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ACCOUNTS RECEIVABLE:
Amounts due to a business for merchandise sold on credit or for services rendered. Accounts receivable are short-term assets.
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ACCOUNTS RECEIVABLE FINANCING:
A short-term financing method in which accounts receivable are collateral for cash advances. (See: factoring). |
ASSET:
Anything of value, whether tangible (e.g. machinery, stock, bonds) or intangible (e.g. popular brand name, good will). |
BALANCE SHEET:
A detailed listing of assets, liabilities, and capital accounts (net worth), showing the financial condition of a company as of a given date. A balance sheet illustrates the basic accounting equation:
assets = liabilities + net worth. |
BOOK BUILDING:
A process by which the offer price of an IPO is based on actual demand from institutional investors. |
BOOK VALUE:
The value at which a debt security is shown on the holder's balance sheet. Book value is often acquisition cost + or amortization/accretion, which may differ markedly from market value. |
CAPITALIZATION:
The capital structure of a company, both prior to the offering and after all securities offered are sold. The debt and/or equity mix that funds a firm's assets. |
CASH VALUE:
The amount that an insurance company will pay to the insured upon surrender of a policy. |
COLLATERAL:
Assets (property or securities) pledged by a borrower to secure payment of a loan or bond issue in the event of default. |
COMMON STOCK, SHARE EQUITY:
A share, usually represented by a certificate, representing participation in the ownership of a company, generally with the right to participate in dividends and in most cases, to vote in major matters affecting stockholders' interests. |
COMPENSATING BALANCE:
The bank balance that a customer must keep on deposit with a bank in order to ensure a credit line, to gain unlimited checking privileges, and/or to offset the bank's expenses in providing various services. |
CONTRACT:
An agreement, enforceable by law, between or among two or more persons, consisting of one or more mutual promises. |
DEBT SECURITIES:
IOUs (debts) created through loan-type transactions, commercial papers, bank CDs, bills, bonds, and other instruments. |
DEBT SERVICE:
Payments of interest and principal on total borrowings that must be made by the borrower in the period during which its debt is outstanding. |
DEFAULT:
A failure to fulfill the conditions of a contract; for example, a failure to make timely payment of interest or principal on a loan. |
DILUTION:
When a disparity exists between the IPO price and the net book value per share of tangible assets. |
DUE DATE:
The date on which payment of interest or principal becomes due and payable. |
EDGAR:
Electronic Data Gathering, Analysis and Retrieval system. The system through which companies electronically file reports and registration statements with the Securities and Exchange Commission. |
EQUITY:
Net worth; assets minus liabilities. |
FACTOR:
A financial firm that purchases at a discount the accounts receivable of other firms and assumes the risks and responsibilities of collection. |
FACTORING:
Sale of a firm's accounts receivable to a financial institution known as a factor. |
FIXED INTEREST:
Debt issued by a company, the Government or local authority, where the amount of interest to be paid each year is set on issue. Usually the date of repayment is also included in the title. |
FIXED-RATE LOAN:
A loan on which the rate paid by the borrower is fixed for the life of the loan. |
GOODWILL:
An accounting term which describes the intangible assets of a company (e.g. brand names, the skill of its staff). |
GUN-JUMPING:
In the context of securities trading, refers to trading in a security on the basis of information that has not been made available to the public. The illegal solicitation of buy orders in underwriting before completion and finalization of Securities and Exchange Commission registration. |
INCOME STATEMENT (PROFIT AND LOSS STATEMENT):
A record of the income and expenses of a business covering a period of time. |
INTEREST:
A payment made in return for the use of money. |
IPO:
Initial public offering. (See Public Offering) |
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LIABILITY:
- A financial obligation.
- Anything of negative value, whether tangible (e.g. an asset with high risk associated) or intangible (e.g. an obligation).
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LIEN:
A lien is a right of possession over goods or property belonging to another, with a right to retain possession until debts due to the possessor are paid. It is also a form of equitable charge in favor of a creditor, who may sell the property thus charged.
