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Competence

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Definition of Competence

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Competence

Sufficient ability or fitness for ones needs. Possessing the necessary abilities to be qualified to
achieve a certain goal or complete a project.



Related Terms:

Core competency

Primary area of competence. Narrowly defined fields or tasks at which a company or
business excels. Primary areas of specialty.


Balanced Scorecard

A system of non-financial performance measurement that links innovation, customer and process measures to financial performance.


balanced scorecard (BSC)

an approach to performance
measurement that weighs performance measures from four
perspectives: financial performance, an internal business
perspective, a customer perspective, and an innovation and
learning perspective


Core Earnings

A measure of earnings that includes only the results of the primary operating
activities of the firm. It is most common to see the measure used by financial firms.


Z score

Statistical measure that quantifies the distance (measured in standard deviations) a data point is from
the mean of a data set. Separately, z score is the output from a credit-strength test that gauges the likelihood of
bankruptcy.



Accountability

The process of satisfying stakeholders in the organization that managers have acted in the best interests of the stakeholders, a result of the stewardship function of managers, which takes place through accounting.


Asset/liability management

Also called surplus management, the task of managing funds of a financial
institution to accomplish the two goals of a financial institution:
1) to earn an adequate return on funds invested, and
2) to maintain a comfortable surplus of assets beyond liabilities.


Competence Image 1

Availability float

Checks deposited by a company that have not yet been cleared.


availability float

Checks already deposited that have not yet been cleared.


Base probability of loss

The probability of not achieving a portfolio expected return.


Basic business strategies

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


Blue-chip company

Large and creditworthy company.


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.


Competence Image 2

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


Certainty equivalent

An amount that would be accepted in lieu of a chance at a possible higher, but
uncertain, amount.


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.


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


Complete capital market

A market in which there is a distinct marketable security for each and every
possible outcome.


Competence Image 3

Complete portfolio

The entire portfolio, including risky and risk-free assets.



Completed-Contract Method

A contract accounting method that recognizes contract revenue
only when the contract is completed. All contract costs are accumulated and reported as expense
when the contract revenue is recognized.


Contingent Liability

An obligation that is dependent on the occurrence or nonoccurrence of
one or more future events to confirm the existence of an obligation, the amount owed, the payee,
or the date payable.


Contingent pension liability

Under ERISA, the firm is liable to the plan participants for up to 39% of the net
worth of the firm.


Conventional project

A project with a negative initial cash flow (cash outflow), which is expected to be
followed by one or more future positive cash flows (cash inflows).


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.


Cumulative probability distribution

A function that shows the probability that the random variable will
attain a value less than or equal to each value that the random variable can take on.


Current liabilities

Amount owed for salaries, interest, accounts payable and other debts due within 1 year.


Current liabilities

Bills a company must pay within the next twelve months.


Current liabilities

Amounts due and payable by the business within a period of 12 months, e.g. bank overdraft, creditors and accruals.


current liabilities

Current means that these liabilities require payment in
the near term. Generally, these include accounts payable, accrued
expenses payable, income tax payable, short-term notes payable, and
the portion of long-term debt that will come due during the coming year.
Keep in mind that a business may roll over its debt; the old, maturing
debt may be replaced in part or in whole by new borrowing.


Current Liabilities

Debts or other obligations coming due within a year.


Current liability

This is typically the accounts payable, short-term notes payable, and
accrued expense accounts on the balance sheet, or any other liabilities that are
expected to be liquidated within a short time interval.


Deferred Tax Liability

Future tax obligation that results from the origination of a temporary
difference that causes pretax book income to exceed taxable income.


Defined benefit plan

A pension plan in which the sponsor agrees to make specified dollar payments to
qualifying employees. The pension obligations are effectively the debt obligation of the plan sponsor.
Related: defined contribution plan


Defined Benefit Plan

A pension plan that pays out a predetermined dollar
amount to participants, based on a set of rules that typically combine the number
of years of employment and wages paid over the time period when each
employee worked for the company.


Defined contribution plan

A pension plan in which the sponsor is responsible only for making specified
contributions into the plan on behalf of qualifying participants. Related: defined benefit plan
Delayed issuance pool Refers to MBSs that at the time of issuance were collateralized by seasoned loans
originated prior to the MBS pool issue date.


Defined Contribution Plan

A qualified retirement plan under which the employer
is liable for a payment into the plan of a specific size, but not for the size
of the resulting payments from the plan to participants.


Defined EBITDA

A measure of EBITDA that is outlined or defined in a debt or credit agreement.
Also see adjusted EBITDA and recurring EBITDA.


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.


design for manufacturability (DFM)

a process that is part of the project management of a new product; concerned with finding optimal solutions to minimizing product failures
and other adversities in the delivery of a new product
to customers


Disability

Inability to work due to injury or sickness.


Disability Insurance

Insurance that pays you an ongoing income if you become disabled and are unable to pursue employment or business activities. There are limits to how much you can receive based on your pre-disability earnings. Rates will vary based on occupational duties and length of time in a particular industry. This kind of coverage has a waiting period before you can begin collecting benefits, usually 30, 60 or 90 days. The benefit paying period also varies from 2 years to age 65. A short waiting period will cost more that a longer waiting period. As well, a long benefit paying period will cost more than a short benefit paying period.


Disability Insurance (Credit Insurance)

Group Insurance designed to cover monthly obligations due to a borrower being unable to work due to sickness or injury.


DLOM (discount for lack of marketability)

an amount or percentage deducted from an equity interest to reflect lack of marketability.


