Definition of Spin-off

Spin-off

A company can create an independent company from an existing part of the company by selling or
distributing new shares in the so-called spinoff.

"Soft" Capital Rationing

Capital rationing that under certain circumstances can be violated or even viewed
as made up of targets rather than absolute constraints.

Absolute Advantage

The ability to produce a good or service with fewer resources than competitors. See also comparative advantage.

Absolute priority

Rule in bankruptcy proceedings whereby senior creditors are required to be paid in full
before junior creditors receive any payment.

Absolute Right of Return

Goods may be returned to the seller by the purchaser without restrictions.

Absorption costing

A method of costing in which all fixed and variable production costs are charged to products or services using an allocation base.

absorption costing

a cost accumulation and reporting
method that treats the costs of all manufacturing components
(direct material, direct labor, variable overhead, and
fixed overhead) as inventoriable or product costs; it is the
traditional approach to product costing; it must be used for
external financial statements and tax returns

Absorption costing

A methodology under which all manufacturing costs are assigned
to products, while all non-manufacturing costs are expensed in the current period.

Accounting insolvency

Total liabilities exceed total assets. A firm with a negative net worth is insolvent on
the books.

acid test ratio (also called the quick ratio)

The sum of cash, accounts receivable, and short-term marketable
investments (if any) is divided by
total current liabilities to compute this ratio. Suppose that the short-term
creditors were to pounce on a business and not agree to roll over the
debts owed to them by the business. In this rather extreme scenario, the
acid test ratio reveals whether its cash and near-cash assets are enough
to pay its short-term current liabilities. This ratio is an extreme test that
is not likely to be imposed on a business unless it is in financial straits.
This ratio is quite relevant when a business is in a liquidation situation
or bankruptcy proceedings.

administrative department

an organizational unit that performs management activities benefiting the entire organization;
includes top management personnel and organization
headquarters

American shares

Securities certificates issued in the U.S. by a transfer agent acting on behalf of the foreign
issuer. The certificates represent claims to foreign equities.

Authorized shares

Number of shares authorized for issuance by a firm's corporate charter.

Authorized shares

The number of shares of stock that the company is legally authorized to sell.

Blue-chip company

Large and creditworthy company.

Canadian Life and Health Insurance Association (CLHIA)

An association of most of the life and health insurance companies in Canada that conducts research and compiles information about the life and health insurance industry in Canada.

Collection Department

An internal department within a company staffed by specialists in collecting past due accounts or accounts receivable.

Common Shares

Are equity instruments that take no security against assets, have no fixed terms of repayment and pay no fixed dividends.

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

Comparison universe

The collection of money managers of similar investment style used for assessing
relative performance of a portfolio manager.

Consol

A type of bond that has an infinite life but is not issued in the U.S. capital markets.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

A federal Act
containing the requirements for offering insurance to departed employees.

Consolidation

The combining of two or more firms to form an entirely new entity.

Consolidation

A summarization of the financial statements of a parent company and
those of its subsidiaries over which it has voting control of common stock.

Consortium banks

A merchant banking subsidiary set up by several banks that may or may not be of the
same nationality. Consortium banks are common in the Euromarket and are active in loan syndication.

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 goods sold

The cost of merchandise that a company sold this year. For manufacturing companies, the cost of raw
materials, components, labor and other things that went into producing an item.

Cost of goods sold

See cost of sales.

Cost of goods sold

The cost of the items that were sold during the current period.

Cost of goods sold

The accumulated total of all costs used to create a product or service,
which is then sold. These costs fall into the general sub-categories of direct
labor, materials, and overhead.

Cost of goods sold

The charge to expense of the direct materials, direct labor, and
allocated overhead costs associated with products sold during a defined accounting
period.

Cost of limited partner capital

The discount rate that equates the after-tax inflows with outflows for capital
raised from limited partners.

Counterpart items

In the balance of payments, counterpart items are analogous to unrequited transfers in the
current account. They arise because the double-entry system in balance of payments accounting and refer to
adjustments in reserves owing to monetization or demonetization of gold, allocation or cancellation of SDRs,
and revaluation of the various components of total reserves.

Counterparties

The parties to an interest rate swap.

Counterparty Party

on the other side of a trade or transaction.

Counterparty risk

The risk that the other party to an agreement will default. In an options contract, the risk
to the option buyer that the option writer will not buy or sell the underlying as agreed.
Country economic risk Developments in a national economy that can affect the outcome of an international
financial transaction.

Crossover rate

The return at which two alternative projects have the same net present value.

Deductive reasoning

The use of general fact to provide accurate information about a specific situation.

Departmental stocks

The informal and frequently unauthorized retention of excess inventory on the shop floor, which is used as buffer safety stock.

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.

Doctrine of sovereign immunity

Doctrine that says a nation may not be tried in the courts of another country
without its consent.

Employee stock ownership plan (ESOP)

A company contributes to a trust fund that buys stock on behalf of
employees.

Employee Stock Ownership Plan (ESOP)

a profit-sharing compensation program in which investments are made in
the securities of the employer

Employee Stock Ownership Plan (ESOP)

A fund containing company stock and owned by employees, paid for by ongoing contributions by the employer.

enterprise resource planning (ERP) system

a packaged software program that allows a company to
(1) automate and integrate the majority of its business processes,
(2) share common data and practices across the entire enterprise, and
(3) produce and access information in a realtime environment

Enterprise resource planning system

A computer system used to manage all company
resources in the receipt, completion, and delivery of customer orders.

feasible solution

a solution to a linear programming problem
that does not violate any problem constraints

Finance Company

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

Flat price (also clean price)

The quoted newspaper price of a bond that does not include accrued interest.
The price paid by purchaser is the full price.

