is an acronym for Principal, Interest, Taxes and Insurance when dealing with property mortgages.
PLACEMENT is bank depositing Eurodollars with (selling Eurodollars to) another bank is said to be making a placement.
PLANT ASSET is a non-current physical asset applicable to manufacturing activities.
PLEDGE is a written or oral agreement to contribute cash or other assets.
PLEDGED ASSET is an asset that is transferred to a lender as security for debt. The lender of the debt takes possession of the pledged asset, but does not have ownership unless default occurs.
PLS see Profit and Loss Sharing.
PLUG is a variable that handles financial slack in the financial plan.
PLUG NUMBER see COST OF GOODS SOLD.
POINTS are additional fee paid to a lender. Points are generally stated as a percent of the total amount borrowed and are in essence prepaid interest. Points paid can be deducted over the life of the loan.
POOLING-OF-INTERESTS, in the US, is the method of accounting used in a business combination in which the acquiring company has issued voting common stock in exchange for voting common stock of the acquired company. The features of the method are that the acquired company's net assets are brought forward at book value, retained earnings and paid-in capital are brought forward, the net income is recognized for the full financial year regardless of the date of acquisition, and the expenses of pooling are immediately charged against earnings. In order to use the method there are a number of criteria to be met concerning the prior independence of the companies and the nature and timing of the acquisition. See POOLING OF INTEREST METHOD.
POOLING OF INTEREST METHOD is an accounting method for reporting acquisitions accomplished through the use of equity. The combined assets of the merged entity are consolidated using book value, as opposed to the PURCHASE METHOD, which uses market value. The merging entities` financial results are combined as though the two entities have always been a single entity. See POOLING-OF-INTERESTS.
POP is an acronym for, among others, Point Of Presence or Post Office Protocol (Internet e-mail protocol).
PORTFOLIO is a term for describing all the investments that an entity owns. A diversified portfolio contains a variety of investments.
POSTIVE ACCOUNTING THEORY is where theorists tend to explain why some accounting practices are more popular than others (e.g., because they increase management compensation). They tend to support their conclusions with inductive theory and empirical evidence as opposed to deductive methods. Generally avoid advocacy of one accounting rule as being better or worse than its alternatives. Positivists are inspired by anecdotal evidence, but anecdotal evidence is never permitted without more rigorous and controlled scientific investigation.
POST it the transfer of accounting entries from a journal of original entry into a ledger book, in chronological order according to when they were generated.
POST DATE is placing on a document or a check a date that follows the date of the initiation or execution of the document. For example, a post dated check cannot be cashed until the date written on the check.
POSTING, in bookkeeping, is to list on the company's records, such as to list the detail of sales and purchases on the accounts receivable or payable records.
PPE can mean either Property, Plant, and Equipment, or Pay Period Ending.
PPI see PRODUCER PRICE INDEX.
PR is an acronym for, among others, 'public relations', 'payroll' and 'purchase request'.
PRACTICAL CAPACITY is where the cost of production is based on the 'practical capacity' of production facilities. Therefore, the proportion of overheads allocated to a unit of production is not to be increased as consequence of idle capacity of the plant.
PREDICTOR RATIOS: Most ratios are descriptive in nature; that is, they describe the firm as it is now. As you might expect, Predictor Ratios provide suggestions about likely future conditions for the firm. VentureLine provides two industry standard Predictor Ratios:
- Altman Z-Score - a valid predictor or bankruptcy, and,
- Sustainable Growth Rate - shows the degree to which a concern can grow using their retained earnings to fund growth.
PREFERENCE SHARE CAPITAL is capital raised by an entity through the sale of preferred shares.
PREFERRED STOCK, usually, non-voting capital stock that pays dividends at a specified rate and has preference over common stock in the payment of dividends and the liquidation of assets.
PREMIUM ON CAPITAL STOCK is excess received over the par value of stock issued. The premium account is shown under the paid-in capital section of stockholder's equity because it resulted from the issuance of stock. It is not an income statement account since the company earns profit by selling goods and services to outsiders, not by issuing shares of stock to owners.
PREPAID EXPENSES are amounts that are paid in advance to a vender or creditor for goods and services. Typically, insurance premiums are paid in advance of the coverage contained in the policy. Prepaid Expenses is a Current Asset for your business. This is because you have paid for something and someone owes you the service or the goods for which you prepaid.
PRESENT VALUE is the discounted value of a payment or stream of payments to be received in the future, taking into consideration a specific interest or discount rate. Present Value represents a series of future cash flows expressed in today's dollars. A given amount of money is almost always more valuable sooner than later, so present values are generally smaller than corresponding future values.
PRICE EARNINGS MULTIPLE: The price-earnings ratio (P/E) is simply the price of a company's share of common stock in the public market divided by its earnings per share. Multiply this multiple by the net income and you will have a value for the business. If the business has no income, there is no valuation. If the common stock in not publicly traded, valuation of the stock is purely subjective. This may not be the best method, but can provide a benchmark valuation.
PRICE EARNING RATIO see PRICE EARNINGS MULTIPLE.
PRICE ELASTICITY is the degree to which customers respond to price changes (calculation: % change in quantity divided by % change in price). A value greater than 1 = customers exhibit a good sensitivity to price. A value less than 1 = customers are insensitive to price. Price Elasticity is if a small change in price is accompanied by a large change in quantity demanded, the product is said to be elastic (or responsive to price changes). A product is inelastic if a large change in price is accompanied by a small amount of change in demand.
PRICE FIXING is an illegal practice where competing companies agree, informally or formally, to jointly restrict or control prices within a specified range.
PRICE MIX is the value of the product determined by the producers. Price mix includes the decisions as to: Price level to be adopted; discount to be offered; and, terms of credit to be allowed to customers.
PRICE TO BOOK is a financial ratio that is derived by dividing a stock’s capitalization by its book value. Also called Market-to-Book.
PRICE TO EARNINGS RATIO (P/E) is a performance benchmark that can be used as a comparison against other companies or within the stock's own historical performance. For instance, if a stock has historically run at a P/E of 35 and the current P/E is 12, you may want to explore the reasons for the drastic change. If you believe that the ratio is too low, you may want to buy the stock. You will generally find a P/E ratio based on either the prior reporting year's earnings, or the earnings of the prior four quarters added together (LTM or Latest Twelve Months)
PRICE TO REVENUE is a financial ratio derived by dividing current stock price by revenue per share (adjusted for stock splits).
PRIMARY DEALER is a designation given by the Federal Reserve System to commercial banks or broker/dealers who meet specific criteria, including capital requirements and participation in Treasury auctions. A primary dealer is entitled and obligated to purchase and sell government securities with the Federal Reserve directly. They serve as the conduits for Federal Reserve open market activities. There are approximately 30-40 such dealers.
PRIMARY MARKET is the first sale of a newly issued security. Those securities are purchased in the primary market. All subsequent trading of those securities is done in the secondary market.
PRIME BROKERS are providers of back-office administration and stock lending for hedge funds.
PRIME COST is equal to the sum of DIRECT MATERIAL plus DIRECT LABOR.
PRIME RATE is the interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates; mortgage interest rates for example.
PRINCIPAL is the amount of a loan, excluding interest, or the amount you invest, excluding income.
PRIVATE CORPORATION is a corporation that ownership is held by the private sector, i.e. individuals or companies.
PRIVATE PLACEMENT is investments in companies that are privately owned; i.e, they are companies that are not traded on a public stock exchange (e.g., NYSE, NASDAQ, and AMEX).
PRIVATE PLACEMENT (DEBT) is the sale of a bond or other security directly to a limited number of investors; used in the context of general equities. For example, sale of stocks, bonds, or other investments directly to an institutional investor like an insurance company, avoiding the need for the registration with the regulator if the securities are purchased for investment as opposed to resale.
PROCESS COSTING is a method of cost accounting applied to production carried out by a series of chemical or operational stages or processes. Its characteristics are that costs are accumulated for the whole production process and that average unit costs of production are computed at each stage.
PRODUCER PRICE INDEX (PPI) measures the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services.
PRODUCT COST is cost of inventory on hand, also called Inventoriable Cost. They are assets until the products are sold. Once they are sold, they become expense, i.e. Cost of Good Sold (COGS). All manufacturing costs are product costs, e.g., direct material, direct labor, and factory overhead.
PRODUCTIVE ACTIVITY usually is defined as including activities that have economic value in the marketplace. A more contemporary definition of productive activity includes any activity that produces a valued good or service, even if it is not actually paid for.
PRODUCTIVITY is a measured relationship of the quantity and quality of units produced and the labor required per unit of time.
PRODUCTIVITY RATIO is the ratio of outputs to inputs. The closer the ratio is to 1.0, the higher the productivity; the closer the ratio is to 0.0, the lower the productivity. Productivity is important because it relates to an organization's ability to compete, and to the overall wealth and standard of living of a nation. Productivity is affected by work methods, capital, quality, technology, and management.
PRODUCT MIX involves planning and developing the right type of product that will satisfy fully the needs of customers. A product has several dimensions. These dimensions are collectively called 'product mix'. Product mix for example may consist of size and weight of the product, volume of output, product quality, product design, product range, brand name, package, product testing, warranties and after sales services and the like.
PROFITABILITY is company's ability to generate revenues in excess of the costs incurred in producing those revenues.
PROFITABILITY RATIOS are measures of performance showing how much the firm is earning compared to its sales, assets or equity.
PROFIT AFTER TAX (PAT) is the net profit earned by the company after deducting all expenses like interest, depreciation and tax. PAT can be fully retained by a company to be used in the business. Dividends, if declared, are paid to the share holders from this residue.
PROFIT AND LOSS SHARING (PLS) is the method utilized in Islamic banking to comply with the prohibition of interest. The Islamic solution, commonly referred to as Profit & Loss Sharing (PLS), suggests an equitable sharing of risks and profits between the parties involved in a financial transaction. In the banking business, there are three parties - the entrepreneur or the actual user of capital, the bank which serves as a partial user of capital funds and as a financial intermediary, and the depositors in the bank who are the suppliers of savings or capital funds. There are two different partnerships of the type mentioned in Islam: the partnership between the depositors and the bank, and the partnership between the entrepreneur (or the borrower) and the bank. Under this proposal, financial institutions will not receive a fixed rate of interest on their outstanding loans, rather, they share in profits or in losses of the business owner to whom they have provided the funds. Similarly, those individuals who deposit their funds in a bank will share in the profit/loss of the financial institution.
PROFIT AND LOSS STATEMENT (P&L) is also known as an income statement. It shows your business revenue and expenses for a specific period of time. The difference between the total revenue and the total expense is your business net income. A key element of this statement, and one that distinguishes it from a balance sheet, is that the amounts shown on the statement represent transactions over a period of time while the items represented on the balance sheet show information as of a specific date (or point in time).
PROFIT BEFORE TAXES is operating profit minus all other expenses (net).
PROFIT MARGIN ON SALES is a profitability ratio calculated by dividing Net Income by Average Total Assets.
PROFIT MULTIPLE: Profit and sales multiples are the most widely used valuation benchmarks used in valuing a business. The information needed are pretax profits and a market multiplier, which may be 1, 2, 3, or 4 and usually a ceiling of 5. The market multiplier can be found in various financial publications, as well as analyzing the sale of comparable businesses. This method is easy to understand and use. The profit multiple is often used as the valuation ceiling benchmark.
PRO-FORMA is to provide in advance to a prescribed form or to describe items <pro forma financial statement or pro forma invoice>.
PRO-FORMA INVOICE is a price quote. It is written as an invoice, and, in effect, says: 'This is the purchase price and terms we are offering.'
PROGRAM BUDGET is a budget wherein inputs of resources and outputs of services are identified by programs without regard to the number of organizational units involved in performing various aspects of the program.
PROGRESSIVE TAX is an income tax system to where the more income that is made the higher the tax percentage that must be paid.
