value of Growth Opportunities (NPVGO) is the simply the present value of additional cash flows associated with an acquisition, net of the purchase price of the acquisition. Essentially, t...
Also referred to as the bottom line, net income, and net earnings, net profit represents how much money a company has after all expenses are paid. You can think of net profit like your paycheck: It...
Net profit margin is a metric that indicates how well a company can transform its revenues into profits. Net profit margin is the percent of revenue remaining after all operating expenses, interest, ...
Net receivables refers to the net amount of money remaining after deducting the provision for bad debt. It is primarily used in businesses that sell on credit. Net Receivables = (Total Amount Borrow...
Net revenue is defined as a company’s sales (revenue) minus discounts and returns. Net revenue is sometimes called the ‘real top line’ because it reflects total sales with only direct sales-rel...
Net sales usually refers to a company's revenue net of discounts and returns. Sometimes, though, the user is referring to net profit, which is sales net of all expenses. Let's assume restaurant chai...
The neutrality of money is a theory stating that changes in the money supply only affect prices and wages rather than overall economic productivity. For example, when the Federal Open Market Committ...
The new economy refers to the convergence of manufacturing, services and technologies to produce high value-added, technology-enabled, and adaptable industries. Industry trends have always adapted t...
A new paradigm is a new logical framework for understanding a situation. In the financial markets, a new paradigm refers to the shift in the underlying economic rules and factors that affect the mark...
The New York Clearing House Association, founded in 1853, is the country's first and largest bank clearing house. The Clearing House was created to streamline the bank settlement process, which had g...
Also referred to as face value or par value, nominal value is the value shown on the face of a security certificate or instrument, including currency. The concept most commonly applies to stocks and ...
A nominee is a person or entity that takes possession of securities or other assets for the purpose of making transactions on behalf of the owner of the securities or other assets. For example, let'...
A non-accredited investor is an individual or organization that does not meet the description of a "sophisticated" investor as defined by the Securities and Exchange Commission. According to the Sec...
A non-cash charge is a write down or expense against earnings that does not involve cash. A company will take a non-cash charge against non-cash items on the balance sheet, such as depreciation, amo...
A non-cash item is an entry on an income statement or cash flow statement correlating to expenses that are essentially just accounting entries rather than actual movements of cash. Depreciation and ...
The descriptors "exempt" and "non-exempt" are used to describe different categories of employees as defined by the Fair Labor Standards Act (FSLA) according to US Federal employment law. Typically, a...
A non-financial asset has a value based on its tangible characteristics and properties. A company's balance sheet includes several types of assets and liabilities. Assets include financial assets, s...
Non-negotiable refers to something that cannot be bought, sold, exchanged or transferred. Non-negotiable also can refer to a term or condition that is not open to negotiation. Certain securities, co...
A non-operating asset is an asset that generates income, but is unrelated to the core operations of the company. Also called a redundant asset, a non-operating asset usually generates some form of r...
Nonfarm payrolls is an economic indicator released by the Department of Labor on the first Monday of each month at 8:30am EST. The data reflect the change in nonfarm payrolls from the previous month....
The North American Free Trade Agreement (NAFTA) is an agreement among the United States, Canada and Mexico designed to remove tariff barriers between the three countries. NAFTA was implemented on Ja...
To notarize means to have a notary affix his or her seal and signature to a document signifying that he or she witnessed the signing of the document. For example, when John and Jane Doe buy a house,...
Notaries are important people because they give documents legal weight. Notaries are commonly involved in the creation of wills, trusts, deeds and powers of attorney. Each state sets forth its own re...
Obamanomics refers to the economic policies of former United States President Barack Obama. In general terms, the primary focus of Obamanomics was economic stimulation in the wake of recession. Cent...
An obligation is a legal requirement to fulfill a responsibility. In the finance world, this often involves making specific payments by specific dates and/or ensuring that a company meets certain per...
Obsolescence risk is the risk that a company's product or service will become obsolete or out of date. For example, consider the fax machine. Once a symbol of modern communication, the fax machine w...
Obsolete inventory is inventory that is essentially useless and/or unsellable. For example, consider Company XYZ, a cheese manufacturer. Company XYZ makes a batch of 1,000 wheels of cheese that are ...
Occupancy fraud occurs when a mortgage borrower lies to a bank about his or her intention to occupy the home that he or she is purchasing with the mortgage. For example, let's say John lives in Denv...
Occupational labor mobility is the ease with which a workforce can switch industries, retrain for new jobs and transfer to other sectors. For example, consider ice delivery or typewriter repair. A h...
Off balance sheet refers to items that are effectively assets or liabilities of a company but do not appear on the company's balance sheet. For example, let's assume that Company XYZ has a $4,000,00...
Off-balance-sheet financing is an accounting method whereby companies record certain assets or liabilities in a way that keeps them from appearing on the balance sheet. For example, let's assume tha...
Off-premise banking refers to regular banking transactions that happen outside of a physical bank, typically at automated teller machines (ATMs). For example, let's assume that Bank XYZ is headquart...
Offensive competitive strategy therefore refers to those strategies that companies adopt to stay ahead of the competition rather than react to the competition. As in team sports, companies can play ...
An offer is a communication of interest in buying or selling an asset. In other contexts, it might refer to the act of making something available for sale. For example, a retailer might offer a men'...
An offering is the process of issuing new securities for sale to the public. For example, let's say the founders of Company XYZ want to sell half of their shares. They need buyers and would like to ...
An offering memorandum is a legal document that discloses the terms, conditions, risks, and other information about a private placement. It is not the same thing as a prospectus (those are for issuan...
An offering price is the price at which a company lists its shares, bonds or other securities on an exchange. For example, let's say the founders of Company XYZ want to sell half of their shares. T...
The Office of the Comptroller of the Currency (OCC) is a division of the U.S. Treasury. It regulates and supervises national banks, including domestic branches of foreign banks. The U.S. Treasury cr...
The Office of Thrift Supervision (OTS) was a regulatory agency that provided oversight to thrift institutions. On July 21, 2011, the OTS became part of the Office of the Comptroller of the Currency (...
An official settlement account is an account that records transactions of foreign exchange reserves, bank deposits and gold at a central bank. For example, the Federal Reserve uses official settlem...
An official staff commentary is a set of written answers from the Federal Reserve or the Treasury department regarding various interpretations and regulatory guidance on a myriad of topics. The Fede...
An official strike, also called an "official industrial action," is a work stoppage by a union. For example, let's say that the unionized workers at a company feel that they are underpaid. They ha...
An offtake agreement is an agreement between a buyer and seller of a resource to purchase or sell products that are yet to be produced. Let's say Company X developed a way to grow a special kind of ...
An oil field is land that contains oil. Specifically, an oil field contains oil that is trapped by a layer of rock. Oil fields are notoriously difficult to locate and tap. There are thousands of oi...
Oil reserves are estimates of the amount of crude oil in a specific area. Let's say Company XYZ is an oil company that is actively engaged in detecting and drilling for oil. It has discovered an oil...
Okun's gap occurs when a country's actual gross domestic product differs from its predicted gross domestic product when applying Okun's law. Named after economist Arthur Okun, Okun's law states that...
Named after economist Arthur Okun, Okun's law states that for every 1% increase in the employment rate, gross domestic product increases 3%. Let's say the unemployment rate decreases by 2% (that is,...
Old Economy describes an economy or even a group of industries that does not rely on technology or technological advancement.   For example, horse farms, bread baking, landscaping and prostitution...
An oligopoly is an economic market whereby a small number of companies or countries generate and control the entire supply of a good or service. Let's assume that Company XYZ, Company ABC, and Compa...
An oligopsony is a market in which only a few buyers purchase all of an industry's output. Let's assume that Company XYZ, Company ABC and Company 123 buy 95% of the country's carrots. If Company XYZ...
