According to ICAI “An audit is an independent examination of financial information of any entity,
whether profit-oriented or not, Irrespective of its size or legal form, When
such an examination is conducted with a view to expressing an opinion thereon.”
Valuation is the analytical process of determining the current
(or projected) worth of an asset or a company. There are many techniques
used for doing a valuation. An analyst placing a value on a company looks at
the business's management, the composition of its capital structure, the prospect of future
earnings, and the market value of its assets, among other
metrics.
A value chain is a business model that describes the full range
of activities needed to create a product or service. For companies that produce
goods, a value chain comprises the steps that involve bringing a product from
conception to distribution, and everything in between—such as procuring raw
materials, manufacturing functions, and marketing activities.
A value-added tax (VAT) is a consumption tax placed on a product
whenever value is added at each stage of the supply chain, from production to
the point of sale. The amount of VAT that the user pays is on the cost of the
product, less any of the costs of materials used in the product that have
already been taxed.
Variability, almost by definition, is the extent to which data
points in a statistical distribution or data set diverge—vary—from the average
value, as well as the extent to which these data points differ from each other.
In financial terms, this is most often applied to the variability of investment
returns. Understanding the variability of investment returns is just as
important to professional investors as understanding the value of the returns
themselves. Investors equate a high variability of returns to a higher degree
of risk when investing.
A variable cost is a corporate expense that changes in
proportion to production output. Variable costs increase or decrease depending
on a company's production volume; they rise as production increases and fall as
production decreases. Examples of variable costs include the costs of raw
materials and packaging.
Variance (σ2) in statistics is a measurement of the
spread between numbers in a data set. That is, it measures how far each number
in the set is from the mean and therefore from every other number in the set.
The velocity of money is a measurement of the rate at which
money is exchanged in an economy. It is the number of times that money moves
from one entity to another. It also refers to how much a unit of currency is
used in a given period of time. Simply put, it's the rate at which consumers
and businesses in an economy collectively spend money. The velocity of money is
usually measured as a ratio of gross
domestic product (GDP) to a country's M1 or M2 money supply.
Venture capital is a form of private equity and a type of
financing that investors provide to startup companies and small businesses that are
believed to have long-term growth potential. Venture capital generally comes from
well-off investors, investment banks and any other financial institutions.
However, it does not always take a monetary form; it can also be provided in
the form of technical or managerial expertise. Venture capital is typically
allocated to small companies with exceptional growth potential, or to companies
that have grown quickly and appear poised to continue to expand.
Vertical analysis is a method of financial statement analysis in
which each line item is listed as a percentage of a base figure within the
statement. Thus, line items on an income statement can be stated as a
percentage of gross sales, while line items on a balance
sheet can be stated as a percentage of total assets or liabilities, and
vertical analysis of a cash flow statement shows each cash inflow or outflow as
a percentage of the total cash inflows.
Vertical integration is a strategy whereby a company owns or
controls its suppliers, distributors, or retail locations to control its value
or supply chain. Vertical integration benefits companies by allowing them to
control the process, reduce costs, and improve efficiencies. However, vertical
integration has its disadvantages, including the significant amounts of capital
investment required.
Volatility is a statistical measure of the dispersion of returns for a given
security or market index. In most cases, the higher the volatility, the riskier
the security. Volatility is often measured as either the standard deviation or variance between returns from that same
security or market index.
Virtual currency is a type of unregulated digital currency that
is only available in electronic form. It is stored and transacted only through
designated software, mobile or computer applications, or through dedicated
digital wallets, and the transactions occur over the internet through secure,
dedicated networks. Virtual currency is considered to be a subset of the
digital currency group, which also includes cryptocurrencies, which exist within the
blockchain network.
A vulture capitalist is an investor who buys up distressed
companies in order to turn them around so he can sell them at a profit.
Vulture capitalists are often criticized because of their aggressive
behavior.
A vanilla option is a financial instrument that gives the holder
the right, but not the obligation, to buy or sell an underlying asset at a predetermined price
within a given timeframe. A vanilla option is a call or put option that has no special or unusual
features. Such options are standardized if traded on an exchange
such as the Chicago Board Options Exchange.
Vendor financing is a financial term that describes the lending
of money by a vendor to a customer who uses that
capital to purchase that specific vendor's product or service offerings.
Sometimes called "trade credit," vendor financing usually
takes the form of deferred loans from the vendor. It may also include a
transfer of stock shares from the borrowing company to the vendor. Such
loans typically carry higher interest rates than those associated with
traditional bank loans.
