ARM

ARM: Adjustable Rate Mortgage

A mortgage loan that allows the interest rate to be charged at specific intervals over the maturity of the loan

CSR

Corporate Social Responsibility

A concept that corporations have an obligation to consider the interests of

customers, employees, shareholders, communities, and ecological

considerations in all aspects of their operations

DCF

Discounted Cash Flow

A technique used to estimate the present value of future expected cash receipts and expenditures; it is a factor analysis of both capital investments and securities investments

DIV

 Dividend

A payment by a corporation to shareholders

EBIT

Earnings Before Interest & Taxes

Financial measure defined as revenues less cost of goods sold and selling,

general, and administrative expenses

EBITDA

arnings Before Interest, Taxes, Depreciation & Amortization

Pre-tax earnings before interest, depreciation and amortization

EBT

Earnings Before Taxes

Sales revenue less cost of sales, operating expenses, and interest, before taxes have been paid

Earnings per Share

The portion of a company’s profit allocated to each outstanding share of common

stock

FASB

Financial Accounting Standards Board

The non-governmental body which sets the accounting rules for US companies

FCF

Free Cash Flow

The amount of cash a company has after expenses, debt service, capital

expenditures and dividends

FDIC

Federal Deposit Insurance Corporation

A U.S. government corporation that provides deposit insurance, which

guarantees the safety of deposits in member banks up to $250,000 per depositor

GAAP

Generally Accepted Accounting Practices

Rules for accounting standards

IMF

 International Monetary Fund

An international organization that oversees the global financial system by

following the macroeconomic policies of its member countries, in particular those with an impact on exchange rates and the balance of payments; it also offers financial and technical assistance to its members, making it an international lender of last resort

LBO

Leveraged Buyout

The takeover of a company, using borrowed funds

LIBOR

London Inter-Bank Offer Rate

The interest rate that the banks charge each other for loans (usually in

Eurodollars). This rate is applicable to the short-term international interbank market, and applies to very large loans borrowed for anywhere from one day to five years. This market allows banks with liquidity requirements to borrow quickly from other banks with surpluses, enabling banks to avoid holding excessively large amounts of their asset base as liquid assets. The LIBOR is officially fixed once per day by a small group of large London banks, but the rate changes throughout the day.

NFA

Net Fixed Assets

Also known as the book value of an asset, this is calculated as the purchase

price of the asset (gross fixed asset) less the accumulated depreciation (the sum of the annual amounts charged for the “wearing out” of the asset).

NOPAT

Net Operating Profit After Tax

In corporate finance, a company’s after-tax operating profit for all investors, including shareholders and debt holders. NOPAT is an operating performancemeasure after taking account of taxation but before financing cost (i.e., interest is excluded).

PPE (Net)

Property, Plant & Equipment less Accumulated Depreciation

R&D

The scientific and marketing evolution of a new product or service

ROA

Return On Assets

Indicator of profitability determined by dividing net income for the past 12 months by total average assets

ROE

Return On Equity

Indicator of profitability determined by dividing net income for the past 12 months by common stockholder equity

ROI

Return On Investment

Book income as a proportion of net book value

SEC

Securities & Exchange Commission

A federal agency that regulates the U.S. financial markets

SG&A

Selling, General and Administrative (expenses)

SWOT

Strengths, Weaknesses, Opportunities, Threats

Components of a situation analysis in marketing and business strategy

TARP

Troubled Assets Relief Program

A U.S. government program to purchase assets and equity from financial

institutions in order to strengthen the financial sector

TVM

Terminal Value

The remaining or expected remaining value of a property at the end of a certain period

WC

 Working Capital

Current assets minus current liabilities

Alpha

A financial measure giving the difference between a fund’s actual return

and its expected level of performance

Amortization

Paying off debt over time

Annuity

 Any terminating stream of fixed payments over a specified period of

time

A financial statement that gives an accounting picture of a

business at a particular date

Beta

The measure of a stock’s volatility relative to the market

Bond

A form of interest bearing security issued by governments, companies,

banks and other institutions

Breakeven Analysis

A financial analysis that identifies the point at which

expenses equal gross revenue for a zero net difference

Budget Deficit

 Excess of spending over income for a government, corporation

or individual over a particular period of time

Business Cycle

Recurrent periods during which the nation’s economy moves in

and out of recession and recovery phases

Call

Right to buy a specific number of shares at a specified price by a fixed date

Capital

Money and other property of a corporation or other enterprise used in

transacting business

Central Bank

The governmental institution that issues currency, administers

monetary policy and holds deposits representing the reserves of other banks

Collateralized Debt Obligation (CDO)

A security backed by a pool of bonds, loans and other assets

Common Stock

Securities that represent an equity ownership interest in a

company

Core Competency

 Distinctive employee, product or capacity leading to a longterm

advantage

Corporate Governance

The monitoring systems of a corporation consisting of

incentives, safeguards and dispute resolution processes

Corporate Social Responsibility (CSR)

A concept that corporations have an obligation to consider the interests of customers, employees, shareholders, communities, and ecological considerations in all aspects of their operations

Coupon

The interest payment that must be made on a note or bond until it

matures

Credit Default Swap (CDS)

A contract between the buyer, who receives

protection, and the seller, who provides protection, under which the seller agrees to make specified payment to the buyer in the event of a negative credit event (e.g., a default) on the underlying fixed income product(s) specified in the contract

Current Assets

Assets that could be converted to cash, sold, exchanged or

expensed in the normal course of business, usually within one year

Current Liabilities

Debt incurred as part of normal operations that is due within

one year

Debt

 An obligation to pay

Demand

Economic expression of desire, and ability to pay, for goods and

services

Depreciation

The reduction in value of an asset through wear and tear,

obsolescence or other factors

Derivative

A generic term for futures, options and swaps, i.e. instruments

derived from conventional direct dealings in securities, currencies and

commodities

Enterprise Value

A measure of what the market believes a company’s ongoing

operations are worth

Equilibrium (economic)

A situation in which market forces do not set in motion

a change in the quantities demanded or the current prevailing price

Equity

The residual value of a company’s assets after all liabilities have been

allowed for

Exponential Equation

An equation in which a term is raised to a power

Fixed Pie

 A situation in which resources to be divided are fixed

Free Cash Flows

The amount of cash that a company has left over after it has

paid all of its expenses, including capital expenditures, debt service and

dividends

Fund of Funds

A mutual fund that invests in other mutual funds

Gain

Increase in value

Gross Domestic Product (GDP)

 The total market value of all final goods and

services produced in a country in a given year, equal to total consumer,

investment and government spending, plus the value of exports, minus the value of imports

Gross Income

The total income from all sources

Gross National Product (GNP)

The total value of all goods and services

produced within a nation in a particular year, plus income earned by its citizens located abroad minus income of non-residents located in that country Groupthink: The condition where the desire for consensus within a group overrides the realistic appraisal of alternative courses of action and downplays risks

Habituation

The process through which people adjust to a change in

circumstances, coming to accept something new as standard