Financial Terms Main Page

This site contains comprehensive definitions for a wide range of terms that cover topics such as financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit...

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Monthly Financial Term Picks:

Book value

A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
company's book value might be more or less than its market value.

Completion undertaking

An undertaking either (1) to complete a project such that it meets certain specified
performance criteria on or before a certain specified date or (2) to repay project debt if the completion test
cannot be met.

Materials requirement planning

Computer-based systems that plan backward from the production schedule
to make purchases in order to manage inventory levels.

Single country fund

A mutual fund that invests in individual countries outside the United States.

Accounting rate of return (ARR)

A method of investment appraisal that measures
the profit generated as a percentage of the
investment – see return on investment.

net present value method

a process that uses the discounted
cash flows of a project to determine whether the
rate of return on that project is equal to, higher than, or
lower than the desired rate of return

treasurer

an individual in a corporation who handles the actual
resources of the organization but who does not have
access to the accounting records

Lambda

The percentage change in the price of an option relative to a 1%
change in the price of the underlying security. Also known as Elasticity.

Exit value

The value that an asset is expected to have at the time it is sold at a predetermined
point in the future.

acquisition

Takeover of a firm by purchase of that firm’s common
stock or assets.

SEC

See Securities and Exchange Commission.

Section 83(b) Election

The decision by an employee to recognize taxable income
on the purchase price of an incentive stock option within 30 days following
the date when an option is exercised and withhold taxes at the ordinary
income tax rate at that time.

Creative Accounting Practices

Any and all steps used to play the financial numbers game, including
the aggressive choice and application of accounting principles, both within and beyond
the boundaries of generally accepted accounting principles, and fraudulent financial reporting.
Also included are steps taken toward earnings management and income smoothing. See Financial
Numbers Game.

Discrete order picking

A picking method requiring the sequential completion of
each order before one begins picking the next order.

line of credit

A revolving source of credit with a pre-established limit. You access the funds only as you need them, and any amount that you pay back becomes accessible to you again. Unlike a personal loan, a line of credit permits you to write cheques and make bank machine withdrawals, and requires you to pay interest only on the funds that you actually use.