Corporate Finance Terminology Glossary

Corporate Finance Terminology Glossary
Acquisition - the purchase of one company by another business entity.

Acquisition of Assets - an acquirer purchases the selling company's assets.
Acquisition of Stock - an acquirer purchases the capital stock of the target company.
Basis Point - the smallest measure used for quoting interest yields.
Blue Sky Laws- state laws covering the issue and trading of securities.
Bond - a debt issued for a period of more than a year.
Book Value - a company's total assets minus intangible assets and liabilities.
Break-Even - the level of revenues and expenses at which a project would make zero profit.
Bullet Loan - a term loan that calls for no amortization and a lump sum payment at maturity.
Capital Budget - a company's plan for capital expenditures (acquisition of fixed assets).
Capital Expenditures - money used to acquire or improve fixed assets.
Capital Stock - stock authorized by a firm's charter.
Capitalization - the debt and equity combination that funds a company's assets.
Cash and Equivalents - assets that can be converted into cash immediately.
Cash Flow Coverage Ratio - the ratio of financial obligations to earnings before interest,
taxes, depreciation and amortization.
Cash Flow From Operations - a company's net cash flow resulting directly from its regular
operations.
Collateral - assets which can be repossessed in the event of default on a loan.
Commitment Fee - a fee paid to a financial institution in return for its commitment to lend
funds that have not yet been advanced.
Compensating Balance - excess balances left in a bank account to provide indirect
compensation for loans or services.
Compound Interest - Interest paid on previously earned interest as well as on the principal.
Consolidation - the joining of two or more companies to form a new company.
Corporation - a legal entity which is separate and distinct from its owners, and can own
assets, incur liabilities, and issue stock.

Coverage Ratio - a formula used to assess the adequacy of cash flow generated through
earnings for the purposes of meeting debt and lease obligations.
Current Assets - assets that could be converted to cash in less than a year.
Current Liabilities - salaries, interest, accounts payable and other debts due within one
year.
Current Ratio - a measure of debt paying ability, current assets divided by current
liabilities.
Depreciation - the charge to amortize the cost of long-term assets over the useful life of the
assets.
Discounting - calculating the present value of a future amount.
E.B.I.T. - Earnings Before Interest and Taxes.
E.B.I.T.D.A. - Earnings Before Interest, Taxes, Depreciation and Amortization.
EDGAR - Electronic Data Gathering and Exchange accesses S.E.C filings to investors.
Equity Kicker - warrants issued in conjunction with privately placed debt.
General Partner - a partner who has unlimited liability for the obligation of a partnership.
General Partnership - a partnership in which all partners are general partners.
I.P.O. - Initial Public Offering. A company's first sale of stock to the public.
Insolvency Risk - the risk that a company will not be able to satisfy its debts.
Insolvent - a firm whose liabilities are greater than its debts.
Intangible asset - goodwill, intellectual property, patents, copyrights, trademarks, etc.
Interest - the price paid for borrowing money.
Liquid Asset - an asset that is easily converted into cash.
L.I.B.O.R - the London Interbank Offered Rate of interest that international banks in
London charge each other for borrowing money.
Long-Term Debt - a debt with a maturity of more than one year.
Management Buyout - a leveraged buyout in which the acquiring group is led by the
company' s management.
Management Fee - the fee charged by the management company to an investment fund
based on the fund's average assets.
Merger - the combination of two companies.
Net Worth / Stockholders' Equity - includes common stock, surplus and retained earnings.
Offering Memorandum - a document that outlines the terms of securities to be offered in a
private placement.
Operating Cash Flow - earnings before depreciation minus taxes.
Perquisites - personal benefits such as a company car, expense account, office decor, etc.
Present Value - the current value of cash to be received in the future.
Prime Rate - the interest rate at which banks lend money to their best customers.
Principal - the total amount of a loan.
Private Placement - the sale of a bond or security directly to a limited number of investors.
Pro Forma Financial Statements - financial statements which have been adjusted to reflect
future events.
Quick Ratio - a calculation of a company's financial strength and liquidity - determined by
subtracting inventories from total current assets and dividing by current liabilities.
Replacement Cost - the cost of replacing a company's assets.
Reserve - an accounting entry that properly reflects contingent liabilities.
Restrictive Covenant - an agreement placing constraints on the operations of a borrower.
Retained Earnings - earnings retained by a company for reinvestment in its operations
rather than paid out as of dividends.
Return on Assets (R.O.A.) - an indicator of profitability, determined by dividing net income
by total average assets.
Return on Equity (R.O.E.) - indicator of profitability, calculated by dividing net income by
average common stockholder equity.
Secured Debt - debt which is covered by specific assets in the event of a default.
Senior Debt - debt which has a priority claim on the assets of a company.
Subordinated Debt - a debt whose holders have a claim on the company's assets only after
senior debtholders claims have been satisfied.
Target Firm - a company which is has been identified as a candidate for acquisition by
another company.
Term Loan - a bank loan for a specified amount with repayment schedule, often at a floating
interest rate and a maturation date from one and ten years.
Unsecured Debt - debt which is not covered by specific assets in the event of a default.
Warrant - a security entitling the holder to buy a proportionate amount of stock at some
specified future date at a specified price.
Yield - the percentage rate of return paid on an investment.
Zero Coupon Bond - a bond in which the principal and interest are paid at the maturity date
rather than in increments over the life of the contract.
FINANCIAL TERMS
Accounts Payable
Amounts owed by the business for purchases made on credit. These amounts are
paid by the business after a time lag that is measured by Days Payable Outstanding
(DPO).
Accounts Receivable
Amounts due to the business from customers for merchandise or services purchased
on credit. The business does not receive payment for these amounts immediately,
and the delay before payment is measured by Days Sales Outstanding (DSO).
Accrued Expenses
Expenses that the business has incurred for which it has not received, or will not
receive, an invoice, and that have not yet been paid.
Accumulated
Depreciation
The total amount of depreciation expense recorded to date for the company's fixed
assets. On the balance sheet, this value is subtracted from the gross value of
Property, Plant and Equipment to derive a net figure.