PROGRESS BILLINGS are interim billings for construction work or government contract work. The entry is to debit progress billings receivable and credit progress billings on construction in progress. Progress billings is a contra account to CONSTRUCTION-IN-PROGRESS.
PROJECTION is an approximation of future events. Usually a projection is made by extrapolating known information into the future period, considering events that could affect the outcome. See FORECAST, BUDGET.
PROMISES FOR THE FUTURE is not a standard term, but is sometimes used in contracts to delineate what orders/commitments may exist in the future. Dependent upon the contractual language, it may or may not be binding.
PROMISSORY NOTE, usually just called a 'note', is a NEGOTIABLE INSTRUMENT wherein the maker agrees to pay a specific sum at a definite time.
PROPRIETARY is an account, item, or information belonging to a company or individual. See PROPRIETARY ASSET.
PROPRIETARY ASSET, usually, is any asset that is considered in the realm of intellectual property that should not be disclosed, e.g., all information having to do with clients/customers, including but not limited to names, addresses, telephone numbers and other contact information, as well as any other personal or business related information, as it may exist from time to time is a valuable, and unique proprietary asset to a company. Proprietary assets would also include trade secrets and undisclosed inventions.
PROPRIETORS DRAW is when a business proprietor draws money for personal needs, but is taxed on business results (at individuals’ marginal rate) regardless of drawings.
PROPRIERTORSHIP see SOLE PROPRIERTORSHIP.
PRO RATA is the basis for allocating an amount proportionally to the items involved. An amount may be proportionally distributed to assets, expenses, funds, etc.
PROSPECTIVE PAYMENT SYSTEM (PPS), in healthcare, is a Medicare administered payment plan where providers are paid a predetermined sum for caring for a given number of consumers. The built in incentive is for providers to control costs, theoretically leading to more cost effective care.
PROSPECTIVE REIMBURSEMENT, in healthcare, is a reimbursement method where the third party payer set the amount of money for a particular service to be delivered to clients in agreement with the organization before the service is delivered.
PROSPECTUS is the disclosure document for an offering registered with the SEC. The final prospectus is issued on the effective date, i.e., when the offering is released by the SEC.
PROVISION, generally, is to prepare in advance for an event that is projected to place in the future. In accounting, it is an amount charged against profits for a specific liability (for example: bad debts, depreciation or taxes). A liability may be known, but the amount is often uncertain. This uncertainty may lead to an adjustment in a later income statement once the final amount of the liability is ascertained.
PROX see PROXIMO.
PROXIMO (usually abbreviated to 'PROX') means of or in the following month.
PRUDENCE is having foresight and caution along with discretion, and to not act recklessly.
PRUDENCE CONCEPT, otherwise known as conservatism, says that whenever there are alternative procedures or values, the accountant will choose the one that results in a lower profit, a lower asset value and a higher liability value.
PUBLIC CORPORATION is a corporation formed by federal, state or local governments for specific public purposes.
PUBLIC OWNERSHIP is either: a. Government ownership and operation of a productive facility for the purposes of providing some goods or services to citizens; or, b. In investments, portion of a corporations stock that is publicly traded and owned in the open market.
PURCHASE METHOD is accounting for an acquisition using market value for the consolidation of the two entities` net assets on the balance sheet. Generally, depreciation/amortization will increase for this method (due to the creation of goodwill) compared to the POOLING OF INTEREST METHOD resulting in lower net income.
PURCHASE MONEY AGREEMENT is an agreement under which a person pledges the property or item bought as security.
PURCHASE MONEY INTEREST is that interest associated with the purchase money mortgage.
PURCHASE MONEY MORTGAGE (PMM) is seller financing as a part of the purchase price.
PURCHASE ORDER is a written authorization for a vendor to supply goods or services at a specified price over a specified time period. Acceptance of the purchase order constitutes a purchase contract and is legally binding on all parties.
PURE COST is any direct readily verifiable cost assignable to the subject or item, e.g., the direct cost of producing a product.
PURE RESEARCH is motivated exclusively by the search for knowledge for its own sake.
PUSH-PULL STRATEGY is the effective simultaneous use of a combination of two marketing strategies: PUSH = 1. (physical distribution definition) A manufacturing strategy aimed at other channel members rather than the end consumer. The manufacturer attempts to entice other channel members to carry its product through trade allowances, inventory stocking procedures, pricing policies, etc. 2. (sales promotion definition) The communications and promotional activities by the marketer to persuade wholesale and retail channel members to stock and promote specific products. PULL = 1. (physical distribution definition) A manufacturing strategy aimed at the end consumer of a product. The product is pulled through the channel by consumer demand initiated by promotional efforts, inventory stocking procedures, etc. 2. (sales promotion definition) The communications and promotional activities by the marketer to persuade consumers to request specific products or brands from retail channel members.
PUT is (1) A stipulated privilege of buying or selling a stated property, security, or commodity at a given price (strike price) within a specified time (for an American-style option, at any time prior to or on the expiration date). A securities option is a negotiable contract in which the seller (writer), for a certain sum of money called the option premium, gives the buyer the right to demand within a specified time the purchase (call) or sale (put) by the option seller of a specified number of bonds, currency units, index units, or shares of stock at a fixed price or rate called the strike price. Many options are settled for cash equal to the difference between the aggregate spot price and the aggregate strike price rather than by delivery of the underlying. In the
PUT OPTION is the right but not the obligation to sell an underlying at a particular price (strike price) on or before the expiration date of the contract. Alternatively, a short forward position with an upside insurance policy.
PUT WARRANT is a security that, in contrast to a conventional warrant, gives the holder the right to sell the underlying or to receive a cash payment that increases as the value of the underlying declines. Put warrants, like their call warrant counterparts, generally have an initial term of more than one year.
QUALIFIED DOMESTIC RELATIONS ORDER (QDRO) is when a state court allocates an interest in a qualified retirement plan to a former spouse through a qualified domestic relations order. Payments made to a former spouse as the result of a QDRO will not result in the taxpayer being assessed a penalty for early withdrawal from the plan; the former spouse will be taxed on the benefits when received, or the benefits can be rolled over tax free into an IRS or another qualified retirement plan.
QUALIFIED OPINION is the auditor’s opinion accompanying a financial statement that calls attention to limitations in the audit or exceptions the auditor has taken with the audit of the statements.
QUALITATIVE INFORMATION is information that is descriptive in nature, relating to, or involving quality or kind.
QUANTATIVE INFORMATION is information relating to, or expressible in, terms of quantity.
QUARTERLY REPORT see INTERIM STATEMENT.
QUICK ASSETS is current assets minus inventories.
QUICK RATIO (or Acid Test Ratio) is a more rigorous test than the Current Ratio of short-run solvency, the current ability of a firm to pay its current debts as they come due. This ratio considers only cash, marketable securities (cash equivalents) and accounts receivable because they are considered to be the most liquid forms of current assets. A Quick Ratio less than 1.0 implies "dependency" on inventory and other current assets to liquidate short-term debt.
QUOTE TO CASH covers the business process for creating a quote for a prospect or customer, order management, invoicing and cash receipt. The functionality is highly integrated with Supply Chain Management and Customer Management. In traditional systems, it is funded in modules like order entry and accounts receivable.
R&D see RESEARCH & DEVELOPMENT.
RANDOM SELECTION is a probability-based selection protocol in which each unit has a known probability of being selected. The chances of selection need not be equal for each unit, as long as the chances are known for each unit.
RATE OF RETURN is the gain or loss for a security in a particular period, consisting of income plus capital gains relative to investment, usually quoted as a percentage. The real rate of return is the annual return realized on that investment, adjusted for changes in the price due to inflation.
RATIO is the relative size, expressed as the number of times one quantity is contained in another (for example, the ratio of assets to liabilities of a company having total assets of $200,000 and liabilities of $150,000 would be $200,000 divided by $150,000 = 1.33).
RATIO ANALYSIS involves conversion of financial numbers for a firm into ratios. Ratio analysis allows comparison of one firm to another. Since ratios look at relationships inside the firm, a firm of one size can be directly compared to a second firm (or a collection of firms) which may be larger or smaller or even in a different business. Financial Ratio Analysis is a method of comparison not dependent on the size of either firm. Financial Ratios provide a broader basis for comparison than do raw numbers. In the VentureLine database the comparison is conducted against the industry (SIC Code) in which each particular listing is associated.
REACH, in advertising, is the total number of people within a target market that will be reached through an advertising campaign.
REAL, dependent upon usage, means either 1. in economics, refers to measures such as cost, price and income, which are corrected for inflation over time in order to permit a comparison of actual purchasing power; or, 2. actual cost, as opposed to nominal.
REALIZATION PRINCIPLE is that revenue should be recognized at the time goods is sold and services are rendered.
REALIZED INCOME see REALIZED NET INCOME.
REALIZED NET INCOME, in relation to a particular investment, is the amount by which the total cash gains from an investment exceeds the total losses from the investment. The Realized Net Income from any investment cannot be less than zero.
REAL PROPERTY is land and / or any permanent structures attached to it; to include saleable natural resources, e.g., vacant land, buildings, farms, oil, gas, timber, etc.
REASONABLE CERTAINTY is the degree of certainty that would be found to be in existence by a reasonable person.
REASONABLENESS TEST is where the expected value is determined by reference to data partly or wholly independent of the accounting information system, and for that reason, evidence obtained through the application of such a test may be more reliable than evidence gathered using other analytical procedures.
REASONABLE PERSON is a phrase to denote a hypothetical person who exercises qualities of attention, knowledge, intelligence, and judgment that society requires of its members for the protection of their interest and the interest of others.
REBATE is a. payment to a customer upon completion of a purchase as an inducement or sales promotion tactic; b. unearned interest refunded to borrower if the loan is paid off prior to maturity; c. amount paid back or credit allowed because of an over-collection or the return of an object sold (i.e., a refund).
RECAPITALIZATION: It is dependent upon how you use the term. The term recapitalization in itself is, dependent upon the scenario, simply an adjustment of the relationships between the debt and equity that funds a firms assets. However, it can become quite complex dependent upon under what conditions or reasons the firm is being recapitalized. This is specially true if recapitalization is being pursued to ward off a hostile takeover.
RECAST EARNINGS is a recalculation of earnings based on the assumption that certain expenses could be eliminated through new forms of cost savings. Recast earnings are often used in the analysis of a takeover or merger.
RECEIPT is a written acknowledgment that a specified article, sum of money, or shipment of merchandise has been received.
RECEIPTS this term, unless otherwise qualified, in accounting means cash received.
RECEIVER is a court appointed person who takes possession of, but not title to, the assets and affairs of a business or estate that is in a form of bankruptcy called RECEIVERSHIP. The receiver collects rents and other income and generally manages the affairs of the entity until a disposition is made by the court.
RECEIVERSHIP is equitable remedy whereby a court orders property placed under the control of a RECEIVER so that it may be preserved for the benefit of affected parties. A failing company may be placed in receivership in an action brought by its creditors. The business is often continued but is subject to the receiver's control. See also BANKRUPTCY.
RECIPROCAL INVESTMENT is primarily a protection measure between states (governments) that ensures that investment between two or more states is balanced.
RECONCILIATION is the adjusting of the difference between two items (e.g., balances, amounts, statements, or accounts) so that the figures are in agreement. Often the reasons for the differences must be explained. One example would be reconciling a checking account (bringing the checking ledger and bank balance statement into agreement).
RECOURSE, in finance, is the right to demand payment from the maker or endorser of a negotiable instrument (as a check).
RECOVERY, in finance, a. absorption of cost through the allocation of depreciation; b. residual cost or salvage value of a fixed asset after all allowable depreciation; or, c. collection of an accounts receivable that had been previously been written off as a bad debt.
