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. Centr...

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Objective probability is the chance that a specific thing will occur. For example, let's say John buys a raffle ticket to support a local Girl Scouts troop. The troop sells 1,000 tickets. F...

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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 ...

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Obsolescence risk is the risk that a company's product or service will become obsolete or out of date.For example, consider the fax machine.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 ...

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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 no ...

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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 Denve...

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Occupancy rate is the ratio of rental units rented versus the total number in the building, city, state, etc.The formula for occupancy rate is: Occupancy Rate = Units Rented Out / Total Units Fo...

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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 hund...

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An ocean bill of lading is a receipt and invoice between a carrier and a shipper.For example, let's assume that Company XYZ is in Seattle and it wants to purchase goods from Supplier ABC in China....

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The October Effect is the theory that stock prices will fall in the month of October.In general, investors create a self-fulfilling prophecy regarding the October Effect. The crashes of 1929 and 1987 ...

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Odd days interest refers to interest earned on loans that close on any day other than the standard day the lender requires interest and principal payments.For example, let's assume that John obtai...

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An odd lot is an order for anything less than 100 shares. This is the opposite of a "round lot," which are orders in multiples of 100 shares. Investors, particularly individuals, are freque...

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The odd-lot theory states that an increase in odd lot activity is a buy signal in a market.An odd lot is a group of shares that is not a multiple of 100 (100 shares is called a round lot). Typically, ...

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An odd-lotter buys securities in odd lots. An odd lot is a group of shares that is not a multiple of 100 (100 shares is called a round lot). For example, let's assume John wants to buy a fe...

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OEX is the ticker symbol of index options on the S&P 100, which trade on the Chicago Board Options Exchange (CBOE). The Standard & Poor's 100 index (S&P 100) is a subset of the f...

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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 $4,000,000...

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The New York Stock Exchange is commonly referred to as the Big Board. Accordingly, "off board" refers to trades of stocks that occur outside major exchanges. Off-board trades usually occur between tw...

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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 th...

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An off-floor order is an investor's request to a broker to buy or sell securities.An off-floor order is what many consider a typical order transaction. For example, let's say John wants to sel...

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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 headquar...

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An off-the-run Treasury is any Treasury bill or note that is not part of the most recent issue of the same maturity.For example, let's assume that in March, the U.S. Treasury issues 10-year bonds....

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An off-the-run Treasury yield curve is a yield curve based on the maturities, prices, and yields of Treasury bills or notes that are not part of the most recent issue of Treasury securities.For exampl...

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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 def...

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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's...

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An offer in compromise is an arrangement between a taxpayer and a taxing authority, whereby the taxing authority agrees to let a taxpayer settle a tax debt for less than the full amount. For example,...

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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...

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An offering circular is an abbreviated prospectus. For example, let's assume than Company XYZ wants to conduct an initial public offering (IPO) of its shares. It hires an underwriter, which...

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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 issuanc...

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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 sh...

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An office audit is a type of audit by the IRS. For example, let's say John Doe gets a letter from the IRS saying that he is being audited. The audit is an office audit, meaning that the IRS...

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The Office of Federal Housing Enterprise Oversight (OFHEO) is a defunct regulatory body that ensured the financial safety of Freddie Mac and Fannie Mae. Started in 1922 after the passage of the Feder...

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The Office of Foreign Assets Control is the entity within the U.S. Treasury Department that creates and enforces trade sanctions. The OFAC used to be called the Office of Foreign Funds Control. ...

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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...

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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 (O...

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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 sett...

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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 Feder...

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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. ...

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An offline transaction, also known as a signature debit transaction, is a payment method that uses a debit card to transfer funds from a checking account to a merchant across a digital credit card net...

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An offset is a transaction that cancels out the effects of another transaction. Offsetting transactions are common in options and futures markets. For example, let's say John Doe sells an option ...

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An offset mortgage is a mortgage held in the same bank as the borrower's deposit accounts, savings accounts or other accounts. The mortgage payments are calculated based on the borrower's combined bal...

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An offsetting transaction is a transaction that cancels out the effects of another transaction. Offsetting transactions are common in options and futures markets. For example, let's say John Doe ...

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An offshore banking unit is a bank branch in another country. For example, let's assume that Bank XYZ is an American bank with a branch in Bermuda. As on offshore banking unit, the Bermuda ...

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An offshore mutual fund is a mutual fund based in another country. Offshore mutual funds cannot be sold in the United States unless they comply with American regulations; however, they can ...

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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 ...

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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 oil...

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An oil refinery is a factory that turns crude oil into marketable products such as gasoline, jet fuel, lubricants and heating oils.   Refining oil is complicated, but generally the idea is to h...

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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 ...

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Also called tar sands, oil sands are areas of the ground that contain a viscous form of oil called bitumen. Alberta, Canada, is famous for its oil sands, which are important sources of oil but requir...

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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 ...

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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% (t...

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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 prostitu...

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In the banking world, Old Lady is a nickname for the Bank of England. The full nickname is "Old Lady of Threadneedle Street." The Bank of England is the United Kingdom's central bank, meani...

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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 Compan...

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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 ...

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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 cr...

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On Balance Volume (OBV) was designed by Joseph Granville to track the flow of volume in and out of a stock or index. Essentially, OBV is a running total of volume. An OBV line typically takes the form...

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A One-Cancels-All (OCA) order is a group of limit orders linked together within a brokerage account. If one order is executed, all other linked orders are automatically canceled. S...