Acid Test Ratio
See quick ratio.
Acquisition Cost
The amount actually paid to purchase an asset. This includes all costs associated
with the purchase, such as installation, freight, and sales tax.
Actuals
Financial statements describing the actual operations of the business. Actuals often
pertain to the "historical" period before the start of the forecast period, but as time
goes on, additional imported Actuals will generally overlap with the forecast.
Additional Paid-in
Capital
The amount paid by investors for stock over and above its par value. See also
contributed capital.
After Tax Income
Another term for net income.
Amortization
The recognition of part of an intangible asset's cost as an expense during each year
of its useful life. Items that are amortized include goodwill, start-up expenses and
purchased patents.
Asset
Anything that has future economic value. In addition to items such as cash and
equipment, assets can include intangibles such as goodwill.
Average Annual Return
The expected annual return on an investment, including interest and dividends,

expressed as a percentage.
Average Cost
A method of inventory valuation whereby the total cost of all units bought or
produced is divided by the number of units.
Bad Debt Expense
Losses for uncollectible accounts receivable.
Balance Sheet
A financial statement that lists the assets, liabilities, and equity of a company at a
certain point in time.
Benefits
The total amount of indirect compensation that the business will provide to
employees for each forecast year. Benefits are either statutory, such as payroll taxes
and worker's compensation; or discretionary, such as health insurance, life
insurance, and 401(K) plans.

Book Value
The value of an asset for accounting purposes. For assets where depreciation is
taken or reserves booked, this is often expressed as a net book value. The book
value of a company is the excess of assets over liabilities, which is equivalent to
total owner's equity.
Breakeven Analysis
An analysis tool that models how revenue, expenses, and profit vary with changes in
sales volume. Breakeven analysis estimates the sales volume needed to cover fixed
and variable expenses.
Breakeven Point
The sales level at which revenues equal expenses (fixed and variable).
Budgeting
The process of determining and recording the expected financial results of a future
period, generally the next fiscal year. In some organizations budgeting is limited to
financial items that are shown on the income statement, while in others the
budgeting process produces the three major statements (Income Statement, Balance
Sheet, and Cash Flow Statement). After the target time period begins, the budgeting
process frequently includes tracking actual financial figures against the forecast as
well. There is considerable overlap between the activities of budgeting and
forecasting. Budgeting usually involves a more detailed account structure and a
finer time scale than forecasting, which typically covers between three and seven
years of higher-level projections.
Capital Lease
A long-term lease of property, plant, or equipment in which the lessee acquires

essentially all the risks and benefits associated with the ownership of the leased
item. Because it most closely resembles the financing of an asset purchase, a capital
lease is treated as a long-term debt rather than as a rental.
Cash & Equivalents
Cash plus investments of very high liquidity and safety, such as money market
funds and treasury bills. See also minimum cash balance.
Cash Flow Statement
A financial report that expresses a company's performance in terms of cash

generated and used.
Chart of Accounts
In an accounting system, the list of accounts to which transactions are posted.
Common-Sized
A term used to refer to a financial statement in which all items are expressed as
percentages of another item in the statement. For example, a common-sized balance
sheet might show all values as a percentage of total assets.