On account is a term that describes situations in which a customer makes a partial payment for goods or services purchased. In the business world, buying things on account is the same as creating ac...
A one-stop shop is a single location where all of the needed services for a particular activity are provided. One-stop shopping is a popular concept for packaging products and service oriented busin...
Operating cash flow (OCF) is a measure of the cash generated or used by a company in a given period solely related to core operations. OCF is not the same as net income, which includes transactions t...
Operating cash flow demand (OCFD) is the present value of the minimum amount of cash a capital investment must generate over its life in order to meet the investor's minimum required return. Let's a...
Operating cash flow margin is cash from operating activities as a percentage of sales in a given period.  Operating cash flow margin is generally calculated using the following formula: Operating C...
An operating company/property company deal (opco propco) is a strategy in which a company is divided into at least two parts: a property company that owns all the real estate and assets associated wi...
Operating costs are key components of operating income calculation (and operating income is a crucial component of many financial measures). Thus, the lower a company's operating costs are, the more ...
Operating earnings is a measure of profitability that tells investors how much of revenue will eventually become profit for a company. The formula for calculating operating earnings is: Operating Ear...
An operating expense is a day-to-day expense incurred in the normal course of business. These expenses appear on the income statement. Operating expenses are costs associated with running a business...
Operating income is the amount of revenue left after subtracting operating expenses and cost of goods sold (COGS). Operating income is a measure of profitability directly related to a company’s ope...
Operating income before depreciation and amortization (OIBDA) is a measure of the income generated or used by a company in a given period exclusive of the company's capital spending decisions and its...
An operating lease is simply a lease that does not give the lessee rights similar to those of an owner of the asset. Let's assume Company XYZ needs a widget machine for its factory. The widget machi...
Operating margin is a financial metric used to measure the profitability of a business. The operating margin shows what percentage of revenue is left over after paying for costs of goods sold and ope...
Also called earnings before interest and taxes (EBIT), operating profit calculates the profits earned from a company’s core business after subtracting the cost of goods sold (COGS), operating costs...
Operating revenue is the sales associated with a company's core, day-to-day operations. Let's assume that Company XYZ sells $1,000,000 of widgets -- its main business -- this year. It also sold $40,...
Opportunity cost is the return on an investment/opportunity you missed out on, compared to the return on the investment that you chose. To determine what was lost (or gained), opportunity cost may be...
Ordinary income is not a capital gain, dividend or other income subject to special taxation.   In the United States, ordinary income is taxed progressively, meaning that there are a series of brac...
The Organization for Economic Cooperation and Development (OECD) is an international economic forum that pursues cooperative approaches to common issues affecting individual members as well as the gl...
Outsourcing is a business strategy that includes transferring work from a company’s employees to an external party. Many companies outsource their services and the creation of goods with the goal o...
Overhead refers to the ongoing operating expenses necessary to running a business, but are not attributed to a specific business activity.  Also referred to as "indirect costs." Generally, overhead...
The overnight rate is the interest rate banks charge each other on loans for meeting reserve requirements. The overnight rate is frequently confused with the discount rate, which is the interest rate...
A Pac Man Defense is a strategy for averting hostile takeovers. In instances where a company is the subject of a hostile takeover, it can employ a Pac Man Defense by making an offer to purchase the f...
Paid-up capital, also called "paid-in capital," is a measure of how much money investors have pumped into the company since inception in return for equity. The line item appears on the balance sheet....
A pale recession is a term describing a recession that does not have much impact on an economy. Former Federal Reserve Chairman Alan Greenspan coined this term in a 2008 television interview. At the...
A paper dealer is a financial institution that buys and sells commercial paper. Commercial paper is an unsecured and discounted promissory note issued to finance the short-term credit needs of large...
Paper money is a medium of exchange for goods or services within an economy. It is printed on paper, rather than in coin form. Paper notes are the most generally accepted forms of paper money. In mo...
The paradox of thrift is an economic theory that states that the more people save, the less they spend and thus the less they stimulate the economy. Developed by economist John Maynard Keynes, the p...
A parallel shift in the yield curve occurs when the interest rates among bonds (or T-Bills) with different maturity dates change at the same rate. /*-->*/ For example, if the yield on a five-y...
A parent company has control of the management and operations of a subsidiary company. It is also referred to as "holding company." A parent company has enough voting stock to influence of the board...
Pari-passu is a latin term that means "at an equal rate or pace." The term is often used in venture capital. Let's assume Company XYZ is looking for $10 million of capital. It contacts three venture...
The Paris Club is slang for 19 developed countries who meet in Paris to discuss issues with nations to which they have lent money. The Paris Club has several members, including the United States, Un...
Participation rate usually refers to the portion of the economy's working age population that is in the civilian labor market. The participation rate measures the number of people who are in the lab...
A partnership is a business structure in which the owners (partners) share with each other the profits and losses. A partnership is organized to provide for proportional ownership of a company among...
A pass-through entity (also known as flow-through entity) is a business structure in which business income is treated as personal income of the owners. It is used to avoid double taxation, when busin...
Pass-through income is sent from a pass-through entity to its owners. The income is not taxed at the corporate level -- it is only taxed at the individual owners' level. A pass-through entity is a sp...
A patent is a grant of property rights to an invention. In the United States, this is done through the U.S. Patent and Trademark Office. A patent prevents others from using, making, or selling a spe...
A patent troll is a person or company whose main business purpose is to sue other people or companies for patent infringement. For example, John Doe buys a patent for the design and manufacture of a...
Payment in kind refers to the use of a good or service as payment instead of cash. Payment in kind may be made for an exchange of goods or services for work performed. The value of the goods or serv...
Payroll is the total of the compensation a company pays to its employees. In the accounting world, it is also a term used for calculating and processing paychecks (as in, "doing payroll"). On the in...
A pension shortfall occurs when a company offering a pension plan for its employees does not have enough money set aside to meet the company's pension obligations. In a defined pension plan, where a...
Per capita measures help analysts and investors get a better feel for whether a company, country, or other entity is productive, efficient, or profitable. For instance, the per capita measure of GDP ...
Per share basis is a carefully scrutinized metric that is often used as a barometer to gauge a company's profitability per unit of shareholder ownership. In many cases, cash flow per share is one of ...
Performance bonuses are intended to be motivational tools that encourage employees to keep goals in mind and take action in their everyday work to help the company achieve those goals. It is importa...
Permanent open market operations (POMO) are used by the Federal Reserve to either add to or drain the capital reserves available in the banking system. If the Federal Reserve wants to increase the a...
Personal Consumption Expenditures (PCE), or the PCE price index, is a statistic compiled and released quarterly by the U.S. Bureau of Economic Analysis (BEA) that synthesizes a host of data, chief am...
The Personal Income and Outlay report is compiled by the U.S. Department of Commerce. The report reflects personal income earned by individuals above the age of 18 working in the United States labor ...
Petty cash is money kept on-hand, generally, by businesses for making change for clients and to cover minor costs. Petty cash is commonly associated with storefront-type businesses who deal with cli...
The Phillips curve refers to the theory that unemployment rates relate inversely to inflation rates. Proposed by British economist A. W. Phillips, the Phillips curve graphically expresses an inverse...
Although physical assets commonly come to mind when one thinks of assets, not all assets are tangible. Trademarks, patents, and goodwill are examples of intangible assets. Regardless of their physi...
The opposite of the dividend payout ratio, a company's plowback ratio is calculated as follows: Plowback ratio = 1 – (Annual Dividend Per Share / Earnings Per Share) Let's assume Company XYZ repor...
A plutocracy is a system of government where the wealthiest people in a country rule or possess the power, and thus govern directly or indirectly. Plutocracy is often linked to the term “dynastic w...
A poison pill is a strategy that tries to create a shield against a takeover bid by another company by triggering a new, prohibitive cost that must be paid after the takeover. There are many poison ...