RED HERRING is a preliminary registration statement describing the issue (the IPO) and prospects of the company that must be filed with the SEC or provincial securities commission. There is no price or issue size stated in the red herring. Red Herring's are sometimes updated several times before it is called the final prospectus. It is known as a red herring because it contains a statement typed in red that the company is not attempting to sell their shares before the registration is approved by the SEC.
RED-WELLS are when legal records are set up in file folders and file pockets called "red-wells." Clients usually have several matters. Red-wells are usually four-inch filing media in which file folders are inserted. A legal file may have several standard components called "sub-files." These sub-files are normally inserted into red-wells.
REFERENDUM is when a legislative act is referred for final approval to a popular vote by the electorate, e.g., a bond referendum.
REGISTER, in accounting, is a formal or official recording of items within a book or register, e.g., Fixed Asset Register or Invoice Register.
REGISTERED BONDS are bonds for which the names and addresses of the bondholders are kept on file by the issuing company.
REGISTERED INVESTMENT ADVISOR (RIA) is an investment advisor registered with the SEC. No certification is required.
REGISTRATION RIGHTS is the right to require that a company register restricted shares. Demand Registered Rights enable the shareholder to request registration at any time, while Piggy Back Registration Rights enable the shareholder to request that the company register his or her shares when the company files a registration statement (for a public offering with the SEC).
REGRESSIVE TAX is a tax system to where the more income that is realized the lower the tax rate becomes.
REIMBURSEMENT is to pay back to someone, e.g. to pay an employee for travel expenses that was paid by the employee out of that employees own personal funds.
RELATED PARTY TRANSACTION is an interaction between two parties, one of whom can exercise control or significant influence over the operating policies of the other. A special relationship may exist, e.g. a corporation and a major shareholder.
RELEVANT COST, in managerial accounting decision-making situations, is any negative-implications phenomenon which is consequent upon the production process, whether it is denominated in money terms or not.
REMITTING BANK is a bank that sends a draft to the overseas bank for collection.
REMUNERATION is the act of paying for goods or services or to recompense for losses (Example: Receiving remuneration for work, i.e., a paycheck).
RENT EXPIRED is based upon prepaid rent and the amount of time that has elapsed that is covered under the prepaid term of the rental.
REPLACEMENT VALUE is a valuation similar to an adjusted book value analysis. Replacement value is different than liquidation value in that is uses the value of the replacement value of assets, which is usually higher than book value. Liabilities are deducted from the replacement value of the assets to determine the replacement value of the business.
REPO is a contract under which the seller of securities, such as Treasury Bills, agrees to buy them back at a specified time and price. Also called repurchase agreement or buyback.
REPORTABLE CONDITION is a matter coming to the auditor’s attention relating to SIGNIFICANT DEFICIENCIES in the design or operation of the entity's internal control that could ADVERSLY AFFECT an entity’s ability to fulfill future obligations with customers and/or the satisfaction of liabilities.
REPORTABLE SEGMENT is a business segment or geographical segment for which IAS 14 requires segment information to be reported.
REPORTING ENTITY is the legal entity for which financial reports are prepared and made available.
REPORTING PERIOD see ACCOUNTING PERIOD.
REQUIRED RATE OF RETURN see HURDLE RATE.
REQUISITION is a written request to buy something. Usually, once approved, the requisition is then transformed into a purchase order.
RESEARCH & DEVELOPMENT (R&D) is research as a planned activity aimed at discovery of new knowledge with the hope of developing new or improved products and services. Development is the translation of the research findings into a plan or design of new or improved products and services.
RESERVE is an accounting entry that properly reflects contingent liabilities.
RESERVE ACCOUNTS, generally, are those accounts where retained earnings are set aside to satisfy dividends, improvements, contingencies, retirement of preferred stock, etc.
RESIDUAL CLAIM is a claim to a share of earnings after debt obligations have been satisfied.
RESIDUAL EQUITY THEORY is the theory that common stockholders are considered to be the real owners of the business, i.e., Assets - Liabilities - Preferred Stock = Common Stock.
RESIDUAL INCOME is income from efforts which continue to generate revenue over time without requiring any additional effort (e.g., a stream of future royalty payments from a book).
RESIDUAL OWNERSHIP see RESIDUAL EQUITY THEORY.
RESIDUAL VALUE is: a) Realizable value of a fixed asset after deducting costs associated with its sale; b) Scrap value or the value to a junk dealer; or c) The amount remaining after all depreciation has been deducted from the original cost of a depreciable asset.
RESOURCE ABSORPTION, in business, is the depletion of the finite resources available to a company, i.e., labor, machinery, materials, etc.
RESPONSIBILITY ACCOUNTING is the collection, summarization, and reporting of financial information about various decision centers throughout an organization; can also be called profitability accounting or activity accounting. It tracks costs, revenues, or profits to the individual managers who are responsible for making the decisions about costs, revenues, or profits and taking action about them.
RESTATEMENT OF FINANCIALS are sometimes required by the IRS when the IRS, through audit, determines that IRS rules were not followed; either lawfully or fraudulently. Such restatements usually have a negative effect on the financial results of the audited entity for the periods in question.
RESTRICTED ASSETS are assets / resources which are restricted by legal or contractual requirements for use under specific circumstances or purposes.
RESULTS FROM OPERATION is a synonym for the financial statement of a corporation: P&L, balance sheet, statement of cash flows, and sometimes a statement of owners equity. See FINANCIAL STATEMENT.
RETAINAGE, in a construction contract, is the money earned by a contractor but not paid to the contractor until the completion of construction or another predetermined date. The retainage is held back as assurance for the quality of the contractors work.
RETAINED EARNINGS are profits of the business that have not been paid out to the owners as of the balance sheet date. The earnings have been "retained" for use in the business (Retained Earnings is an account in the equity section of the balance sheet). It is comprised of the balance, either debit or credit, of appropriated or unappropriated earnings of an entity that are retained in the business. NOTE: Appropriated earnings are not available for dividends, but may be used to reduce a deficit or may be transferred to stated capital. Other appropriations of profits require a vote of the shareholders.
RETAINED EARNINGS STATEMENT see STATEMENT OF RETAINED EARNINGS.
RETROSPECTIVE REIMBURSEMENT, in healthcare, is where reimbursement came after medical care was delivered.
RETURN ON ASSETS (ROA) shows the after tax earnings of assets. Return on assets is an indicator of how profitable a company is. Use this ratio annually to compare a business' performance to the industry norms: The higher the ratio the greater the return on assets. However this has to be balanced against such factors as risk, sustainability and reinvestment in the business through development costs.
RETURN OF CAPITAL is the distribution of cash that resulted from tax savings on depreciation, sale of a capital asset or securities, or any other sources unrelated to retained earnings.
RETURN ON CAPITAL EMPLOYED (ROCE) is a measure of how effectively the company is using its capital. The formula to measures the return on all the assets the company is using: Profit before interest and tax (PBIT) / (total assets - current liabilities)
RETURN ON EQUITY (ROE) measures the overall efficiency of the firm in managing its total investments in assets and in generating a return to stockholders. It is the primary measure of how well management is running the company. ROE allows you to quickly gauge whether a company is a value creator or a cash consumer. By relating the earnings generated to the shareholders' equity, you can see how much cash is created from the existing assets. Clearly, all things being equal, the higher a company's ROE, the better the company.
RETURN ON INVESTMENT (ROI) is a profitability measure that evaluates the performance of a business. ROI can be calculated in various ways. The most common method is Net Income as a percentage of Net Book Value (total assets minus intangible assets and liabilities).
RETURN ON NET WORTH see RETURN ON STOCKHOLDERS EQUITY.
RETURN ON SALES is a measure of a company's profitability, equal to a fiscal year's pre-tax income divided by total sales.
RETURN ON STOCKHOLDERS EQUITY is a measure of how profitably the company is utilizing shareholders' funds. It is calculated: profit after tax ÷ total stockholder's equity. Also called RETURN ON NET WORTH.
REVALUATION, in general, is the reconsideration of the value or worth of a property. In currency, it is the increase in the exchange rate of a currency as a result of official action.
REVALUATION SURPLUS, under the revaluation model, increases in carrying amount above a cost-based measure are recognized as revaluation surplus.
REVENUE is the inflows of assets from selling goods and providing services to customers; including the reduction of liabilities from selling goods and providing services to customers.
REVENUE BONDS are a type of municipal bond where principal and interest are secured by revenues such as charges or rents paid by users of the facility built with the proceeds of the bond issue. Projects financed by revenue bonds include highways, airports, and not-for-profit health care and other facilities.
REVENUE CONTRACT is a binding agreement between a governmental body and another party that defines the terms under which revenue will be received. A contract can be distinguished from a customer purchase order by the fact that a contract will contain the signatures of both parties, while a purchase order will contain only the signature of the customer.
REVENUE EXPENDITURE is an outlay than only benefits the current business year. It is treated as an expense that is matched against revenues.
REVENUE RECOGNITION is the process of recording revenue, under one of the various acceptable methods, in the accounting period. In each period of revenue recognition, all related expenses should be matched to revenue. The most common method of recognizing revenue is at the time of sale or provisioning of service.
REVENUE RESERVE is a fund that is not a CAPITAL RESERVE, i.e. the funds are distributable.
REVERSE TAKEOVER can occur in different forms: 1. a smaller corporate entity takes over a larger one.; 2. a private company purchases a public one; or, 3. a method of listing a private company while bypassing most securities regulations, whereby which a shell public company buys out a functioning private company whose management then controls the public company.
REVERSING ENTRY is a very special type of adjusting entry. Generally, it is a debit or credit bookkeeping entry made to reverse a prior bookkeeping entry. They can be extremely useful and should be used where necessary. A reversing entry comes in two parts: the original adjusting entry, and the reverse, or opposite entry. The second entry is written by simply reversing the position of all debits and credits. Ultimately, the end result on the books is zero, but the adjusting entry serves to correctly allocate an expense, so the financial statements are correct.
For example: X Company has a payroll department, and cuts checks every two weeks after tabulating hours, and calculating net pay. A large number of allocations have to be made to various withholding accounts. The accountants don't want to interfere with the operations of the payroll department. And the employees also want the department to run efficiently so they can get their pay checks on time.
At the end of the year the accountants need to appropriately allocate payroll expenses, plus taxes due and payable. Rather than interfere with the payroll department the calculation is made on paper (or computer), and entered as an adjusting entry. It is marked to be reversed. After the closing entries are made, the first entries of the new year are the reversing entries. They undo the effects of the adjusting entry.
If the adjusting entry is not reversed, the books will not be correct. Both the accountants and payroll department will be making entries related to payroll. The reversing entry effectively allows the accountants to make adjusting entries without causing the books to be incorrect; the payroll department continues to make routine entries, and doesn't need to make any special entries or allocations.
REVERSION ASSET see ASSET REVERSION.
REVIEW is an accounting service providing some assurance to the Board of Directors and interested parties as to the reliability of financial data without the CPA conducting an examination in accordance with generally accepted accounting standards. The AICPA auditing standards board formulates review standards for public companies while the AICPA Accounting and Review Services Committee provides review standards for non-public businesses.
REVOCABLE LETTER OF CREDIT is a letter of credit which can be cancelled or altered by the drawee (buyer) after it has been issued by the drawee's bank.
REVOLVING COLLATERAL are accounts receivable or inventory which change from day to day.
REVOLVING LINE OF CREDIT in commercial banking is a contractual agreement between a bank and, usually, a company where the bank agrees to provide loans up to a specified maximum over a specified period, usually a year or more. In consumer banking, it is a loan account requiring monthly payments less than the full amount of the loan, and the balance is carried forward with a finance charge on that balance.
REVOLVING FINANCING is financing secured by collateral.
REVOLVING FUND is money that is renewed as it is used.
REVOLVING LOAN is a loan that is automatically renewed upon maturity.
RFP is Request for Proposal.