Common Stock
Equivalents
Convertible preferred stock plus convertible bonds, stock options, and warrants.
Contra Accounts
Accounts, such as Accumulated Depreciation, that offset a related account, usually

an asset. The contra account is subtracted from the related account to arrive at the
net book value.
Contributed Capital
The total amount paid to the business for its common and preferred stock.
Contribution Margin
The difference between revenue and the associated variable costs. This is an
important concept in breakeven analysis.
Cost
Another term for expenditure. See also expenses.
Cost of Goods Sold
Another term for cost of sales.
Cost of Sales/Services
(COS)
All the costs associated with the goods or services that were sold during a specified
accounting period, including materials, labor, and overhead.
Covenants
A set of conditions agreed to in a formal debt agreement and designed to protect the
lender's interests. Covenants may include restrictions on debt/equity ratio, working
capital, or dividend payments. See also management goals.
Current Assets
Assets that are convertible to cash within one year in the normal course of business.
This usually includes cash, accounts receivable, inventory, and prepaid expenses.
See also non-current assets.
Current Liabilities
Obligations that will come due within a year from the current date. These usually
include accounts payable, accrued expenses, and the portion of long-term
obligations due within one year. See also non-current liabilities.
Current Ratio
Current assets divided by current liabilities. This ratio is a measure of a company's

ability to meet its financial obligations in a timely manner.
Days Payable
The number of days a business takes to pay its accounts payable, on average.
Outstanding (DPO)
Days Sales Outstanding
(DSO)
The number of days a business takes to collect on its accounts receivable, on

average.
Debt
A form of liability that represents money borrowed from banks or other institutions.
Debt to Equity Ratio
The ratio of total debt to owners' equity, used as a measure of leverage and ability to
repay obligations.
Debt to Tangible Equity

Ratio
The ratio of total debt to tangible equity, used as a measure of leverage and
solvency. Typical values for this ratio vary from one industry to another. Lower
values for the ratio represent a better financial condition.
Deferred Revenue
A liability that arises when a customer pays for goods or services before delivery is
complete; for example, a one-year service contract billed in advance. Under accrual
accounting, revenue must be booked when the obligation is fulfilled, not when cash
is paid or received.
Department
An entity defined for reporting purposes.
Depreciation
The recognition of part of an asset's cost as an expense during each year of its useful
life. There are several acceptable methods for calculating this expense, including
straight-line depreciation and various accelerated methods. See also doubledeclining balance, straight-line method, and sum of the years' digits.
Direct Costs
Expenses, such as labor, overhead, and materials, that vary in direct proportion to
units produced or services rendered.
Direct Labor
Wages paid for activities directly related to production of units sold or services
delivered, considered part of cost of sales. This does not include management and
administrative salaries, which are treated as operating expenses or overhead. Also
referred to simply as labor.
Double Declining Balance

(DDB)
A method of recording accelerated depreciation. Also called the 200 percent

declining balance method, this system applies twice the annual straight-line rate to
the undepreciated balance of the asset's depreciable cost each year of the asset's
useful life. For example, if the asset has a depreciable value of $1,000,000 and a
useful life of five years, the double-declining balance method would record
$400,000 of depreciation the first year, $240,000 the second year, $131,429 the third
year, $114,286 the fourth year, and $114,285 the fifth year. See also straight-line
method and sum of the years' digits.
DPO
See days payable outstanding.
DSO
See days sales outstanding.
Earnings Before Interest

and Taxes (EBIT)
Net income before income tax expense and interest expense. This is a popular
measure for comparing the earning power of companies, because it eliminates the
impact of capital structure and effective tax rates, two non-operating factors.
Earnings Per Share