Pork barrel spending is a type of appropriated expenditure that is added into a non-related Congressional bill.  Pork barrel spending may also be referred to as earmarking. The Oxford English dict...
Porter's 5 Forces is an analytical framework for assessing business competitiveness strategies in a particular market. Michael E. Porter, a professor at Harvard Business School, developed a framewor...
Pre-tax operating income is a company's operating income before taxes. The formula for pre-tax operating income is: Pre-Tax Operating Income = Gross Revenue - Operating Expenses – Depreciation L...
A predictive indicator is a ratio, index, report or other measurement that signals a company or market's direction in advance.  The business cycle has highs and lows. That's why predicting what's a...
Preemptive rights are a clause in an option, security or merger agreement that gives the investor the right to maintain his or her percentage ownership of a company by buying a proportionate number o...
Present value (PV) measures the current value of an amount of money – or a stream of cash flows – that is expected in the future. This value will differ from the cash flows’ nominal value, sinc...
A price ceiling is the maximum price a seller can legally charge a buyer for a good or service. Regulators usually set price ceilings. Price ceilings typically have four tenets: 1. The regulator (su...
Price creep refers to a gradual increase in the price of a good or service. Price creep usually occurs because production costs have increased. Usually, producers will attempt to fight price creep b...
Price discovery refers to the act of determining the proper price of a security, commodity, or good or service by studying market supply and demand and other factors associated with transactions. In...
Price discrimination is the act of charging different customers different prices for the same good or service. A common example of price discrimination is ladies' night: men must pay full price for ...
Price elasticity of demand (PED) is a way to measure the change in the demand for a product or service in response to a change in its price. With most goods, an increase in price will lead to a decre...
Price fixing is an agreement among businesses to sell the same product or service at the same price. Price fixing involves the cooperation among two or more business competitors to set or stabilize ...
Price improvement is the often unexpected event of obtaining a better bid or ask price than the price quoted at the time the buy or sell order is made. For example, assume you own 1,000 shares of Co...
Price inflation is simply an increase in the price of a good or service over time. The consumer price index (CPI) is the most common measure of price inflation. The Bureau of Labor Statistics (BLS) ...
Price leadership is the act of setting the price for a good or service in an industry. Let's assume that Company XYZ manufactures windshield wipers. It is one of five windshield manufacturers in the...
In economics, a price maker is a monopolistic company that can dictate the prices of its goods because there are no substitutes for it. In trading, a price maker is a stockholder who controls a large...
Also known as collusion or price fixing, price rigging occurs when a group of people or businesses agree to set the price for something.  In the stock market, traders with inside information might ...
In consumer behavior, price sensitivity (also called the elasticity of demand) is the degree to which price affects the sales of a product or service. Thus, the formula for price sensitivity is:Pric...
Price stickiness refers to the price persistence of a good, service, security or economic measure (like wages) despite changing economic conditions. Prices can be sticky on the way up or sticky on t...
A price-taker is the opposite of a price maker, which is a monopolistic company that can dictate the prices of its goods because there are no substitutes for its goods. In the trading world, a price-...
A price war is an event whereby two or more companies continually lower prices to undercut each other. Airline companies are famous for their price wars. If Airline XYZ cuts the price of a flight fr...
Price-level targeting is an economic strategy whereby a central bank tries to reestablish an overall price level rather than reestablish a particular inflation rate. For example, let's assume that i...
"Priced out" refers to something being too expensive. Alternatively, priced out refers to the adjustment in a security's market price in response to new information. For example, a person earning $3...
Pricing power is the effect the price of a good or service has on the demand for that good or service. For example, a company that manufactures a pill that cures cancer has a lot of pricing power: t...
When financial assets and markets -- as with the broader economy -- fall steadily for an extended period of time, it is known as a primary downtrend, or "bear market." A primary downtrend is when ea...
When financial assets and markets -- as with the broader economy -- move in an upward direction for extended periods of time, it is known as a primary uptrend, or “bull market.” A primary uptren...
Out of 18 million businesses in the United States, fewer than 4,000 are publicly listed on a stock exchange. Private companies remain the default model of conducting business, so what are they and ho...
A private placement is an offering of securities that is not registered with the U.S. Securities and Exchange Commission (SEC) Companies issuing stock in the U.S. public capital markets must registe...
A privately held company is different from a public company in that its stock is not traded on public exchanges like the New York Stock Exchange, Nasdaq, American Stock Exchange, etc. Instead, shares...
A privately owned company is different from a publicly traded company in that its stock is not traded on public exchanges like the New York Stock Exchange, Nasdaq, American Stock Exchange, etc. Inste...
Pro bono refers to any work or service that someone provides free of charge for the common good. From the Latin phrase "pro bono publico" meaning "for the public good," the motivation behind pro bon...
Procurement is a purchasing process that controls quantity, quality, sourcing and timing to ensure the best possible total cost of ownership. Procurement may be a simple purchasing arrangement with ...
The Producer Price Index (PPI) is used to measure the change over time of the average price of goods produced domestically. The producer price index consists of a weighted index of goods prices at w...
Productivity refers to the measure of output (e.g. products) from a production process per unit of input (e.g. labor and capital). Productivity is usually expressed as a ratio of output to inputs. I...
Profit is the positive gain remaining for a business after all costs and expenses have been deducted from total sales. Profit is also referred to as the bottom line, net profit or net earnings. (See ...
Profit and loss (P&L) statements are one of the three financial statements used to assess a company’s performance and financial position. The two others are the balance sheet and the cash flow ...
Profit before tax measures a company's operating and non-operating profits before taxes are considered. It is the same as earnings before taxes. Simplifying things a bit, revenue minus expenses equa...
A profit center is a part of a company that directly adds to its profits. A company may have a variety of distinct departments, divisions, or operating groups, each with separate responsibilities an...
Profit margin usually refers to the percentage of revenue remaining after all costs, depreciation, interest, taxes, and other expenses have been deducted. The formula is: (Total Sales - Total Expense...
A profit sharing plan gives employees a share in the company's profits.  A profit sharing plan is usually structured to give a percentage of the profits to employees based on the company's earnings...
A profit warning is a public communication from a company that its earnings will fall below expectations. Profit warnings are part of the large, fluid world of earnings guidance, whereby the managem...
A proxy statement is the common name for the Securities and Exchange Commission (SEC) Form 14-A. It is the document containing the voting ballot and material information related to the propositions t...
A public company is a company that is permitted to sell its registered securities to the general public. Also referred to as a "publicly-traded company." A public company is a company with securitie...
A publicly traded partnership is a limited partnership that is traded in a capital market. Typically, a publicly traded partnership is a partnership between the limited partners who provide the capi...
Purchasing power is a phrase to describe the quantity of goods or services that a dollar can buy. A decrease in purchasing power is called inflation. Let's assume $1 bought 1.50 gallons of gas in 19...
A qualified eligible participant (QEP) is a person who is allowed to trade in investment funds as defined in Rule 4.7 of the Commodity Exchange Act. In order to be a QEP, a person must own at least ...
Qualified exchange accommodation arrangements are a strategy to simplify and assist with real estate exchanges made under Section 1031. For example, let's assume that John wants to sell his commerci...
A qualified institutional buyer (QIB or QUIB) is a company that manages at least $100 million of securities on a discretionary basis or is a registered broker-dealer investing at least $10 million in...
A qualified institutional placement (QIP) occurs when the Securities and Exchange Board of India (SEBI) allows an Indian company to issue securities in India without providing preliminary filings reg...
A qualified opinion is a cautionary written notice from an auditor stating that a company has not complied with generally accepted accounting principles (GAAP).  There are two main reasons an audit...
A qualified professional asset manager (QPAM) is a registered investment advisor (RIA) that helps pension plans and similar entities make investments. The Employee Retirement Income Security Act of ...