A waiver of subrogation is a contractual provision whereby an
insured waives the right of their insurance carrier to seek redress or seek
compensation for losses from a negligent third party. Typically, insurers charge an additional fee for a
waiver of subrogation endorsement. Many construction contracts and leases
include a waiver of subrogation clause.
Wall Street is a street located in the lower Manhattan section
of New York City and is the home of the New
York Stock Exchange or NYSE. Wall Street has also been the
historic headquarters of some of the largest U.S. brokerages and investment banks.
A war bond is a debt security issued by a government to finance
military operations during times of war or conflict. Investment in War Bonds
was made through an emotional appeal to patriotic citizens to lend the
government money as these bonds offered a rate of return below the market rate.
Warrants are a derivative that give the right, but not the
obligation, to buy or sell a security—most commonly an equity—at a
certain price before expiration. The price at which the underlying security can
be bought or sold is referred to as the exercise price or strike price. An
American warrant can be exercised at any time on
or before the expiration date, while European warrants can only be exercised on
the expiration date. Warrants that give the right to buy a security are known
as call warrants; those that give the right to sell a security are known as put
warrants.
Wealth management is an investment advisory service that
combines other financial services to address the needs
of affluent clients. It is a consultative process whereby the advisor gleans
information about the client's wants and tailors a bespoke strategy utilizing
appropriate financial products and services.
Weighted average is a calculation that takes into account the
varying degrees of importance of the numbers in a data set. In calculating a
weighted average, each number in the data set is multiplied by a predetermined
weight before the final calculation is made.
The weighted average cost of capital (WACC) is a calculation of
a firm's cost of capital in which each category of
capital is proportionately weighted. All sources of capital, including
common stock, preferred stock, bonds, and any other long-term debt, are
included in a WACC calculation.
White-collar crime is a nonviolent crime committed for financial
gain. According to the FBI, a key agency that investigates these offenses,
"these crimes are characterized by deceit, concealment, or violation of
trust." The motivation for these crimes is to obtain or avoid losing
money, property, or services, or to secure a personal or business advantage.
A wholesale price index (WPI) is an index that measures and
tracks the changes in the price of goods in the stages before the retail level
– that is, goods that are sold in bulk and traded between entities or
businesses instead of consumers. Usually expressed as a ratio or percentage,
the WPI shows the included goods' average price change and is often seen as
one indicator of a country's level of inflation.
Although many countries and organizations use WPIs in this way,
many other countries, including the United States, use the producer
price index (PPI) instead – a similar but more accurately named
index.
Fact: Wholesale prices are what
retailers pay manufacturers.
A withholding tax is an amount that an
employer withholds from employees’ wages and pays directly to the
government. The amount withheld is a credit against the income taxes the
employee must pay during the year. It also is a tax levied on income (interest
and dividends) from securities owned by a nonresident alien, as well as other income
paid to nonresidents of a country. Withholding tax is levied on the vast majority of people who
earn income from a trade or business in the United States.
A wire transfer is an electronic transfer of funds via a
network that is administered by hundreds of banks and transfer service agencies
around the world. The transfer can also be made in cash at a cash office. Wire
transfers allow for the individualized transmission of funds from single
individuals or entities to others while still maintaining the efficiencies
associated with the fast and secure movement of money. By using a wire
transfer, people in different geographic locations can safely transfer money to
locales and financial institutions around the globe.
Working capital, also known as net working capital (NWC), is the
difference between a company’s current assets, such as cash, accounts
receivable (customers’ unpaid bills) and inventories of raw materials and
finished goods, and its current liabilities, such as accounts payable.
Net operating working capital is a measure of a company's liquidity and refers
to the difference between operating current assets and operating current
liabilities. In many cases these calculations are the same and are derived from
company cash plus accounts receivable plus inventories, less accounts payable
and less accrued expenses.
The term work-in-progress (WIP) is a production and supply-chain
management term describing partially finished goods awaiting completion. WIP
refers to the raw materials, labor, and overhead costs incurred for products
that are at various stages of the production process. WIP is a component of the
inventory asset account on the balance sheet. These costs are subsequently
transferred to the finished goods account and eventually to the cost of sales.
Created in 1995, the World Trade Organization (WTO) is an
international institution that oversees the global trade
rules among nations. It superseded the 1947 General
Agreement on Tariffs and Trade (GATT) created in the wake of
World War II.
WorldCom was not just the biggest accounting scandal in the
history of the United States—it was also one of the biggest bankruptcies of all
time. The revelation that telecommunications giant WorldCom had cooked its books came on the heels of the
Enron and Tyco frauds, which had rocked the
financial markets. However, the scale of the WorldCom fraud put even them in
the shade.
