Accounting & Finance Concepts.

 

  

Name	Meaning
	A
Account	Formal record that represents, in words, money or other unit of measurement, certain resources, claims to such resources, transactions or other events that result in changes to those resources and claims.
Account Payable	Amount owed to a CREDITOR for delivered goods or completed services.
Accounts Receivable	Claim against a DEBTOR for an uncollected amount, generally from a completed transaction of sales or services rendered.
Accountant	Person skilled in the recording and reporting of financial transactions.
Accountant Report	Formal document that communicates an independent accountant's: (1) expression of limited assurance on FINANCIAL STATEMENTS as a result of performing inquiry and analytic procedures (REVIEW REPORT); (2) results of procedures performed (AGREED-UPON PROCEDURES REPORT); (3) non-expression of opinion or any form of assurance on a presentation in the form of financial statements information that is the representation of management (COMPILATION REPORT); or (4) an opinion on an assertion made by management in accordance with the Statements on Standards for Attestation Engagements (ATTESTATION REPORT). An accountants' report does not result from the performance of an AUDIT.
Accounting	Recording and reporting of financial transactions, including the origination of the transaction, its recognition, processing, and summarization in the FINANCIAL STATEMENTS.
Accounting Cycle	The sequence of steps followed in the accounting process to measure business transactions and transform the measurements into FINANCIAL STATEMENTS for a specific period.
Accounts Payable Subsidiary Ledger	A financial record of an individual ACCOUNT PAYABLE in which entries can be made daily.
Accounts Receivable Turnover	Used to measure a company’s ability to collect cash from credit customers. Found by dividing net sales by average net ACCOUNT RECEIVABLE.
Accrual	The recognition of an expense or revenue that has occurred but has not yet been recorded.
Accrual Accounting	The attempt to record the financial effects of transactions and other events in the periods in which those transactions or events occur rather than only in the periods in which cash is received or paid by the business, using all the techniques developed by accountants to apply the MATCHING PRINCIPLE.
Accrual Basis	Method of ACCOUNTING that recognizes REVENUE when earned, rather than when collected. Expenses are recognized when incurred rather than when paid.
Accrued Expense	An expense that has occurred but is not recognized in the accounts.
Accrued Interest	INTEREST that has accumulated between the most recent payment and the sale of a BOND or other fixed-income security.
Accumulated Depreciation	Total DEPRECIATION pertaining to an ASSET or group of assets from the time the assets were placed in services until the date of the FINANCIAL STATEMENT or tax return. This total is the CONTRA ACCOUNT to the related asset account.
Accumulation	Profits that are not paid out as DIVIDENDS but are instead added to the company’s capital base.
Acid Test Ratio	The relationship of a company’s current assets that can be converted into cash to its current liabilities. It is determined by dividing QUICK ASSETS by current liabilities.
Acquisition	One company taking over controlling interest in another company.
Actuary	Mathematician employed by an insurance company to calculate PREMIUMS, RESERVES, DIVIDENDS, and insurance, PENSION, and ANNUITY rates, using risk factors obtained from experience tables.
Additional Paid In Capital	Amounts paid for stock in excess of its PAR VALUE or STATED VALUE. Also, other amounts paid by stockholders and charged to EQUITY ACCOUNTS other than CAPITAL STOCK.
Adjusted Basis	After a taxpayer's basis in property is determined, it must be adjusted upward to include any additions of capital to the property and reduced by any returns of capital to the taxpayer. Additions might include improvements to the property and subtractions may include depreciation or depletion. A taxpayer's adjusted basis in property is deducted from the amount realized to find the gain or loss on sale or disposition.
Adjusted Gross Income	Gross income reduced by business and other specified expenses of individual taxpayers. The amount of adjusted gross income affects the extent to which medical expenses, non business casualty and theft losses and charitable contributions may be deductible. It is also an important figure in the basis of many other individual planning issues as well as a key line item on the IRS form 1040 and required state forms.
Adjusted Trial Balance	A trial balance prepared after all adjusting entries have been recorded and posted to the accounts. Should have equal credit and debit totals.
Adjusted Journal Entry	An accounting entry made into a subsidiary ledger called the General journal to account for a periods changes, omissions or other financial data required to be reported "in the books" but not usually posted to the journals used for typical period transactions (the cash receipts journal, cash disbursements journal, the payroll journal, sales journal and so on) the entry is posted to the general ledger accounts directly and usually will be numbered itself, dated and have an explanation. Example: AJE# 1 12-31-2003, debit Cash in bank $1,000. Credit interest income $1,000, to record interest income on business bank account at year end, not recorded in cash receipts journal but credited by the bank. (Cross-reference bank reconciliation and account where it was found)
ADR	Receipts for shares of foreign company stock maintained by an intermediary indicating ownership.
Adverse Opinion	Expression of an opinion in an AUDITORS' REPORT which states that FINANCIAL STATEMENTS do not fairly present the financial position, results of operations and cash flows in conformity with GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP).
Affiliated Company	Company, or other organization related through common ownership, common control of management or owners, or through some other control mechanism, such as a long-term LEASE.
Agency Fund	Fund consisting of ASSETS where the holder agrees to remit the assets, income from the assets, or both, to a specified beneficiary in due course or at a specified time.
Allocate	To set aside for a specific reason.
Allowance for Doubtful Accounts	A contra-asset account used to reduce ACCOUNTS RECEIVABLE to the amount that is expected to be collected in cash.
Alternative Dispute Resolution	An alternative to formal litigation which includes techniques such as arbitration, mediation, and a non-binding summary jury trial.
Alternative Minimum Tax (AMT)	Tax imposed to back up the regular income tax imposed on CORPORATION and individuals to assure that taxpayers with economically measured income exceeding certain thresholds pay at least some income tax.
American Depository Receipt (ADR)	Receipts for shares of foreign company stock maintained by an intermediary indicating ownership.
Amortization	Gradual and periodic reduction of any amount, such as the periodic writedown of a BOND premium, the cost of an intangible ASSET or periodic payment Of MORTGAGES or other DEBT.
AMT	Tax imposed to back up the regular income tax imposed on CORPORATION and individuals to assure that taxpayers with economically measured income exceeding certain thresholds pay at least some income tax.
Analyst	Person in a brokerage house, bank trust dept., or mutual fund group who studies a number of companies and makes buy or sell recommendations on the securities of particular companies and industry groups.
Analytical Procedures	Substantive tests of financial information which examine relationships among data as a means of obtaining evidence. Such procedures include: (1) comparison of financial information with information of comparable prior periods; (2) comparison of financial information with anticipated results (e.g., forecasts); (3) study of relationships between elements of financial information that should conform to predictable patterns based on the entity's experience; (4) comparison of financial information with industry norms.
Annual Report	Report to the stockholders of a company which includes the company's annual, audited BALANCE SHEET and related statements of earnings, stockholders' or owners' equity and cash flows, as well as other financial and business information.
Annunity	Series of payments, usually payable at specified time intervals.
Anti-Dilution	Condition that may increase the computation of EARNINGS PER SHARE (EPS) or decrease loss per share solely because of the inclusion of COMMON STOCK equivalents, such as STOCK OPTIONS, WARRANTS, convertible DEBT or convertible PREFERRED STOCK, nomination or selection of the independent AUDITORs.
Apperciation	Increase in the value of an ASSET such as a stock, BOND, commodity, or real estate.
Assertion	Explicit or implicit representations by an entity's management that are embodied in financial statement components and for which the AUDITOR obtains and evaluates evidential matter when forming his or her opinion on the entity's financial statements.
Asset	An economic resource that is expected to be of benefit in the future. Probable future economic benefits obtained as a result of past transactions or events. Anything of value to which the firm has a legal claim. Any owned tangible or intangible object having economic value useful to the owner.
Asset Turnover	A way of measuring how profitably and efficiently assets are being used to produce sales. This is determined by dividing net sales by average total assets.
At Par	At a price equal to the face, or nominal, value of a security.
Audit	A professional examination of a company’s financial statement by a professional accountant or group to determine that the statement has been presented fairly and prepared using GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP).
Audit Documentation	The written record of the basis for the AUDITOR's conclusions that provides the support for the auditor's representations, whether those representations are contained in the auditor's report or otherwise. (May be referred to as work papers or working papers).
Audit Engagement	Agreement between a CPA firm and its client to perform an AUDIT.
Audit Risk	The risk that the AUDITOR may unknowingly fail to modify appropriately his or her opinion on financial statements that are materially misstated.
Audit Sampling	Application of an AUDIT procedure to less than 100% of the items within an account BALANCE or class of transactions for the purpose of evaluating some characteristic of the balance or class.
Authorized Shares	Maximum number of shares of any class a company may legally create under the terms of its articles of incorporation.
Average Days Inventory On-Hand	The average number of days required to sell the current inventory of products available for sale. It is found by dividing the number of days in a year by inventory turnover.
Average Days Sales Uncollected	A ratio that shows the average length of time it takes a company to receive payment for credit sales.
Average Cost Method	A way of arriving at the cost of inventory that computes the average cost of all goods available for sale during a fixed period in order to determine the value of inventory.
B
Backup Withholding	Payors of interest, dividends and other reportable payments must withhold income tax equal at a rate equal to the fourth lowest rate applicable to single filers if they fail to supply a federal id # or if they fail to certify that they are not subject to it.
Bad Debt	All or portion of an ACCOUNT, loan, or note receivable considered to be uncollectible.
Balance	Basic FINANCIAL STATEMENT, usually accompanied by appropriate DISCLOSURES that describe the basis of ACCOUNTING used in its preparation and presentation of a specified date the entity's ASSETS, LIABILITIES and the EQUITY of its owners. Also known as a STATEMENT OF FINANCIAL CONDITION.
Bank Reconciliation	A process by which an accountant determines whether and why there is a difference between the balance shown on the bank statement and the balance of the cash account in the firm’s GENERAL LEDGER.
Bank Statement	A periodic statement, usually monthly, that a bank sends to the holder of a checking account showing the balance in the account at the beginning of the month, during, and at the end of the month.
Bankruptcy	Legal process, governed by federal statute, whereby the DEBTS of an insolvent person are liquidated after being satisfied to the greatest extent possible by the DEBTOR'S ASSETS. During bankruptcy, the debtor's assets are held and managed by a court appointed TRUSTEE.
Base Market Value	Average market price of a group of securities at a given time.
Beta Coefficient	Measure of a stock’s relative volatility. The beta is the covariance of a stock in relation to the rest of the stock market.
Bid and Asked	Bid is the highest price a prospective buyer is prepared to pay at a particular time for a trading unit of a given SECURITY; asked is the lowest price acceptable to a prospective seller of the same security. The difference between the prices is the SPREAD.
Bond	One type of long-term PROMISSORY NOTE, frequently issued to the public as a SECURITY regulated under federal securities laws or state BLUE SKY LAWS. Bonds can either be registered in the owner's name or are issued as bearer instruments.
