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Definition of sole proprietor
sole owner of a business which has no partners and no shareholders. The proprietor is personally liable for all the firm’s obligations.
A business owned by a single individual. The sole proprietorship pays no corporate
An unincorporated business owned by one person which may or may not have employees.
an entity’s legal nature (for example,
The reduction in utility of an inventory item or fixed asset. If it is an
Parts not used in any current end product.
A single person who is the owner of an unincorporated business.
income that has been earned but not yet received. For instance, if you have a non-registered Guaranteed Investment Certificate (GIC), Mutual Fund or Segregated Equity Fund, growth accrues annually or semi-annually and is taxable annually even though the gain is only paid at maturity of your investment.
Cumulative gains or losses reported in shareholders'
The sum of cash, accounts receivable, and short-term marketable
Operations Reported income from continuing operations
A bond covenant that specifies certain actions the firm must take.
The ratio of net income to net sales.
Money after-tax rate of return minus the inflation rate.
The discount rate that reflects only the business risks of a project and abstracts from the
Total costs, explicit and implicit.
All or none
Requirement that none of an order be executed unless all of it can be executed at the specified price.
An arrangement whereby a security issue is canceled if the underwriter is unable
assign based on the use of a cost driver, a cost predictor,
the systematic assignment of an amount to a recipient
The process of storing costs in one account and shifting them to other
Allocation base A measure of activity or volume such as labour
hours, machine hours or volume of production
Allowance for bad debts
An offset to the accounts receivable balance, against which
Allowance for doubtful accounts
A contra account related to accounts receivable that represents the amounts that the company expects will not be collected.
Allowance for Doubtful Accounts
An estimate of the uncollectible portion of accounts receivable
A method of adjusting accounts receivable to the amount that is expected to be collected based on company experience.
approximated net realizable value at split-off allocation
a method of allocating joint cost to joint products using a
Asset allocation decision
The decision regarding how an institution's funds should be distributed among the
Also called surplus management, the task of managing funds of a financial
A situation wherein participants in a transaction have different net tax rates.
An option is at-the-money if the strike price of the option is equal to the market price of the
Average tax rate
taxes as a fraction of income; total taxes divided by total taxable income.
average tax rate
Total taxes owed divided by total income.
The amount of accounts receivable that is not expected to be collected.
Refers to accounts receivable from credit sales to customers
Any large principal payment due at maturity for a bond or loan with or without a a sinking
Gives the lessee the option to purchase the asset at a price below fair market
Basic business strategies
Key strategies a firm intends to pursue in carrying out its business plan.
Before-tax profit margin
The ratio of net income before taxes to net sales.
Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees
A committee formed in response to SEC chairman Arthur Levitt's initiative to improve the financial
Pretax income reported on the income statement.
In the mortgage pipeline, the risk that prospective borrowers of loans committed to be
Break-even tax rate
The tax rate at which a party to a prospective transaction is indifferent between entering
Repetitive cycles of economic expansion and recession.
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.
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
business process reengineering (BPR)
the process of combining information technology to create new and more effective
The risk that the cash flow of an issuer will be impaired because of adverse economic
an activity that is necessary for the operation of the business but for which a customer would not want to pay
An option that gives the right to buy the underlying futures contract.
a. An option to buy a certain quantity of a stock or commodity for a
Call an option
To exercise a call option.
A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond
Call money rate
Also called the broker loan rate , the interest rate that banks charge brokers to finance
An option contract that gives its holder the right (but not the obligation) to purchase a specified
A contract that gives the holder the right to buy an asset for a
Right to buy an asset at a specified exercise price on or before the exercise date.
The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a
The price for which a bond can be repaid before maturity under a call provision.
A feature of some callable bonds that establishes an initial period when the bonds may not be
An embedded option granting a bond issuer the right to buy back all or part of the issue prior
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.
A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The
A financial security such as a bond with a call option attached to it, i.e., the issuer has the right to
A bond that allows the issuer to buy back the bond at a
Bond that may be repurchased by the issuer before maturity at specified call price.
decision allocation of invested funds between risk-free assets versus the risky portfolio.
Capital Consumption Allowance
Capital Cost Allowance (CCA)
The annual depreciation expense allowed by the Canadian income tax Act.
Cash flow after interest and taxes
Net income plus depreciation.
Cash Flow–to–Income Ratio (CFI)
Adjusted cash flow provided by continuing operations
Communication barrier between financiers (investment bankers) and traders. This barrier is
A transaction in which the purchaser's intention is to reduce or eliminate a short position in
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-size income statement
income statement that presents items as a percentage of revenues.
Raw materials or subassemblies used to make either finished goods
he written statement that follows any "trade" in the securities markets. Confirmation is issued
An obligation that is dependent on the occurrence or nonoccurrence of
This is the person designated to become the new owner of a life insurance policy if the original owner dies before the life insured.
Contingent pension liability
Under ERISA, the firm is liable to the plan participants for up to 39% of the net
The acquisition of one firm by anther firm.
Debt obligations issued by corporations.
A legal document creating a corporation.
one of the three areas of the discipline of finance. It deals with the operation of the firm
Corporate financial management
The application of financial principals within a corporation to create and
Corporate financial planning
Financial planning conducted by a firm that encompasses preparation of both
Corporate processing float
The time that elapses between receipt of payment from a customer and the
Corporate tax view
The argument that double (corporate and individual) taxation of equity returns makes
Corporate taxable equivalent
Rate of return required on a par bond to produce the same after-tax yield to
the assignment, using some reasonable basis,
A short call option position in which the writer owns the number of shares of the underlying
Covered call writing strategy
A strategy that involves writing a call option on securities that the investor
Current Income Tax Expense
That portion of the total income tax provision that is based on
This is typically the accounts payable, short-term notes payable, and
Current Tax Payment Act of 1943
A federal Act requiring employers to withhold income taxes from employee pay.
A provision that prohibits the company from calling the bond before a certain date. During this
Deferred Income Tax Expense
That portion of the total income tax provision that is the result
Deferred Tax Asset
Future tax benefit that results from (1) the origination of a temporary difference
Deferred Tax Liability
Future tax obligation that results from the origination of a temporary
A non-cash expense that provides a source of free cash flow. Amount allocated during the
tax deductions that businesses can claim when they spend money on investment goods.
Depreciation tax shield
The value of the tax write-off on depreciation of plant and equipment.
depreciation tax shield
Reduction in taxes attributable to the depreciation allowance.
Direct stock-purchase programs
The purchase by investors of securities directly from the issuer.
income less income tax.
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