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LINE OF CREDIT:
A credit arrangement whereby a bank agrees to lend up to a certain limit (line) of money for a specified period. Called a committed facility, when the bank is obliged to lend subject to satisfaction of pre-specified conditions. An uncommitted line of credit does not oblige the bank to lend and allows the bank to call for repayment at any time. |
LIQUIDITY:
A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. |
LIQUIDITY RATIO:
A ratio that reflects a borrower's ability to meet his/her short-term obligations. |
LOAN:
An agreement whereby one party gives another use of money for a set period in return for the regular payment of interest. |
MORTGAGE:
A loan secured by real estate. |
NASDAQ:
National Association of Securities Dealers Automatic Quotation System. The largest U.S. electronic stock market, with approximately 3,200 companies, it lists more companies and on average trades more share per day than any other U.S. market. |
NET ASSET:
The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. |
NET CURRENT ASSET:
The difference between current assets and current liabilities, also known as working capital. |
PRESENT VALUE:
The current worth of a payment or a series of payments discounted at a given interest rate. Future value becomes present value through the process of discounting. |
PRICE-EARNINGS (P/E) RATIO:
This ratio may be calculated as the share price divided by the earnings per share, where earnings per share is net profit divided by the total number of outstanding shares, on a parent basis. |
PROSPECTUS:
A document containing all the pertinent information about a public offering of securities and about the borrower. |
PUBLIC OFFERING:
An offering for sale of a new issue of securities to the general investing public. Securities from such an offering will generally be placed through a syndicate, will be issued in small denominations and will be listed on a stock exchange. |
RATIO ANALYSIS:
The study of a corporation's or government's financial situation by comparison of a number of ratios (derived from their financial statements) with historical ratios and those of similar institutions. |
RED HERRING:
In the United States , a preliminary prospectus. So called because of the red legend along the left margin of the prospectus, calling the reader's attention to the fact that the contents of the prospectus may be amended and, for issues for U.S. companies, that the prospectus has not been declared effective by the U.S. Securities and Exchange Commission (SEC) and that the securities covered by the prospectus may not be legally offered for sale until it is. |
REGISTRATION STATEMENT:
A statement that must be filed with the SEC before a security is offered for sale. The statement must contain all materially relevant information relating to the offering. A similar type of statement is required when a firm's shares are listed. |
RETAINED EARNINGS:
Past profits, which the company has not distributed to shareholders. |
REVOLVING LINE OF CREDIT:
A bank line of credit on which the customer pays a commitment fee and can take down and repay funds according to his/her needs. Normally the line involves a firm commitment from the bank for a period of several years. |
ROAD SHOW:
A series of meetings with potential investors in key cities across the country and if appropriate, overseas. |
SALES FORECAST:
A key input to a firm's financial planning process. External sales forecasts are based on historical experience, statistical analysis, and consideration of various macroeconomic factors. |
SARBANES-OXLEY SECTION (SOX):
Passed in 2002, in the wake of corporate accounting scandals as a new IPO regulation that imposes a vast array of reporting and procedural obligations on a public company and its officers. |
TERM LOAN:
A loan with a fixed rate of interest and a determinable repayment schedule, where the principal is normally repaid on an equal, semi-annual basis. |
UNDERWRITE:
To agree to purchase securities (if they are not purchased by others), i.e. to buy an issue of securities or to contract to buy the un-subscribed securities of a primary market issue on a given date at a specific price, thus guaranteeing the borrower the full proceeds. |
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UNDERWRITER:
- Under generally accepted market terminology, an underwriter is a member of a new issue syndicate who is invited to sub-underwrite a new issue but who does not participate as a manager.
- In legal terms, it is each member of a new issue syndicate, including the managers and the sub-underwriters, who contracts to underwrite a new issue.
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UNDERWRITING AGREEMENT:
An agreement between the managers, as agents of the borrower, and each of the sub-underwriters which sets out the obligation of each sub-underwriter to subscribe for a specific amount of the issue in the event that the full amount of the issue is not subscribed for by members of the selling group. |
VARIABLE (ADJUSTABLE) RATE LOAN:
A loan that allows the lender to make periodic adjustments in the interest rate, according to fluctuating market conditions. |
VENTURE CAPITAL:
Risk capital extended to start-up or small going concerns. |
WAITING PERIOD:
The period between the filing of the registration statement and its effective date. |
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WORKING CAPITAL:
The excess of a business's current assets over its current liabilities; the liquid funds available to a business for its daily needs.
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WORKING CAPITAL MANAGEMENT:
The deployment of current assets and current liabilities so as to maximize short-term liquidity. |
YIELD:
Annual rate of return expressed as a percentage. |
| For additional definitions, see : Bloomberg Financial Glossary, Investorwords, Forbes: Financial Glossary, Investopedia, and Yahoo! Financial Glossary. |
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