Bond Discoount	The amount below PAR VALUE that a BOND sells for.
Bond Indenture	An additional agreement to a BOND issue that defines the rights, privileges, and limitations of BONDHOLDERS.
Bondholder	A person who owns a BOND certificate issued by a government or CORPORATION.
Book Value	Amount, net or CONTRA ACCOUNT balances, that an ASSET or LIABILITY shows on the BALANCE SHEET of acompany. Also known as CARRYING VALUE.
Bookkeeping	The process of recording financial transactions and keeping financial records.
Boot	The non technical term used by some to describe any cash or other property that is received in exchange of property that would be otherwise nontaxable.
Bottom Line	The line in a FINANCIAL STATEMENT that shows NET INCOME or LOSS.
Break-Even Point	The point at which TOTAL REVENUES equals TOTAL COSTS.
Break-Even Units	The number of units of a product that must be sold before a company makes enough money to pay for direct and indirect costs of making the product.
Budget	Financial plan that serves as an estimate of future cost, REVENUES or both.
Burden Rate	Standard rate multiplied by a level of activity to determine the OVERHEAD cost of that activity. Activity measures include LABOR or machine hours
Buyout	Purchase of at least a controlling percentage of a company’s stock to take over its ASSETS and operations.
Bylaws	Collection of formal, written rules governing the conduct of a CORPORATION'S affairs (such as what officers it will have, what their responsibilities are, and how they are to be chosen). Bylaws are approved by a corporation's stockholders, if a stock corporation, or other owners, if a non-stock corporation.
C
Call Loan	Loan repayable on demand. Also known as DEMAND LOAN.
Call Price	A specified price, usually above face value, at which a CORPORATION may, at its option, buy back and retire BONDS before maturity.
Callable	Redeemable by the issuer before the scheduled maturity.
Callable Instrument	BOND which accords an issuer the right to redemption before it is due.
Capital Asset Pricing Model (CAPM)	Sophisticated model of the relationship between expected risk and expected return.
Capital Expenditure	Outlay of money to acquire or improve capital assets such as buildings and machinery.
Capital Gain	Portion of the total GAIN recognized on the sale or exchange of a noninventory asset which is not taxed as ORDINARY INCOME. Capital gains have historically been taxed at a lower rate than ordinary income.
Capital Project Funds	Funds used by a not-for-profit organization to account for all resources used for the development of a land improvement or building addition or renovation.
Capital Stock	Ownership shares of a CORPORATION authorized by its ARTICLES OF INCORPORATION. The money valueassigned to a corporation's issued shares. The BALANCE SHEET account with the aggregate amount of the PAR VALUE or STATED VALUE of all stock issued by a corporation.
Capitalize	Convert a schedule of INCOME into a principal amount, called capitalized value, by dividing by a rate of INTEREST.
Capitalized Cost	Expenditure identified with goods or services acquired and measured by the amount of cash paid or the market value of other property, CAPITAL STOCK, or services surrendered. Expenditures that are written off during two or more accounting periods.
Capitalized Interest	INTEREST cost incurred during the time necessary to bring an ASSET to the condition and location for its intended use and included as part of the HISTORICAL COST of acquiring the asset.
Capitalized Lease	LEASE recorded as an ASSET acquisition accompanied by a corresponding LIABILITY by the LESSEE.
Carrying Value	Amount, net or CONTRA ACCOUNT balances, that an ASSET or LIABILITY shows on the BALANCE SHEET of a company. Also known as BOOK VALUE.
Carryovers	Provision of tax law that allows current losses or certain tax credits to be utilized in the tax returns of future periods..
Cash	ASSET account on a balance sheet representing paper currency and coins, negotiable money orders and checks, bank balances, and certain short-term government securities.
Cash Account	Brokerage firm account whose transactions are settled on a cash basis.
Cash Basis	Method of bookkeeping by which REVENUES and EXPENDITURES are recorded when they are received and paid.
Cash Dividend	Distribution of a CORPORATION’s earnings to stockholders in the form of CASH.
Cash Equivalents	Short-term (generally less than three months), highly liquid INVESTMENTS that are convertible to known amounts of cash.
Cash Flow to Assets	Used to measure the ability of ASSETS to generate operating CASH FLOWS.
Cash Flow to Sales	A way of measuring the ability of sales to generate operating CASH FLOWS.
Cash Flows	Net of cash receipts and cash disbursements relating to a particular activity during a specified accounting period.
Cash Payments Journal	A multicolumn journal used to record sums of cash paid out for expenses.
Cash Ratio	Ratio of CASH and MARKETABLE SECURITIES to CURRENT LIABILITIES.
Cash Recepits Journal	A multicolumn journal used to record business transactions involving the receipt of CASH from other individuals or businesses.
Casualty Loss	Any loss of an asset due to fire storm act of nature causing asset damage from unexpected or accidental force. Generally it is deductible regardless of whether it is business or personal.
Certificate of Deposit (CD)	Formal instrument issued by a bank upon the deposit of funds which may not be withdrawn for a specified time period. Typically, an early withdrawal will incur a penalty.
Close	To clear the BALANCES of temporary accounts in order to be ready for the next accounting period.
Closed-End Mutual Fund	MUTUAL FUND with a fixed number of shares outstanding that may be bought or sold.
Closing Entry	A journal entry made at the end of an accounting period in order to prepare for the next accounting period by clearing the BALANCES of temporary accounts and summarizing the period’s REVENUES and expenses.
Collateral	ASSET provided to a CREDITOR as security for a loan.
Collateralized Mortgage Obligation (CMO)	SECURITY whose cash flows equal the difference between the cash flows of the collateralizing ASSETS and the collateralized obligations of a securitized TRUST. Characteristics of CMO residuals vary greatly and can be extremely complex in nature.
Comfort Letter	Letter provided by a company's independent public accountant to an underwriter when the underwriter has a DUE DILIGENCE responsibility under Section 11 of the Securities Act of 1933 regarding financial information included in an offering statement.
Commercial Paper	A way of borrowing money by using unsecured short-term loans sold directly to the public, usually through professionally managed investments firms.
Commission	Percentage of the selling price of the property, paid by the seller.
Comodities	Bulk goods such as grains, metals, and foods traded on a commodities exchange or on the SPOT MARKET.
Common Stock	CAPITAL STOCK having no preferences generally in terms of dividends, voting rights or distributions.
Comparative Financial Statement	FINANCIAL STATEMENT presentation in which the current amounts and the corresponding amounts for previous periods or dates also are shown.
Compensate	To pay or make payment for something.
Compensatory Balance	Funds that a borrower must keep on deposit as required by a bank.
Compilation	Presentation of financial statement data without the ACCOUNTANT'S assurance as to conformity with GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP).
Compliance Audit	Review of financial records to determine whether the entity is complying with specific procedures or rules.
Compound Interest Principles	Interest computed on principal plus interest earned in previous periods.
Consolidated Financial Statements	Combined FINANCIAL STATEMENTS of a parent company and one or more of its subsidiaries as one economic unit
Consolidation	BUSINESS COMBINATION of two or more entities that occurs when the entities transfer all of their NET ASSETS to a new entity created for that purpose.
Constructive Report	A taxpayer is considered to have received the income even though the monies are not in hand, it may have been set aside or otherwise made available. An example is interest on a bank account.
Consumer Goods	Goods bought for personal or household use, as distinguished from capital goods or producer’s goods, which are used to produce other goods.
Contingency	An event that might happen but that is not likely or planned.
Contingent Liability	Potential LIABILITY arising from a past transaction or a subsequent event
Continuing Operations	Portion of a business entity expected to remain active.
Contra Account	ACCOUNT considered to be an offset to another account. Generally established to reduce the other account to amounts that can be realized or collected.
Contra-Liability Account	A deduction from a LIABILITY, such as discounts on notes payable, which is a deduction from the balance of notes payable.
Contribution Margin	The excess of REVENUES over all variable costs related to a particular sales volume.
Control Deficiency	This exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.
Control Risk	Measure of risk that errors exceeding a tolerable amount will not be prevented or detected by an entity's internal controls.
Control Tests	Tests directed toward the design or operation of an internal control structure policy or procedure to assess its effectiveness in preventing or detecting material misstatements in a financial report.
Conversion	Exchange of a convertible security such as a BOND into another security such as a fixed number of shares of the issuing CORPORATION’s COMMON STOCK.
Convertible Stock	Stock that may be exchanged for other SECURITIES of the issuer.
Corporate Bond	DEBT instrument issued by a private CORPORATION, as distinct from one issued by a government agency or a municipality.
Corporate Income Tax	The TAX that an incorporated business must pay to the federal government and, often, to state and city governments as well.
Cost Accounting	Procedures used for rationally classifying, recording, and allocating current or predicted costs that relate to a certain product or production process.
Cost Basis	Original price of an ASSET, used in determining CAPITAL GAIN.
Cost of Capital	Rate of return that a business could earn if it chose another investment with equivalent risk.
Cost of Goods Sold	Figure representing the cost of buying raw materials and producing finished goods.
Cost Recovery Method	Method of REVENUE RECOGNITION which recognizes profits after costs are completely recovered. Generally used only when the total amount of collections is highly uncertain. In tax, the ACCOUNTING METHOD used to depreciate ASSETS.
Coupon	INTEREST rate on a DEBT SECURITY the ISSUER promises to pay to the holder until maturity, expressed as an annual percentage of FACE VALUE.
Coupon Bond	A BOND that is usually not registered with the issuing CORPORATION but instead bears interest coupons stating the amount of INTEREST due and the payment date.
Credit	Entry on the right side of a DOUBLE-ENTRY BOOKKEEPING system that represents the reduction of an ASSETor expense or the addition to a LIABILITY or RVENUE.
Credit Agreement	Arrangement in which one party borrows or takes possession in the present by promising to pay in the future.
Credit Balance	BALANCE remaining after one of a series of bookkeeping entries. This amount represents a LIABILITY or incometo the entity.
Creditor	Party that loans money or other ASSETS to another party.
Current Asset	ASSET that one can reasonably expect to convert into cash, sell, or consume in operations within a single operating cycle, or within a year if more than one cycle is completed each year.
Current Liability	Obligation whose LIQUIDATION is expected to require the use of existing resources classified as CURRENT ASSETS, or the creation of other current liabilities.
Current Ratio	Used as an indicator of a COMPANY’s liquidity and ability to pay short-term debts. This is found by dividing CURRENT ASSETS by CURRENT LIABILITIES.
Current Value	1) Value of an ASSET at the present time as compared with the asset's HISTORICAL COST. (2) In finance, the amount determined by discounting the future revenue stream of an asset using COMPOUND INTEREST PRINCIPLES.
Current Yield	Annual INTEREST on a BOND divided by the market price.
D
Debenture	General DEBT obligation backed only by the integrity of the borrower and documented by an agreement called and INDENTURE.