Window dressing is a strategy used by mutual fund and other portfolio managers near the year or
quarter end to improve the appearance of a fund’s performance before presenting
it to clients or shareholders. To window dress, the fund manager sells stocks with
large losses and purchases high-flying stocks near the end of the quarter.
These securities are then reported as part of the fund's holdings.
Winding up is the process of dissolving a company.
While winding up, a company ceases to do business as usual. Its sole purpose is
to sell off stock, pay off creditors, and distribute any remaining assets to
partners or shareholders.
The term is used primarily in Great Britain, where it is
synonymous with liquidation.
A write-off is an accounting action that reduces the value of an
asset while simultaneously debiting a liabilities account. It is primarily used
in its most literal sense by businesses seeking to account for unpaid loan
obligations, unpaid receivables, or losses on stored inventory. Generally it
can also be referred to broadly as something that helps to lower an annual tax
bill.
Whipsaw describes the movement of a security when, at a particular time, the
security's price is moving in one direction but then quickly pivots to move
in the opposite direction. There are two types of whipsaw patterns. The
first involves an upward movement in a share price, which is then followed
by a drastic downward move causing the share's price to fall relative to
its original position. The second type occurs when a share price drops in value
for a short time and then suddenly surges upward to a positive
gain relative to the stock's original position.
The water ETF is an exchange-traded
fund that invests primarily in companies that operate within
the purview of water treatment, distribution and sales. This ETF goes beyond
the scope of private companies and deals with utility companies and third-party
marketers as well.
Whisper stock is shares in a company that is rumored to be the
target of a takeover offer. The reason for the whisper is that any such talk
must be kept quiet for one of two reasons. One, if the rumor has some validity,
those who believe it will want to act on it before the rumor spreads. Two, if
the whispering actually turns out to be true due to a leak of a confidential
mergers and acquisition (M&A) transaction, no one wants to be
brought in for questioning by the enforcement unit of a regulator or an
investigator from the Department of Justice. There may be a surge in trading
volume and upward price pressure on shares of a whisper stock. Once that
happens and gains wider notice by the market, the stock will no longer be
a whisper stock.
A whistleblower is anyone who has and reports insider knowledge
of illegal activities occurring in an organization. Whistleblowers can be
employees, suppliers, contractors, clients, or any individual who becomes aware
of illegal business activities. Whistleblowers are protected from retaliation
under various programs created by the Occupational Safety and Health
Administration (OSHA), Sarbanes Oxley Act, and the Securities and Exchange
Commission (SEC). The protection of federal employees is under the
Whistleblower Protection Act of 1989.
Extensible Markup Language (XML) is a flexible markup
language for structured electronic documents. Extensible Markup Language (XML)
is a programming language commonly used by data-exchange services (like blog
feeds) to send information between otherwise incompatible systems. It is
readable by both humans and computers and is based on SGML (standard generalized
markup language), an international standard for electronic
documents. Many other languages, such as RSS and XHTML, are based on XML.
Xenocurrency is a currency that circulates or trades in markets
outside of its domestic borders. The name derives from the Greek prefix "xeno,"
meaning foreign or strange.
Today, use of the term is infrequent, perhaps due to
the somewhat negative connotation of the word "Xeno." Xenophobia, for
example, means an irrational fear or hatred of foreigners. Foreign currency,
therefore, has become the preferred term when referring to a non-domestic
currency.
XBRL or eXtensible Business Reporting Language is a software
standard that was developed to improve the way in which financial data is
communicated, making it easier to compile and share this data. Notably,
eXtensible Business Reporting Language is an implementation of XML (extensible markup language), which
is a specification that is used for organizing and defining data online
Yacht insurance is an insurance policy that provides
indemnity liability coverage on pleasure boats. Yacht insurance includes
liability for bodily injury or damage to the property of others and damage to
personal property on the boat. Depending on the insurance provider, this
insurance could also include gas delivery, towing and assistance if your boat
gets stranded.
A Yankee bond is a debt obligation issued by a foreign entity,
such as a government or company, which is traded in the United States and
denominated in U.S. dollars.
Yield refers to the earnings generated and realized on an
investment over a particular period of time. It's expressed as a percentage
based on the invested amount, current
market value, or face value of the security. It includes the
interest earned or dividends received from holding a
particular security. Depending on the valuation (fixed vs. fluctuating) of the
security, yields may be classified as known or anticipated.
A yield curve is a line that plots yields (interest rates) of
bonds having equal credit quality but differing maturity dates. The slope of the yield curve
gives an idea of future interest rate changes and economic activity. There are
three main types of yield curve shapes: normal (upward sloping curve), inverted
(downward sloping curve) and flat.
