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Definition of 10-K

10-K Image 1


Annual report required by the SEC each year. Provides a comprehensive overview of a company's state
of business. Must be filed within 90 days after fiscal year end. A 10Q report is filed quarterly.

Related Terms:

Accounts Payable Days (A/P Days)

The number of days it would take to pay the ending balance
in accounts payable at the average rate of cost of goods sold per day. Calculated by dividing
accounts payable by cost of goods sold per day, which is cost of goods sold divided by 365.

Accounts Receivable Days (A/R Days)

The number of days it would take to collect the ending
balance in accounts receivable at the year's average rate of revenue per day. Calculated as
accounts receivable divided by revenue per day (revenue divided by 365).

Accumulated Other Comprehensive Income

Cumulative gains or losses reported in shareholders'
equity that arise from changes in the fair value of available-for-sale SECurities, from the
effects of changes in foreign-currency exchange rates on consolidated foreign-currency financial
statements, certain gains and losses on financial derivatives, and from adjustments for underfunded
pension plans.

Act of state doctrine

This doctrine says that a nation is sovereign within its own borders and its domestic
actions may not be questioned in the courts of another nation.

After-tax profit margin

The ratio of net income to net sales.

After-tax real rate of return

Money after-tax rate of return minus the inflation rate.

Aggregate Expenditure Curve

Aggregate demand for goods and services drawn as a function of the level of national income.

10-K Image 1

Annual fund operating expenses

For investment companies, the management fee and "other expenses,"
including the expenses for maintaining shareholder records, providing shareholders with financial statements,
and providing custodial and accounting services. For 12b-1 funds, selling and marketing costs are included.

Annual percentage rate (APR)

The periodic rate times the number of periods in a year. For example, a 5%
quarterly return has an APR of 20%.

annual percentage rate (APR)

Interest rate that is Annualized using simple interest.

Annual percentage yield (APY)

The effective, or true, Annual rate of return. The APY is the rate actually
earned or paid in one year, taking into account the affect of compounding. The APY is calculated by taking
one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate
has an APY of 12.68% (1.01^12).

Annual Premium

yearly amount payable by a client for a policy or component.

Annual report

yearly record of a publicly held company's financial condition. It includes a description of the
firm's operations, its balance sheet and income statement. SEC rules require that it be distributed to all
shareholders. A more detailed version is called a 10-K.

Annual Report

The report required by the Stock Exchange for all listed companies, containing the company’s financial statements.

Annual report

A report issued to a company’s shareholders, creditors, and regulatory
organizations at the end of its fiscal year. It typically contains at least an income
statement, balance sheet, statement of cash flows, and accompanying footnotes. It
may also contain management comments, an audit report, and other supporting
schedules that may be required by regulatory organizations.

annual return

The fund return, for any 12-month period, including changes in unit value and the reinvestment of distributions, but not taking into account sales, redemption, distribution or other optional charges or income taxes payable by any unitholder that would reduce returns.

10-K Image 2

Annualized gain

If stock X appreciates 1.5% in one month, the Annualized gain for that sock over a twelve
month period is 12*1.5% = 18%. Compounded over the twelve month period, the gain is (1.015)^12 = 19.6%.

Annualized holding period return

The Annual rate of return that when compounded t times, would have
given the same t-period holding return as actually occurred from period 1 to period t.

Asset-Backed Securities

Bond or note SECured by assets of company.

Asset-backed security

A SECurity that is collateralized by loans, leases, receivables, or installment contracts
on personal property, not real estate.

Auditor's report

A SECtion of an Annual report containing the auditor's opinion about the veracity of the
financial statements.

Autonomous Expenditure

Elements of spending that do not vary systematically with variables such as GDP that are explained by the theory. See also exogenous expenditure.

Available-for-Sale Security

A debt or equity SECurity not classified as a held-to-maturity SECurity or a trading SECurity. Can be classified as a current or noncurrent investment depending on the intended holding period.

Average collection period, or days' receivables

The ratio of accounts receivables to sales, or the total
amount of credit extended per dollar of daily sales (average AR/sales * 365).

Base Year

The reference year when constructing a price index. By tradition it is given the value 100.

Basic business strategies

Key strategies a firm intends to pursue in carrying out its business plan.

Blend off

The reintroduction of a faulty product into a process production flow by
adding it back in small increments.
1Copied with permission from Appendix B of Bragg, Inventory Best Practices, John Wiley
& Sons, 2004.

Blue-chip company

Large and creditworthy company.

Book-entry securities

The Treasury and federal agencies are moving to a book-entry system in which SECurities are not represented by engraved pieces of paper but are maintained in computerized records at the
Fed in the names of member banks, which in turn keep records of the SECurities they own as well as those they
are holding for customers. In the case of other SECurities where a book-entry has developed, engraved
SECurities do exist somewhere in quite a few cases. These SECurities do not move from holder to holder but are
usually kept in a central clearinghouse or by another agent.