Debenture Stock	Stock issued under a contract providing for fixed payments at scheduled intervals and more like preferred stock than a DEBENTURE, since their status in liquidation is EQUITY and not DEBT.
Debit	Entry on the left side of a DOUBLE-ENTRY BOOKKEEPING system that represents the addition of an ASSET or expense or the reduction to a LIABILITY or REVENUE.
Debit Balance	BALANCE remaining after one or a series of bookkeeping entries. This amount represents an ASSET or an expense of the entity.
Debt	General name for money, notes, BONDS, goods or services which represent amounts owed.
Debt Instrument	Written promise to repay a DEBT.
Debt Retirement	Repayment of DEBT.
Debt Security	Document which is evidence of an obligation or LIABILITY.
Debt Service Fund	Fund whose PRINCIPAL or INTEREST is set aside and accumulated to retire DEBT.
Debt to Equity Ratio	A way of measuring the relationship of DEBT financing to EQUITY FINANCING, or the extent to which a companyis leveraged.
Debtor	Party owing money or other ASSETS to a CREDITOR.
Decedent	Individual who has died.
Declare	Authorize the payment of DIVIDEND on a specified date, an act of the BOARD OF DIRECTORS of a CORPORATION.
Declining- Balance Method	An accelerated method of depreciating a tangible long-lived ASSET by applying a fixed-rate based on some multiple of the STRAIGHT-LINE DEPRECIATION rate to its CARRYING VALUE.
Defalcation	To misuse or embezzle funds.
Default	Failure to meet any financial obligation. Default triggers a CREDITOR'S rights and remedies identified in the agreement and under the law.
Defeasance	Annulment of a contract or deed; a clause within a contract or deed that provides for annulment.
Deferral	The postponement of the date that an expense already paid or incurred, or of a REVENUE already received, is entered in the LEDGER.
Deferred Charge	Income received but not earned until all events have occurred. Deferred income is reflected as a LIABILITY.
Deferred Income Taxes	ASSETS or LIABILITIES that arise from timing or measurement differences between tax and accounting principles.
Deferred Income Bond	BOND that pays INTEREST at a later date.
Deferred Payment Annuity	ANNUITY whose contract provides that payments to the annuitant be postponed until a number of periods have elapsed.
Deficit	Financial shortage that occurs when LIABILITIES exceed ASSETS.
Deflation	Decline in the prices of goods and services.
Demand Loan	Loan repayable on demand. Also known as a CALL LOAN.
Depreciation	Expense allowance made for wear and tear on an ASSET over its estimated useful life.
Derivatives	Financial instruments whose value varies with the value of an underlying asset (such as a stock, BOND, commodity or currency) or index such as interest rates. Financial instruments whose characteristics and value depend on the characterization of an underlying instrument or asset.
Direct Labor Costs	The labor cost is for specific work that can be easily and economically traced to an end product.
Direct Material	A material that will become part of a finished product and can be easily and economically traced to specific product units.
Direct Overhead	Portion of OVERHEAD costs allocated to manufacturing, by the application of a standard factor termed a BURDEN RATE or OVERHEAD APPLICATION RATE.
Disbursement	Payment by cash or check.
Disclosure	Process of divulging accounting information so that the content of FINANCIAL STATEMENTS is understood.
Discount	Reduction from the full amount of a price or DEBT.
Discount Bond	BOND selling below its REDEMPTION VALUE.
Discount Rate	Rate at which INTEREST is deducted in advance of the issuance, purchasing, selling, or lending of a financial instrument. Also, the rate used to determine the CURRENT VALUE, or present value, of an ASSET or incomestream.
Discount Yield	Yield on a SECURITY sold at a DISCOUNT.
Discounted Cash Flow	Present value of future cash estimated to be generated.
Disposable Income	Personal INCOME remaining after personal taxes and noncommercial government fees have been paid.
Dissolution	Termination of a CORPORATION.
Distribution Expense	Expense of selling, advertising, and delivery of goods and services.
Distributions	Payment by a business entity to its owners of items such as cash ASSETS, stocks, or earnings.
Dividend Payout Ratio	Percentage of earnings paid to shareholders in CASH.
Dividends	Distribution of earnings to owners of a CORPORATION in CASH, other ASSETS of the corporation, or the corporation's CAPITAL STOCK.
Dividends in Arrears	DIVIDENDS on cumulative PREFERRED STOCK that remain unpaid in the year they are due.
Dividends Payable	A LIABILITY for payment of a COMPANY’s earnings to its shareholders.
Dividends Yield	Used to measure the current return to an investor in a stock.
Double Taxation	The act of taxing corporate earnings twice, once as the NET INCOME of the CORPORATION and once as the DIVIDENDS distributed to stockholders.
Double-Declining-Balance Depreciation Method (DDB)	Method of ACCELERATED DEPRECIATION, approved by the INTERNAL REVENUE SERVICE (IRS), permitting twice the rate of annual DEPRECIATION as the STRAIGHT-LINE DEPRECIATION method.
Double-Entry Bookkeeping	Method of recording financial transactions in which each transaction is entered in two or more accounts and involves two-way, self-balancing posting. Total DEBITS must equal total CREDITS.
Draft	Signed, written order by which one party (drawer) instructs another party (drawee) to pay a specified sum to a third party (payee).
Due Date	Each governing agency and its forms scheduled reporting and most importantly payments have a required due date. It is this date that if most files timely may result in a penalty, fine, and commence interest charges.
Due Diligence	(1) Procedures performed by underwriters in connection with the issuance of a SECURITIES EXCHANGE COMMISSION (SEC) registration statement. These procedures involve questions concerning the company and its business, products, competitive position, recent financial and other developments and prospects. Also performed by others in connection with acquisitions and other transactions. (2) Requirement found in ethical codes that the person governed by the ethical rules exercise professional care in conducting his or her activities.
E
Earned Income	Wages, salaries, professional fees, and other amounts received as compensation for services rendered.
Earned Income Tax Credit (EITC)	A refundable tax credit for eligible low income workers, subject to computations based on qualifying children and phase in and phase out income levels.
Earnings Per Share (EPS)	Measure of performance calculated by dividing the net earnings of a company by the average number of shares outstanding during a period.
Earnings Per Ratio	Relationship of EARNINGS PER SHARE (EPS) to current stock price.
Econometrics	Use of computer analysis and modeling techniques to describe in mathematical terms the relationship between key economic forces such as labor, capital, interest rates, and government policies, the test the effects of changes in economic scenarios.
Economic Growth Rate	Rate of change in the gross national product, as expressed in an annual percentage.
Economics	The study of the ways goods and services are produced, transported, sold, and used.
Effective Interest Method	A way of AMORTIZING BOND DISCOUNTS or PREMIUMS by applying a constant interest rate to the CARRYING VALUE of the BONDS at the beginning of each interest period.
Effective Interest Rate	The rate of INTEREST actually paid or earned.
Effective Tax Rate	Total income taxes expressed as a percentage of NET INCOME before taxes.
Employee Stock Ownership Plan (ESOP)	Stock bonus plan of an employer that acquires SECURITIES issued by the plan sponsor.
Encumbrance	(1) MORTGAGE or other lien on the entity's ASSETS; (2) Anticipated EXPENDITURE; (3) Uncompleted or undelivered portion of a purchase commitment.
Endorsement	The process by which the payee transfers ownership of a CHECK to a bank or another party by writing his or her name on the back of it.
Equilibrium Price	Price when the supply of goods in a particular market matches demand.
Equity	Residual INTEREST in the ASSETS of an entity that remains after deducting its LIABILITIES. Also, the amount of a business' total assets less total liabilities. Also, the third section of a BALANCE SHEET, the other two being assets and liabilities.
Equity Account	ACCOUNT in the EQUITY section of the BALANCE SHEET. Includes CAPITAL STOCK, ADDITIONAL PAID IN CAPITAL and RETAINED EARNINGS.
Equity Financing	Raising the money by issuing shares of COMMON STOCK or PREFERRED STOCK.
Equity Method of Accounting	Investors cost basis is adjusted up or down (in proportion to the % of stock ownership) as the investee's retained earnings fluctuation; used for long-term investments in equity securities of affiliate where holder can exert significant influence; 20% ownership or greater is arbitrarily presumed to have significant influence over the investee.
Equity Securities	CAPITAL STOCK and other SECURITIES that represent ownership shares, or the legal rights to purchase or acquire CAPITAL STOCK.
Estimated Tax	Amount of tax LIABILITY a taxpayer may expect to pay for the current tax period. Usually paid through quarterly installments.
Estimation Transactions	Activities that involve management judgments or assumptions in formulating account balances in the absence of a precise means of measurement.
Exchanges	Transfer of money, property or services in exchange for any combination of these items.
Excise Tax	Tax or duty on the manufacture, sale, or consumption of commodities.
Exclusions	Income item which is excluded from a taxpayer's gross income by the INTERNAL REVENUE CODE or an administrative action. Common exclusions include gifts, inheritances, and death proceeds paid under a life insurance contract. Also known as excluded income.
Executor	Person appointed by a will to manage a DECENDENT'S estate.
Exemption	Amount of a taxpayer's income that is not subject to tax. All individuals, TRUSTS, and estates qualify for an exemption unless they are claimed as a dependent on another individual's tax return. Exemptions also are granted to taxpayers for their dependents.
Expectation Gap	The difference in perception between the public and the CPA as a result of accounting and audit service.
Expenditure	Payment, either in CASH, by assuming a LIABILITY, or by surrendering ASSET.
Expense	Something spent on a specific item or for a particular purpose.
Expense ratio	Amount, expressed as a percentage of total investment, that shareholders pay for MUTUAL FUND operating expenses and management fees.
F
Face Value	Amount due at maturity from a BOND or note.
Factoring	Selling a RECEIVABLE at a discounted value to a third party for cash.
Factoring: Over-Advances	Circumstance where a business receives more money from a factor than the value of the RECEIVABLES, which is a loan against inventory in anticipation of future sales.
Factory Overhead Costs	Various production-related costs that cannot be practically or conveniently traced to an end product.
Fair Market Value	Price at which property would change hands between a buyer and a seller without any compulsion to buy or sell, and both having reasonable knowledge of the relevant facts.
Favorable Variance	Excess of actual REVENUE over projected revenue, or actual costs over projected costs.
Finance	The science of the management of money and other financial ASSETS.
Financial Institution	Organization engaged in any of the many aspects of finance including commercial banks, thrift institutions, investment banks, securities brokers and dealers, credit unions, investment companies, insurance companies, and REAL ESTATE INVESTMENT TRUSTS.
Financial Leverage	The ability to increase earnings for stockholders by earning more on ASSETS than is paid in INTEREST on DEBTincurred to finance the assets.