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In trading, a one-cancels-the-other order is an instruction given when placing two orders simultaneously. If one part of an order on a security is executed, then the other part is canceled. Such an or...

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A one-night-stand investment is a security that was supposed to be a long-term investment but is sold after a short time. Let's say John Doe goes to an investing seminar that hypes the stoc...

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One-sided markets can be volatile and very stressful for market makers. Market makers are obligated to facilitate trading in particular stocks even if doing so is inconvenient or less profitable. In o...

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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 business...

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Also called a one-sided market, a one-way market is a market in which market makers only show a bid or an offer price rather than both. In broader terms, the concept refers to situations in which ...

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Online banking enables bank customers to handle account management and perform account transactions directly with the bank through the internet.  This is also known as internet banking. Most ban...

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An online transaction, also known as a PIN-debit transaction, is a password-protected payment method that authorizes a transfer of funds over an electronic funds transfer (EFT) When you pay for goods...

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In the stock markets, open refers to the beginning of the trading day or the price of a security at the beginning of the trading day. The New York Stock Exchange has the most famous opening bell. At ...

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An open order is an instruction to buy or sell securities that has not been executed or cancelled.  Another term used is "backlog order." An order may remain open when an investor places...

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Open outcry is a trading mechanism that uses verbal bids and offers. It is usually conducted in trading pits on futures and options exchanges. Open outcry is not just vocal. It involves a s...

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Opening bell refers to the beginning of the trading day on an exchange. However, in the United States, only the New York Stock Exchange (NYSE) rings an actual bell every day.At 9:30 A.M. on every trad...

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The open is the start of a new day, though it is important to note that that doesn't necessarily mean trading hasn't been going on right before the open. After-hours markets remain open as do ...

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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 th...

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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 as...

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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...

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The operating cash flow ratio is cash from operating activities as a percentage of current liabilities in a given period. Operating cash flow ratio is generally calculated using the followin...

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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 wit...

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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 mo...

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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 Earni...

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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'...

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The operating expense ratio (OER) is equal to a company's operating expenses divided by its revenues. The measure is very common in real estate analysis, whereby analysts are measuring the costs to op...

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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 ...

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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 ...

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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 mach...

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Operating leverage is the ratio of a company's fixed costs to its variable costs. Here is the formula for operating leverage:Operating Leverage = [Quantity x (Price - Variable Cost per Unit)]...

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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 ...

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Operating netback is a measure used in the oil and gas industry to reflect the net profit on oil and gas after royalties, production, and transportation expenses. The formula for operating netbac...

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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,...

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Operating ratio is the ratio of operating expenses to net sales. Operating ratio is also a common term in the insurance business, where it refers to an issuer's profit from underwriting and invest...

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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...

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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 ...

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An option is a financial contract that gives an investor the right, but not the obligation, to either buy or sell an asset at a pre-determined price (known as the strike price) by a specified date...

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Option pricing theory is the theory of how options are valued in the market. The Black-Scholes model is the most common option pricing theory. All options are derivative instruments, meaning that th...

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Options backdating occurs when a company grants an option that is dated prior to the date the company granted the option. For example, let's assume Jane Smith is the CEO of Company XYZ. When she was ...

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The Options Clearing Corporation (OCC) is a clearinghouse for equity options and is a guarantor of the obligations in listed options contracts.  The OCC confirms, certifies and clears ...

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An options contract is an agreement between a buyer and seller that gives the buyer the right to buy or sell a particular asset at a later date (expiration date) and an agreed upon price (strike p...

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Thanks to an ability to spot undervalued companies and purchase them on the cheap, Buffett has made many people very wealthy over the course of his five-decade career. Buffett caught the investing b...

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An ordinary dividend is a dividend that is not eligible for capital gains tax. For example, let’s assume that John Doe holds 10,000 shares of Company XYZ stock, which pays $0.20 per year in divi...

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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 ...

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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 glo...

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Original cost is the total cost attributed to purchasing an asset. For accounting purposes, it is important to identify the original cost of an asset.  The original cost includes all c...

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Orphan stocks is a colloquial term for stocks that analysts and investors seem to disregard.Orphan stocks are stocks that investors and analysts tend to ignore. Also known as wallflowers, orphan stock...

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"Out of the money" describes an option that is worthless if exercised today. In the case of a call option, the option has no intrinsic value because the current price of the underlying stock i...

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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 ...

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Outstanding shares are common stock authorized by the company, issued, purchased and held by investors.Outstanding shares may also be referred to as shares outstanding, or issued shares.Outstanding sh...

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An over the counter security is traded through a dealer network rather than through a centralized, formal exchange (such as the NYSE, Nasdaq, or London Stock Exchange). Assets traded OTC are usually t...

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The over-the-counter (OTC) market, also known as the over-the-counter bulletin board (OTCBB), is a quotation service offered by the National Association of Securities Dealers (NASD) that provides quot...

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In most states, writing a bad check is at least a misdemeanor, with the consequences growing depending on the state, the amount involved and whether the transaction crosses state lines. Most overdraft...

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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, overh...

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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 ...

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Overvalued describes a security for which the market price is considered too high for its fundamentals. Some metrics used to evaluate whether a security is overvalued are: P/E ratio, growth potential,...

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Overweight refers to a given security which has been disproportionately allocated in an investment portfolio relative to a benchmark. It is the opposite of underweight.Investment portfolios are common...

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Owner financing is when a seller, usually of a property or a business, provides financing for the purchase directly to the buyer under a for sale by owner situation. Owner financing is also ...

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