RISK is the measurable possibility of losing or not gaining value. Risk is different from uncertainty. Uncertainty is not measurable.
RISK ADJUSTED RETURN is when we subtract from the rate of return on an asset a rate of return from another asset that has similar risk. This gives an abnormal rate of return that shows how the asset performed over and above a benchmark asset with the same risk. We can also use the beta against the benchmark to calculate an alpha which is also risk adjusted performance.
ROA see RETURN ON ASSETS.
ROBUST is when a business is considered fully developed and healthy.
ROCC is an acronym for Return On Committed Capital.
ROE see RETURN ON EQUITY.
ROG, in business, is an acronym meaning “Receipt Of Goods”.
ROI (Return on Investment) can be calculated in various ways. The most common method is Net Income as a percentage of Net Book Value (total assets minus intangible assets and liabilities).
ROIC see RETURN ON INVESTED CAPITAL.
ROLL FORWARD BUDGET see CONTINUOUS BUDGET.
ROLLING STOCK is the equipment available for use as transportation, as automotive vehicles, locomotives, or railroad cars, owned by a particular company or carrier. Does not include aircraft or water borne craft.
ROLLOVER is: a. in
ROYALTY is the share of the product, or of the proceeds realized from the product, reserved by an owner for permitting another entity to exploit and use that entity’s property, i.e. it is the rental paid to the original owner of property based upon a percentage of sales, profit or production. Royalty can involve literary works, inventions, and other intellectual property, as well as mining leases and conveyances.
RUNNING RATE is a sustained constant rate, often the only important single rate except for zero observed under a given schedule (as in some ratio performances); also known as stream rate.
RUNNING TOTAL is the sum of any given set of numbers that is incremented/decremented as additional numbers become available over time. For example, a retail store makes sales throughout a time period, the running total is the sum of their sales, including returns/credits, at any given point of time during that time period: day, week, month, quarter, year.
RUN RATE, in finance, is how the financial performance of a company would look if you were to extrapolate current results out over a certain period of time. In accounting, it is the average annual dilution from stock option grants at a company over the most recent three year period reported in the annual report.
SAFE HARBOR RULE is a concept in statutes and regulations whereby a person who meets listed requirements will be preserved from adverse legal action. Frequently, safe harbors are used where a legal requirement is somewhat ambiguous and carries a risk of punishment for an unintended violation.
SALES CONTRACT see SALES ORDER.
SALES INVOICE is a document that records the sale of goods or services from a vendor to a customer.
SALES / RECEIVABLES (Receivables Turnover) is a ratio that measures the number of times trade Receivables turn over during the year. Generally, the higher the turnover of receivables, the shorter the time between sale and cash collection. It indicates how fast the company is getting paid for goods and services. Receivables turnover is best compared to the industry in order to determine if the company should improve their collection rate. The faster the receivables turnover, the better cash flow will look. Slow or below par turnover can be an indication of systemic problems within the company. It is best to compare receivables turnover with that of industry averages.
SALES MULTIPLE is the most widely used valuation benchmark used in the valuation of a business. The information needed are annual sales and an industry multiplier, which is usually a range of .25 to 1 or higher. The industry multiplier can be found in various financial publications, as well as analyzing sales of comparable businesses. This method is easy to understand and use. The sales multiple is often used as the valuation benchmark.
SALES ORDER, also known as SALES CONTRACT, is a contract by which buyer and seller agree to the terms and conditions of a sale.
SALES PROCEEDS are the sum of the service units (products, services) sold by a corporation within a particular period. The sales proceeds are calculated from the quantities sold (pcs, kg, hrs) multiplied by the sales price per unit within a particular period.
SALVAGE VALUE is: a) Realizable value of a fixed asset after deducting costs associated with its sale; b) Scrap value or the value to a junk dealer; or c) The amount remaining after all depreciation has been deducted from the original cost of a depreciable asset.
SAME STORE SALES is used when analyzing the retail industry. It compares sales in stores which have been open for a year or more.
S&P 500 see STANDARD AND POOR'S (S&P) 500.
SAP is an integrated enterprise resource planning (ERP) system that seamlessly integrates most activities of a company.
SCHEDULE is an ordered list of times at which things are planned to occur, e.g., cash receipts schedule and amortization schedule.
SCIENTER THEORY is based on the word 'scienter', which is Latin for "having knowledge." In criminal law, the theory refers to knowledge by a defendant that his/her acts were illegal or his/her statements were lies and thus fraudulent. In securities, it is to knowingly transact a fraudulent securities deal.
S CORPORATION see SUBCHAPTER S.
SDCF is Sales & Distribution Cash Flow.
SEC is the Securities Exchange Commission.
SECURED is an obligation backed by a pledge of collateral. Opposite of unsecured.
SECURED LIABILITY is a liability that has a degree of protection towards satisfaction if unpaid because the debtor has pledged personal/company assets towards satisfaction of that liability; e.g., a property mortgage is a secured liability because the mortgage holder has a guarantee through a lien on the property.
SECURITIES FRAUD, in most cases, is nothing more than stealing. Federal and state securities laws contain more technical definitions. But when investors are enticed into purchasing security instruments based on untrue data, statements or promises, it is securities fraud.
SECURITIZATION is the process of creating a pass-through, such as the mortgage pass-through security, by which the pooled assets become standard securities backed by those assets. Also, refers to the replacement of non-marketable loans and/or cash flows provided by financial intermediaries with negotiable securities issued in the public capital markets.
SEGMENT REVENUE is revenue, including intersegment revenue, which is directly attributable or reasonably allocable to a segment. Includes interest and dividend income and related securities gains only if the segment is a financial segment (bank, insurance company, etc.).
SEGREGATED FUND is a pooled investment fund, much like a mutual fund, established by an insurance company and segregated from the general capital of the company. Its chief distinction from a mutual fund is its guarantee that, regardless of fund performance, at least a minimum percentage of the investor's payments into the fund will be returned when the fund matures.
SELF-CONTRUCT ASSETS is the costs incurred to build it yourself.
SEMIVARIALBLE COST is one that varies with changes in volume, but, unlike variable cost, does not vary in direct proportion. This component contains both fixed and variable elements, e.g., a rented vehicle may have a rental fee (fixed), but contain a mileage adder (variable).
SENIOR DEBT/NOTE are loans or debt securities that have a claim prior to junior obligations and equity on a corporation’s assets in the event of a liquidation.
SENSEX is a Bombay Stock Exchange Index (BSE 30-Share Benchmark Sensex Index).
SENSITIVE ASSETS are those assets that can be affected by uncontrollable external factors. There are interest rate sensitive assets (assets yielding cash-flows at some fixed points in the future) and theft-sensitive assets (inventory for example).
SENSITIVE LIABILITIES normally refers to 'interest rate sensitive liabilities' (i.e., liabilities where there is a floating interest rate).
SENSITIVITY ANALYSIS is the analysis of how sensitive outcomes are to changes in the assumptions. The assumptions that deserve the most attention should depend largely on the dominant benefit and cost elements and the areas of greatest uncertainty of the program or process being analyzed.
SERIAL BOND is a bond issue in which the bonds mature periodically over a number of years.
SERVICE BUSINESS is a form of business providing different types of labor services in a wide variety of business sectors, e.g., lawn mowing, housecleaning and clothes cleaners are three types of consumer services offered to the general public.
SERVICE CHARGE ACCOUNTING, in property management, is estate and property service charge accounting system that provides the mechanism for comprehensive service charge reconciliation reports for both the tenant and the property manager. Expenditure can be apportioned equally over the entire service charge period or can be allocated to a specific date range within the period. Full budget reporting and next period budget calculation routines are usually provided.
SERVICE LEVEL AGREEMENT (SLA) is performance objectives reached by consensus between the user and the provider of a service, or between an outsourcer and an organization. A service level agreement specifies a variety of performance standards that may or may not include "service level."
SETOFF is the discharge of a debt by setting against it a distinct claim in favor of the debtor.
SETUP COST see FIXED CHARGE.
SEVERANCE TAX is levied on production of natural resources taken from land or water bottoms within the territorial boundaries of a state.
SG&A refers to the indirect overhead costs contained within the Sales, General and Administrative expense / cost categories.
SGD is an acronym for SIGNED.
SHARE is one unit of ownership interest in a company, mutual fund, limited partnership, etc.
SHARE APPLICATION MONEY is that money received by a company during an IPO. Payments received for a subscription of stock is normally received over the IPO life. For example: Widgets Limited has been registered with an authorized capital of $2,00,000 divided into 2,000 shares of $100 each of which, 1,000 shares were offered for public subscription at a premium of $5 per share, payable as:
on application $10
on allotment $25 (including premium)
on first call $40
on final call $30
For a total of $105/share
The amounts received would be carried as a current liability until such time as the stock is issued, then it would be considered as part of equity.
SHARE BUY-BACK is when a company makes an offer to buy back some of its own shares. There are several types of buy-backs. Three common types are: 1. an equal access scheme - when the company offers to buy back the same proportion of each shareholder's shares; 2. a selective buy-back - when the company offers to buy back shares from only one or some of its shareholders; or, 3. the company may buy the shares on the exchange where the shares are traded.
SHARE CAPITAL is that portion of a corporation's equity obtained from issuing shares in return for cash or other considerations.
SHAREHOLDER is an individual or company, (including corporations) that legally owns one or more shares of a company.
SHAREHOLDER OF RECORD is any individual or company that owns at least one share of stock of a corportion; such shares represented by a stock certificate or record of shares held by the owner's broker.
SHAREHOLDERS FUND is equity plus accumulated profits.
SHAREHOLDER'S EQUITY is total assets minus total liabilities. It is the same as EQUITY, NET WORTH and stockholder’s equity.
SHARE PREMIUM is the difference between the higher price paid for a share of stock and the stocks par value when issued.
SHARPE RATIO, named after William P. Sharpe, is a measurement of portfolio trading performance. It is calculated by subtracting risk free rate from total portfolio return, then dividing by the standard deviation of the portfolio:Sharpe ratio = Total portfolio return – Risk free rate / Portfolio standard deviation.
SHIP IN PLACE is sales billed to customers prior to delivery and held by the seller (also: "bill and hold" or "bill in place" sales).
SHIPPING NOTICE is a formal notification that goods ordered are en-route to their destination.
SHORT TERM ASSET is an asset expected to be converted into cash within the normal operating cycle (usually one year), e.g. accounts receivable and inventory.
SHORT TERM LIABILITY is a liability that will come due within one year or less.
SIC (STANDARD INDUSTRIAL CLASSIFICATION) is a U.S. Government numerical coding system used in the
SIGHT DRAFT is a draft which is payable on demand.
SIGNATURE LOAN is a loan secured by the borrower with nothing more than the signature of that borrower.
SILENT PARTNERSHIP is the relation of partnership sustained by a person who furnishes capital only, i.e., the partner is not involved in the day-to-day operations or decisions of the entity.
SIMPLE INTEREST is interest computed on principal alone, as opposed to compound interest which includes accrued interest in the calculation.
SIMPLE JOURNAL ENTRY is a journal entry that involves only one debit and one credit in the transaction.
SINGLE-ENTRY BOOKKEEPING is a simple bookkeeping system in which all transactions are recorded in a single record (e.g., a checkbook that indicates expenditures only). Single-entry does not rely upon equal debits and credits.
SINKING FUND is a sum set apart periodically from the income of a government or a business and allowed to accumulate in order ultimately to pay off a debt. A preferred investment for a sinking fund is the purchase of the government's or firm's bonds that are to be paid off. Usually the fund is administered by a trustee.
SIPS is an acronym for Secure Internet Payment Service (e.g., Cybercash).
SKIP PERSON is a transfer of property to a person who is in a generation below a child of the transferor, referred to as a "skip" person, typically a grandchild or great grandchild.
