Definition of Supermajority

Supermajority

Provision in a company's charter requiring a majority of, say, 80% of shareholders to approve
certain changes, such as a merger.

Blue-chip company

Large and creditworthy company.

Call provision

An embedded option granting a bond issuer the right to buy back all or part of the issue prior
to maturity.

Certainty equivalent

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

Changes in Financial Position

Sources of funds internally provided from operations that alter a company's
cash flow position: depreciation, deferred taxes, other sources, and capital expenditures.

Company-specific risk

Related: Unsystematic risk

Conglomerate merger

A merger involving two or more firms that are in unrelated businesses.

Corporate charter

A legal document creating a corporation.

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.

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.

Fair price provision

See:appraisal rights.

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.

Horizontal merger

A merger involving two or more firms in the same industry that are both at the same
stage in the production cycle; that is two or more competitors.

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.

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.

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.

Majority voting

Voting system under which each director is voted upon separately. Related: cumulative voting.

Merger

1) Acquisition in which all assets and liabilities are absorbed by the buyer.
2) More generally, any combination of two companies.

Optimal redemption provision

Provision of a bond indenture that governs the issuer's ability to call the
bonds for redemption prior to their scheduled maturity date.

Provisional call feature

A feature in a convertible issue that allows the issuer to call the issue during the noncall
period if the price of the stock reaches a certain level.

Put provision

Gives the holder of a floating-rate bond the right to redeem his note at par on the coupon
payment date.

Shareholders' equity

This is a company's total assets minus total liabilities. A company's net worth is the
same thing.

Shareholders' letter

A section of an annual report where one can find jargon-free discussions by
management of successful and failed strategies which provides guidance for the probing of the rest of the
report.

Stock exchanges

Formal organizations, approved and regulated by the Securities and Exchange Commission
(SEC), that are made up of members that use the facilities to exchange certain common stocks. The two major
national stock exchanges are the New York Stock Exchange (NYSE) and the American Stock Exchange (ASE
or AMEX). Five regional stock exchanges include the Midwest, Pacific, Philadelphia, Boston, and Cincinnati.
The Arizona stock exchange is an after hours electronic marketplace where anonymous participants trade
stocks via personal computers.

Vertical merger

A merger in which one firm acquires another firm that is in the same industry but at another
stage in the production cycle. For example, the firm being acquired serves as a supplier to the firm doing the acquiring.

Allocation base A measure of activity or volume such as labour

hours, machine hours or volume of production
used to apportion overheads to products and
services.

Provision

Estimates of possible future liabilities that may arise.

Shareholders’ funds

The capital invested in a business by the shareholders, including retained profits.

Shareholders' equity

The total amount of contributed capital and retained earnings; synonymous with stockholders' equity.

stockholders' equity, statement of changes in

Although often considered
a financial statement, this is more in the nature of a supporting schedule
that summarizes in one place various changes in the owners’ equity
accounts of a business during the period—including the issuance and
retirement of capital stock shares, cash dividends, and other transactions
affecting owners’ equity. This statement (schedule) is very helpful
when a business has more than one class of stock shares outstanding
and when a variety of events occurred during the year that changed its
owners’ equity accounts.

Companyspecific Risk

See asset-specific risk

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

service company

an individual or firm engaged in a high or moderate degree of conversion that results in service output

Merger

The combination of two or more entities into a single entity, usually with one
of the original entities retaining control.

Parent company

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

Subsidiary company

A company that is controlled by another company through ownership
of the majority of its voting stock.

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.

majority voting

Voting system in which each director is voted on separately.

merger

Combination of two firms into one, with the acquirer assuming assets and liabilities of the target firm.

Say's Law

Belief that supply creates its own demand.

Form 8027

The form used by employers to report tip income by their employees
to the government.

Roth IRA. An IRA account whose earnings are not taxable at all under certain

circumstances.

Antifraud Provisions

Specific sections and rules of the 1933 Act and 1934 Act that are
designed to reduce fraud and deceit in financial filings made with the SEC. The antifraud Provisions
are Section 17(a) of the 1933 Act and Section 10(b) and Rule 10b-5 of the 1934 Act.

Income Tax Provision

The expense deduction from pretax book income reported on the
income statement. It consists of both current income tax expense and deferred income tax
expense. The terms income tax expense and income tax Provision are used interchangeably.

Provision for Doubtful Accounts

An operating expense recorded when the allowance for
doubtful accounts is increased to accommodate an increase in uncollectible accounts receivable.

Sales Revenue Revenue recognized from the sales of products as opposed to the provision of

services.

Shareholders' Equity

The residual interest or owners' claims on the assets of a corporation
that remain after deducting its liabilities.

Antidilution Provisions

A clause in a shareholders agreement preventing a company from issuing additional shares, without allowing the current shareholders the opportunity to participate in the offering to avoid dilution of their percentage ownership.

Company Acquisitions

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

Finance Company

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

Insurance Company

A firm licensed to sell insurance to the public.

Trust Company

Organization usually combined with a commercial bank, which is engaged as a trustee for individuals or businesses in the administration of Trust funds, estates, custodial arrangements, stock transfer and registration, and other related services.

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