Dow Jones industrial average

This is the best known U.S.index of stocks. It contains 30 stocks that trade on
the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest
U.S.companies are performing. There are thousands of investment indexes around the world for stocks,
bonds, currencies and commodities.


Dow Jones Industrial Average

Index of the investment performance of a portfolio of 30 “blue-chip” stocks.


Evidence of Insurability

Evidence submitted to Canada Life that is used to determine whether an individual is eligible for the insurance coverage the individual has applied for.


Finance Company

company engaged in making loans to individuals or businesses. Unlike a bank, it does not receive deposits from the public.


goal

a desired abstract achievement


goal congruence

a circumstance in which the personal and
organizational goals of decision makers throughout a firm
are consistent and mutually supportive


Health Insurance Portability and Accountability Act of 1996 (HIPAA)

A federal Act expanding upon many of the insurance reforms created by
COBRA. In particular, it ensures that small businesses will have access to
health insurance, despite the special health status of any employees.


High-Risk Small Business

Firm viewed as being particularly subject to risk from an investors perspective.


Holding company

A corporation that owns enough voting stock in another firm to control management and
operations by influencing or electing its board of directors.


Independent project

A project whose acceptance or rejection is independent of the acceptance or rejection of
other projects.


independent project

an investment project that has no specific
bearing on any other investment project


Independent Projects

A situation where an increase (or decrease) in the benefits of one
project has no effect on the benefits of another project. Also, a
situation where the acceptance of one project does not preclude
the acceptance of another project.


Inflation uncertainty

The fact that future inflation rates are not known. It is a possible contributing factor to
the makeup of the term structure of interest rates.


Insurance Company

A firm licensed to sell insurance to the public.


Intercompany loan

Loan made by one unit of a corporation to another unit of the same corporation.


Intercompany transaction

Transaction carried out between two units of the same corporation.


Internet business model

a model that involves
(1) few physical assets,
(2) little management hierarchy, and
(3) a direct pipeline to customers


LIABILITIES

What a company owes to its creditors. In other words, debts.


Liabilities

Debts that the business owns.


Liabilities

Amounts owed by the company.


Liability

A financial obligation, or the cash outlay that must be made at a specific time to satisfy the
contractual terms of such an obligation.


Liability

A dollar amount of obligation payable to another entity.


Liability

A probable future sacrifice of economic benefits arising from present obligations of
a particular entity to transfer assets or provide services to other entities in the future as a result of
past transactions or events.


Liability funding strategies

Investment strategies that select assets so that cash flows will equal or exceed
the client's obligations.


Liability swap

An interest rate swap used to alter the cash flow characteristics of an institution's liabilities so
as to provide a better match with its assets.


Limited liability

Limitation of possible loss to what has already been invested.


limited liability

The owners of the corporation are not personally responsible for its obligations.


limited liability company

an organizational form that is a hybrid of the corporate and partnership organizational
forms and used to limit the personal liability of the owners;
it is typically used by small professional (such as accounting) firms


Limited-liability instrument

A security, such as a call option, in which the owner can only lose his initial
investment.


Limited-liability instrument

A security, such as a call option, in which the owner can only lose his initial investment.


limited liability partnership

an organizational form that is a hybrid of the corporate and partnership organizational
forms and used to limit the personal liability of the owners;
it is typically used by large professional (such as accounting) firms


Long-term liabilities

Amount owed for leases, bond repayment and other items due after 1 year.


LONG-TERM LIABILITIES

Bills that are payable in more than one year, such as a mortgage or bonds.


Long-term liabilities

Amounts owing after more than one year.


Make-Work Project

A project, such as digging holes and filling them up again, that has no useful purpose other than to make work.


Marketability

A negotiable security is said to have good marketability if there is an active secondary market
in which it can easily be resold.


mutually exclusive projects

a set of proposed capital projects from which one is chosen, causing all the others to be rejected


mutually exclusive projects

Two or more projects that cannot be pursued simultaneously.


mutually inclusive projects

a set of proposed capital projects that are all related and that must all be chosen if the Primary project is chosen


Nondiversifiability of human capital

The difficulty of diversifying one's human capital (the unique
capabilities and expertise of individuals) and employment effort.


Nonqualified Retirement Plan

A pension plan that does not follow ERISA and
IRS guidelines, typically allowing a company to pay key personnel more than
other participants.


Nonqualified Stock Option

A stock option not given any favorable tax treatment
under the Internal Revenue Code. The option is taxed when it is exercised,
based on the difference between the option price and the fair market
value of the stock on that day.


Normal probability distribution

A probability distribution for a continuous random variable that is forms a
symmetrical bell-shaped curve around the mean.


NSF (non-sufficient funds)

This appears on your statement if there are inSufficient funds in your account to cover a cheque that you have written or a pre-authorized payment that you have already arranged. You will be charged a service fee for non-Sufficient funds.


operating risk (business risk)

Risk in firm’s operating income.


Other long term liabilities

Value of leases, future employee benefits, deferred taxes and other obligations
not requiring interest payments that must be paid over a period of more than 1 year.


Parent company

A company that retains control over one or more other companies.


Political Business Cycle

A business cycle caused by policies undertaken to help a government be re-elected.


Primary location

A storage location labeled as the Primary location for a specific
inventory item.


Primary market

The first buyer of a newly issued security buys that security in the Primary market. All
subsequent trading of those securities is done in the secondary market.


Primary Market

Market where debt and equity securities are sold by an issuing
company to investors to raise capital for its operations


primary market

Market for the sale of new securities by corporations.



 

 

 

 

 

 

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