SKU is an acronym for Stock Keeping Unit. It is usually used to identify an item carried in inventory or stock.
SLIPPAGE is the difference between estimated transactions costs and actual transactions costs. The difference usually represents revisions to price difference or spread and commission costs.
SLR is an acronym with several possible meanings, e.g., Stock Level Report, Stock Level Requirement, System Level Requirement(s).
SMALL-CAP is a stock with a capitalization, meaning a total equity value, of less than $500 million.
SOCIAL ENTITY is the separate existence of an organization that is perceived to exist, by its members and the public at large, as a 'given', i.e. something that exists before and outside of them.
SOES (Small Order Execution System) trading is an electronic method of day trading the NASD market. At present, SOES trading is at the center of controversy between the NASD, SEC, individual traders, and the courts. SOES is changing the way trading is done on the NASD, and it may rewrite the rules of the game for trading. Bandits is just a term being used for the individuals using the SOES system for day trading.
SOFT COSTS are those extraneous costs that are not readily foreseen or budgeted for, e.g. legal fees, loan fees and interest, etc.
SOLE PROPRIETOR is an individual who owns a business as opposed to stock in a corporation. A sole proprietor pays no corporate income tax but has unlimited liability for his/her business debts and obligations. See SOLE PROPRIERTORSHIP.
SOLE PROPRIERTORSHIP is a business structure in which an individual and his/her company are considered a single entity for tax and liability purposes. A sole proprietorship is a company which is not registered with the state as a limited liability company or corporation. The owner does not pay income tax separately for the company, but he/she reports business income or losses on his/her individual income tax return. The owner is inseparable from the sole proprietorship, so he/she is liable for any business debts; also called proprietorship. The distinguishing characteristics of a sole proprietorship include: only one owner for the business (hence, "sole") and the business is unincorporated.
SOLVENCY is a company's long-term ability to meet all financial obligations.
SOUND, when used in a financial context, means financially secure and safe.
SOURCE DOCUMENTS are the primary documents used when forwarding an argument or making a presentation of fact. Usually used as a direct reference as a source of empirical data, expert opinion or information. See SUPPORTING DOCUMENTS.
SPE see SPECIAL-PURPOSE ENTITY.
SPECIAL JOURNAL contains records of original entry other than the general journal that are designed for recording specific types of transactions of similar nature, e.g. Sales Journal, Purchase Journal, Cash Receipts Journal, Cash Disbursements Journal, and Payroll Journal.
SPECIAL-PURPOSE ENTITY (SPE) is a financing vehicle that is not a substantive operating entity, usually one created for a single specified purpose. An SPE may be in the form of a corporation, trust, or partnership. Special-purpose entities have been used for several decades for asset securitization, risk sharing, and to take advantage of tax statutes.
SPECIAL PURPOSE VEHICLE (SPV) is an organization constructed with a limited purpose or life. Frequently, these Special Purpose Vehicles serve as conduits or pass through organizations or corporations. In relation to securitisation, it means the entity which would hold the legal rights over the assets transferred by the originator.
SPECIFIC RESEARCH is a method used when gathering primary information for a market survey where targeted customers / consumers are asked very specific and in-depth questions geared toward resolving problems found through prior exploratory research.
SPENDING LEVEL is the true expenditure or cash outlay of any entity in a given category or budgetary area.
SPIN-OFF is a type of corporate reorganization in which the original corporation transfers some of its assets to a newly formed corporation. In exchange for the spun off assets, the original corporation receives all of the new corporation's capital stock, which it then distributes to its shareholders as a property dividend.
SPIN-OFF RULING is a legally binding ruling by the Internal Revenue Service as to any aspect of a spin-off by a corporation. See also SPINOFF.
SPLIT-INTEREST AGREEMENT, in not-for-profits, is a contribution to the institution in which the institution must share the investment income/benefits with the donor and other beneficiaries if designated.
SPLIT-OFF POINT is the stage in the production process at which joint products become identified as distinct products which can be sold or processed further; this is called the split-off point.
SPLIT PAYMENT allows the customer to: a. pay part of the bill with cash and part with a credit card; or, b. apply portions of payments across several invoices.
SPONTANEOUS ASSETS are assets that arise automatically, in the course of operating a company day-to-day, when a company purchases assets and they are delivered.
SPONTANEOUS LIABILITIES are obligations that are realized automatically, in the course of operating a company day-to-day, when a company buys goods and services on credit.
SPOT COMMODITY is a commodity traded with the expectation that it will actually be delivered to the buyer, as contrasted with to a FUTURES CONTRACT that will usually expire without any physical delivery actually taking place. Spot commodities are traded in the SPOT MARKET.
SPOT RATE is the price at which a currency can be purchased or sold and then delivered within two business days, e.g., spot dollar.
SPREAD see ASK PRICE.
SPREADSHEET is (1) A multi-column sheet of paper used for performing numeric work, especially accounting and business related weekly or monthly summaries. (2) A computer application program that supports a user in numeric manipulation, especially in column / row format.
SPV see Special Purpose Vehicle.
SRO is Self-Regulatory Organization.
STATEMENT OF AFFAIRS is the listing of a debtor's assets and liabilities sworn under oath by the debtor before a lawyer or designated legal/court entity.
STOCK POWER is a form that permits a Donor to provide the authority to change the name on a stock certificate from the Donor’s name to the name of another party, such as a charitable organization, without using a “transfer agent”. This form, together with the designated stock certificate and Letter of Authorization, given to the charitable organization will expedite the transfer of the Donor’s stock certificate by the charitable organization’s brokerage to expedite the sale and receipt of proceeds from the gift of securities.
STAKE is a share or an interest in an enterprise, especially a financial share.
STALE CHECK is a check that is six months or older than the date affixed to the check by the maker. If a customer’s check is presented more than six months after the date appearing on the check, the paying bank has the option of paying or dishonoring the check because the check is deemed "stale".
STANDARD AND POOR'S (S&P) 500 is an index of the 500 largest, most actively traded stocks on the New York Stock Exchange. It provides a guide to the overall health of the
STANDARD COST is production or operating cost that is carefully predetermined. A standard cost is a target cost that should be attained. The standard cost is compared with the actual cost in order to measure the performance of a given costing department or operation. See STANDARD COST SYSTEM.
STANDARD COST SYSTEM is an accounting system designed to properly allocate costs of direct labor, indirect labor, materials, overhead, and selling/ general/administrative accounts on a unit basis for the purpose of accurately costing products and the subsequent control of those costs in managing the production, marketing, purchasing, and administrative functions of the business.
STANDARD RATE AND DATA SERVICE (SRDS), in advertising, is a company that produces a directory for each different type of media; normally listing: rates, circulation, contacts, markets serviced, etc.
STARTUP COSTS or Organization Cost, in the
STATED CAPITAL is the declared total amount of money or other resources owned or used to acquire future income or benefits.
STATED VALUE is the per share value sometimes assigned to no-par stock by the corporation.
STATEMENT OF CASH FLOWS measures the flow of money in and out of a business. One of four financial statements found in the annual report, it categorizes a company's cash receipts and disbursements for a given fiscal year by three major activities: operations, investments and financing.
STATEMENT OF RETAINED EARNINGS is one of the four basic financial statements; the Statement of Retained Earnings is a reconciliation of the Retained Earnings account. Information such as dividends or announced income is provided in the statement. The Statement of Retained Earnings provides information about what a company's management is doing with the company's earnings.
STATE UNEMPLOYMENT TAX ACT (SUTA), in the
STATUTORY ACCOUNT is an involuntary account, which is created by law rather than by business need. An example of a statutory account would be taxes.
STATUTORY LAW is law enacted by the legislative branch of government, as distinguished from case law or common law.
STATUTORY LIEN is an involuntary lien, which is created by law rather than by contract. Statutory liens include tax liens, judgment liens, mechanic's liens, etc.
STEAMSHIP CONFERENCE is an agreement between multiple shipping companies to provide common freight rates. Some shipping lines will state that they are “non-conference”, i.e., they charge an independent and likely lower rate.
STEP LEASE is type of lease that outlines or stipulates the expected annual increases in the tenant's base rent based on an approximation of what the landlord believes what the landlord’s expenses may be.
STEWARDSHIP is responsibility for taking good care of resources entrusted to one, e.g., boards of directors must show good stewardship towards the company for which they are a board member.
STOCKHOLDER see SHAREHOLDER.
STOCKHOLDER'S EQUITY see SHAREHOLDER'S EQUITY.
STOCK SALE is where the equity price is assumed to include the operating assets and operating liabilities of the seller's business and not include the long term liabilities assumed. The long term liabilities assumed are shown as a separate line item and when added to the equity price results in the deal price. In those transactions indicated as an asset sale the equity price is assumed to include the operating assets.
STOCK SPLIT is the issuance of a substantial amount of additional shares, thereby reducing the par value of the stock on a proportionate basis.
STOCKTAKING is the process of counting and evaluating stock-in-trade, usually at an organization's year end in order to value the total stock for preparation of the accounts. In more sophisticated organizations, in which permanent stock records are maintained, stock is counted on a random basis throughout the year to compare quantities counted with the quantities that appear in the, usually, computerized records.
STOCK TURNOVER PERIOD is calculated: Long Term Disabilities X 100% / Cost of Sales.
STOCK TURNS is the number of times per year that the stock (raw material, wip & finished goods) is turned over in relation to the sales revenue of a given product. Calculation - Stock turns = Sales turnover of products / Value of raw material, wip & finished goods.
STRAIGHT-LINE DEPRECIATION METHOD allows an equal amount to be charged as depreciation for each year of the expected use of the asset. It is computed by dividing the adjusted basis of a property by the estimated number of years of remaining useful life.
STRANDED PLANT is a cost that has been incurred, but can not be reversed. Usually referred to as a sunk cost.
STRATEGIC ASSET, in relation to the assets held by a legal entity, means an asset or group of assets that the entity needs to retain if the entity is to maintain the entity's capacity to achieve or promote any outcome that the entity determines to be important to the current or future well-being of the entity.
STRATEGIC PERFORMANCE MANAGEMENT provides a detailed blueprint for turning corporate vision into reality - breaking down the things an entity needs to achieve as a business into real actions that can be measured. See BALANCED SCORECARD.
STRATEGIC PLANNING is the activity of defining what you want to accomplish in your business and then identifying the path that will allow you to reach your goal in the most efficient and sensible manner.
STRAW MAN is a weak or imaginary opposition (as an argument or adversary) set up only to be easily confuted. Often done to create an environment for brainstorming from a certain starting point.
STRIPPED BOND is a bond that can be subdivided into a series of zero-coupon bonds.
STUMPAGE refers to: a. Timber in standing trees; usually sold without the land at a fixed price per tree or per stump, the stumps being counted when the land is cleared. (NOTE: Only trees above a certain size are allowed to be cut by loggers buying stumpage from the owners of land); or, b. A tax on the amount of timber cut, regulated by the price of lumber.
SUBCHAPTER S is a legal corporate entity organized under the United States Federal Tax Code that allows Subchapter S Corporations to distribute all income / loss proportionately to its shareholders, who then claim that income / loss on their personal income taxes; thereby avoiding the payment of corporate taxes.
SUBLET, in real estate, refers to the leasing of space within a leased facility by the original lessee.
SUBLEDGER is for the purpose of organizing revenue and expense transaction for only one account, e.g., For an individual salesperson, like a general ledger, the subledger has different default account types, each from a salesperson's perspective, not a company perspective. Thus, Due is due to the salesperson and Payable is payable by the salesperson.
SUBORDINATED DEBT is debt over which senior debt takes priority. In the event of bankruptcy, subordinated debt holders receive payment only after senior debt claims are paid in full. There is a pecking order determining the sequence in which a company will pay off its debt instruments, subordinate (or junior) issues will not be repaid until unsubordinated (or senior) debt has been repaid in full.