Quality control is the act of ensuring that a company's goods and services are built and delivered to spec, on time and at the appropriate cost. For example, let's assume that Company XYZ makes widg...
Quality management is the act of ensuring that a company's goods and services are built and delivered to spec, on time and at the appropriate cost. For example, let's assume that Company XYZ makes w...
Quality of earnings describes the amount of profit from core operations rather than accounting methods, extraordinary situations or earnings management. For example, let's say that Company XYZ's sal...
Quantitative easing (sometimes abbreviated "QE") is a strategy used by a central bank -- like the Federal Reserve -- to add more money to that which is in circulation. The premise (which is largely ...
The quantity theory of money argues that the size of the money supply influences the price of goods. The quantity theory of money (sometimes called QTM) says that prices rise when there is more mone...
Quarter over quarter refers to the mathematical process of comparing one quarter of data to the previous quarter. In business, note that the start and end dates of quarters can vary, though they are ...
Quarter to date refers to the three-month period extending from the beginning of the quarter to the end of the quarter. In the finance world, quarter 1 usually spans January 1-March 31; quarter 2 usu...
A quarterly report is a set of financial statements issued by a company every three months. Public companies in the United States file this report via the Securities and Exchange Commission (SEC) For...
The Quarterly Services Survey is an estimate of the operating revenue by customer class for communications firms, IT firms, hospitals and nursing services providers.   The Census Bureau administer...
Quick assets are assets that can be converted to cash quickly. Typically, they include cash, accounts receivable, marketable securities, and sometimes (not usually) inventory. For example, let's say...
A quiet filing is an IPO filing that intentionally excludes certain information. When a company is getting ready to go public, it files an SEC Form S-1, which is also called a prospectus. The Securi...
A quorum is the minimum number of directors required to conduct a board meeting. Usually is a quorum is a majority. Let's assume Company XYZ has 10 board members. Its bylaws state that at least six ...
A rabbi trust is a type of deferred compensation plan that lets employers transfer money into a trust for executives. Rabbi trusts were first used to compensate rabbis, which is how they get their n...
When most people think of racketeering, thoughts of 1930s mobsters come to mind. Gangs of this time period are often associated with organized crime and operating “rackets” to illicitly earn and m...
In the finance world, raider is short for corporate raider, which is a person or entity that purchases a company for the sole purpose of selling off its assets. Raiders are attracted to companies wh...
A rainmaker is a successful salesperson or other individual who generates significant revenue for a company. Let's say John Doe is a salesman for Company XYZ. He has a lead on a potential customer, ...
A raintaker is a successful salesperson or other individual who generates significant revenue for a company and then takes those clients with her to a new employer. A rainmaker is a successful sales...
A ramp up is an increase in the amount of products or services a company sells, usually by expansion into new markets or geographic regions. Let's say John Doe opens a sandwich shop. He offers custo...
Raw materials are commodities, parts or substances that are assembled or processed to form a final product.   For example, the raw materials involved in chocolate chip cookies are butter, sugar, e...
A re-offer price is the price at which an underwriter offers a security to the general public. In order to sell its securities to the public, a company first needs to retain the services of an inves...
Reaganomics is a reference to U.S. president Ronald Reagan's economic policies between 1981 and 1989. Also called voodoo economics, Reaganomics is an idiomatic expression used in reference to the tr...
The Real Estate Settlement Procedures Act, abbreviated as RESPA, is a federal ordinance that was established by the U.S. Department of Housing and Urban Development (HUD). It is currently supervised ...
Real gross domestic product, or real GDP, is a measure of the value of all goods and services produced by an economy in a period. Because the value is adjusted for inflation it can separate out the e...
Real income is inflation-adjusted income or wages. For example, let's say John Doe works for Company XYZ. His salary is $100,000 per year. He started the job five years ago at $100,000 and has not h...
The term receivables is short for accounts receivable (A/R), which are amounts bought by customers for a company's goods and services. Company XYZ sells $1 million in widget parts to a widget manufa...
The receivables turnover ratio is a company's sales made on credit as a percentage of average accounts receivable. The formula for receivables turnover ratio is: Receivables Turnover = Net Credit Sa...
A recession is two consecutive quarters of declining gross domestic product (GDP) Let's assume that there has been a significant decline in industrial production, employment, and wholesale or retail...
A stock or other investment is recession resistant when it tends to rise in value when the economy falters (and the markets falter with it). Recession-resistant investments are usually countercyclica...
Recurring revenue is revenue that a company has reasonable assurance will occur at regular intervals in the future.   Let's assume Company XYZ sells a widget-cleaning service. Its customers sign ...
Red is slang for loss. Losses are the negative amount remaining after all costs, depreciation, interest, taxes, and other expenses have been deducted from total sales. The formula for profit is: Tota...
A red herring is a registration statement filed with the Securities and Exchange Commission (SEC) by a company that intends to make a public equity offering. The red herring is a rough draft of the c...
A redundant asset is an asset that generates income, but is not linked to the fundamental operations of the company. Also known as a non-operating asset, a redundant asset usually generates some typ...
A Registered Investment Advisor (RIA) is an investment manager who is registered with the Securities Exchange Commission (SEC) and who must comply with SEC regulations. An investment manager who is ...
A registered principal is a person in a management position in the investment banking or securities business. For example, a registered principal might oversee the trading and sales operations at a ...
Regulation DD is a directive created by the Federal Reserve. It was enacted to fulfill the Truth in Savings Act (TISA) that was passed in 1991, which requires lenders to provide accurate information ...
Regulation Fair Disclosure (Reg FD) requires all publicly traded companies to disclose material information to all investors simultaneously. The Securities and Exchange Commission (SEC) issued a rul...
Regulatory data is information that must be provided by a company to a regulatory agency.  Protecting consumers is the main rationale offered by governments looking to regulate economic activity, a...
Reorganization may refer to the rehabilitation of a company's finances pursuant to a bankruptcy. It can also refer to any process that affects the tax structure of a corporation. In addition, reorgan...
Rescission is the cancelling of a contract so that it is no longer legally binding. A court can release parties from any obligations under the contract and revert them to their positions before the c...
Research and development (R&D) aims to create new technology or information that can improve the effectiveness of products or make the production of products more efficient. Let's say company XY...
The reserve ratio is the percentage of deposits that the Federal Reserve requires a bank to keep on hand at a Federal Reserve Bank. For example, let's assume that Bank XYZ has $400 million in deposi...
Reserve requirements are Federal Reserve rules that require banks and other financial institutions to keep a strict percentage of their deposits on reserve at a Federal Reserve bank. The Federal Rese...
Restructure, or restructuring, refers to the management process of reorganizing a company to make it more profitable.  During a major transition, a buyout or a bankruptcy, for example, the manageme...
Retail banking refers to the consumer-oriented services offered by commercial banks. These services include checking and savings accounts, mortgages and various types of loans and investment services...
Retained capital is the sum of a company's profits, after dividend payments, since the company's inception. It can also be called retained earnings, earned surplus, or accumulated earnings. Let's lo...
Retained earnings are the sum of a company's profits, after dividend payments, since the company's inception. They are also called earned surplus, retained capital, or accumulated earnings. Let's as...
Return on assets (ROA) is a financial ratio that can help analyze the profitability of a company. ROA measures the amount of profit a company generates as a percentage relative to its total assets....
Return on capital (ROC) is a ratio that measures how well a company turns capital (e.g. debt, equity) into profits. In other words, ROC is an indication of whether a company is using its investments ...
Return on equity (ROE) is a measurement of how effectively a business uses equity – or the money contributed by its stockholders and cumulative retained profits – to produce income. In other word...
Return on net assets is a metric which measures a company's financial performance with regard to fixed assets combined with working capital. Return on net assets (RONA) is calculated by dividing a c...