Financial Statements	Presentation of financial data including BALANCE SHEETS, INCOME STATEMENTS and STATEMENTS OFCASH FLOW, or any supporting statement that is intended to communicate an entity's financial position at a point in time and its results of operations for a period then ended.
Finished Goods	The products that have been made and are ready for sale.
Finished Goods Inventory	An inventory account unique to manufacturing operations.
Firm	A business partnership, especially when it is unincorporated.
Fiscal Year	Period of 12 consecutive months chosen by an entity as its ACCOUNTING period which may or may not be a calendar year. Fixed Asset - Any tangible ASSET with a life of more than one year used in an entity's operations.
Fixed Annuity	Investment contract sold by an insurance company that guarantees fixed payments, either for life or for a specified period, to an annuitant.
Fixed Assets	Tangible LONG TERM ASSETS used in the continuing operation of a business that are unlikely to change for a long time.
Fixed Costs	Costs that remain constant within a defined range of activity, volume, or time period.
Fixed Price	In a public offering of new SECURITIES, price at which investment bankers in the underwriting syndicate agree to sell the issue to the public.
Fixture	Attachment to real property that is not intended to be moved and would create damage to the property if it were moved.
Flotation Cost	Cost of issuing new stocks or BONDS.
Foreclosure	Seizure of COLLATERAL by a CREDITOR when DEFAULT under a loan agreement occurs.
Free Cash Flow	The amount of cash that remains after deducting the funds a COMPANY must commit to continue operating at its planned level.
Freight In	Transportation charges on merchandise purchased for resale.
Freight Out	Transportation charges on merchandise sold; an operating expense.
Full Disclosure	Requirement to disclose all material facts relevant to a transaction.
Fund Accounting	Method of ACCOUNTING and presentation whereby ASSETS and LIABILITIES are grouped according to the purpose for which they are to be used. Generally used by government entities and not-for-profits.
Fundamental Analysis	Research of such factors as interest rates, gross national product, inflation, unemployment, and inventories as tools to predict the direction of the economy.
Funding	Refinancing a DEBT on or before its MATURITY; also called REFUNDING and, in certain instances, pre-refunding.
Future Contract	Transferable agreement to deliver or receive during a specific future month a standardized amount of a commodity.
Future Value	The amount that an investment will be worth at a future date if it is invested at compound interest.
G
Gain	Excess of REVENUES received over costs relating to a specific transaction.
General Journal	The simple and most flexible type of journal.
General Ledger	Collection of all ASSET, LIABILITY, owners EQUITY, REVENUE, and expense accounts.
General Partnership	PARTNERSHIP with no limited partners.
Gift	A valid transfer of property from one taxpayer to another without consideration or compensation. A gift may be subject to the unified estate and gift transfer tax.
Going Concern	Assumption that a business can remain in operation long enough for all of its current plans to be carried out.
Going private	Movement from public ownership to private ownership of a COMPANY’s shares either by the company’s repurchase of shares or through purchases by an outside private investor.
Going Public	Activities that relate to offering a private company's shares to the general investing public including registering with the SEC.
Goods Available for Sale	The sum of beginning inventory and the net cost of purchases during a period; the total goods available for sale to customers during an accounting period.
Goodwill	Premium paid in the acquisition of an entity over the fair value of its identifiable tangible and intangible ASSETS less LIABILITIES assumed.
Grantee	Person to whom property is transferred.
Grantor	(1) Person who transfers property. (2) Person who creates a trust.
Gross Income	The beginning point for the determination of income, including income from whatever sources derived.
Gross Margin	The difference between NET SALES and COST OF GOODS SOLD.
Gross Sales	The total amount of sales for cash and on credit accumulated during a specific accounting period.
Gauaranty	Legal arrangement involving a promise by one person to perform the obligations of a second person to a third person, in the event the second person fails to perform.
H
Hedge	A financial term for a specific type of commodities planning and trading.
Held-to-Maturity Security	A DEBT SECURITY that management intends to hold to its MATURITY or payment date and whose cash value is not needed until that date.
High-Low Method	A common, simple way of separating VARIABLE COSTS from FIXED COSTS.
High-Premium Convertible Debenture	BOND with a long-term, high-premium, COMMON STOCK conversion feature and also offering a fairly competitive interest rate.
Historical Cost	Original cost of an asset to an entity.
Holding Period	The time in which a taxpayer acquires property and the date on which it is sold.
Horizontal Analysis	A technique for analyzing FINANCIAL STATEMENTS that involves the computation of changes in both dollar amounts and percentages from the previous year to the current year.
I
Imputed Interest	If no interest or an unrealistic amount of interest is charged in a salve involving certain kinds of deferred payments, then the transaction will be treated as if the realistic rate of interest had been used. The difference between the realistic interest and the interest actually used is referred to as imputed interest.
In Arrears	Not paid at the time originally agreed to and overdue.
Income	Inflow of REVENUE during a period of time.
Income from Operations	Gross margin with operating expenses subtracted.
Income Statement	Summary of the effect of REVENUES and expenses over a period of time.
Income Summary	A temporary account used during the closing process that holds a summary of all REVENUES and EXPENSES before the NET INCOME or loss is transferred to the capital account.
Income Tax Basis	(1) For tax purposes, the concept of basis determines the proper amount of gain to report when an ASSET is sold. Basis is generally the cost paid for an asset plus the amounts paid to improve the asset less deductions taken against the asset, such as DEPRECIATION and AMORTIZATION. (2) For accounting purposes, a consistent basis of accounting that uses income tax accounting rules while GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) does not.
Incorporation	Process by which a COMPANY receives a state charter allowing it to operate as a CORPORATION.
Incremental Cash Flow	Net of cash outflows and inflows attributable to a corporate investment project.
Indenture	Formal agreement, also called a deed of trust, between an issuer of bonds and the BONDHOLDER covering certain considerations such as form of the BOND for example.
Index	Statistical composite that measures changes in the economy or in financial markets, often expressed in percentage changes from a base year or from the previous month.
Indirect Cost	Any cost that cannot be conveniently and economically traced to a specific department; a manufacturing cost that is not easily traced to a specific product and must be assigned using an allocation method.
Indirect Labor Cost	Labor costs for production-related activities that cannot be connected with or conveniently and economically traced to a specific end product.
Indirect Manufacturing Costs	Various production-related costs that cannot be practically or conveniently traced to an end product.
Indirect Materials	Minor materials and other production supplies that cannot be conveniently and economically traced to specific products.
Indirect Method	The procedure for converting the INCOME STATEMENT from an ACCRUAL to a CASH BASIS.
Inflation	Rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market.
Individual Retirement Account (IRA)	A personal savings plan that allows an individual to make cash contributions per year dependent on the individual'sadjusted gross income and participation in an employer's retirement plan. Under a traditional IRA these earnings are not taxable until the time of withdrawal from the plan.
Inflation Rate	Rate of change in prices.
Initial Public Offering (IPO)	When a private company goes public for the first time.
Inquiry	A procedure that consists of seeking information, both financial and non financial, of knowledgeable persons throughout the company. It is used extensively throughout the audit and often is complementary to performing other procedures. Inquiries may range from formal written inquiries to informal oral inquiries.
Insolvency	Inability to pay DEBTS when due.
Insovent	When an entity's LIABILITIES exceed its ASSETS.
Installment Method	Tax ACCOUNTING method of reporting GAIN on the sale of an ASSET exchanged for a RECEIVABLE. In general, the gain is reported as the note is paid off.
Insurance	System whereby individuals and companies that are concerned about potential hazards pay premiums to an insurance company, which reimburses them in the event of loss.
Instrument	A legal document used for a specific purpose, such as paying for goods received.
Insured Account	Account at a bank, savings and loan association, credit union, or brokerage firm that belongs to a federal or private insurance organization.
Intangible Asset	Asset having no physical existence such as trademarks and patents.
Interest	Payment for the use or forbearance of money.
Interest Coverage Ratio	A way of measuring the degree of protection that a CREDITOR has from a DEBTOR’s DEFAULT on interestpayments.
Interest Rate	An amount of money charged for borrowing money or paid for the use of somebody else’s money.
Interim Dividend	DIVIDEND declared and paid before annual earnings have been determined, generally quarterly.
Interim Financial Statements	FINANCIAL STATEMENTS that report the operations of an entity for less than one year.
Internal Audit	AUDIT performed within an entity by its staff rather than an independent certified public accountant.
Internal Control	Process designed to provide reasonable assurance regarding achievement of various management objectives such as the reliability of financial reports.
Internal Rate of Return	Method that determines the discount rate at which the present value of the future CASH FLOWS will exactly equal investment outlay.
Internal Revenue Code	Collection of tax rules of the federal government. Also referred to as Title 26 of the United States Code.
Intrinsic Value	Valuation determined by applying data inputs to a valuation theory or model.
Inventory	Tangible property held for sale, or materials used in a production process to make a product.
Inventory Financing	Circumstance where loans in excess of ACCOUNTS RECEIVABLE are made against inventory in anticipation of future sales. Sometimes used as a synonym for OVER-ADVANCES IN FACTORING.
Inventory Turnover	A ratio used to indicate the number of times a COMPANY’s average inventory is sold during an accounting period.
Invest	To put money into something such as property, stocks, or a business, in order to earn INTEREST or make a profit.
Investing	The practice of putting money into something, such as property, in order to earn INTEREST or make a profit.
Investment	EXPENDITURE used to purchase goods or services that could produce a return to the investor.
Investment Banker	Firm, acting as underwriter or agent, that serves as intermediary between an issuer of SECURITIES and the investing public.
Investment Income	Income from SECURITIES and other non-business investments; such as DIVIDENDS, INTEREST, etc.
Invoice	Bill prepared by a seller of goods or services and submitted to the purchaser.
Issue	Stock or BONDS sold by a CORPORATION or a government entity at a particular time.
Issue and Outstanding	Shares of a CORPORATION, authorized in the corporate charter, which have been issued and are outstanding.
Issuer	This term means an issuer, the securities of which are registered under Section 12 of the Securities Exchange Act of 1934, or that is required to file reports under Section 15(d) of that Act, or that files or has filed a registration statement with the SEC that has not yet become effective under the Securities Act of 1933 and that it has not withdrawn.
J
Joint Venture	When two or more persons or organizations gather CAPITAL to provide a product or service. Often carried out as a PARTNERSHIP.
Journal	Any book containing original entries of daily financial transactions.
Journal Entry	A notation in the GENERAL JOURNAL. It records a single transaction.
Just-In-Time	An overall operating philosophy of INVENTORY management in which all resources, including materials, personnel, and facilities, are used only as needed.
L
Labor	Physical or mental effort; work.
Laissez-Faire	Doctrine that interference of government in business and economic affairs should be minimal.
Lay Off	Reduce the risk in standby commitment, under which the bankers agree to purchase and resell to the public any portion of a stock issue not subscribed to by shareowners who hold rights.