SUB-PRIME CREDIT CARDS are credit cards offered to consumers with credit problems or no established credit; as opposed to prime cards for those with good credit ratings. Sub-prime cards do not offer as many benefits and possibly could be more costly.
SUBSCRIPTION, in securities, is an agreement to buy a new issue of securities.
SUBSIDIARY is a company whose voting stock is more that 50% owned by another company.
SUBSTANCE OVER FORM is an accounting concept where the entity is accounting for items according to their substance and economic reality and not merely their legal form. This concept is one of the key determinants of reliable information. For most transactions there will be no difference, so no issue arises. In some cases however, the two diverge and the choice of how to present the transactions can give very different results. This difference occurs when an asset or liability is not recognized in the accounts even though benefits or obligations may result from the transaction, or oppositely.
SUBVENTION is the provision of assistance or financial support such as an endowment or a subsidy from a government or foundation.
SUI is either State Unemployment Insurance (tax) or State Unemployment Income.
SUM-OF-THE-YEARS DIGITS (SYD) is the accelerated depreciation method in which a constant balance (cost minus salvage value) is multiplied by a declining depreciation rate.
SUNDRY ACCOUNT is an account where miscellaneous items are recorded, e.g., SUNDRY RECEIVABLES represent miscellaneous receivables.
SUNK COST is the cost expended that cannot be retrieved on a product or service.
SUPPORTING DOCUMENTS assist in making a case (prove a point or forward an argument) by providing additional depth and analysis for much of the case in question. See SOURCE DOCUMENTS.
SUPPRESSED INFLATION means that a situation exists in which prices would rise -- if government regulations did not establish artificial limits on prices, wages, etc.
SURCHARGE is a charge added on top of another charge for a specific service, product or purpose.
SURETY BOND is a contract by which one party agrees to make payment on any default or the debt of another party.
SURPLUS generally means any excess amount, but in finance it is the remainder of a fund appropriated for a particular purpose. In a corporation, surplus means assets left after liabilities and debt, including capital stock, have been subtracted.
SUSPENSE ACCOUNT, in accounting, is an account that is used on a temporary basis for receipts, disbursements, or discrepancies until such time as the analysis is complete and they can be properly classified.
SUSTAINABLE GROWTH RATE(SGR) shows how fast a company can grow using internally generated assets without issuing additional debt or equity. SGR provides a useful benchmark for judging a company's appropriate rate of growth. A company with a low sustainable growth rate but lots of opportunities for expansion will have to fund that growth via outside sources, which could lower profits and perhaps strain the company's finances. Growth can be a major dilemma because with growth comes a spontaneously generated need for increased working capital. VentureLine calculates a Sustainable Growth Rate from the data entered into the Income Statement and Balance Sheet. The Sustainable Growth Rate is the rate at which the firm may grow the Stockholder's Equity Account (Net Worth) using only increases in Retained Earnings (Net Profit's contribution to retained earnings) to fund the growth. Growth beyond this amount will force the firm to obtain additional financing from external sources to finance growth.
SUTA see STATE UNEMPLOYMENT TAX ACT.
SWOT ANALYSIS is one of the most used forms of business analysis. A SWOT examines and assesses the impacts of internal strengths and weaknesses, and external opportunities and threats, on the success of the "subject" of analysis. An important part of a SWOT analysis involves listing and evaluating the firm's strengths, weaknesses, opportunities, and threats. Each of these elements is described:
1. Strengths: Strengths are those factors that make an organization more competitive than its marketplace peers. Strengths are what the company has a distinctive advantage at doing or what resources it has that is strategic to the competition. Strengths are, in effect, resources, capabilities and core competencies that the organization holds that can be used effectively to achieve its performance objectives.
2. Weaknesses: A weakness is a limitation, fault, or defect within the organization that will keep it from achieving its objectives; it is what an organization does poorly or where it has inferior capabilities or resources as compared to the competition.
3. Opportunities: Opportunities include any favorable current prospective situation in the organization's environment, such as a trend, market, change or overlooked need that supports the demand for a product or service and permits the organization to enhance its competitive position.
4. Threats: A threat includes any unfavorable situation, trend or impending change in an organization's environment that is currently or potentially damaging or threatening to its ability to compete. It may be a barrier, constraint, or anything that might inflict problems, damages, harm or injury to the organization.
A firm's strengths and weaknesses (i.e., its internal environment) are made up of factors over which it has greater relative control. These factors include the firm's resources; culture; systems; staffing practices; and the personal values of the firm's managers. Meanwhile, an organization's opportunities and threats (i.e., its external environment) are made up of those factors over which the organization has lesser relative control. These factors include, among others, overall demand, the degree of market saturation, government policies, economic condition, social, cultural, and ethical developments; technological developments; ecological developments, and the factors making up Porter's Five Forces (i.e., intensity of rivalry, threat of new entrants, threat of substitute products, bargaining power of buyers, and bargaining power of suppliers.)
SWEEPING ACCOUNTS is when an entity zeros out a monetary asset account (takes the money) that does not meet an established mandatory monetary hurdle at which they will make a payment to the holder of that account, e.g., if a salesman does not make a certain amount of sales required over a time period, his company will not pay him commission on the sales that were made during that period and sweep his account balance to zero at the end of the time period.
SWIFT CODE, within the context of international payment transactions, is a code issued by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) that enables banks worldwide to be identified without the need to specify an address or bank number. SWIFT codes are used mainly for automatic payment transactions.
SYNDICATE is a group of investment bankers or banks that acts jointly, on a temporary basis, to, in the case of investment bankers, sell securities or to underwrite a new issue of bonds (syndicated capital), or, for the bank syndicate to loan money in a bank credit (syndicated credit).
SYNERGY is the working together of two or more things to produce an effect greater than the sum of their individual effects. For example, in the context of mergers, cost synergy is the savings in operating costs expected after two companies, who compliment each other's strengths, join.
SYNTHETIC LEASE is a transaction that appears, from an accounting standpoint, as a lease, but as a loan from a tax standpoint; resulting in an off-balance sheet account of the financing and the tax benefits that accompany the financed asset.
T-ACCOUNT is the basis for journal entry in accounting. T-accounts have three basic elements. A title, a left side (debit side) and a right side (credit side). To make an entry in a t-account, put the currency (dollar, pound, etc.) amount on the appropriate side (debit or credit). There are five basic types of accounts: assets, liabilities, equity, revenue and expenses. Assets, liabilities and equity are the balance sheet accounts.
TAINTED ACCOUNTS RECEIVABLE is receivables that are considered to be legally suspect due to acts of fraud, misuse, or abuse.
TAKEOVER refers to one company (the acquirer) purchasing another (the target). Such events resemble mergers, but without the formation of a new company.
T&E is an acronym for Travel & Entertainment.
T&M is Time and Materials.
T&R, among others, can mean: Technical & Research or Termination & Recoupment.
TANGIBLE normally refers to assets that can be held or seen and that are capable of being appraised at an actual or approximate value (e.g. inventory, land & buildings, etc.).
TANGIBLE BOOK VALUE is different than book value in that it deducts from asset value intangible assets, which are assets that are not hard (e.g., goodwill, patents, capitalized start-up expenses and deferred financing costs).
TANGO SHEETS is a not often used slang term refering to a document that compares forecasted financial data to actual financial performance for the purposes of illegally adjusting the reported financial data to more closely match the prior forecasted performance.
TARE WEIGHT is the weight of packing container and packaging material without the weight of the goods contained therein.
TARGET COSTING is a disciplined process for determining and realizing a total cost at which a proposed product with specified functionality must be produced to generate the desired profitability at its anticipated selling price in the future.
TARIFF, usually, a country's tax on imports. May sometimes refer to the rate of tax; and, is used interchangeably with the term “duty”.
TARIFF, AD VAL
TAXABLE INCOME is that income that is reported to the government for the purposes of calculating income taxes. Taxable income normally is not aligned with the financial income reported within financial statements. See FINANCIAL INCOME.
TAX EQUIVALENT YIELD is the yield that must be offered before factoring in taxes so that an investment pays off a certain after-tax yield. This measure is often necessary to compare taxable and tax-free investments, since tax-free issues tend to have lower pre-tax yields due to the fact that the investment's proceeds will not be reduced by taxes. Tax equivalent yield is equal to required after-tax yield divided by (1 minus the tax rate).
TAX LOSS CARRY FORWARD/BACKWARD is a tax benefit that lets a company or individual to deduct losses in order to reduce a tax liability.
TAX SHELTER are legal methods taxpayers can use to reduce tax liabilities. An example is the use of depreciation of assets.
TERM BONDS are bonds whose principal is payable at maturity. Sometimes referred to as bullet-maturity bonds or bullet bonds.
TERM DEBT, as in Term Bonds, is debt that mature in one lump sum at a specified future date. Term debt is usually carried as one type of long-term debt.
TERM ENDOWMENT are endowments with time restrictions required by the donor such as a restriction that the income from the endowment may not be utilized until a future period or a specific date for condition is met.
TERMINAL VALUE, when used in a discounted cash flow valuation, the cash flow is projected for each year into the future for a certain number of years, after which unique annual cash flows cannot be forecasted with reasonable accuracy. At that point, rather than attempting to forecast the varying cash flow for each individual year, one uses a single value representing the discounted value of all subsequent cash flows. This single value is referred to as the terminal value.When a firm's cash flows grow at a "constant" rate forever, the present value of those cash flows can be written as: Value = Expected Cash Flow Next Period / (r - g)where, r = Discount rate (Cost of Equity or Cost of Capital) g = Expected growth rate. This "constant" growth rate is called a stable growth rate and cannot be higher than the growth rate of the economy in which the firm operates. While companies can maintain high growth rates for extended periods, they will all approach "stable growth" at some point in time. When they do approach stable growth, the valuation formula above can be used to estimate the "terminal value" of all cash flows beyond.
TERM LOAN is a bank loan, typically with a floating interest rate, for a specified amount that matures in between one and ten years and requires a specified repayment schedule.
TESTIMONY is evidence given by a competent witness under oath.
THIRD PARTY is someone other than the principals directly involved in a transaction or agreement.
THIRD PARTY RECOVERY normally refers to delinquent accounts receivable recovered by a collection agency for a fee.
THREE PERCENT (3%) RULE is a rule used in vesting pension plan benefits. The participant's accrued benefit must be at least equal to 3% of the participant's normal projected retirement benefit for each year of participation, with a maximum of 100% after 33 1/3 years of participation.
TI is an acronym that could mean, among others, Total Income or Tenant Improvements.
TILL ROLL is a roll of paper on which the separate amounts of money paid for goods are recorded in a retail shop's cash register.
TIME LAG see LAG TIME.
TIME PERIOD CONCEPT provides that accounting take place over specific time periods known as fiscal periods. These fiscal periods are of equal length, and are used when measuring the financial progress of a business.
TIMES FIXED CHARGES EARNED see COVERAGE OF FIXED CHARGES.
TIMES INTEREST EARNED (TIE) measures the extent to which operating income can decline before the firm is unable to meet its annual interest costs. The TIE ratio is used by bankers to assess a firm’s ability to pay their liabilities. TIE determines how many times during the year the company has earned the annual interest costs associated with servicing its debt. Normally, a banker will be looking for a TIE ratio to be 2.0 or greater, showing that a business is earning the interest charges two or more times each year. A value of 1.0 or less suggests that the firm is not earning sufficient amounts to cover interest charges.
TIME TO MARKET (TTM) is the length of time it takes to develop a new product from an early initial idea for a new product to initial market sales. Precise definitions of the start and end point vary from one company to another, and may vary from one project to another within the company.
TIME VALUE OF MONEY is the idea that a dollar today is worth more than a dollar in the future, because the dollar received today can earn interest up until the time the future dollar is received.
TOBIN RATIO see MARKET TO BOOK VALUE.