Revenue, also called sales (or turnover, in the UK), refers to the value of the products and services a company sells. Net revenue usually refers to a company's sales net of discounts and returns. Ot...
Revenue per employee measures the average revenue generated by each employee of a company.  Revenue per employee is calculated by dividing a firm's revenue by its total number of workers (Revenue/N...
A reverse takeover is the purchase of a publicly-traded company by a smaller private company. In what is also called a reverse merger, a private company purchases an increasingly controlling stake i...
A reverse triangular merger is a merger in which the acquisition is carried out by a subsidiary of the acquiring company. In a reverse triangular merger, a subsidiary of the acquiring company execut...
Right of first refusal grants the terms of a transaction to one party to determine if they are interested (i.e., the holder of the right of first refusal) before it is given to a third party. Right ...
The rolling EPS is a variation of the earnings per share (EPS) metric which measures a company's profitability. The rolling EPS is measured on the basis of a year and is calculated by adding a compa...
A rounding error is a mistake made when rounding a number up or down.   For example, most math books teach students to round numbers 5 through 9 up. For example, the number 10.5693 would round up t...
A routing number is a exclusive identification number assigned to banking institutions by the American Bankers Association (ABA). For those banks and banking institutions that qualify as account hol...
A run occurs when a flood of depositors withdraw their funds from a bank within a short time frame. It’s important to remember one thing about banks: They don’t keep your money in cash in a vaul...
A sacrifice ratio measures the costs of lower economic production as a percentage of the change in inflation. The formula for the sacrifice ratio is: Sacrifice Ratio = Dollar Cost of Production Los...
Safekeeping is a term describing a financial institution's responsibility to keep clients' assets in a safe area. Let's say John Doe deposits $4,000 into his savings account at Bank XYZ. Bank XYZ ha...
The Salad Oil Scandal of 1963 was a case of corporate fraud perpetrated by the Allied Crude Vegetable Oil Company, which resulted in serious losses for major banks acting as its creditors. Banks for...
A salary freeze is a temporary cessation of pay raises. For example, Company XYZ makes widgets. Company ABC recently launched the new iWidget, which is taking away a significant amount of market sha...
A sale is the transfer of title to a piece of property or performance of a service in return for compensation. In the retail world, a sale means a temporary price discount on certain items.   Let'...
In the business world, a sale of crown jewels occurs when a company is frantically attempting to fend off a takeover. For example, Company ABC makes a bid to buy Company XYZ. Company XYZ's founder, ...
A sales lead is a prospective customer or information about a prospective customer. For example, Company XYZ sells widgets. Its salespeople want to sell more widgets to earn more commissions, and so...
Sales per square foot is an indicator of sales efficiency. The formula for it is: Sales Per Square Foot = Sales / Square Feet of Selling Space For example, let's say Company XYZ sold $15 million wor...
Salvage value, also called scrap value, is the value of an asset after it has come to the end of its useful life. For example, let's assume you buy a car for $20,000. You believe that the car could ...
Same-store sales measures the increase in revenue over a particular period for the same set of stores in each period. For example, let's assume that Company XYZ is a restaurant company that has 45 r...
The Sarbanes-Oxley Act, officially named the Public Company Accounting Reform and Investor Protection Act of 2002, became law on July 30, 2002. The law was informally named after its sponsors, Senato...
Scalability refers to a company's ability to increase its production profitably. Let's assume it costs Company XYZ $1 million to produce 1 million widgets per year ($1 per widget). This $1 million c...
A beneficial ownership report, known as SEC Schedule 13-D, is a public notice of anyone who has acquired 5% or more of a voting class of a company's equity securities. For example, let's say you rea...
Scrap value, also called salvage value, is the value of an asset after it has come to the end of its useful life. Let's assume you buy a car for $20,000. You believe the car could last for 15 years....
A seasonal industry is an industry whose sales or profits fluctuate in repeatable patterns during the course of the year. For example, the restaurant industry is a seasonal industry. Sales for many ...
Seasonality is a fluctuation in sales or profits during the course of a fiscal year. For example, the restaurant industry is somewhat seasonal. Sales for many companies are stronger in summer and fa...
SEC Form 10-Q is a quarterly performance report that public companies must submit to the SEC. The 10-Q is just one of many forms a company that is publicly traded in the U.S. must file with the SEC....
An SEC Form 11-K is an annual report that is filed with the Securities and Exchange Commission (SEC) for employee stock purchase plans and similar savings plans that constitute securities registered ...
SEC Form BD is an application with the Securities and Exchange Commission (SEC) to register as a broker-dealer. A Form BD makes public the information about any broker-dealer that wishes to trade s...
The Securities Act of 1933 was the first law passed that imposed regulations on the securities industry following the stock market crash of 1929. The stock market crash of 1929 resulted from more th...
A securities analyst gathers and interprets data about securities, companies, corporate strategies, economies or financial markets. Securities analysts are sometimes called financial analysts, equity...
The Securities and Exchange Commission, also known as the SEC, is a regulatory body that was established as a result of the Securities Act of 1934. Founded after the stock market crash of 1929, the S...
/*-->*/ The Securities Investor Protection Corporation (SIPC) is a nonprofit corporation created to insure the assets investors have deposited in brokerage firms. All registered brokers, dealers...
Seed capital is the earliest stage of capital investment for a start-up venture. Startup financing involves several stages of capital formation:  seed capital, venture capital, mezzanine or bridge ...
Sell side, sometimes called prime brokers, refers to investment firms which sell securities and assets to money management firms and corporate entities. They may be considered intermediaries which bo...
A seller's market exists when there are more sellers than buyers in the market for a certain good or service. Housing is a common place to find a seller's market. Let's say that ABC Town has 100,000...
A semi-variable cost has characteristics of both fixed costs and variable costs once a specific level of output is surpassed. Semi-variable costs remain fixed up to a particular production volume. B...
The Series 63 (formally known as the Uniform Securities Agent State Law Exam) primarily covers a specific state's laws and ethical standards. Some states require brokers to obtain this license before...
/*-->*/ Series 7 is a license that is required before an individual can sell securities. Those who pass the exam for a Series 7 license are eligible to become a registered representative of brok...
The Series 82 is an exam for individuals who want to be licensed to do primary offerings of private placements. The Financial Industry Regulatory Authority (FINRA) administers the Series 82 exam as ...
Settlement risk refers to the risk or probability that one party will not uphold their contractual obligation in a transaction or deal. Settlement risk is most often associated with currency trading...
Severance pay refers to a payment from a company to an employee who is being discharged.  Under certain circumstances, employers compensate an employee who is being discharged with a sum of money c...
The shadow banking system (or shadow financial system) is a network of financial institutions comprised of non-depository banks -- e.g., investment banks, structured investment vehicles (SIVs), condu...
The Shadow Open Market Committee (SOMC) is a group of economists that provides critical analysis of Federal Open Market Committee (FOMC) decisions. Founded by two economists from Carnegie Mellon Uni...
Shareholders equity is a measure of how much of a company's net assets belong to the shareholders. Shareholders equity is found on the balance sheet. It has five primary components: Par Value of sha...
A shelf registration is the filing and registration with the Securities and Exchange Commission (SEC) for a security offering that is released to the public market incrementally over a period of time...
Simple interest is a basic formula for calculating how much interest to apply to a principal balance.  Simple Interest = Interest Rate x Principal Balance For example, let's assume that John Doe p...
A sole proprietorship is a person who owns an unincorporated business by himself or herself. In a sole proprietorship, there is no legal distinction between the owner and the business entity. A sole...
A squawk box is a speaker used at brokerage firms and investment banks to help brokers, analysts and traders communicate with each other. Squawk Box is also an early morning business program on CNBC....
The statement of income is one of the three primary financial statements used to assess a company’s performance and financial position at the end of an accounting period (the two others being the b...