Business cycle

Repetitive cycles of economic expansion and recession.

Business Cycle

Fluctuations of GDP around its long-run trend, consisting of recession, trough, expansion, and peak.

Business Expansion Investment

The use of capital to create more money through the addition of fixed assets or through income producing vehicles.

Business failure

A business that has terminated with a loss to creditors.

business intelligence (BI) system

a formal process for gathering and analyzing information and producing intelligence to meet decision making needs; requires information about
internal processes as well as knowledge, technologies, and competitors

business process reengineering (BPR)

the process of combining information technology to create new and more effective
business processes to lower costs, eliminate unnecessary
work, upgrade customer service, and increase
speed to market

Business risk

The risk that the cash flow of an issuer will be impaired because of adverse economic
conditions, making it difficult for the issuer to meet its operating expenses.

business-value-added activity

an activity that is necessary for the operation of the business but for which a customer would not want to pay


List of new issues scheduled to come to market shortly.

Calendar effect

The tendency of stocks to perform differently at different times, including such anomalies as
the January effect, month-of-the-year effect, day-of-the-week effect, and holiday effect.

Capital expenditures

Amount used during a particular period to acquire or improve long-term assets such as
property, plant or equipment.

capital expenditures

Refers to investments by a business in long-term
operating assets, including land and buildings, heavy machinery and
equipment, vehicles, tools, and other economic resources used in the
operations of a business. The term capital is used to emphasize that
these are relatively large amounts and that a business has to raise capital
for these expenditures from debt and equity sources.

Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized against

future-period revenue.

Capitalized Expenditures

Expenditures that are accounted for as assets to be amortized
against income in future periods as opposed to current-period expenses.

Cash dividend

A dividend paid in cash to a company's shareholders. The amount is normally based on
profitability and is taxable as income. A cash distribution may include capital gains and return of capital in
addition to the dividend.

cash dividend

Payment of cash by the firm to its shareholders.

Cash flow after interest and taxes

Net income plus depreciation.


A statement that shows where a company’s cash came from and where it went for a period of time, such as a year.

Cash Flow statement

A financial report that shows the movement in cash for a business during an accounting period.

Cash-surrender value

An amount the insurance company will pay if the policyholder ends a whole life
insurance policy.

Cash Surrender Value

This is the amount available to the owner of a life insurance policy upon voluntary termination of the policy before it becomes payable by the death of the life insured. This does not apply to term insurance but only to those policies which have reduced paid up values and cash surrender values. A cash surrender in lieu of death benefit usually has tax implications.

Cash Surrender Value

Benefit that entitles a policy owner to an amount of money upon cancellation of a policy.

Change in Reporting Entity

A change in the scope of the entities included in a set of, typically, consolidated financial statements.

Closed-end fund

An investment company that sells shares like any other corporation and usually does not
redeem its shares. A publicly traded fund sold on stock exchanges or over the counter that may trade above or
below its net asset value. Related: Open-end fund.

Closed-end mortgage

Mortgage against which no additional debt may be issued.

Commercial Business Loan (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.

Common-base-year analysis

The representing of accounting information over multiple years as percentages
of amounts in an initial year.
Common-size analysis The representing of balance sheet items as percentages of assets and of income
statement items as percentages of sales.

common-size income statement

Income statement that presents items as a percentage of revenues.

Company Acquisitions

Assets acquired to create money. May include plant, machinery and equipment, shares of another company etc.

company cost of capital

Expected rate of return demanded by investors in a company, determined by the average risk of the company’s assets and operations.

Company-specific risk

Related: Unsystematic risk

Companyspecific Risk

See asset-specific risk

Comprehensive due diligence investigation

The investigation of a firm's business in conjunction with a
SECurities offering to determine whether the firm's business and financial situation and its prospects are
adequately disclosed in the prospectus for the offering.

constant-growth dividend discount model

Version of the dividend discount model in which dividends grow at a constant rate.

contract vendor

an external party that has been granted an
outsourcing contract to provide a service activity for an entity

Convention statement

An Annual statement filed by a life insurance company in each state where it does
business in compliance with that state's regulations. The statement and supporting documents show, among
other things, the assets, liabilities, and surplus of the reporting company.

Convertible security

A SECurity that can be converted into common stock at the option of the SECurity holder,
including convertible bonds and convertible preferred stock.

Cost company arrangement

Arrangement whereby the shareholders of a project receive output free of
charge but agree to pay all operating and financing charges of the project.

cost of production report

a process costing document that
details all operating and cost information, shows the computation
of cost per equivalent unit, and indicates cost assignment
to goods produced during the period

Cross-sectional approach

A statistical methodology applied to a set of firms at a particular point in time.

Cum dividend

With dividend.

