Businesses & Corporations
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 ...
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...
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...
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's letter, also called an auditor opinion, is a written statement describing an auditor‚Äôs independent, unbiased and qualified evaluation of the accuracy and completeness of a company‚Ä...
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...
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...
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 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...
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...
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...
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...
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...
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 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 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...
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 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...
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 ...
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...
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 ...
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...
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...
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...
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 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...
A bank deposit is the placement of funds in an account with a bank. There are two general types of bank deposits: demand deposits and time deposits. Demand deposits are the placement of funds into a...
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 b...
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...
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 ...
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...
The Better Business Bureau (BBB) was born out of so-called ‚Äėvigilance committees‚Äô which arose in the early 1900s to correct advertising abuses and help facilitate consumer trust in the marketplac...
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 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...
A board of directors consists of elected individuals who serve as advisors to a corporation and act as a proxy (representative or substitute) for shareholders. Both for-profit and nonprofit corporati...
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 ...
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...
A break-even analysis is a calculation of the point at which revenues equal expenses. In securities trading, the break-even point is the point at which gains equal losses. The basic idea behind doin...
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...
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 ‚Äúbrick and mortar‚ÄĚ has evolved over the las...
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 buyout is the purchase of at least 51% of a company. Under a buyout, the previous ownership loses control over the company in exchange for compensation. The buyout process usually begins when an ...
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 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 ...
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...
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...
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 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...
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...
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 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...
Also called the spot market or the physical market, a cash market is a market for securities or commodities in which the goods are sold for cash and for immediate delivery. In some cases, "immediate"...
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...
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...
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 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 "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 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...
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...
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...
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...
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 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....
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...
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...
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...
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...
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...
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 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...
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 ...
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...
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...
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 ...
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...
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...
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 ...
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...
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 ...
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...
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...
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...
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...
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...
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 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...
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...
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...
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 ...
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 ...
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...
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...
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 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...
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 ...
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 ...
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...
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 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 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 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...
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 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 ...
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...
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 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 ...
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...
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...
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 ...
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...
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...
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 ...
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 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...
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 ...
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 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...
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...
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 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 ...
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 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 ...
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...
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 ...
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 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‚ÄĒin 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 can save the day for shareholders of targets. By devising ways to defend companies from takeovers, they can cost potential acquirers millions of dollars by implementing changes that force...
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...
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 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...
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...
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 ...
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...
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...
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 ...
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...
Liquidity risk is the risk that a company or bank may be unable to meet short term financial demands. This usually occurs due to the inability to convert a security or hard asset to cash without a lo...
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...
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...
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 ...
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...
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 ...
Management audits are not the same as individual performance reviews. Rather, the goal is to compare an organization's overall management quality to the rest of the industry and especially to competi...
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 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...
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 ...
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 ...
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 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...
A merger is a corporate strategy of combining different companies into a single company in order to enhance the financial and operational strengths of both organizations.   A merger usually involve...
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...
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...
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...
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 ...
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...
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...
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. ...
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 ...
Net revenue is defined as a company‚Äôs sales (revenue) minus discounts and returns. Net revenue is sometimes called the ‚Äėreal top line‚Äô because it reflects total sales with only direct sales-rela...
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...
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...
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...
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 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 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...
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 ...
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...
Buying things on account is similar to saying, "put it on my tab." Eventually, however, you have to pay the tab. In our example, the transaction requires careful accounting. Once Company XYZ places i...
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 ...
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...
Outsourcing is the process of contracting a portion of a company's activities to third-party providers. Outsourcing involves subcontracting parts of a company's value-chain, (i.e.  steps in the des...
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...
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 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...
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 is a special business structure that is used to reduce the effects of double taxation. Pass-through entities don't pay income taxes at the corporate level. Instead, corporate i...
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 spec...
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...
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...
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...
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 ‚Äď (Annual Dividend Per Share / Earnings Per Share) Let's assume Company XYZ repor...
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 ...
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...
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-takers, by definition, are not price makers. That is, they are not guaranteed profit makers, and they may even choose to make more product even if it’s not profitable to do so, just so they c...
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 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...
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 ...
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 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...
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...
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 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...
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 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...
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...
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 ...
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...
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...
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 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 you analyze the profitability of a company. ROA measures the amount of profit a company generates as a percentage relative to its total asset...
Also referred to as ‚Äúreturn on net assets‚ÄĚ, return on equity (ROE) is a measurement of how effectively a business uses equity ‚Äď or the money contributed by its stockholders and cumulative retai...
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...
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...
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 ...
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 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...
/*-->*/ 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...
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...
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....
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...
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...
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...
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...
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...
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 ...
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 ...
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...
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...
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...
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...
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...
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...
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...
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-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...
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...
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...
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...
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...
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...
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...
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 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 ...
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...
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...
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...
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...
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...