The statement of operations is one of the three primary financial statements used to assess a company’s performance and financial position (the two others being the balance sheet and the cash flow ...
Stock, also known as equity, represents ownership interests in corporations. Whether you own one, 100 or 100 million shares of stock in a company, you're an owner of the company. Corporations sell s...
The stock market crash of 1929 is the most famous stock market crash of all time. On just one day (October 24, 1929), panicked sellers traded nearly 13 million shares on the New York Stock Exchange (...
The stock market crash of 1987, also called Black Monday, refers to the 509-point fall in the Dow Jones Industrial Average on October 19, 1987, one of the worst days in the average's history.   Bla...
A strategic buyout is a merger wherein one company acquires another based on the belief that the synergy of their combined operational capabilities will generate higher profits than if the two had re...
Strong-form efficiency is a component of the random walk theory and states that market and securities prices are not random and are influenced by past events. Strong-form efficiency is the opposite o...
Structural unemployment is a category of unemployment arising from the mismatch between the jobs available in the market and the skills of the available workers in the market. Structurally unemploye...
The suicide pill is a takeover defense mechanism whereby a target company takes self-destructive measures to thwart a hostile takeover. If a company becomes the target of a hostile takeover by anoth...
Supply chain management (SCM) is the central organization of a company's production resources and materials intended to streamline the production process and reduce costs on a continuing basis. A co...
The sustainable growth rate represents how quickly a company can expand using only its own sources of funding. A company's sustainable growth rate is expressed mathematically in the following way: S...
A swap is an agreement between two parties to exchange a series of future cash flows. Swaps are financial agreements to exchange cash flows. Swaps can be based on interest rates, stock indices, fore...
 Sweat equity is the time and effort that people contribute to a project. Sweat equity is used to describe the non-financial investment that people contribute to the development of a project such a...
SWOT stands for strengths, weaknesses, opportunities, and threats. A SWOT analysis uses internal and external data to evaluate a company's competitive status and risk exposures in strategic planning...
A syndicate is a group of lenders or underwriters that come together to share or participate in a specific loan or investment. A project may require too large of financial investment for a single le...
T+1, T+2 and T+3, as well as other "T+" numbers, refers to the number of days it takes to settle a financial transaction. Funds settlement refers to the transfer of funds from buyer to seller and th...
The Taft-Hartley Act, officially known as the Labor-Management Relations Act, is a federal labor law that regulates the actions of labor unions. Ratified in 1947, the Taft-Hartley Act sought to refo...
Take or pay is a contract that obligates one party to either take possession of certain goods or pay a certain amount. Let's say John Doe is a beet farmer in Scranton, Pennsylvania. He usually grows...
A takeover is the purchase of a company. A takeover is different from a merger, which occurs when the purchaser and the target both cease to exist and instead form a new, combined company.   Let's ...
A takeover target is a company that is a good candidate for purchase by an acquirer. Let's assume Company XYZ has developed an exciting new widget. Several companies may be interested in purchasing ...
A tangible asset is anything that has commercial or exchange value and has a physical form. Let’s assume XYZ Company intends to purchase an office building for $10 million. The building has a phys...
Tangible book value per share (TBVPS) equals a company's net tangible assets divided by its number of shares outstanding. A tangible asset is anything that has commercial or exchange value and has a ...
Tangible common equity (TCE) is the common equity listed on the balance sheet minus preferred stock and intangible assets.  The formula for tangible common equity is: Tangible Common Equity = Commo...
The formula for tangible common equity ratio is: Tangible Common Equity Ratio = (Common Equity - Intangible Assets)/Tangible Assets Some analysts also subtract preferred stock from common equity wh...
A target market is an intended audience for a marketing campaign, product or service. Let's assume Company XYZ manufactures orthopedic shoes. Clearly, the company's target market might be seniors, a...
News stories over the past few years have focused on tariffs and rumors of “escalated trade wars” between the United States and another country. But what is a tariff? Are they taxes on all importe...
Tax accounting focuses on the preparation, analysis and presentation of tax returns and tax payments. For example, Company XYZ might use one accounting method for calculating depreciation when it r...
A tax bracket is range of incomes for which a certain tax rate applies. The United States has a progressive tax system, which means that different portions of a person's income is taxed at increasin...
Tax evasion is the act of illegally avoiding tax liability. Tax evasion is a felony. Section 7201 of the Internal Revenue Code states, "Any person who willfully attempts in any manner to evade or de...
Generally, tax exempt means free from federal income taxation. Tax exemptions can apply to a portion of an individual's income or to the nature of an organization. For example, let's say that John p...
Tax expense is the amount of tax owed in a given period. It appears on the income statement. The formula for tax expense is: Tax Expense = Effective Tax Rate x Taxable Income For example, let's assu...
Tax fraud is the willful and intentional act of lying on a tax return for the purpose of lowering one's tax liability. For example, let's say John owns a painting business. As an employer, he dutifu...
Tax incidence is a term that describes whether producers or consumers bear the burden of a new tax. For example, let's assume that Congress passes a bill that places a $0.10 per ounce tax on potato ...
Also called the Revenue Reconciliation Act of 1993, the Tax Reform Act of 1993 was a major revision to the United States tax system. The Tax Reform Act of 1993 had several components that received a...
A tax roll is a list of taxable property in a city, county, state or other taxing authority. For example, let's assume that the city of Investon has 1,500 residents. About 750 of those residents own...
A tax treaty is an agreement between two countries regarding how they tax each other's citizens. In the U.S., residents of foreign countries that have tax treaties with the U.S. are taxed at a reduc...
A taxable spinoff occurs when a company divests a portion of its business in a manner that does not qualify as a tax-free transaction under Section 355 of the Internal Revenue Code. Under a taxable ...
"Taxation without representation" is a phrase commonly thought to have been first made famous by Boston lawyer James Otis in 1765. It refers to the idea of imposing taxes on people who have no recour...
The Taxpayer Relief Act was created in 1997 and signed by President Bill Clinton. It represented a major overhaul of the U.S. tax system and introduced dozens of new tax credits, benefits and bracket...
A teaser is a document that advertises the potential future sale of a security. The teaser's job is to create demand for a security. Because it is not a prospectus, it does not usually have all the ...
The Tennessee Valley Authority (TVA) is the largest public power company in the United States. It supplies electricity, economic development assistance and natural resource management to millions of ...
A time deposit is an interest-bearing deposit held by a bank or financial institution for a fixed term whereby the depositor can only withdraw the funds after giving notice. Time deposits generally ...
The times interest earned, also known as interest coverage ratio, is a measure of how well a company can meet its interest-payment obligations. The formula for times interest earned is: Earnings B...
The Tobin's Q ratio is a measure of firm assets in relation to a firm's market value. The formula for Tobin's Q is: Tobin's Q = Total Market Value of Firm / Total Asset Value of Firm For example, le...
The top line, also called gross sales, usually refers to a company's revenue before subtracting discounts and returns. Let's assume restaurant chain XYZ had $1,000,000 in sales for the year. The com...
The trade balance, also known as the "balance of trade (BOT)", is the calculation of a country's exports minus its imports. When a country imports more than it exports, the resulting negative number...
A trade bloc (or trading bloc) is a type of agreement between governments where barriers to international trade are eliminated or reduced between participating nations/regions.  Reducing or eliminat...
When the value of a country's imports exceeds the value of its exports, the resulting negative number is called a trade deficit. Balance of trade (BOT; also called the "trade balance") is a measure ...
When the value of a country's exports exceeds the value of its imports, the resulting positive number is called a trade surplus. First, let's back up and define another important term. Balance of tr...
A trademark is any legally-protected abstract or figural representation or slogan associated with a company or product that deliberately differentiates it in the market. A trademark is a marketing d...
Trailing twelve months (TTM), sometimes referred to as last twelve months (LTM), is the 12-month interval of a company's financial performance that occurs before a designated point in time.  TTM is...