Yield on Cost (YOC) is a measure of dividend yield calculated by dividing a
stock's current dividend by the price initially paid for that stock. For
example, if an investor purchased a stock five years ago for $20, and its
current dividend is $1.50 per share, then the YOC for that stock would be 7.5%.
A yield spread is the difference between yields on differing
debt instruments of varying maturities, credit ratings, issuer, or risk level,
calculated by deducting the yield of one instrument from the other. This
difference is most often expressed in basis points (bps) or percentage points.
Yield to call (YTC) is a financial term that refers to the
return a bondholder receives if the bond is held until the call date, which
occurs sometime before it reaches maturity. This number can be mathematically
calculated as the compound interest rate at which the present value of a bond's
future coupon payments and call price is equal to the current market price of
the bond.
Yield to maturity (YTM) is the total return anticipated on a
bond if the bond is held until it matures. Yield to maturity is considered a
long-term bond yield but is expressed as an annual
rate. In other words, it is the internal
rate of return (IRR) of an investment in a bond if the investor
holds the bond until maturity, with all payments made as scheduled and
reinvested at the same rate.
Yield variance is the difference between actual output and
standard output of a production or manufacturing process, based on standard
inputs of materials and labor. The yield variance is valued at standard cost.
Yield variance is generally unfavorable, where the actual output is less than
the standard or expected output, but it can be that output expects expectations
as well.
Yuppie is a slang term denoting the market segment of young urban
professionals. A yuppie is often characterized by youth, affluence, and
business success. They are often preppy in appearance and like to show off
their success by their style and possessions.
Zacks Investment Research is an American
company dedicated to the production of independent research and
investment-related content. Founded in 1978 by Len Zacks, armed with
his PhD from MIT, hit upon a key discovery: Earnings estimate
revisions are the most powerful force impacting stock prices.
ZCash is a cryptocurrency with a decentralized blockchain that
seeks to provide anonymity for its users and their transactions. As a digital
currency, ZCash is similar to Bitcoin. Like Bitcoin, ZCash also has an including
its open-source code, but their major
differences lie in the level of privacy and fungibility that each provides.
Zero-based budgeting (ZBB) is a method of budgeting in which
all expenses must be justified for each new
period. The process of zero-based budgeting starts from a "zero
base," and every function within an organization is analyzed for its needs
and costs. Budgets are then built around what is
needed for the upcoming period, regardless of whether each budget is higher or
lower than the previous one.
A zero balance account (ZBA) is pretty much exactly what it
sounds like: a checking account in which a balance of zero is maintained. When
funds are needed in the ZBA, the exact amount of money required is
automatically transferred from a central or master account. Similarly, deposits
are swept into the master account daily. Corporations sometimes use zero
balance accounts to ensure that funds are readily available throughout
different departments, to eliminate excess balances in separate accounts, and
to maintain greater control over the disbursement of funds.
A zero-beta portfolio is a portfolio constructed to have zero
systematic risk, or in other words, a beta of zero. A zero-beta portfolio would
have the same expected return as the risk-free rate. Such a portfolio
would have zero correlation with market movements, given that its expected
return equals the risk-free rate or a relatively low rate of return compared to higher-beta
portfolios.
A zero-coupon bond is a debt security that does not pay interest
but instead trades at a deep discount, rendering a profit at maturity, when the
bond is redeemed for its full face value.
Zero-sum is a situation in game theory in which one person’s gain is
equivalent to another’s loss, so the net change in wealth or benefit is zero. A
zero-sum game may have as few as two players or as many as millions of
participants. In financial markets, options and futures are examples of zero-sum games, excluding
transaction costs. For every person who gains on a contract, there is a
counter-party who loses.
The Zero-volatility spread (Z-spread) is the constant spread
that makes the price of a security equal to the present value of its cash flows
when added to the yield at each point on the spot rate Treasury curve where cash flow
is received. In other words, each cash flow is discounted at the appropriate Treasury
spot rate plus the Z-spread. The Z-spread is also known as a static spread.
The Zig Zag indicator plots points on the chart whenever prices
reverse by a percentage greater than a pre-chosen variable. Straight lines are
then drawn, connecting these points. The indicator is used to help identify
price trends. It eliminates random price fluctuations and attempts to show
trend changes. Zig Zag lines only appear when there is a price movement between
a swing high and a swing low that is
greater than a specified percentage; often 5%. By filtering minor price
movements, the indicator makes trends easier to spot in all time frames.
Zombies are companies that earn just enough money to continue
operating and service debt but
are unable to pay off their debt. Such companies, given that they just scrape
by meeting overheads (wages, rent, interest payments
on debt, for example), have no exccess capital to invest to spur growth. Zombie companies are
typically subject to higher borrowing costs and may be one just event—market disruption or a poor quarter
performance—away from insolvency or a bailout. Zombies are
especially dependent on banks for financing, which is fundamentally their life
support. Zombie companies are also known as the "living dead" or
"zombie stocks."