(EPS)
Net income divided by the number of outstanding shares of common stock and
equivalents.
EBIT
See earnings before interest and taxes.
EBIT/DA
See earnings before interest, taxes, depreciation, and amortization.
Economic Indicators
Technical measures that analysts use to forecast events in economic systems; for
example, Gross Domestic Product and Consumer Price Index.
Economic Profit
A general term for various technical measures of profit in which adjustments are
made to the traditional accounting definition of Net Income. Such adjustments are
typically made in order to better estimate the future value of a business.
Equity
Also known as net worth or owners' equity. Equity is the net value of a company's
total assets, less its total liabilities.
Expenditures
All purchases made by a business, whether in cash or on credit; not equivalent to

expenses. Also known as costs.
Expenses
Resources used to support the ongoing operations of a business for a specified time
period; not equivalent to expenditures or costs.
FIFO
See first in, first out.
Finished Goods
Inventory ready for sale.
First In, First Out (FIFO)
A method of inventory valuation whereby the goods first purchased or manufactured

are considered the first ones sold. During periods of inflation, the FIFO method
shows inflated profits compared to the last in, first out (LIFO) method.
Fiscal Year
The 12-month period, not necessarily coinciding with the calendar year, chosen to
constitute a single year for external financial reporting and taxes.
Fiscal Year End
The last month of a company's fiscal year.
Fixed Assets
Another term for Property, Plant and Equipment. See also depreciation.
Fixed Assets to Tangible

Equity Ratio
The ratio of net Property, Plant and Equipment book value to tangible equity, used
as a type of efficiency ratio. Typical values for this ratio vary from one industry to
another. Higher values for the ratio represent a more capital-intensive company,
which may be good or bad depending on the industry and how well the assets are
being used to generate revenues.
Fixed Costs
Expenses that are assumed not to vary with sales volume within the expected range
of sales volumes, such as rent or administrative costs. This is an important concept
in breakeven analysis and in distinguishing between gross margin and contribution
margin. See also variable costs.
Forecast Period
The period of time for which a business is modeled. Depending on the forecast start
month, the first year of the forecast period may not be a complete forecast year. See
also Forecast Year.
Forecast Start Date
The month and year on which the forecast period begins. See also Forecast Year.
Forecast Year
Most people choose the forecast year to coincide with either the January-December
calendar year or the fiscal year of the business, but this is not a requirement.
Depending on the forecast start month, the first year of the forecast period may
cover less than 12 months. In this case, assumption values that are entered for the
first forecast year should represent the correct fraction of the 12-month totals.
Forecasting
Financial forecasting is the process of estimating future financial performance. The

projected financial performance of a business is measured by using pro-forma
financial statements as well as other indicators such as trend analysis, ratio analysis,
and return on equity. Forecasting often takes a higher-level viewpoint than the
related activity of budgeting. In broader terms, forecasting can also refer to
estimates of broad economic activity in a country, industry, or financial area. For
instance, analysts and economists release forecasts of where interest rates or stock
market prices might go in the future.
GAAP
An acronym for Generally Accepted Accounting Principles. Accountants follow

GAAP standards, conventions, and rules in recording and summarizing financial
transactions, and in preparing financial statements. GAAP standards are issued by
the American Institute of Certified Public Accountants.
Goodwill
The accounting term for amounts paid for assets over and above their fair market
value. Goodwill arises, for example, when a company purchases another business
and pays a price higher than the value of the acquired assets alone. Goodwill
theoretically represents the value of the business's name, reputation, and customer
relations, which increase the true value of the business beyond the value of its assets
alone.
Gross Margin
Net Sales less cost of sales (including both fixed and variable costs), often expressed
as a percentage of sales. Also referred to as gross profit.
Gross Sales
The total of amounts received (sales for cash) and amounts expected (sales on
credit) in return for products sold or services rendered during the given time period.
Gross sales reflects sales at invoice values, before sales discounts and credit card
fees.
Income
Income Statement
A financial report that shows a company's performance over a specified period of

time by subtracting expenses from revenue to obtain net income. Also known as a
profit and loss statement (P&L) or an earnings report.
Income Tax Expense
Levies on the income of a business imposed by federal and state governments. This
expense appears on the income statement simply as Taxes.
Intangible Asset
A long-term asset that represents a financial, legal, or accounting concept rather