A transfer agent manages and maintains records of who owns a corporation's or mutual fund's stock or bonds. Most transfer agents are banks or trust companies, although some companies act as their own...
Treasuries refer to all the tradable and negotiable debt obligations issued by a country's government. Broadly speaking, when an investor is referring to "Treasuries," he or she is referring to U.S....
Trickle down theory suggests that a policy of tax cuts and other financial benefits to businesses and rich individuals will indirectly benefit the broader and poor population. The basic principle of...
A turnaround occurs when a company takes successful steps to correct a period of deteriorating financial performance. To turn a business' financial results around, companies often obtain special fin...
The U.S. Agency for International Development (USAID) is a federal agency that works to encourage foreign markets for American goods. USAID invests in foreign countries' agriculture, health systems ...
The U.S. Bureau of Engraving and Printing creates and produces U.S. paper currency. It does not produce coins -- that's the job of the United States Mint. Founded in 1862, the U.S. Bureau of Engravi...
The U. S. Department of Housing and Urban Development (HUD) is a federal agency dedicated to strengthening and supporting the housing market. HUD is a cabinet-level agency. Formed in 1937, HUD's res...
The United States Department of the Treasury protects and manages many American economic and financial systems. The Secretary of the Treasury is the Chief Financial Officer of the U.S. government and...
The U.S. House Financial Services Committee is a group of 60 Congressional representatives that make decisions regarding the economy, the banking system, housing, insurance, securities rules and fina...
Unappropriated retained earnings are profits that are not set aside for a specific purpose. Let's say Company XYZ makes $1 million in profits this year. It sets aside $200,000 of those profits to bu...
An unaudited opinion is a written statement describing an auditor’s expectations about the outcome of its audit before the audit occurs Before an audit occurs, the auditor may issue an unaudited o...
Uncle Sam is a fictional character who represents the United States government. His predecessor was a character named Brother Jonathan. Uncle Sam first appeared in the 1820s. Though many artists dre...
Undercapitalization occurs when a company does not have enough cash to conduct its operations. Let's say Company XYZ is a jewelry company that begins getting huge orders from several national depart...
Underemployment occurs when one does not have a job that is full-time or that reflects his or her training and financial needs. It is not the same as unemployment, which is the percentage of employab...
In the securities industry, underwriting fees are the fees earned by an investment bank to help bring a company public or to conduct some other offering. In the mortgage business, an underwriting fee...
Unemployment occurs when one does not have a job. In the financial world, the term is often short for unemployment rate, which is the percentage of employable people in a country’s workforce who ar...
The unemployment rate measures the percentage of employable people in a country's workforce who are over the age of 16 and who have either lost their jobs or have unsuccessfully sought jobs in the la...
The Uniform Gifts to Minors Act (UGMA) is a set of rules under which adults can give money to a minor via a custodial account in the minor's name. In some states, the UGMA has been superseded by the ...
Unit cost is a measure of a company's cost to build or create one unit of product. For example, let's assume that it costs Company XYZ $10,000 to purchase 5,000 widgets that it will resell in its re...
Universal banking refers to the practice of offering clients retail banking as well as investment services. Investment services and retail banking services (savings and checking accounts, loans, mor...
An unqualified opinion is a written notice from an auditor stating that a company has complied with generally accepted accounting principles (GAAP). For example, let’s assume that Company XYZ is a...
A useful life is the number of years in which an asset can reliably produce benefits. Let's assume you buy a car for $20,000. You believe the car could last for 15 years. After that, the car is prob...
Usury is lending money at an interest rate thought to be irrationally high or higher than permitted by law.  Usury is another word for predatory lending, which is the act of imposing unfair and abus...
Vagit Y. Alekperov is the founder of Russian oil giant Lukoil. Born in 1950 in Baku, Azerbaijan, Alekperov is the youngest of five children. He went into the oil industry at the age of 22 as a drill...
The value chain is the process through which a company turns raw materials and other inputs into a finished product. For example, Company XYZ might take sugar, flour, eggs, baking powder, vanilla an...
A value network is a system that organizations, departments, operating units or people use to do work, buy or sell products, or create plans that benefit the entire organization. Research and develo...
A value proposition is a marketing statement that positions a company’s products in the mind of the consumer as the best one for their needs. It clearly, easily, and concisely articulates what the c...
A value-added reseller (VAR) is an entity that adds features or services to a product and resells the combination as a package. For example, let's say Company XYZ installs accounting software for co...
Vance D. Coffman is the former chairman and CEO of Lockheed Martin Corporation. Born in Kinross, Iowa, on April 3, 1944, Coffman earned his bachelor's degree in aerospace engineering from Iowa State...
Variable costs are the direct costs a company incurs when producing goods or services. Variable costs are incurred in direct proportion to the quantity of goods or services produced.  Simply put: As...
A Veblen good is a good or service whose demand increases when its price increases. The term is named after economist Thorstein Veblen. Many luxury goods are Veblen goods. That is, the more expensiv...
The velocity of money is the average frequency with which a unit of money is spent in an economy. For example, assume a very small economy that has a money supply of $100 and only two people. Bob se...
A vendor is a company or person that sells goods or services. Vendors sell accounting services, food, electricity, hair styling, maid service, toilet repair, and just about anything else imaginable....
Vendor financing is lending to a customer. Let’s say you plan to purchase inventory from Company XYZ  for $2 million. You only have $200,000 in cash and want to pay Company XYZ over time for the ...
A vendor note is a short-term loan to a customer. Let's say you plan to purchase inventory from Company XYZ  for $2 million. You only have $200,000 in cash and want to pay Company XYZ over time for...
A Venn diagram is an illustration of common characteristics. Named after John Venn, a Venn diagram is often little more than two or more overlapping circles (you can use other shapes, too). The plac...
Venture capital is money for new, young, and/or small businesses that typically have little or no access to capital markets. There are three general types of venture capital: seed capital, for ideas...
Venture capitalists provide funding (called venture capital) to start-up companies which they see as promising investments, but which otherwise are unable to obtain business loans. Venture capitalist...
Vernon L. Smith is an American economist who won the Nobel Prize for Economics in 2002. Born in 1927 in Wichita, Kansas, Vernon L. Smith earned an engineering degree from Cal Tech in 1949 and a mast...
Vertical integration describes a company's control over several or all of the production and/or distribution steps involved in the creation of its product or service. Let's assume XYZ Company, which...
A vertical market is a niche market in which a company supplies goods or services to a very specific type of customer. Its goods or services do not have broad appeal or application. Let’s assume X...
A vertical merger (also called vertical integration) is a merger between a manufacturer and a supplier. This is different from a horizontal merger between two companies that manufacture similar produ...
Vittorio Mincato was the former CEO of Italian oil and gas company Eni. Born in 1936, Mincato is an accountant on paper. His first any only employer was Italian oil and gas company Eni, where he ros...
Vladimir Illyic Ulyanov, also known as Vladimir Lenin, was the first leader of the Soviet Union and a key player in its October Revolution. Born in 1870 as Vladimir Ulyanov, Lenin's revolutionary ro...
Voodoo accounting refers to any accounting practices that artificially inflate the profits reported on a company's financial statements. Voodoo accounting comprises a wide range of unethical and unp...
Also called “Reaganomics,” voodoo economics is the nickname for the hallmark economic policy of Ronald Reagan, the 40th President of the United States (1981-1989), who was trying to stimulate an ...
Voting shares are shares of stock that allow the owner to vote on company matters. Stocks, also known as equities, represent ownership interests in corporations. If you own one, 100, or 100 million ...
A vulture fund is a pool of investor money that makes investments in securities from distressed issuers (usually bonds). Let's say Company XYZ has lost 75% of its customers due to a food-poisoning s...