TO DATE is prior to the current date.
TOP DOWN is a concept of analyzing a subject, such as costs or revenue, starting from the highest level working towards the bottom.
TOP-LINE of a company is its gross sales, or revenue figure.
TOTAL ASSETS is the total of all assets; both current and fixed.
TOTAL ASSET TURNOVER measures management's efficiency in managing all of a firm’s assets - specifically the generation of revenues from the firm's total investments in assets. This ratio is extremely important in high asset firms such as manufactures and telecommunications companies. Generally, the higher this ratio as compared to like companies or the industry:
·
the smaller the investment required to
generate sales, thus the more profitable the firm.
·
indicates the firm has less money tied
up in fixed assets for each dollar of sales revenue.
TOTAL CURRENT ASSETS is total of cash & equivalents, trade
receivables, inventory and all other current assets.TOTAL CURRENT LIABILITIES is the total of notes payable-short term, current maturities-LTD, trade payables, income taxes payable, and all other current liabilities.
TOTAL LIABILITIES & NET WORTH is the sum of all liability items and Net Worth.
TOTAL QUALITY MANAGEMENT (TQM) is a structured system for satisfying internal and external customers and suppliers by integrating the business environment, continuous improvement, and breakthroughs with development, improvement, and maintenance cycles while changing organizational culture.
TQM see TOTAL QUALITY MANAGEMENT.
TRACEABLE, in accounting, is to discover by going backward over the transactions (evidence) step by step establishing a "paper-trail" for a transaction. Non-traceable is where the "paper-trail" of a transaction is broken or non-existent.
TRADE DISCOUNT is a producer discount given to retail trade members to assist them in increasing sales of the producer's product.
TRADE DRAFT is a draft addressed to a commercial enterprise.
TRADE EXCHANGE is a barter system where people or companies trade goods and services without the use of money. In the
TRADE NAME is a distinctive name used to identify a product or company and build recognition. Many corporations; e.g. Coca Cola, Ford, IBM, etc.; aggressively protect their trade names within the market.
TRADE PAYABLE, also known as an account payable, is an amount owed to a creditor for goods and services received.
TRADE RECEIVABLES (NET) are all accounts from trade, net of allowance for doubtful accounts.
TRADING CONCERN is an entity that derives its products for sale, thereby revenue, through purchasing products for sale from other producers / manufacturers for resale to their customer base.
TRADING PROFIT is that profit earned from the short-term trading of securities that were held for less than one year. Such profit is usually subject to tax at regular income tax rates.
TRAILING, in time periods, is the most recently completed time period. For example, trailing twelve months would be the twelve-month period which ended on the final day of the last month.
TRANCHES are related securities that are offered at the same time but have different risk, reward, and/or maturity.
TRANSACTION is an event or happening that changes financial position and/or earnings.
TRANSACTION DRIVERS are used to count the frequency of an activity, i.e., the number of times an activity is performed.
TRANSACTION EXPOSURE, in foreign exchange, is the possibility of incurring exchange gains or losses on transactions already entered into and denominated in a foreign currency. It is typified by real exchange gains or losses and mixes retrospective and prospective views. It is short-term in nature.
TRANSFER PRICE is the price charged by an individual entity in a multi-entity corporation on transactions among the entities involved.
TRANSLATION EXPOSURE, in foreign exchange, is to convert the results of foreign operations from the local currency to the home currency in the areas of paper exchange gains or losses; it is retrospective and short-term in nature.
TRANSPARENCY, in economics, (1) Principle adopted in the General Agreement on Tariffs and Trade that governments must make their rules, regulations, and practices open and accessible to the public and other governments. (2) General Agreement on Trade in Services requirement that its member states publish their regulations affecting trade in services, that they notify the Council for Trade in Services of any relevant changes, and that they respond promptly to requests for information from other members.
TRANSPOSITION ERROR is the unintentional exchange of two elements of an ordered list with all others staying the same. A transposition is therefore a permutation of two elements. For example, the swapping of 2 and 5 to take the list 123456 to 153426 is a transposition. In this example, if the newly ordered list of 153426 was unintentional, it would be commonly called a transposition error. In accounting, an error in copying a number from one place to another is a transposition error.
TREASURY CERTIFICATE is a U. S. Treasury security usually issued at par with a specified rate of interest and a maturity of one year or less. It is issued payable to the bearer and sold in minimum amounts of $l0,000.
TREASURY STOCK is stock reacquired by the issuing company and available for retirement or resale. It is issued but not outstanding. It cannot be voted and it pays or accrues no dividends. It is not included in any of the ratios measuring values per common share.
TREND ANALYSIS is the analysis of changes over time through the use of analytical techniques, such as time series analysis, to discern trends.
TRIAL BALANCE is a listing of the accounts in your general ledger and their balances as of a specified date. A trial balance is usually prepared at the end of an accounting period and is used to see if additional adjustments are required to any of the balances. Since the basic accounting system relies on double-entry bookkeeping, a trial balance will have the same total debit amount as it has total credit amounts.
TRIPLE BOTTOM LINE (TBL) is a metric for a corporation's social, environmental, and economic performance. TBL is the latest series of buzz words to describe business involvement in sustainability. TBL is all about dropping the financial bottom line as a meaningful indicator of where you stand in the market place and replacing it with a bottom line that properly acknowledges the interplay of the social economic and environmental dimensions of our lives.
TRIPLE NET LEASE is a real property lease that requires the tenant to pay for all maintenance expenses, utilities, taxes, and insurance. Usually done under a limited partnership, resulting in lower risk for investors.
TRIPLE P is a productivity model wherein the interrelationship between productivity, profitability and performance, as well as, effectiveness and efficiency are plotted in a schematic view where the main difference between these five terms can be captured.
TRUE AND FAIR VIEW is one of the most prominent principles of accounting. It suggests that an enterprise should provide a true and fair view about its financial conditions and operating results. The concept of true and fair view does not mean absolute truth about enterprises. Financial statements are a product of management's judgments and estimates. The principle of true and fair view requires comparative truth about the enterprises' picture. True and fair view is rather defined operationally; it is thought to be accomplished by complying with all other lower accounting principles.
TRUE VALUE is the amount that a buyer is finally willing to pay.
TRUST ACCOUNT is a separate bank account, segregated from a broker's own funds, in which the broker is required by state law to deposit all monies collected for clients; in some states called an ESCROW ACCOUNT.
TRUST DEED is an instrument of conveyance of title to property wherein the transferee will be holding the title to the property on behalf of another person.
TRUST FUND is a fiduciary relationship calling for a trustee to hold the title to assets, usually monetary, for the benefit of the beneficiary.
T/T is a payment or financial transaction designation meaning "Telegraphic Transfer" of funds.
TTM see Time To Market.
TURNOVER, in
TWO PARTY ENDORSEMENT, normally, is when two signatures are required to make a document or bank draft legal or authorized.
ULLAGE is the empty space present when a shipping container is not full.
UNALLOCATED COSTS represents corporate costs not associated either directly or indirectly in providing a product or service for sale. Unallocated costs are not included in the calculation of COST OF GOODS SOLD.
UNAUDITED OPINION is a qualified opinion by a Certified Public Accountant who has not audited the relevant financial statements.
UNBUDGETED are items and/or amounts that are currently not included within a budget.
UNCONTROLLABLE EXPENSE is expense that cannot be controlled or restrained. Some of the costs of doing business can not be postponed or spread out over a longer period of time (e.g., taxes, rent and utilities).
UNDERBUDGETED is a line item within a budget to where the budgeted amount is not sufficient to cover the actual amount.
UNDERLYING is the security, cash commodity, forward, futures contract, swap, or other contract or instrument that is the subject of a derivative contract or instrument.
UNDERRECORDED normally refers to an understatement as to what a total would be if all data was accurately included or considered; e.g. underrecorded costs, revenues, population, etc.
UNDERSTATED is to represent as less than is the case.
UNEXPIRED means not having come to an end or been terminated by the passage of time.
UNDISTRIBUTED EARNINGS see Retained Earnings.
UNEARNED REVENUE / INCOME represents money that you have received in advance of providing the goods or services to your customer. Unearned revenue is a liability of your business until you provide the goods or services you agreed to provide to the customer.
UNICAP see UNIFORM CAPITALIZATION RULES.
UNIFORM CAPITALIZATION RULES (UNICAP), in the
UNIT-CONTROL SYSTEM is an accounting system used in inventory management that tracks inventory using bin tickets and physical inventory checks.
UNIT COST see OBJECT COST.
UNIT-LEVEL ACTIVITY, in Activity Based Costing, is an activity that must be done for each unit of production.
UNREALIZED INCOME (paper profit) is profit which has been made but not yet realized or collected through a transaction, such as a stock which has risen in value but is still being held. also called unrealized gain or unrealized profit or paper gain or book profit.
UNREALIZED LOSS is a term that commonly refers to the write-down of an investment portfolio resulting from applying the lower of cost or market value on an aggregate basis. On a short-term portfolio, the unrealized loss is shown on the income statement. On a long-term portfolio, the unrealized loss is presented as a separate item in the stockholder's equity section of the balance sheet.
UNRESTRICTED ASSETS are assets / resources which are not restricted for use by legal or contractual requirements and may be used for any purpose.
UNSECURED is obligation backed not by collateral but only by the integrity of the borrower. Opposite of secured.
UPSTREAM / DOWNSTREAM SALES is normally associated with inter-company sales: Upstream is a subsidiary selling into the parent entity; while downstream is the parent selling into a subsidiary.
UNUSUAL GAINS AND LOSSES are material gains and losses that are either unusual or occur infrequently, but not both, are excluded from the extraordinary item classification (see EXTRAORDINARY ITEMS).
USEFUL LIFE is the expected period of time, in years, during which a depreciating asset will be productive.
VAD, in business, can mean: Value of Annual Demand, Value-Added Data, Value-Added Dealer, or, Value-Added Distributor.
VALIDATE is to a. declare or make legally valid; b. mark with an indication of official sanction; or, c. to establish the soundness of; corroborate.
VALUATION ALLOWANCE/RESERVE is an allowance to provide for changes in the value of a company's assets, such as depreciation or if an asset is deemed impaired.
VALUE is a term that defines the worth of a thing. The term is usually preceded by the word, or words such as 'Fair" or "Fair Market", and it is usually defined in the document where it is found. Not all value for an item is the same, i.e. value is usually perceived.
VALUE ADDED is the difference, at each stage of production or the provisioning of a service, between the price of a product or service and all materials or activities paid for to produce the product or provide the service.
VALUE ADDED TAX is a consumption tax where taxes are levied at each step of a manufacturing process where value is added to that product at that point in the manufacturing cycle; as well as at the point where the consumer purchases the end product.
VALUE ADDED VERTICAL INTEGRATION is controlling as much of the build stream, both upstream and downstream, in producing a product or service as possible while ensuring that every part of the stream provides added value. See also VALUE ADDED and VERTICAL INTEGRATION.
VALUE CHAIN is the sequential set of primary and support activities that an enterprise performs to turn inputs into value-added outputs for its external customers. As developed by Michael E. Porter, it is a connected series of organizations, resources, and knowledge streams involved in the creation and delivery of value to end customers. Value systems integrate supply chain activities, from determination of customer needs through product/service development, production/operations and distribution, including (as appropriate) first-, second-, and third-tier suppliers. The objective of value systems is to position organizations in the supply chain to achieve the highest levels of customer satisfaction and value while effectively exploiting the competencies of all organizations in the supply chain.
VALUE FOR MONEY is in the perception of the buyer or receiver of goods and/or services. Proof of good value for money is in believing or concluding that the goods/services received was worth the price paid. Examples of the types of factors that may be considered are suitability, quality, skills, price, whole of life costs and other criteria. The mix of these and other factors and the relevant importance of each will vary on a case by case basis.