Lease	Conveyance of land, buildings, equipment or other ASSETS from one person (LESSOR) to another (LESSEE) for a specific period of time for monetary or other consideration, usually in the form of rent.
Lease Acquisition Cost	Price paid by a real estate limited partnership, when acquiring a lease, including legal fees and related expenses.
Lease-Purchase Agreement	Agreement providing that portions of lease payments may be applied toward the purchase of the property under lease.
Leasehold	Property INTEREST a LESSEE owns in the leased property.
Ledger	Any book of accounts containing the summaries of debit and credit entries.
Ledger Account	A complete record of the transactions recorded in each individual account.
Lender	Individual or firm that extends money to a borrower with the expectation of being repaid, usually with INTEREST.
Lending Securities	SECURITIES borrowed from a broker’s INVENTORY, other MARGIN accounts, or from other brokers, when a customer makes a short sale and the securities must be delivered to the buying customer’s broker.
Lessee	Person or entity that has the right to use property under the terms of a LEASE.
Lessor	Owner of property, the temporary use of which is transferred to another (LESSEE) under the terms of a LEASE.
Letter Of Credit	Conditional bank commitment issued on behalf of a customer to pay a third party in accordance with certain terms and conditions. The two primary types are commercial letters of credit and standby letters of credit.
Letter Of Intent	Any letter expressing an intention to take an action, sometimes subject to other action being taken.
Leverage	The use of borrowed funds to increase the profit from an investment.
Leverage Buy Out	Acquisition of a controlling INTEREST in a company in a transaction financed by the issuance of DEBT instruments by the acquired entity.
Leveraged Lease	Transaction under which the LESSOR borrows funds to acquire property which is leased to a third party. The property and lease rentals are security for the LESSOR'S indebtedness.
Liability	DEBTS or OBLIGATIONS owed by one entity (DEBTOR) to another entity (CREDITOR) payable in money, goods, or services.
Lien	CREDITOR’s claim against property. For example a MORTGAGE is a lien against a house.
Life Expectancy	Age to which an average person can be expected to live, as calculated by an ACTUARY.
LIFO	ACCOUNTING method of valuing inventory under which the costs of the last goods acquired are the first costs charged to expense.
LIFO Liquidation	The reduction of INVENTORY levels at year’s end below beginning-of-the-year levels for businesses using the LAST IN, FIRST OUT (LIFO) inventory method.
Limited Company	A COMPANY, usually registered in the United Kingdom, that is organized to protect its owners from financial responsibility.
Limited Liability	The obligation of owners of a CORPORATION, who are liable only for the amount of their INVESTMENT and are not liable for the corporation’s DEBTS.
Limited Liability Company (LLC)	Form of doing business combining LIMITED LIABILITY for all owners (called members) with taxation as a PARTNERSHIP. An LLC is formed by filing ARTICLES OF ORGANIZATION with an appropriate state official. Rules governing LLCs vary significantly from state to state.
Limited Liability Partnership (LLP)	GENERAL PARTNERSHIP which, via registration with an appropriate state authority, is able to enshroud all its partners in LIMITED LIABILITY. Rules governing LLPs vary significantly from state to state.
Limited Partnership	PARTNERSHIP in which one or more partners, but not all, have LIMITED LIABILITY to CREDITORS of the partnership.
Liquid Assets	Cash, cash equivalents, and marketable SECURITIES.
Liquidation	Winding up an activity by distributing its ASSETS to the appropriate parties and settling its DEBTS.
Liquidity	Available money on hand to pay bills when they are due and to take care of unexpected needs for CASH.
Liquidity Ratio	Measure of a firm’s ability to meet maturing SHORT-TERM OBLIGATIONS.
Loan	Transaction wherein an owner of property, called the LENDER allows another party, the borrower, to use the property.
Loan Value	Amount a LENDER is willing to LOAN against COLLATERAL.
Long Bond	BOND that matures in more than 10 years.
Long Term	HOLDING PERIOD of six months or longer, according to the Tax Reform Act of 1984 and applicable in calculating the CAPITAL GAINS tax until 1988.
Long-Term Asset	An ASSET that has the following characteristics: (1) it has a useful life of more than one year; (2) it is acquired for use in the operation of a business; and (3) it is not intended for resale to customers.
Long-Term Debt	DEBT with a maturity of more than one year from the current date.
Long-Term Investment	An INVESTMENT that management plans to hold for more than one year.
Long-Term Liability	A DEBT that falls due more than one year in the future or beyond the normal OPERATING CYCLE, or that is to be paid out of noncurrent assets.
Long-Term Loss	Negative counterpart to LONG-TERM GAIN as defined by the same legislation.
Loss	Excess of EXPENDITURES over REVENUE for a period or activity. Also, for tax purposes, an excess of basis over the amount realized in a transaction.
Loss on Disposal of Plant and Equipment	The account in which a LOSS is recorded when a firm sells or trades in an ASSET and receives an amount less than the BOOK VALUE for that asset.
Lump-Sum Distribution	Single payment to a beneficiary covering the entire amount of an agreement.
M
Macroeconomics	Analysis of a nation’s economy as a whole, using such aggregate data as price levels, unemployment, INFLATION, and industrial production.
Management Accounting	Reporting designed to assist management in decision-making, planning, and control. Also known as MANAGERIAL ACCOUNTING.
Management Discussion and Analysis (MD&A)	SEC requirement in financial reporting for an explanation by management of significant changes in operations, ASSETS, and LIQUIDITY.
Management's Report	Management is required to include in its annual report its assessment of the effectiveness of the company's internal control over financial reporting in addition to its audited financial statements as of the end of the most recent fiscal year.
Managerial Accounting	Reporting designed to assist management in decision-making, planning, and control.
Manipulation	Buying or selling a SECURITY to create a false appearance of active trading and thus influence other investors to buy or sell shares.
Manufacturing Overhead	Another term for FACTORY OVERHEAD COSTS.
Margin	Excess of selling price over the unit cost.
Margin of Profit	Relationship of gross profits to net sales.
Marginal Cost	Increase or decrease in the TOTAL COSTS of a business firm as the result of one more or one less unit of output.
Marginal Tax Rate	Amount of tax imposed on an additional dollar of income.
Mark-to-Market	Method of valuing ASSETS that results in adjustment of an asset's carrying amount to its market value.
Market Capitalization	Value of a CORPORATION as determined by the MARKET PRICE of its ISSUED AND OUTSTANDING  COMMON STOCK.
Market Index	Numbers representing weighted values of the components that make up the INDEX.
Market Interest Rate	The rate of interest paid in the MARKET on BONDS of similar risk.
Market Price	Last reported price at which a SECURITY was sold on an exchange.
Market Share	Percentage of industry sales of a particular COMPANY or product.
Market Value	The price investors are willing to pay for a share of stock on the open market.
Marketable Securities	Stocks and other negotiable instruments which can be easily bought and sold on either listed exchanges or over-the-counter markets.
Maturity	The time at which payment of a loan or BOND becomes due.
Maturity Date	Date on which the principal amount of a NOTE, DRAFT, acceptance, BOND, or other DEBT INSTRUMENTbecomes due and payable.
Merger	BUSINESS COMBINATION that occurs when one entity directly acquires the ASSETS and LIABILITIES of one or more entities and no new corporation or entity is created.
Mixed Costs	Costs that result when both VARIABLE COSTS and FIXED COSTS are charged to the same GENERAL LEDGER account.
Modeling	Designing and manipulating a mathematical representation of an economic system or corporate financial application so that the effect of changes can be studied and forecast.
Monetary Items	Definite fixed amounts stated in terms of dollars, either by law or by contract agreement.
Money Laundering	The use of an intermediate agent, such as a bank, to disguise the source of money received from illegal activities.
Money Market	MARKET for SHORT-TERM DEBT instruments.
Monopoly	Control of the production and distribution of a product or service by one firm or a group of firms acting in concert.
Mortgage	Legal instrument evidencing a security interest in ASSETS, usually real estate. Mortgages serve as COLLATERAL for PROMISSORY NOTES.
Moving Average	Average of SECURITY or COMMODITY prices constructed on a period as short as a few days or as long as several years and showing trends for the latest interval.
Moving Average Method	A modified version of the WEIGHTED-AVERAGE-COST METHOD. It is used to compute the average cost of a PERPETUAL INVENTORY.
Municipal Bond	BOND issued by a government or public body, the INTEREST on which is typically exempt from federal taxation.
Mutual Agency	The ability of each partner in a COMPANY to act as an agent of the company.
Mutual Fund	Numbers representing weighted values of the components that make up the INDEX.
N
Net Asset Value (NAV)	In mutual funds, the MARKET VALUE of a fund share, synonymous with bid price; BOOK VALUE of a company’s different classes of securities, usually stated as NET ASSET value per BOND, net asset value per share of PREFERRED STOCK, and net book value per common share of COMMON STOCK.
Negotiable	Something that can be sold or transferred to another party in exchange for money or as settlement of an obligation.
Net	Figure remaining after all relevant deductions have been made from the gross amount.
Net Assets	Excess of the value of SECURITIES owned, cash, receivables, and other ASSETS over the LIABILITIES of the company.
Net Current Assets	Difference between current assets and current liabilities; another name for WORKING CAPITAL.
Net Income	Excess or DEFICIT of total REVENUES and GAINS compared with total expenses and losses for an ACCOUNTING period.
Net Loss	The difference between expenses and REVENUES when expenses exceed revenues over a period of time.
Net Present Value (NPV)	Method used in evaluating investments whereby the net present value of all CASH outflows and cash inflows is calculated using a given DISCOUNT RATE, usually required rate of return.
Net Present Value Method	A capital INVESTMENT evaluation method that discounts future CASH FLOWS to their PRESENT VALUE.
Net Proceeds	Amount received from the sale or disposition of property, from a LOAN, or from the sale or issuance of securities after deduction of all costs incurred in the transaction.
Net Sales	Sales at gross invoice amounts less any adjustments for returns, allowances, or discounts taken.
Net Worth	Similar to EQUITY, the excess of ASSETS over LIABILITIES.
No-Par Stock	Stock authorized to be issued but for which no PAR VALUE is set in the ARTICLES OF INCORORATION. A STATED VALUE is set by the BOARD OF DIRECTORS on the issuance of this type of stock.
No-Par Value	Stock or bond that does not have a specific value indicated.
Non-Callable	PREFERRED STOCK or BOND that cannot be redeemed at the OPTION of the ISSUER.
Non for Profit Organization/Tax exempt Organization	An incorporated organization which exists for educational or charitable purposes, and from which its shareholders or trustees do not benefit financially. Also called NOT-FOR-PROFIT organization.
Note	Written promise to pay a specified amount to a certain entity on demand or on a specified date.
Notes Payable	Collective term for written promissory notes that are due in less than one year.
Notes Receivable	Collective term for written promissory notes that are due in less than one year and are held by the entity to whom payment is promised.