A W-shaped recovery refers to two consecutive cycles of economic decline and growth that graphically resemble the letter "W." A W-shaped recovery graphically expresses what is frequently termed a "d...
Also called garnishment, a wage execution is a process under which money owed or paid to a borrower is given to a creditor instead. Let's say John Doe has stopped paying child support to his ex-wife...
Wage expense is the total compensation a company pays its employees during a particular accounting period. The compensation a company pays its employees is treated as an expense on its income statem...
Also called cost-push inflation, a wage-price spiral is an economic term that describes how prices increase when wages increase. The general idea behind a wage-price spiral is a simple one of supply...
Also called cost-push inflation or a wage-price spiral, wage-push inflation is an economic term that describes how prices increase when wages increase. The general idea behind a wage-push inflation ...
The waiting period refers to the time period between a company filing a registration statement with the US Securities and Exchange Commission (SEC) and the SEC declaring that statement to be effectiv...
A waiver is a party's voluntary renunciation of rights in a contractual arrangement. When two parties enter into a contract, they often agree to forfeit some of their respective rights or claims. Ei...
Under a waiver of demand, a payee assumes responsibility for a check or bank draft that he or she endorses. Sometimes, the bank account a check or bank draft is drawn against does not contain the fu...
A waiver of exemption is a clause in a contract that allows a creditor to seize property that state laws may exempt from seizure. Let's assume 65-year-old John Doe borrows $250,000 to buy a house. I...
A waiver of notice is an agreement that allows people to conduct certain legal procedures without giving formal notification that he or she is going to do so. For example, let's assume that John Doe...
A waiver of premium rider is language in an insurance policy that allows the insured to stop making premium payments if he or she becomes ill or disabled. For example, let's assume that John Doe has...
A waiver of subrogation prevents an insurer from seeking payments from third parties that cause losses to the person or business it is insuring. For example, let's say ABC Insurance sells a property...
Wall Street is the name used to describe the place in New York City where much of the United States' financial industry is concentrated. The name "Wall Street" is also used frequently used to describ...
The Walmart effect refers to the economic impact of a large discount retailer on a local market. Named after the large discount retailer, it is used to describe the crowding out and shuttering of sma...
Walras's law is the concept that a surplus in one market indicates the presence of a shortage in another. In 1844, neoclassical French economist Leon Walras posited that the existing markets of the ...
War babies are securities issued by companies in the defense industry. Let's assume Company XYZ builds jets for the Navy, and Company ABC builds guns for the Army. Both are public companies, and bot...
A war chest is the cash set aside to deal with unexpected changes in a business environment or to take advantage of a sudden opportunity. Uncertainties, unexpected events and opportunities occur reg...
A war economy centers on producing goods and services that support war efforts. For example, if Country X spends most of its tax dollars on defense and/or uses most of the proceeds from borrowing mo...
Warehousing is the process of accumulating shares in a company for the purpose of eventually acquiring the firm. Let's say the John Doe Hedge Fund is thinking about acquiring a controlling interest ...
A warm card is a bank card that allows the user to make one kind of transaction but not another. For example, let's assume that John works for Company XYZ and he is the manager of the Cleveland, Ohi...
A warranty is a guarantee, usually written, that a product or service works as expected. For example, when you buy a new car from a car dealer, the warranty states that the car works. If the car doe...
Water rights are the legal permissions to use water in a specific way. For example, let's assume that John buys a house on the famous Yellowstone River in Livingston, Montana. The house is on riverf...
In investing, a wave is a pattern found in stock prices, technology, consumer trends or other areas. In technical analysis, the term often refers to Elliot Wave Theory. Elliot Wave Theory is a m...
The random walk theory states that market and securities prices are random and not influenced by past events. The idea is also referred to as weak form efficiency or the weak form efficient-market hy...
In investing terms, WACC shows the average rate that companies pay to finance their overall operations. WACC is calculated by incorporating equity investments from the sale of stock, as well as any o...
A Wells Notice is a letter from a regulator such as the Securities and Exchange Commission that warns a financial institution or financial professional that the SEC is beginning an investigation into...
A white knight is a company that acquires another company that is trying to avoid acquisition by a third party. For example, let's assume that Company XYZ wants to acquire Company ABC. Company ABC f...
A wholly owned subsidiary is a subsidiary company whose parent company owns 100% of the company's outstanding common stock.  In a wholly owned subsidiary, the parent company owns all of the shares ...
A wide economic moat is a significant competitive advantage that is extremely difficult to copy or emulate, thereby creating a barrier to entry for competing firms. Castles were traditionally part c...
Window dressing is a term that describes the act of making a company's performance, particularly its financial statements, look attractive. Let's assume Company XYZ wants to look attractive to poten...
Work in process refers to items in a manufacturing plant that are in the stages between raw materials and finished goods (or inventory). In-process goods are expected to be finished and moved into in...
Working capital is money that’s available to a company for its day-to-day operations. Simply put, working capital indicates a company's operating liquidity and efficiency.  A company's working cap...
The World Trade Organization (WTO) establishes rules of trade among its member nations. To this end, the WTO also handles trade disputes, monitors trade policies, provides technical assistance for de...
A write-down is the accounting term used to describe a reduction in the book value of an asset due to economic or fundamental changes in the asset. A write-down is the opposite of a write-up. A writ...
X-efficiency describes a company's inability to get the maximum output for its inputs due to a lack of competitive pressure. Economist Harvey Leibenstein, a Harvard professor who studied the psychol...
An X-mark signature is a mark made by a person who is not able to sign his or her name. Let's say John Doe suffers a traumatic brain injury and can no longer read or write. He marries his high schoo...
XBRL stands for Extensible Business Reporting Language. XBRL is a code through which companies and other entities can communicate business information. It is part of the XML (Extensible Markup Langu...
Y2K is short for the term "year 2000." In the business world, Y2K (also called the millennium bug) was a problem that plagued computer systems around the world. Prior to the year 2000, most software...
In the business world, a year is a 12-month period, four-quarter period, or 13-period stretch of time. It is not always 365 days long, though it is usually very close to that. In business, note that ...
Year over year, often referred to using the acronym "YoY," refers to the mathematical process of comparing one year of data to the previous year of data. In business, note that a fiscal year does no...
Year to date (YTD) refers to the period extending from the beginning of the year to the present. In business, note that the beginning of the year is not always January 1; many companies have fiscal y...
A yellow knight is a company that backs out of an attempt to take over another company. Let's assume Company XYZ wants to acquire Company ABC. Company ABC feels that Company XYZ is a hostile bidder ...
The Young and Wealthy but Normal (YAWN) demographic is a group of people who typically have generated their own wealth but live modest lifestyles. Let's say John and Jane Doe each has a job that pay...
A zero-balance account, sometimes called a "ZBA," is a business-oriented bank account that usually has a balance of $0. Let's say restaurant company XYZ keeps its cash in a checking account. Every ...
Zero based budgeting (ZBB) is a budgeting method that involves starting with $0 and adding only enough money in the budget to cover expected costs. There are many ways to create company budgets. Le...
A zero-layoff policy is a company policy that prohibits laying off employees. Let's assume Company XYZ is an organic grocery chain that has a zero layoff policy. The policy states that Company XYZ w...
Zero-bound is a scenario in which the Federal Reserve lowers interest rates to zero or near zero. Traders sometimes also use the term to describe stocks that seem to be quickly losing value. The Fed...
A zombie company is a firm that continues to operate even though its liabilities exceed its assets (in other words, it has a net worth of zero). Let's say Bank XYZ has $1 billion in assets (loans it...
Zoning is a method of determining how people can use land and buildings within a certain area. Zoning typically delineates areas within a town acceptable for residential construction, commercial c...
A zoning ordinance is a rule regarding how people can use land and buildings within a certain area. Zoning ordinances typically delineate acceptable areas within a town for residential construction,...