A zoning ordinance is a rule that defines how property in
specific geographic zones can be used. Zoning ordinances
detail whether specific geographic zones are acceptable for residential or
commercial purposes. Zoning ordinances may also regulate lot size, placement,
density, and the height of structures. Zoning ordinances also describe the
procedures for how to handle any zoning rule infractions (including any
penalties).
Zero-floor limit is a term that relates to authorization for
transactions involving credit and debit cards. Floor limit refers to the limit
above which credit or debit transactions require authorization. A retailer can
only automatically process transactions up to the maximum set by the floor
limit. When that limit is zero, all transactions require authorization,
regardless of their size. Authorization is provided electronically through the
debit or credit card's issuer.
Zakat is an Islamic finance term referring to the
obligation that an individual has to donate a certain proportion of wealth each
year to charitable causes. Zakat is a mandatory process for Muslims and is
regarded as a form of worship. Giving away money to the poor is said to purify
yearly earnings that are over and above what is required to provide the
essential needs of a person or family.
Zombie debt is debt that has fallen off your credit report but,
for various reasons, someone is still trying to collect. Zombie debt has often been long forgotten and
has probably been written off as uncollectible. But zombie debt can rise from
the grave if a debt collector attempts to collect on it all over again, even
when the debt is too old to legally pursue.
Real gross domestic product (GDP) is an inflation-adjusted measure that
reflects the value of all goods and services produced by an economy in a given
year (expressed in base-year prices) and is often referred to as
"constant-price," "inflation-corrected", or "constant
dollar" GDP.
A repurchase agreement (repo) is a form of short-term borrowing
for dealers in government securities. In the case of repo, a dealer sells
government securities to investors, usually on an overnight basis, and
buys them back the following day at a slightly higher price. That small
difference in price is the implicit overnight interest rate. Repos are
typically used to raise short-term capital. They are also a common tool of central bank open market operations.
Return on invested capital (ROIC) is a calculation used to
assess a company's efficiency at allocating the capital under its control to
profitable investments. The return on invested capital ratio gives a sense of
how well a company is using its money to generate returns. Comparing a
company's return on invested capital with its weighted average cost of capital (WACC) reveals whether invested capital
is being used effectively. This measure is also known simply as "return on
capital."
The accounts receivable turnover ratio is an accounting
measure used to quantify a company's effectiveness in collecting its
receivables or money owed by clients. The ratio shows how well a company uses and manages the credit it extends to customers and how
quickly that short-term debt is collected or is paid. The receivables turnover
ratio is also called the accounts receivable turnover ratio.
Return on Investment (ROI) is a performance measure used to
evaluate the efficiency of an investment or compare the efficiency of a number
of different investments. ROI tries to directly measure the amount of return on
a particular investment, relative to the investment’s cost. To calculate ROI,
the benefit (or return) of an investment is divided by the cost of the
investment. The result is expressed as a percentage or a ratio.
A rate of return (RoR) is the net gain or loss of an investment
over a specified time period, expressed as a percentage of the investment’s
initial cost. When calculating the rate of return, you are determining the
percentage change from the beginning of the period until the end.
Rational choice theory states that individuals use rational
calculations to make rational choices and achieve outcomes that are aligned
with their own personal objectives. These results are also associated with an
individual’s best, self-interests. Using rational choice theory is
expected to result in outcomes that provide people with the greatest benefit
and satisfaction given the choices they have available.
A required minimum distribution (RMD) is the amount of money that must be
withdrawn from a
traditional IRA, SEP, or SIMPLE individual retirement account (IRA) by owners and
qualified retirement plan participants of retirement age.
Real estate is property made up of land and the buildings on it,
as well as the natural resources of the land including uncultivated flora and
fauna, farmed crops and livestock, water, and any additional mineral deposits.
Retained earnings (RE) is the amount of net income left over for
the business after it has paid out dividends to its shareholders. A business
generates earnings that can be positive (profits) or negative (losses).
Regression is a statistical method used in finance, investing,
and other disciplines that attempts to determine the strength and character of
the relationship between one dependent variable (usually denoted by Y) and a
series of other variables (known as independent variables).
A real estate investment trust (REIT) is a company that owns,
operates, or finances income-generating real estate. Modeled after mutual
funds, REITs pool the capital of numerous investors. This makes it possible for
individual investors to earn dividends from real estate investments—without
having to buy, manage, or finance any properties themselves.