Notional	Value assigned to ASSETS or LIABILITIES that is not based on cost or market (e.g., the value of a service not yet rendered).
O
Obligations	Any amount which may require payment by an entity at a future time.
Obsolescence	The process of becoming out-of-date.
Offer	Price at which someone who owns a SECURITY offers to sell it.
Offering Price	Price per share at which a new or secondary distribution of securities is offered for sale to the public.
Open End Mutal Fund	MUTUAL FUND that does not have a fixed number of shares outstanding, offers new shares to the public, and buys back outstanding shares at market value.
Operating Agreement	Agreement, usually a written document, that sets out the rules by which a LIMITED LIABILITY COMPANY (LLC) is to be operated. It is the LLC equivalent of corporate BYLAWS or a PARTNERSHIP agreement.
Operating Cycle	Period of time between the acquisition of goods and services involved in the manufacturing process and the final cash realization resulting from sales and subsequent collections.
Operating Expense	An EXPENSE other than COST OF GOODS SOLD that is incurred in running a business.
Operating Lease	Type of LEASE, normally involving equipment, whereby the CONTRACT is written for considerably less than the life of the equipment and the lesser handles all maintenance and servicing.
Operating Profit (or Loss)	The difference between the REVENUES of a business and the related costs and expenses, excluding INCOME derived from a sources other than its regular activities and before income deductions.
Opportunity Cose	Highest price or rate of return an alternative course of action would provide.
Option	Right to buy or sell something at a specified price during a specified time period.
Ordinary Annunity	A series of equal payments made at the end of equal intervals of time, with compound interest on these payments.
Ordinary Income	One of two classes of income (the other being CAPITAL GAINS) taxed under the INTERNAL REVENUE CODE. Historically, ordinary income is taxed at a higher rate than capital gains.
Orginial Cost	In ACCOUNTING, all costs associated with the acquisition of an ASSET.
Outsourcing	The act or an instance of purchasing essential products or services from another COMPANY.
Outstanding	Not settled or paid.
Outstanding Check	A CHECK that has been written by the drawer and deducted on his or her records but has not reached the bank for payment and is not deducted from the bank BALANCE by the time the bank issues its statement.
Over the Counter	Sold to customers at retail and without any special restrictions.
Overhead	Costs of a business that are not directly associated with the production or sale of goods or services.
Owner's Equity	The residual INTEREST in the assets of a business entity that remains after deducting the entity’s liabilities.
P
P/E Ratio	A ratio that is used as a way of measuring investor confidence in a COMPANY and comparing stocks for profitability. It is found by dividing MARKET PRICE per share by EARNINGS PER SHARE (EPS).
Paid in Capital	Portion of the stockholders' EQUITY which was paid in by the stockholders, as opposed to CAPITAL arising from profitable operations.
Par	Equal to the nominal or face value of a SECURITY.
Par Value	Amount per share set in the ARTICLES OF INCORPORATION of a CORPORATION to be entered in the CAPITAL STOCKS account where it is left permanently and signifies a cushion of EQUITY capital for the protection of CREDITORS.
Parent Company	Company that has a controlling interest in the COMMON STOCK of another.
Partnership	Relationship between two or more persons based on a written, oral, or implied agreement whereby they agree to carry on a trade or business for profit and share the resulting profits. Unlike a CORPORATION'S shareholders, the partnership's general partners are liable for the DEBTS of the partnership.
Passive activity Loss	LOSS generated from activities involved in the conduct of a trade or business in which the taxpayer does not materially participate.
Passive Income	Includes income derived from such sources as dividends, interest, royalties, rents, amounts received from personal service contracts, and income received as a beneficiary of an estate or trust.
Payback Period	In capital budgeting; the length of time needed to recoup the cost of capital investment.
Payback Period Method	A way of judging capital investments that bases the decision to invest in capital equipment on the minimum length of time it will take to earn back in CASH the amount of the initial INVESTMENT.
Payout Ratio	Percentage of a firm’s profits that is paid out to shareholders in the form of DIVIDENDS.
Penalty	The various government codes contain numerous provisions which impose penalties on a taxpayer (any type of taxpayer) for failure to perform a specific act or omitting vital information on a return.
Pension	Retirement plan offered by an employer for the benefit of an employee, usually at retirement, through a TRUSTEEwho controls the plan ASSETS.
Periodic Inevntory System	A system for determining INVENTORY on hand by a physical count that is taken at the end of an accounting period.
Perpetual Inventory	System that requires a continuous record of all receipts and withdrawals of each item of INVENTORY.
Personal Financial Planning	Process for arriving at a comprehensive plan to solve an individual's personal, business, and financial problems and concerns.
Personal Financial Specialist (PFS)	CERTIFIED PUBLIC ACCOUNTANT who specializes in PERSONAL FINANCIAL PLANNING and completes a series of requirements that include education, experience, ethics and an exam.
Personal Financial Statements	FINANCIAL STATEMENTS prepared for an individual or family to show financial status
Plant	A building or group of buildings where something is made or processed; factory.
Pooling of Interest	Used to account for the acquisition of another company when the acquiring company exchanges its voting COMMON STOCK for the voting common stock of the acquired company when certain criteria are met.
Portfolio	Combined holding of more than one stock, BOND, commodity, real estate investment, cash equivalent, or other ASSET by an individual or institutional investor
Post-Closing Trial Balance	A trial BALANCE prepared at the end of an accounting period after all adjusting and closing entries have been posted; a final check on the balance of the LEDGER.
Post-Retirement Benefits	PENSIONS, health care, life insurance and other benefits that are provided by an employer to retirees, their dependents, or survivors.
Predetermined Overhead Rate	A rate that is used as a way of estimating and assigning OVERHEAD costs to products or jobs for each department or operating unit before the end of an accounting period.
Preferred Stock	Type of CAPITAL STOCK that carries certain preferences over COMMON STOCK, such as a prior claim on DIVIDENDS and ASSETS.
Premium	(1) Excess amount paid for a BOND over its face amount. (2) In insurance, the cost of specified coverage for a designated period of time.
Premium Bond	BOND with a selling price above face or REDEMPTION VALUE.
Prenuptial Contract	Agreement between a future husband and wife that details how the couple’s financial affairs are to be handled both during the marriage and in the event of divorce.
Prepaid Expense	Cost incurred to acquire economically useful goods or services that are expected to be consumed in the revenue-earning process within the operating cycle.
Present Value	CURRENT VALUE of a given future CASH flow stream, discounted at a given rate.
Price Range	High/low range in which a stock has traded over a particular period of time.
Preventive Controls	These have the objective of preventing errors or fraud from occurring in the first place that could result in a misstatement of the financial statements.
Price/Earnings (P/E Ratio)	A ratio that is used as a way of measuring investor confidence in a COMPANY and comparing stocks for profitability. It is found by dividing MARKET PRICE per share by EARNINGS PER SHARE (EPS).
Primary Earnings Per Share	Earnings available to COMMON STOCK divided by the number of common shares OUTSTANDING.
Prime Rate	Rate of INTEREST charged by major U.S. banks on loans made to their preferred customers.
Principal	Face amount of a SECURITY, exclusive of any PREMIUM or INTEREST. The basis for INTEREST computations.
Private Placement	Sales of SECURITIES not involving a PUBLIC OFFERING and exempt from registration pursuant to certain EXEMPTIONS.
Privilege	A right or immunity granted as a peculiar benefit advantage.
Privity	An interest in a transaction, contract or legal action to which one is not a party, arising out of a relationship to one of the parties.
Pro Forma	Presentation of financial information that gives effect to an assumed event (e.g., MERGER).
Pro Rata	Distribution of an expense, fund, or DIVIDEND proportionate with ownership.
Product Line	The place in a factory where products are made.
Profit	Positive difference that results from selling products and services for more than the cost of producing these goods.
Profit Margin	Used to measure the percentage of each sales dollar that results in NET INCOME.
Profit Margin Pricing	An approach to cost-based pricing in which price is computed using a percentage of a product’s total costs and expenses.
Profit Sharing Plan	DEFINED CONTRIBUTION PLAN characterized by the setting aside of a portion of an entity's profits in participant's accounts.
Profitability	The ability to earn enough INCOME to attract and hold INVESTMENT capital.
Projection	Prospective FINANCIAL STATEMENTS that include one or more hypothetical assumptions.
Promissory Note	Evidence of a DEBT with specific amount due and interest rate. The note may specify a maturity date or it may be payable on demand. The promissory note may or may not accompany other instruments such as a MORTGAGEproviding security for the payment thereof.
Property, Plant, and Equipment	Long-term tangible assets used in the continuing operation of a business for a long time.
Proprietorship	Business owned by an individual without the limited liability protection of a CORPORATION or a LIMITED LIABILITY COMPANY (LLC). Also known as SOLE PROPRIETORSHIP.
Proxy	Document authorizing someone other than the shareholder to exercise the right to vote the stock owned by the shareholder.
Public Offering	Offering shares to the public. Generally done through SEC filings.
Purchase Order	Written authorization to a vendor to deliver specified goods or services at a stipulated price.
Purchases	A temporary ACCOUNT used under the PERIODIC INVENTORY SYSTEM to record the TOTAL COST of all MERCHANDISE purchased for resale during an accounting period.
Purchase Discounts	Discounts taken by merchants in return for prompt payment for MERCHANDISE purchased for resale.
Purchase Returns & Allowances	A CONTRA ACCOUNT used under the PERIODIC INVENTORY SYSTEM to accumulate CASH refunds, credits on ACCOUNT, and other allowances made by suppliers for unsatisfactory or incorrect MERCHANDISE that was originally purchased for resale.
Puts	A put is an option to sell a certain number of shares of stock at a stated price within a certain period. The gain or loss on a put is short or long term depending on the holding period of the stock involved.
Q
Qualitative Analysis	Analysis that evaluates important factors that cannot be precisely measured.
Quality	An operating environment in which a company’s product or service meets a customer’s specifications the first time it is produced or delivered.
Qualitative	Relating to quality, especially as distinguished from quantity or amount.
Quantitative Analysis	Analysis dealing with measurable factors as distinguished from such QUALITATIVE considerations as the character of management or the state of employee morale.
Quantity	An amount or number.
Quarter	Three-month intervals of the year.
Quarterly Reports	Another term for INTERIM FINANCIAL STATEMENTS.
Quasi- Reorganization	Type of reorganization in which, with shareholder approval, the management revalues ASSETS and eliminates the DEFICIT (increased by asset devaluations if any) by charging it to other EQUITY accounts without the creation of a new corporate entity or without court intervention.
Quick Assets	Assets that are or are expected to be converted into CASH in the near term: cash, accounts receivable, SHORT-TERM INVESTMENTS.
Quick Ratio	The relationship of a company’s QUICK ASSETS to its current liabilities.
R
R & D	Research is 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 research findings into a plan or design of new or improved products and services.