Cumulative dividend feature

A requirement that any missed preferred or preference stock dividends be paid
in full before any common dividend payment is made.

Days in receivables

Average collection period.

Days' sales in inventory ratio

The average number of days' worth of sales that is held in inventory.

Days' sales outstanding

Average collection period.

Days Statistics

Measures the number days' worth of sales in accounts receivable (accounts receivable
days) or days' worth of sales at cost in inventory (inventory days). Sharp increases in these measures
might indicate that the receivables are not collectible and that the inventory is not salable.

Debt securities

IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
other instruments.

Debt Security

A SECurity representing a debt relationship with an enterprise, including a government
SECurity, municipal SECurity, corporate bond, convertible debt issue, and commercial


Acceptance of a capital budgeting project contingent on the acceptance of another project.

dependent variable

an unknown variable that is to be predicted
using one or more independent variables

Depository Trust Company (DTC)

DTC is a user-owned SECurities depository which accepts deposits of
eligible SECurities for custody, executes book-entry deliveries and records book-entry pledges of SECurities in
its custody, and Provides for withdrawals of SECurities from its custody.

Derivative security

A financial SECurity, such as an option, or future, whose value is derived in part from the
value and characteristics of another SECurity, the underlying SECurity.


To remove the general drift, tendency or bent of a set of statistical data as related to time.

Discount securities

Non-interest-bearing money market instruments that are issued at a discount and
redeemed at maturity for full face value, e.g. U.S. Treasury bills.

Discounted dividend model (DDM)

A formula to estimate the intrinsic value of a firm by figuring the
present value of all expected future dividends.


A dividend is a portion of a company's profit paid to common and preferred shareholders. A stock
selling for $20 a share with an Annual dividend of $1 a share yields the investor 5%.


A payment a company makes to stockholders. Earnings before income tax. The profit a company made
before income taxes.


The payment of after-tax profits to shareholders as their share of the profits of the business for an accounting period.


A payment made to shareholders that is proportional to the number of shares
owned. It is authorized by the Board of Directors.


Periodic cash distribution from the firm to its shareholders.


As the term dividend relates to a corporation's earnings, a dividend is an amount paid per share from a corporation's after tax profits. Depending on the type of share, it may or may not have the right to earn any dividends and corporations may reduce or even suspend dividend payments if they are not doing well. Some dividends are paid in the form of additional shares of the corporation. Dividends paid by Canadian corporations qualify for the dividend tax credit and are taxed at lower rates than other income.
As the term dividend relates to a life insurance policy, it means that if that policy is "participating", the policy owner is entitled to participate in an equitable distribution of the surplus earnings of the insurance company which issued the policy. Surpluses arise primarily from three sources:
1) the difference between anticipated and actual operating expenses,
2) the difference between anticipated and actual claims experience, and
3) interest earned on investments over and above the rate required to maintain policy reserves. Having regard to the source of the surplus, the "dividend" so paid can be considered, in part at least, as a refund of part of the premium paid by the policy owner.
Life insurance policy owners of participating policies usually have four and sometimes five dividend options from which to choose:
1) take the dividend in cash,
2) apply the dividend to reduce current premiums,
3) leave the dividends on deposit with the insurance company to accumulate at interest like a savings plan,
4) use the dividends to purchase paid-up whole life insurance to mature at the same time as the original policy,
5) use the dividends to purchase one year term insurance equal to the guaranteed cash value at the end of the policy year, with any portion of the dividend not required for this purpose being applied under one of the other dividend options.
NOTE: It is suggested here that if you have a participating whole life policy and at the time of purchase received a "dividend projection" of incredible future savings, ask for a current projection. Life insurance company's surpluses are not what they used to be.


Unlike dividends which are paid to company shareholders, participating insurance policy dividends are not based on the company's overall profits. Rather, they are determined by grouping policies by type and country of issue and looking at how each class contributes to the company's earnings and surplus.

Dividend clawback

With respect to a project financing, an arrangement under which the sponsors of a project
agree to contribute as equity any prior dividends received from the project to the extent necessary to cover
any cash deficiencies.

Dividend clientele

A group of shareholders who prefer that the firm follow a particular dividend policy. For
example, such a preference is often based on comparable tax situations.

dividend discount model

Computation of today’s stock price which states that share value equals the present value of all expected future dividends.

Dividend discount model (DDM)

A model for valuing the common stock of a company, based on the
present value of the expected cash flows.

dividend growth method

a method of computing the cost
of common stock equity that indicates the rate of return
that common shareholders expect to earn in the form of
dividends on a company’s common stock

Dividend growth model

A model wherein dividends are assumed to be at a constant rate in perpetuity.

Dividend income

Income that a company receives in the form of dividends on stock in other companies that it holds.

Dividend limitation

A bond covenant that restricts in some way the firm's ability to pay cash dividends.

Dividend payout ratio

Percentage of earnings paid out as dividends.







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