A renewable resource is one that can be used repeatedly and does
not run out because it is naturally replaced. A renewable resource,
essentially, has an endless supply such as solar energy, wind energy, and
geothermal pressure. Other resources are considered renewable even though some
time or effort must go into their renewal (e.g., wood, oxygen, leather, and
fish). Most precious metals are renewable also. Although precious metals are
not naturally replaced, they can be recycled because they are not destroyed
during their extraction and use.
Return on assets (ROA) is an indicator of how profitable a
company is relative to its total assets. ROA gives a manager, investor, or analyst an idea as to how efficient
a company's management is at using its assets to generate earnings. Return on
assets is displayed as a percentage.
Return on equity (ROE) is a measure of financial performance
calculated by dividing net income by shareholders' equity. Because shareholders' equity is equal
to a company’s assets minus its debt, ROE is considered the return on net assets. ROE is considered a measure of how
effectively management is using a company’s assets to create profits.
The term risk-averse describes the investor who chooses the
preservation of capital over the potential for a higher-than-average return.
The retention ratio is the proportion of earnings kept back in
the business as retained earnings. The retention ratio refers to the percentage
of net income that is retained to grow the business, rather than being paid out
as dividends. It is the opposite of the payout ratio, which measures the percentage of
profit paid out to shareholders as dividends. The retention ratio is also
called the plowback ratio.
A random variable is a variable whose value is unknown or a
function that assigns values to each of an experiment's outcomes. Random
variables are often designated by letters and can be classified as discrete, which are variables that have specific
values, or continuous, which are variables that can have any values within a
continuous range.
Risk analysis is the process of assessing the likelihood of
an adverse event occurring within the corporate,
government, or environmental sector. Risk analysis is the study of the
underlying uncertainty of a given course of action and refers to the
uncertainty of forecasted cash flow streams, the variance of portfolio or stock
returns, the probability of a project's success or failure, and possible future
economic states. Risk analysts often work in tandem with forecasting professionals
to minimize future negative unforeseen effects.
A recession is a macroeconomic term that refers to a significant
decline in general economic activity in a designated region. It had been
typically recognized as two consecutive quarters of economic decline, as reflected by GDP in conjunction with monthly indicators such as a rise in
unemployment. However, the National Bureau of Economic Research (NBER), which officially declares recessions,
says the two consecutive quarters of decline in real GDP are not how it is
defined anymore. The NBER defines a recession as a significant decline in
economic activity spread across the economy, lasting more than a few months,
normally visible in real GDP, real income, employment, industrial production,
and wholesale-retail sales.
Recapitalization is the process of restructuring a company's
debt and equity mixture, often to make a company's capital structure more
stable.
A revaluation is a calculated upward adjustment to a country's
official exchange
rate relative to a chosen baseline. The baseline can include
wage rates, the price of gold, or a foreign currency.
The standard deviation is a statistic that measures the
dispersion of a dataset relative to its mean and is calculated as the square
root of the variance.
It is calculated as
the square root of variance by determining the variation between each data
point relative to the mean. If the data points are further from the mean, there
is a higher deviation within the data set; thus, the more spread out the data,
the higher the standard deviation.
SWOT (strengths, weaknesses, opportunities, and threats)
analysis is a framework used to evaluate a company's
competitive position and to develop strategic planning. SWOT
analysis assesses internal and external factors, as well as current and future
potential.
The S&P
500 or Standard & Poor's 500 Index is a
market-capitalization-weighted index of the 500 largest U.S. publicly traded
companies. The index is widely regarded as the best gauge of large-cap
U.S. equities. Other common U.S. stock market benchmarks include the Dow Jones
Industrial Average or Dow 30 and the Russell
2000 Index, which represents the small-cap index.
The S&P does not currently provide the total list of all 500 companies on
its website, outside of the top 10. Many of the top
companies in the S&P 500 include technology firms and
financial businesses.
The Sarbanes-Oxley Act of
2002 is a law the U.S. Congress passed on July 30 of that year to help protect
investors from fraudulent financial reporting by corporations. Also known as
the SOX Act of 2002 and the Corporate Responsibility Act of 2002, it mandated
strict reforms to existing securities regulations and imposed tough new
penalties on lawbreakers.
The Sarbanes-Oxley Act of 2002 came in response to financial scandals in the
early 2000s involving publicly traded companies such as Enron Corporation, Tyco
International plc, and WorldCom. The high-profile frauds shook investor
confidence in the trustworthiness of corporate financial statements and led
many to demand an overhaul of decades-old regulatory standards.