Fully diluted earnings per shares

Earnings per share expressed as if all outstanding convertible securities
and warrants have been exercised.

General partner

A partner who has unlimited liability for the obligations of the partnership.

General partnership

A partnership in which all partners are general partners.

Government National Mortgage Association (Ginnie Mae)

A wholly owned U.S. government corporation
within the Department of Housing & Urban Development. Ginnie Mae guarantees the timely payment of
principal and interest on securities issued by approved servicers that are collateralized by FHA-issued, VAguaranteed,
or Farmers Home Administration (FmHA)-guaranteed mortgages.

Government sponsored enterprises

Privately owned, publicly chartered entities, such as the Student Loan
Marketing Association, created by Congress to reduce the cost of capital for certain borrowing sectors of the
economy including farmers, homeowners, and students.

Guaranteed Renewal

A promise that a life insurance policy will be renewed without penalty or medical examination after the term has expired. The renewal rate can also be guaranteed.

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 Broker

This is a provincial government licensed independent businessperson who usually represents five or more life insurance companies in a sales and service capacity and who is paid a commission by those life insurance companies for sales and service of life insurance products. We for example, have been in business for 12 years and regularly place new business with over twenty different life insurance companies.

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.

independent variable

a variable that, when changed, will
cause consistent, observable changes in another variable;
a variable used as the basis of predicting the value of a
dependent variable

Inductive reasoning

The attempt to use information about a specific situation to draw a conclusion.

Insolvency risk

The risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk.

Insolvent

A firm that is unable to pay debts (liabilities are greater than assets).

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.

ISO 14000

a series of international standards that are designed
to support a company’s environmental protection
and pollution prevention goals in balance with socioeconomic
needs

ISO 9000

a comprehensive series of international quality standards
that define the various design, material procurement,
production, quality-control, and delivery requirements and
procedures necessary to produce quality products and services

Issued shares

The number of shares that the company has sold to the public.

issued shares

shares that have been issued by the company.

Labour-Sponsored Venture Funds

Venture capital corporations established by labour unions. They function as other venture capital corporations but are subject to government regulation.

Lessor

An entity that leases an asset to another entity.
Letter of comment A communication to the firm from the SEC that suggests changes to its registration
statement.

Lessor

An entity that leases an asset to another entity.

Lessor

The entity that rents property that it owns to a second party in exchange for a
periodic set of rental payments.

Lessor

A person who grants a lease; the owner of the asset.

Limitation on merger, consolidation, or sale

A bond covenant that restricts in some way a firm's ability to
merge or consolidate with another firm.

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 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

Limited partner

A partner who has limited legal liability for the obligations of the partnership.

Limited partnership

A partnership that includes one or more partners who have limited liability.

Limited partnership

A partnership that includes one or more partners who have limited liability.

Management/closely held shares

Percentage of shares held by persons closely related to a company, as
defined by the Securities and exchange commission. part of these percentages often is included in
Institutional Holdings -- making the combined total of these percentages over 100. There is overlap as
institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company.

Manufacturing resource planning

An integrated, computerized system for planning
all manufacturing resources.

manufacturing resource planning (MRP II)

a fully integrated materials requirement planning system that involves
top management and provides a basis for both strategic
and tactical planning

Manufacturing resource planning (MRP II)

An expansion of the material requirements planning concept, with additional computer-based capabilities in the areas of
direct labor and machine capacity planning.

Master limited partnership (MLP)

A publicly traded limited partnership.

National Futures Association (NFA)

The futures industry self regulatory organization established in 1982.

net income (also called the bottom line, earnings, net earnings, and net

operating earnings)
This key figure equals sales revenue for a period
less all expenses for the period; also, any extraordinary gains and losses
for the period are included in this final profit figure. Everything is taken
into account to arrive at net income, which is popularly called the bottom
line. Net income is clearly the single most important number in business
financial reports.

New Classicals

Economists who, like classical economists, believe that wages and prices are sufficiently flexible to solve the unemployment problem without help from government policy.

New-issues market

The market in which a new issue of securities is first sold to investors.

New Keynesians

Economists who, like Keynes, believe that for good reason wages and prices are sticky and so prolong recessions, suggesting a need for government policy.

New money

In a Treasury auction, the amount by which the par value of the securities offered exceeds that of
those maturing.

New York Stock Exchange (NYSE)

Also known as the Big Board or The Exhange. More than 2,00 common
and preferred stocks are traded. The exchange is the older in the United States, founded in 1792, and the
largest. It is lcoated on Wall Street in new York City

Non-participating Policy

A type of insurance policy or annuity in which the owner does not receive dividends.

Nonsignificant part number

An identifying number assigned to a part that conveys
no other information.

Obsolescence

The reduction in utility of an inventory item or fixed asset. If it is an
inventory item, then a reserve is created to reduce the value of the inventory by the
estimated amount of obsolescence. If it is a fixed asset, the depreciation method and
timing will be set to approximate the rate and amount of obsolescence.

Obsolete inventory

parts not used in any current end product.

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