Rate of Return	The amount of PROFIT or INTEREST earned on an INVESTMENT, usually expressed as a percentage, such as an interest; the COST OF CAPITAL; the cost of money.
Ratio Analysis	Comparison of actual or projected data for a particular company to other data for that company or industry in order to analyze trends or relationships.
Raw Material	Something in its natural state that will be used in a manufacturing process.
Raw Material Inventory Account	Another term for MATERIALS INVENTORY ACCOUNT.
Real Estate	Piece of land and all physical property related to it, including houses, fences, landscaping, and all rights to the air above and earth below the property.
Real Estate Investment Trust (REIT)	Investor-owned TRUST which invests in real estate and, instead of paying income tax on its income, reports to each of its owners his or her pro rata share of its income for inclusion on their income tax returns. This unique trust arrangement is specifically provided for in the INTERNAL REVENUE CODE.
Real Estate Mortgage Investment Conduit (REMIC)	An entity that holds a fixed pool of mortgages and issues multiple classes of interests in itself to investors. A qualified REMIC is generally taxed like a partnership, unless it takes contributions after its start up day or engages in a prohibited transaction.
Real Income	Income of an individual, group, or country adjusted for changes in purchasing power caused by INFLATION.
Real Interest Rate	Current INTEREST RATE minus INFLATION RATE.
Real Property	LAND and improvements, including buildings and PERSONAL PROPERTY, that is permanently attached to the land or customarily transferred with the land.
Real Rate of Return	RETURN on an INVESTMENT adjusted for INFLATION.
Realization	Conversion into CASH, as happens in the sale of asset.
Realized Profit (or Loss)	PROFIT or LOSS resulting from the sale or other disposal of a SECURITY.
Reasonable Assurance	Management's assessment of the effectiveness of internal control over financial reporting is expressed at the level of reasonable assurance. It includes the understanding that there is a remote likelihood that material misstatements will not be prevented or detected on a timely basis. It is a high level of assurance.
Rebate	In lending, UNEARNED INTEREST refunded to a borrower if the LOAN is paid off before MATURITY.
Recapitalization	An internal reorganization of a corporation including a rearrangement of the capital structure by changing the kind of stock or the number of shares outstanding or issuing stock instead of bonds. It is distinguished from most other types of reorganization because it involves only one corporation and is usually accomplished by the surrender by shareholders of their securities for other stock or securities of a different type.
Receivables	Amounts of money due from customers or other DEBTORS.
Receivable Turnover	A ratio for measuring the relative size of a company’s accounts receivable and the success of its CREDIT and collection policies during an accounting period.
Recession	Downturn in economic activity, defined by many economists as at least two consecutive quarters of decline in a country’s gross national product.
Reconcile	To resolve.
Reconciliation	Comparison of two numbers to demonstrate the basis for the difference between them.
Recovery	Period in a business cycle when economic activity picks up and the gross national product grows, leading into the expansion phase of the cycle.
Redemption Value	Price to be paid by an ENTITY to retire its BONDS or PREFERRED STOCK.
Refinancing Agreement	Arrangement to provide funding to replace existing financing, the most common being a refinance of a home MORTGAGE.
Refunding	Replacing an old DEBT with a new one, often in order to lower the INTEREST costs of the issuer.
Regression Analysis	Statistical technique used to establish the relationship of a dependent variable, such as the sales of a COMPANY, and one or more independent variables, such as family formations, gross national product, per capita income, and other economic indicators.
Regressive Rate	Rate that decreases as the calculation base increases. Often used to describe taxes where the TAX rate paid decreases as the TAXABLE INCOME increases.
Reinsurance	Process by which an insurance company obtains insurance on its insurance claims with other insurers in order to spread the risk.
Reinvestment Rate	RATE OF RETURN resulting from the reinvestment of the INTEREST from a BOND or other fixed-income SECURITY.
Reorganization	This is a change in the businesses capital arrangements. If for a CORPORATION there are seven statutory options for reorganization that would cause the corporation and shareholders to not recognize any GAIN or LOSS on the exchange of stock.
Repairs	EXPENDITURES made in order to keep property in good condition but that do not appreciably prolong the life or increase the value of the property.
Replacements	EXPENDITURES for making good or whole the portions of property that have deteriorated through use or have been destroyed through accident.
Report	An oral or written description of something, such as a book, event, or situation.
Repos	Agreement whereby an institution purchases SECURITIES under a stipulation that the seller will repurchase the securities within a certain time period at a certain price.
Required Rate of Return	RETURN required by investors before they will commit money to an INVESTMENT at a given level of risk.
Residual Value	The estimated NET scrap, salvage, or trade-in value of a TANGIBLE ASSET at the estimated date of disposal.
Restructuring	Reorganization within an entity. Restructuring may occur in the form of changing the components of CAPITAL, renegotiating the terms of DEBT agreements, etc.
Retained Earnings	Accumulated undistributed earnings of a company retained for future needs or for future distribution to its owners.
Retained Earnings Account	The ACCOUNT that reflects the stockholders’ claim to the assets earned from operations and reinvested in corporate operations.
Return	PROFIT on a securities or capital INVESTMENT, usually expressed as an annual percentage rate.
Return on Assets	A measurement of a company’s PROFITABILITY or overall earning power, that is, how efficiently a company uses its assets to produce INCOME. It is found by dividing INCOME by average total assets.
Return on Equity	A measurement of PROFITABILITY that relates the amount earned by a business to the stockholders’ investments in the business. It is found by dividing NET INCOME by average OWNER'S EQUITY.
Return on Investment (ROI)	Ratio measure of the profits achieved by a firm through its basic operations. An indicator of management's general effectiveness and efficiency. The simplest version is the ratio of NET INCOME to total ASSETS.
Return on Sales	NET pretax profits as a percentage of NET SALES. A useful measure of overall operational efficiency when compared with the prior periods or with other companies in the same line of business.
Revenue Recognition	Method of determining whether or not income has met the conditions of being earned and realized or is realizable.
Revenues	Sales of products, merchandise, and services; and earnings from INTEREST, DIVIDEND, rents.
Risk	Measurable possibility of losing or not gaining value.
Risk Management	Process of identifying and monitoring business risks in a manner that offers a RISK / RETURN relationship that is acceptable to an entity's operating philosophy.
S
Sale	Any exchange of goods or services for money.
Sales Discount	A discount that is given to a buyer for early payment for a sale made on CREDIT.
Sales Tax	A TAX that is levied by a state or city government on the retail sale of goods and services.
Salvage Value	Selling price assigned to retired FIXED ASSETS or merchandise unsalable through usual channels.
Seasonality	Variations in business or economic activity that recur with regularity as the result of changes in climate, holidays, and vacations.
Secondary Market	EXCHANGES and OVER-THE-COUNTER markets where securities are bought and sold subsequent to original issuance, which took place in the primary MARKET.
Secured Bond	A BOND that gives the bondholders a pledge of certain company assets as a guarantee of repayment.
Secured Debt	DEBT guaranteed by the pledge of assets or other COLLATERAL.
Securitization	Source of financing whereby an entity's ASSETS (typically mortgage loans, lease obligations or other types of RECEIVABLES) are placed in a special purpose vehicle that issues SECURITIES collateralized by such assets.
Security	Any kind of transferable certificate of ownership including EQUITY SECURITIES and DEBT SECURITIES.
Security Interest	Legal interest of one person in the property of another to assure performance of a second person under a contract.
Sell Out	LIQUIDATION of a MARGIN ACCOUNT by a broker after a margin call has failed to produce additional EQUITY to bring the margin to the required level.
Selling, General, & Administrative (SG&A) Expenses	Grouping of expenses reported on a company’s PROFIT and LOSS statement between COST OF GOODS SOLDand INCOME deductions.
Sensitivity Analysis	Study measuring the effect of a change in a variable on the RISK or PROFITABILITY of an INVESTMENT.
Separate Entity	A business that is treated as distinct from its creditors, customers, and owners.
Settlement Method	Method of ACCOUNTING for SECURITIES whereby transactions are recorded on the date the securities settle by the delivery or receipt of securities and the receipt or payment of cash.
Share	Unit of EQUITY in a CORPORATION.
Shareholder	Owner of one or more shares of stock in a CORPORATION.
Shares Authorized	Number of shares of stock provided for in the articles of INCORPORATION of a COMPANY.
Shares Outstanding	The number of shares in a COMPANY that have been issued and remain in circulation.
Short Bond	BOND with a short MATURITY; a somewhat subjective concept, but generally meaning two years or less.
Short Coupon	BOND INTEREST payment covering less than the conventional six-month period.
Short Interest	Total amount of shares of stock that have been sold short and have not yet been repurchased to close out short positions.
Short Sale	Sale of an item before it is purchased. A person entering into a short sale believes the price of the item will decline between the date of the short sale and the date he or she must purchase the item to deliver the item under the terms of the short sale.
Short Term	Current; ordinarily due within one year.
Short Term Debt	All DEBT obligations coming due within one year; show on a balance sheet as CURRENT LIABILITIES.
Short Term Gain or Loss	For TAX purposes, the PROFIT or LOSS realized from the sale of securities or other capital assets held six months or less.
Short Term Investment	The temporary INVESTMENT of excess CASH, intended to be held until needed to pay current OBLIGATIONS.
Simple Interest	INTEREST calculation based only on the original PRINCIPAL amount.
Sinking Fund	Money accumulated on a regular basis in a separate custodial ACCOUNT that is used to redeem DEBT securities or PREFERRED STOCK issues.
Solvency	State of being able to meet maturing OBLIGATIONS as they come due.
Solvent	Capable of paying one’s financial obligations.
Specialized Mutual Fund	Fund that limits its investments to a particular sector of the marketplace.
Speculation	Assumption of RISK in anticipation of gain but recognizing a higher than average possibility of LOSS.
Spinoff	Transfer of all, or a portion of, a subsidiary's stock or other ASSETS to the stockholders of its PARENT COMPANYon a PRO RATA basis.
Spot Market	MARKET for buying and selling COMMODITIES or financial instruments for immediate delivery and payment based on the settlement conventions of the particular market.
Standard Cost	Realistic costs for direct materials, direct labor, and factory overhead that have been determined before they occur.
Standard Deviation	Statistical measure of the degree to which an individual value in a probability distribution tends to vary from the mean of the distribution.
Statement of Cash Flows	One of the basic FINANCIAL STATEMENTS that isGENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) required as part of a complete set of financial statements prepared in conformity with . It categorizes net cash provided or used during a period as operating, investing and financing activities, and reconciles beginning and ending cash and cash equivalents.
Stock Exchange	Organized marketplace in which stocks, COMMON STOCK equivalents, and bonds are traded by members of the exchange, acting both as agents and principals.
Stock Market	General term referring to the organized trading of securities through the various EXCHANGES and the OVER-THE-COUNTER MARKET.