The U.S. Securities and
Exchange Commission (SEC) is an independent federal government regulatory
agency responsible for protecting investors, maintaining fair and orderly
functioning of the
securities markets, and facilitating capital formation. It was
created by Congress in 1934 as the first federal regulator of the securities
markets. The SEC promotes full public disclosure, protects investors against fraudulent and
manipulative practices in the market, and monitors corporate takeover actions
in the United States. It also approves registration statements for bookrunners among underwriting firms.
Short selling is an investment or trading strategy that
speculates on the decline in a stock or other securities price. It is an
advanced strategy that should only be undertaken by experienced traders and
investors.
The solvency ratio is a key metric used to measure an
enterprise’s ability to meet its debt obligations and is used often by
prospective business lenders. The solvency ratio indicates whether a company’s
cash flow is sufficient to meet its short-and long-term
liabilities. The lower a company's solvency ratio, the greater the
probability that it will default on its debt obligations.
A spread can have several
meanings in finance. Basically, however, they all refer to the difference
between two prices, rates or yields.
The stock market refers to the collection of markets and
exchanges where regular activities of buying, selling, and issuance of shares
of publicly-held companies take place. Such financial activities are conducted
through institutionalized formal exchanges or over-the-counter (OTC) marketplaces which
operate under a defined set of regulations. There can be multiple stock
trading venues in a country or a region which allow transactions in stocks and
other forms of securities.
In the corporate world, a subsidiary is a company that belongs
to another company, which is usually referred to as the parent
company or the holding
company.
The parent holds a controlling interest in the
subsidiary company, meaning it has or controls more than half of its stock. In
cases where a subsidiary is 100% owned by another firm, the subsidiary is
referred to as a wholly
owned subsidiary. Subsidiaries become very important when discussing a reverse triangle mortgage.
A stop-limit order is a conditional trade over a set timeframe
that combines the features of stop with those of a limit order and is used to
mitigate risk. It is related to other order types, including limit orders (an
order to either buy or sell a specified number of shares at a given price, or
better) and stop-on-quote orders (an order to either buy or sell a security
after its price has surpassed a specified point).
Six Sigma is a quality-control methodology developed in 1986 by
Motorola, Inc. The method uses a data-driven review
to limit mistakes or defects in and process. Six Sigma emphasizes cycle-time
improvement while at the same time reducing manufacturing defects to a level of
no more than 3.4 occurrences per million units or events. In other words, the
system is a method to work faster with fewer mistakes.
A sinking fund is a fund containing money set aside or saved to pay off a debt or bond. A company that issues debt will need to pay that debt off in the future, and the sinking fund helps to soften the hardship of a large outlay of revenue. A sinking fund is established so the company can contribute to the fund in the years leading up to the bond's maturity.
A tariff is a tax
imposed by one country on the goods and services imported from
another country.
Technical analysis is a trading discipline employed to
evaluate investments and identify trading opportunities
by analyzing statistical trends gathered from trading activity, such as
price movement and volume.
Term life insurance, also known as pure life insurance, is a
type of life insurance that guarantees payment of a stated death benefit if the
covered person dies during a specified term. Once the term expires, the
policyholder can either renew it for another term, convert the policy to
permanent coverage, or allow the policy to terminate.
Terminal value (TV) is the value of a business or project beyond
the forecast period when future cash flows can be estimated. Terminal value
assumes a business will grow at a set
growth rate forever after the forecast period. Terminal value
often comprises a large percentage of the total assessed value.
"Third World" is a phrase that can be used to describe
a class of economically inferior nations. Historical observations have
developed a four-part segmentation for dividing the world’s
economies by economic status. Third World falls behind First
World and Second World but is ahead of Fourth World though Fourth World
countries are hardly recognized at all.
Total quality management (TQM) is the continual process of
detecting and reducing or eliminating errors in manufacturing, streamlining supply chain management, improving the
customer experience, and ensuring that employees are up to speed with training.
Total quality
management aims to hold all parties involved in the production
process accountable for the overall quality of the final product or service.
A trade deficit occurs when a country's imports exceed its exports during a given time period. It is
also referred to as a negative balance of trade (BOT).
A Treasury Bill (T-Bill) is a short-term U.S. government debt
obligation backed by the Treasury Department with a maturity of
one year or less. Treasury bills are usually sold in denominations of
$1,000. However, some can reach a maximum denomination of $5 million in
non-competitive bids. These securities are widely regarded as low-risk and
secure investments.
The triple bottom line (TBL) is a framework or theory that
recommends that companies commit to focus on social and environmental concerns
just as they do on profits. The TBL posits that instead of one bottom line,
there should be three: profit, people, and the planet. A TBL seeks to gauge a
corporation's level of commitment to corporate
social responsibility and its impact on the environment over
time.