VALUE IN USE is the value of an asset in the opinion of the owner.
VALUE MANAGEMENT is the application of established techniques to help define and refine business need, delivery strategy and the best value concept by setting customer objectives and values and determining success criteria for the project.
VAR is an acronym for Value-Added Reseller (usually of technology products); or, in finance, Value at Risk.
VARIABLE COSTS are those costs associated with production that changes directly with the amount of production, e.g.,the direct material or labor required to complete the build or manufacturing of a product.
VARIANCE ANALYSIS is the analysis of performance by means of variances. Used to promote management action at the earliest possible stages. After a budget (based on standard costs) has been set, its usefulness lies in the review procedures which compare actual results against the budget. Variance analysis is the process of examining in detail each variance between actual and budgeted/expected/standard costs to determine the reasons why budgeted results were not met (material costs too high, sales prices too low, etc.).
VARIABLE EXPENSES are those business expenses that usually fluctuate dependent upon production or sales volume. Contrast with FIXED EXPENSES.
VARIANCE, in accounting, is the difference between a projected number and the actual number, e.g. 1. a budget variance is spending either more or less from the amount that was budgeted; and 2. a cost variance is the difference between actual cost and standard cost in the categories of direct material, direct labor, and direct overhead.
VAT see VALUE ADDED TAX.
VENDOR MANAGED INVENTORY (VMI) is a process in which a supplier generates orders for its distributor based on demand information sent by the distributor. Vendor Managed Inventory was first applied to the grocery industry, between companies like Procter & Gamble (supplier) and Wal-Mart (distributor). But increasingly, Vendor Managed Inventory is providing the benefits of smoother demand, increased sales, lower inventories and reduced costs to other industries.
VENDOR STATEMENT is a statement by the seller to the buyer detailing material particulars regarding the property in question (suitability for intended use).
VENTURE CAPITAL is capital committed to an unproven venture. The initial, start-up money is referred to as "seed money" and entails the greatest risk. If the project gets off the ground it may require additional financing at additional "rounds" or the "mezzanine level" before the company is finally brought to the market and the venture capitalist can enjoy handsome rewards. Experienced investors in venture capital situations typically plan on turning away a minimum of 9 out of every 10 proposals which are brought to them, and then they expect as many failures as successes from their selected investments.
VERIFIABILITY is where the fact is capable of being tested (verified or falsified) by experiment or observation.
VERTICAL FINANCIAL ANALYSIS allows comparison of the financial ratios of a company in time – past, present and future.
VERTICAL INTEGRATION is the extent to which a firm owns its upstream suppliers and its downstream buyers. Control upstream is referred to as backward integration (towards suppliers of raw material), while control of activities downstream (towards the eventual buyer) is referred to as forward integration.
VESTED refers to having an absolute right or title, when previously the holder of the right or title only had an expectation. Example: after 20 years of employment Larry Loyal's pension rights are now vested.
VIABILITY, in economics, is the capability of developing and surviving as a relatively independent social, economic or political unit.
VMI see VENDOR MANAGED INVENTORY.
VOLUME GAIN is to obtain advantages due to increase in volume, such as value increase, points in gross margin or profit.
VOSTRO ACCOUNT is a local currency account maintained with a bank by another bank. The term is normally applied to the counterparty's account from which funds may be paid into or withdrawn, as a result of a transaction.
VOUCHER is a. a piece of substantiating evidence; a proof; or, b. a written record of expenditure, disbursement, or completed transaction; or, c. a written authorization or certificate, especially one exchangeable for cash or representing a credit against future expenditures.
WACC see Weighted Average Cost of Capital.
WAGE is actual remuneration paid to an employee for services rendered. Minimum wages, in the
WARRANT, in government accounting, is an order drawn authorizing payment to a designated payee. In securities, it is a security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market. This "warrant" is then traded as a security, the price of which reflects the value of the underlying stock. Warrants are issued by corporations and often used as a "sweetener" bundled with another class of security to enhance the marketability of the latter. Warrants are like call options, but with much longer time spans -- sometimes years. In addition, warrants are offered by corporations whereas exchange traded call options are not issued by firms.
WARRANTY is a guarantee given to a buyer from a seller that the goods or services purchased will perform as promised, or a refund will be given, repair will be done at no charge, or an exchange made.
WEIGHTED AVERAGE is one in which different data in the data set are given different "weights." Varying subjective assumptions are derived for determining the level of importance for each data category. For example, many teachers will use a "weighted average" when calculating a student's grade in a course. A teacher might determine the final grade for the course by calculating that the test average is 60% of the grade, quiz average is 30% of the grade, and a single project is 10% of the grade.
WEIGHTED AVERAGE COST OF CAPITAL (WACC) is an average representing the expected return on all of a company's securities. Each source of capital, such as stocks, bonds, and other debt, is weighted in the calculation according to its prominence in the company's capital structure.
WHITE PAPER 1. in a technological industry, is an informational brief offering an overview of a technology, product, issue, standard, policy, or solution - its importance, use and implementation, and business benefits. White Papers have emerged as the standard way of communicating more in-depth information to business decision-makers in terms of problems solved and markets addressed; or, 2. a White Paper can be an official government report of an investigation into a public event that received a great deal of publicity and notoriety; it indicates the official government position on a particular public issue.
WHOLLY OWNED SUBSIDIARY is an entity whose parent owns virtually 100% of its common stock.
WINDFALL PROFIT/GAIN is profit that occurs suddenly as a result of an event not controlled by the company or person realizing the gain from the event. For example, a hurricane may bring extraordinary revenue to a roofing contractor as a result of the natural disaster.
WINDOW DRESSING is the act or an instance of making something appear deceptively attractive or favorable. Usually using something, e.g. inflated sales projections, to create a deceptively favorable or attractive impression.
WINDOW OF ENTERPRISE depicts the overall structure of accounting.
WIDGET is a device that is very useful for a particular job. Often used within a name of a fictitious company.
WIP is an acronym for Work in Process/Progress. Usually refers to inventory that has value added from labor or additional processing. When considered for inventory value, the value of the raw material plus the value added component is accounted for in determining the value of that inventory at that point in the process.
WITHHOLDING TAX usually refers to those taxes that are withheld from an employee’s compensation to account for that individuals tax liability on his/her compensation.
WITNESS is an individual who testifies at a trial on what he has seen, heard, or otherwise observed.
WORKER’S COMPENSATION is, usually, a state or privately managed insurance fund in the
WORKING CAPITAL STATEMENT (WCS) is part of the financial statements' "Statements of Cash Flows or Changes in Financial Position." The WCS normally includes sections covering: Sources of Working Capital, Uses of Working Capital, and Working Capital Changes.
WORKING CAPITAL TURNOVER (WCT) shows how efficiently Working Capital (WC) is employed, i.e., it measures how efficiently the business is using its available assets. WCT measures the amount of Net Revenue generated per monetary unit of Working Capital. It varies widely by industry; therefore it is best to compare WCT to industry averages.
WORKING CAPITAL (WC) (the difference between current assets and current liabilities) measures the margin of protection for current creditors. It reflects the ability to finance current operations.
WORK IN PROCESS is parts and subassemblies in the process of becoming completed finished goods.
WORK IN PROGRESS a piece of work that is not yet finished.
WORK SHEET is a document or schedule in which an accountant or auditor gathers information to substantiate an opinion concerning an account balance or 'test of transaction.'
WORLD TRADE ORGANIZATION (WTO) is the international trade body formed by the agreement of member nations. The WTO is an evolution of the GATT process designed to resolve trade disputes and work for the lowering of tariff and non-tariff trade barriers.
WRAP ACCOUNT at its most basic is an alternative form of commission arrangement between a securities firm and its client. Wrap accounts generally charge the client an annual fee based on assets in the account in lieu of a per transaction commission structure. In other words, the firm "wraps" together all the costs and charges them off as a "management fee”. Firms often add further features to wrap accounts such as investment management, custodial services, and enhanced reporting.
WRITE-OFF is to decrease the value of an item, e.g., a tax write-off decreases tax liability, a vehicle involved in an accident can be declared a write-off if the cost to repair is in excess of the value of the vehicle.
WRITE-UP is the increase in value of an asset, but it is seldom used and is not allowed in GAAP (Generally Accepted Accounting Principles).
WRITE-UP SERVICE is the provisioning of all reporting requirements of bookkeeping and accounting services. The following is a non-exhaustive list of reporting services provided:
1099s report preparation for subcontractors.
Bank account reconciliation.
Check coding.
Fixed asset schedules.
Maintenance of general ledger.
Payroll deposit calculations.
Payroll tax filings.
Personal property tax returns.
Preparation of internal financial statements.
X-INEFFICIENCY is the failure to minimize costs or maximize
returns. (Sometimes referred to as X-efficiency, but carrying the same
meaning.)
YANKEE BOND is a dollar bond issued by a non-U.S. borrower in the
YEN is the currency of
YIELD is the annual return on an investment, expressed as a percentage. The yield to redemption or maturity (the same thing) combines the running yield with the "pull to redemption"; thus a bond which has a 10% coupon and exactly one year of remaining life will sell at $98.2% when interest rates are at 12.0%, that 12.0% being composed of 10.2% running yield and 1.8% pull to redemption ($100.0 - 98.2%).
ZERO BASED BUDGET is where the expenses or costs of the prior year are not taken into consideration when establishing expense or budgetary levels looking forward. Each expense category starts from zero. All expenses or cost levels within the budget must be justified or re-justified as being necessary; thus “zero-base”.
ZERO COUPON BONDS are bonds priced at a large discount from face value. The bonds mature at full face value so the difference between the original issue price and the face value represents interest income. The issuer of the zero coupon bond saves on cash flow since the interest isn't paid out until the end of the bond holding period.
ZERO COUPON CONVERTIBLE DEBENTURE/SECURITY is a zero coupon bond that is convertible into the common stock of the issuing company after the common stock reaches a certain price.
Z-SCORE see ALTMAN'S "Z-SCORE"
3% RULE see THREE PERCENT RULE.
4-4-5 CALENDAR, in budgeting and accounting, is the breakdown of each month into weeks by counting the number of times Friday occurs within each month, e.g., Jan = 4 weeks, Feb = 4 weeks, Mar = 5 weeks, Apr = 4 weeks, May = 4 weeks, Jun = 5 weeks… etc. to total 52 weeks in a 12 month period. Every third month, Friday will occur 5 times. All other months, Friday will occur 4 times. In the months where Friday occurs 5 times, it is considered a 5 week month. Whereas, the 4 Friday months will be considered as 4 week months.
10-K is the audited annual report that most reporting companies file with the Securities Exchange Commission (SEC). It provides a comprehensive overview of the registrant's business. The report must be filed within 90 days after the end of the company's fiscal year.
10-Q is a report filed quarterly to the Securities Exchange Commission (SEC) by most reporting companies. It includes unaudited financial statements and provides a continuing view of the company's financial position during the year. The report must be filed for each of the first three fiscal quarters of the company's fiscal year and is due within 45 days of the close of the quarter.
13TH PERIOD in the fiscal year is the period used for fiscal year-end adjusting entries (periods 1-12 being the months in the fiscal year).
80 - 20 RULE (Pareto Principle/Law) is a general rule of thumb in business that says that 20% of the items produce 80% of the activity, while 20% of the product line produces 80% of the sales, 20 % of the customers generate 80% of the complaints, and so on. In evaluating any business situation, look for the small group which produces the major portion of the transactions you are concerned with. This rule is not exactly accurate, but it reflects a general truth, nothing is evenly distributed.
401 (K) PLAN is a retirement plan in the
940 Form is the U.S. IRS Employer's Annual Payroll Tax form.
941 Form is the U.S. IRS Employer's Federal Quarterly Payroll Tax form.
Thank you for the info. It sounds pretty user friendly. I guess I’ll pick one up for fun. thank u
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