Stock Split	Increase in the number of shares of a company's COMMON STOCK outstanding that result from the issuance of additional shares proportionally to existing stockholders without additional capital investment. The PAR VALUE of each share is reduced proportionally.
Stockholder	A person who owns shares of STOCK in a COMPANY.
Stockholder's Equity	The OWNER'S EQUITY in a CORPORATION.
Straight Line Depreciation	ACCOUNTING method that reflects an equal amount of wear and tear during each period of an ASSET'S useful life. For instance, the annual STRAIGHT-LINE DEPRECIATION of a $2,500 asset expected to last five years is $500.
Straight Line Percentage	A percentage used to determine the amount of DEPRECIATION to be recorded each ACCOUNTING period for the straight-line method.
Strike Price	Price of a financial instrument at which conversion or exercise occurs.
Subsidiary	COMPANY of which more than 50% of the voting shares are owned by another CORPORATION, called the PARENT COMPANY.
Surplus	Not needed; extra.
Swap	Financial contract in which two parties agree to exchange net streams of payments over a specified period. The payments are usually determined by applying different indices (e.g., interest rates, foreign exchange rates, equityindices) to a NOTIONAL amount. The term notional is used because swap contracts generally do not involve exchanges of PRINCIPAL.
T
Takeover	The act or an instance of taking control of something, especially by force.
Tangible Asset	ASSETS having a physical existence, such as cash, land, buildings, machinery, or claims on property, investments or goods in process.
Tax	Charge levied by a governmental unit on income, consumption, wealth, or other basis.
Tax Basis	Original cost of an ASSET, less ACCUMULATED DEPRECIATION, that goes into the calculation of a GAIN  or LOSS for TAX purposes.
Tax Lien	ENCUMBRANCE placed on property as security for unpaid taxes.
Tax Shelter	Arrangement in which allowable tax deductions or EXCLUSIONS result in the deferral of tax on INCOME that would otherwise be payable currently.
Tax Year	The period used to compute a taxpayer's TAXABLE INCOME is tax year. It is an annual period that is either a calendar year , FISCAL YEAR or fractional part of a year for which the return is made.
Taxable Earnings	The amount of an employee’s earnings subject to a TAX.
Taxable Income	Taxable income is generally equal to a taxpayer's ADJUSTED GROSS INCOME during the TAX YEAR less any allowable EXEMPTIONS and deductions.
Term	Period of time during which the conditions of a CONTRACT will be carried out.
Term Loan	Loan for a specified time period.
Time Value	Price put on the time an investor has to wait until an INVESTMENT matures, as determined by calculating the PRESENT VALUE of the investment at MATURITY.
Time Value of Money	The concept that CASH FLOWS of equal dollar amounts separated by a time interval have different present values because of the effect of compound INTEREST.
Total Capitalization	Capital structure of a COMPANY, including LONG-TERM DEBT and all forms of EQUITY.
Total Cost	Sum of FIXED COSTS, semi-variable costs, and VARIABLE COSTS.
Total Direct Labor Cost Variance	The difference between the actual LABOR costs incurred and the standard labor costs for the good units produced.
Total Direct Materials Cost Variance	The difference between the actual materials costs incurred and the standard costs of those items.
Total Gain	Excess of the proceeds realized on the sale of either INVENTORY or noninventory goods.
Total Inventory Method	A lower-of-cost-or-market method of valuing INVENTORY.
Total Quality Management	An organizational environment in which all business functions work together to build quality into the firm’s products or services.
Trade	Buying or selling goods and services among companies, states, or countries, called commerce.
Trademark	Distinctive name, symbol, motto, or emblem that identifies a product, service, or firm.
Trader	Anyone who buys and sells goods or services for PROFIT; a DEALER or merchant.
Transaction	The act of transacting, especially a business agreement or exchange; event or condition recognized by an entry in the book ACCOUNT.
Transfer	To move or cause to go from one place, person, or thing to another.
Transfer Price	Price charged by individual entities in a multi-entity COPORATION on transactions among themselves; also termed transfer cost.
Treasurer	COMPANY officer responsible for the receipt, custody, INVESTMENT, and DISBURSEMENT of funds, for borrowings, and, if it is a public company, for the maintenance of a MARKET for its securities.
Treasury	A place where private or public funds are controlled.
Treasury Bill	Short-term obligation that bears no INTEREST and is sold at a discount.
Tresaury Bond	Long-term obligation that matures more than five years from issuance and bears INTEREST.
Treasury Note	Intermediate-term obligation that matures one to five years from issuance and bears INTEREST.
Trend	Long-term price or trading volume movements either up, down, or sideways, which characterize a particular MARKET, commodity or SECURITY.
Trend Analysis	A type of horizontal analysis in which percentage changes are calculated for related items for several successive years instead of for two years.
Trial Balance	A comparison of the total of DEBIT and CREDIT balances in the LEDGER to check that they are equal.
Trust	Ancient legal practice where one person (the GRANTOR) transfers the legal title to an ASSET, called the principal or corpus, to another person (the TRUSTEE), with specific instructions about how the corpus is to be managed and disposed.
Trustee	Person who is given legal title to, and management authority over, the property placed in a TRUST.
Turnover	The number of times a particular product is sold and restocked during a fixed period of time.
U
Unamortized Bond Discount	Difference between the FACE VALUE of a BOND and the proceeds received from the sale of the bond by the issuing COMPANY, less whatever portion has been amortized, that is, written off to EXPENSE as recorded periodically on the PROFIT and LOSS statement.
Unamortized Premiums on Investments	Unexpensed portion of the amount by which the price paid for a SECURITY exceeded its PAR VALUE.
Uederlying Debt	MUNICIPAL BOND term referring to the debt of government entities within the jurisdiction of larger government entities and for which the larger entity has partial CREDIT responsibility.
Underlying Security	SECURITY that must be delivered if a put OPTIONS or call option contract is exercised.
Undervalued	SECURITY selling below its LIQUIDATION value or the MARKET VALUE analysts believe it deserves.
Underwrite	To assume the RISK of buying a new ISSUE of securities from the issuing CORPORATION or government entity and reselling them to the public, either directly or through dealers.
Unearned Discount	ACCOUNT on the books of a lending institution recognizing INTEREST deducted in advance and which will be taken into INCOME as earned over the life of the LOAN.
Unearned Income	Payments received for services which have not yet been performed.
Unearned Interest	Unexpensed portion of the amount by which the price paid for a SECURITY exceeded its PAR VALUE.
Unit	Any division of quantity accepted as a standard of measurement or of exchange.
Unlimited Liabilty	The responsibility of all the partners in a COMPANY for its DEBT.
Unrealized Loss or Gain on Long Term Investments	A BALANCE sheet ACCOUNT for entering increases or decreases in the value of long-term investments.
Unrealized Profit or Loss	PROFIT or LOSS that has not become actual.
Unrestricted Fuunds	Resources of a not-for-profit entity that have no restrictions as to use or purpose.
Unsecured Bonds	A BOND issued on the general CREDIT of a COMPANY.
V
Valuation	The process of determining the PRESENT VALUE of a BOND based on the current MARKET INTEREST RATE.
Valuation Allowance	Method of lowering or raising an object's CURRENT VALUE by adjusting its acquisition cost to reflect its market value by use of a CONTRA ACCOUNT.
Value	How much money something is worth.
Value Added Tax (VAT)	Consumption TAX levied on the VALUE added to a product at each stage of its manufacturing cycle as well as at the time of purchase by the ultimate consumer
Variable Annuity	Life insurance ANNUITY CONTRACT whose VALUE fluctuates with that of an underlying securities PORTFOLIO or other INDEXof performance.
Variable Costs	Total costs that change in direct proportion to changes in productive output or any other measure of volume.
Variable Manufacturing Costs	Costs that increase or decrease in direct proportion to the number of units produced.
Variable Overhead	The portion of mixed or semi-variable overhead costs that changes proportionately with some measure of activity or output.
Variable Rate Loan	Loan whose interest rate changes over its life in relation to the level of an index.
Variance	Deviation or difference between an estimated value and the actual value.
Velocity	Rate of spending, or turnover of money- in other words, how many times a dollar is spent in a given period of time.
Vendor	Supplier of goods or services of a commercial nature; may be a manufacturer, importer, or wholesale distributor.
Venture Capital	Investment company whose primary objective is capital growth. New ASSETS invested largely in companies that are developing new ideas, products, or processes.
Vertical Analysis	A technique for analyzing FINANCIAL STATEMENTS that uses percentages to show the relationships of each stated item to the total, which is 100 percent of the figure in a single statement.
Volatile	Tending to rapid and extreme fluctuations.
Volatility	Characteristic of a SECURITY, commodity, or MARKET to rise or fall sharply in price within a SHORT-TERM period.
Volume	Total number of stock shares, bonds, or COMMODITIES futures contracts traded in a particular period.
W
Wage	Payment for services of employees at an hourly rate.
Warrant	Option to purchase additional SECURITIES from the issuer.
Weighted Average Cost Method	An AVERAGE-COST METHOD procedure for determining the cost of ENDING INVENTORY under the PERIODIC INVENTORY SYSTEM
Wholesale	The sale of goods in large quantities, especially to a person or COMPANY that plans to sell them at retail.
Wholesaler	Middleman or distributor who sells mainly to retailers, jobbers, other merchants, and industrial, commercial, and institutional users as distinguished from consumers.
Withholding	Amount withheld or deducted from employee salaries by the employer and paid by the employer, for the employee, to the proper authority.
Work in Progress	INVENTORY account consisting of partially completed goods awaiting completion and transfer to finished inventory.
Working Capital	Excess of CURRENT ASSETS over CURRENT LIABILITIES.
Working Interest	Direct participation with UNLIMITED LIABILITY, as distinguished from passive LIMITED PARTNERSHIP shares.
Wrap Around Mortgage	Second MORTGAGE which conveniently expands the total amount of borrowing by the mortgagor without disturbing the original mortgage.
Write Off	Charging an ASSET ACCOUNT to EXPENSE or LOSS.
Y
Yield	Return on an INVESTMENT an investor receives from DIVIDENDS or INTEREST expressed as a percentage of the cost of the SECURITY.
Yield Curve	Graph showing the TERM structure of interest rates by plotting the yields of all bonds of the same quality with maturities ranging from the shortest to the longest available.
Yield to Call	YIELD on a BOND assuming the bond will be redeemed by the ISSUER at the first call date specified in the INDENTURE agreement.
Yield to Maturity	Rate of return on a SECURITY to its maturity, giving effect to the stated interest rate, accrual of discount, or AMORTIZATION of PREMIUM.
Z
Zero Coupon Bond	BOND on which the holder receives only one payment at maturity which includes both PRINCIPAL and INTERESTfrom issuance to maturity.
Zero Coupon Convertible Security	ZERO-COUPON BOND convertible into the COMMON STOCKof the issuing COMPANY when the stock reaches a predetermined price.