A trust is a fiduciary relationship in which one
party, known as a trustor, gives another party, the trustee, the right to hold
title to property
or assets for the benefit of a third party, the beneficiary.
Trusts are established to provide legal protection for the trustor’s assets, to
make sure those assets are distributed according to the wishes of the trustor,
and to save time, reduce paperwork and, in some cases, avoid or reduce
inheritance or estate taxes. In finance, a trust can also be a type of closed-end
fund built as a public limited company.
A trustee is a person or firm that holds and administers
property or assets for the benefit of a third
party. A trustee may be appointed for a wide variety of purposes,
such as in the case of bankruptcy, for a charity, for a trust fund, or for
certain types of retirement plans or pensions. Trustees are trusted to make
decisions in the beneficiary's best interests and often have a fiduciary
responsibility to the trust beneficiaries.
Transfer pricing is an accounting
practice that represents the price that one division in a
company charges another division for goods and services provided. Transfer
pricing allows for the establishment of prices for the goods and services
exchanged between a subsidiary, an affiliate, or commonly controlled companies
that are part of the same larger enterprise. Transfer pricing can lead to tax
savings for corporations, though tax authorities may contest their claims.
The time value of money (TVM) is the concept
that money you have now is worth more than the identical sum in the future due
to its potential earning
capacity. This core principle of finance holds that provided money
can earn interest, any amount of money is worth more the sooner it is received.
TVM is also sometimes referred to as present discounted value.
A traveler’s check is a
once-popular but now largely outmoded medium of exchange utilized as an
alternative to hard
currency. The product typically is used by people on
vacation in foreign countries. It offers a safe way to travel
overseas without cash. The issuing party, usually a bank, provides security
against lost or stolen checks. Beginning in the late 1980s, traveler’s
checks have increasingly been supplanted by credit and prepaid debit cards.
A turnkey business is a business that is ready to use, existing
in a condition that allows for immediate operation.
The term "turnkey" is based on the concept of only needing to turn the key to unlock the doors to begin operations. To be fully considered a turnkey solution, the business must function correctly and at full capacity from the moment when it is initially received.
An underwriter is any party that evaluates and assumes another
party's risk for a fee. The fee is often a commission, premium, spread, or
interest. Underwriters are critical to the financial world including the
mortgage industry, insurance industry, equity markets, and common types of
debt security trading. A lead underwriter is called a book runner.
A unicorn is a term used in the venture capital industry to
describe a privately held startup company with a value of over $1 billion. The
term was first popularized by venture capitalist
Aileen Lee, founder of CowboyVC, a seed stage venture capital fund based in Palo Alto,
California.
The unemployment rate is the share of the labor force that is
jobless, expressed as a percentage. It is a lagging
indicator, meaning that it generally rises or falls in the wake of
changing economic conditions, rather than anticipating them. When the economy
is in poor shape and jobs are scarce, the unemployment rate can be expected to
rise. When the economy is growing at a healthy rate and jobs are relatively
plentiful, it can be expected to fall.
Unlevered free cash flow (UFCF) is a company's cash
flow before taking interest payments into account. Unlevered free cash flow can
be reported in a company's financial
statements or calculated using financial statements by
analysts. Unlevered free cash flow shows how much cash is available to the firm
before taking financial obligations into account.
{UFCF} = {EBITDA} - {CAPEX} - {Working Capital} - {Taxes}
Where:
{UFCF} = {Unlevered free
cash flow}
An unsecured note is a loan that is not secured
by the issuer's assets. Unsecured notes are similar to debentures but offer a higher rate of
return. Unsecured notes
offer less security than a debenture. Such notes are also often uninsured and
subordinated. The note is structured for a fixed period of time.
Universal banking is a system in which banks provide a wide
variety of comprehensive financial services, including those tailored to
retail, commercial, and investment services. Universal banking is common in
some European countries, including Switzerland.
An unlawful loan is a loan that fails to comply with—or
contravenes—any provision of prevailing lending laws. Examples of unlawful
loans include loans or credit accounts with excessively high interest rates or
that exceed the legal size limits that a lender is permitted to extend.
Beta is a measure of
market risk. Unlevered beta (or asset beta) measures the market risk of the
company without the impact of debt. Unlevering a beta removes the financial
effects of leverage thus
isolating the risk due solely to company assets. In other words, how much did
the company's equity contribute to its risk profile.
Universal life (UL) insurance is permanent
life insurance with an investment savings element and low
premiums that are similar to those of term life insurance. Most UL insurance
policies contain a flexible-premium option. However, some require a single
premium (single lump-sum premium) or fixed premiums (scheduled
fixed premiums).
Introduction There is a thrilling announcement that Microsoft has launched a new functionality for Vendor Aging reports having large data v...