than a physical item. Examples of intangible assets include: Goodwill , the value of
a patent, copyright, or trademark, the value of a franchise or operating rights. Under
accounting rules, an intangible asset must have a useful life greater than one year,
and a portion of its value must be amortized over time as an expense. Near the end
of the useful life of an intangible asset, when its remaining life is less than one year,
the asset must still be classified as a long-term asset. See also tangible asset.
Interest Basis
The interest rate, such as prime or LIBOR, that is used as a reference point for
quoting borrowing rates. For example, using the prime rate as the interest basis, a
loan might be offered at prime plus one percent. See also Prime Rate and London
Interbank Offered Rate.
Interest Expense
Money paid by a business in exchange for the use of capital for a specified time
period. On the income statement, "Interest Expense (Income)" is a single account
that is the net amount of interest income and interest expense.
Interest Income
Money received by a business in exchange for the use of capital for a specified time
period. On the income statement, "Interest Expense (Income)" is a single account
that is the net amount of interest income and interest expense.
Interest Rate
The cost of borrowing money, expressed as a percentage per period of time, usually
one year.
Inventory
Goods purchased or manufactured by a business and held for production or sale.

Inventory is often subdivided into raw materials, work in progress, and finished
goods. See also Inventory Targets.
Inventory Targets
The numbers of months of inventory that the user requires to be in stock at a given
point in time. For Raw Materials, this amount represents the number of months of
future production. For Finished Goods, the amount represents the number of months
of future sales.
Inventory Turns
The ratio of annual cost of sales to inventory, commonly used as a rough measure of
inventory management efficiency. Also known as inventory turnover ratio or simply
turns.
Investment
The expenditure of cash to create additional capital. Investment can be in incomeproducing vehicles such as stocks and bonds, or more risk-oriented ventures such as
the purchase of another company.
Labor
Another term for direct labor. See also salaries and benefits.
Last In, First Out (LIFO)
A method of inventory valuation whereby the goods most recently purchased or

manufactured are considered the first ones sold. In periods of rising prices, the LIFO
method shows a lower profit than the first in, first out (FIFO) method.
Lease
A long-term contract granting use of real estate, equipment or other fixed assets in
exchange for payment. All leases entered in the Property, Plant and Equipment
Detail are considered capital leases; operating leases should be entered as expenses
in the Expenses Detail. See also mortgage.
Leverage
The relationship between debt and equity. A company is considered highly

leveraged if its levels of debt are high compared to its equity.
Liabilities
Obligations used to fund the operations of a business, including bank loans,

accounts payable, and accrued expenses.
LIBOR
See London Interbank Offered Rate.
LIFO
See last in, first out.
Line of Credit
The amount of short-term credit available to a business from banks.
Liquidity
A company's ability to generate cash in a timely manner in order to meet its

obligations, often measured by the quick ratio or the current ratio.
London Interbank
Offered Rate (LIBOR)
The interest rate used among the most creditworthy international banks for large
loans in eurodollars. LIBOR is an important reference number, because loans to
businesses can be tied to it on a percentage basis. See also prime rate and interest
basis.
Long-Term Asset
Any asset that has an economic life greater than one year. Liquid items such as cash
are considered to be current or short-term assets. Under accounting rules, intangible
assets must always be classified as long-term assets, even if their remaining life is
less than one year.
Long-Term Borrowing
Liabilities that represent money borrowed from banks or other lenders to fund the
ongoing operations of a business and that will not come due within one year.
Management Goals
A set of conditions a business is striving to achieve. These may include
requirements for debt/equity ratio, working capital, or dividend payments. See also
covenants.
Market Value
The price at which an asset would pass from an informed and willing seller to an
informed and willing buyer, assuming that goodwill played no role in the
transaction.
Marketable Securities
Securities that can readily be converted into cash, including government securities,
bankers' acceptances, and commercial paper.
Materials
The physical inputs to manufacturing, treated as part of cost of sales. Also known as
raw materials.
Miscellaneous Current
Assets
An account for current assets that do not fall into the following categories: cash,
marketable securities, accounts receivable, other receivables, inventory, and prepaid
expenses.
Miscellaneous Current
Liabilities
An account for current liabilities that do not fall into any of the categories already
defined. Examples of predefined categories are accounts payable, accrued expenses,
and short-term notes payable.
Miscellaneous Expenses
An account for operating expenses that do not fall into any of the predefined
categories such as salaries, utilities, advertising, and depreciation.
Miscellaneous NonCurrent Assets
An account for assets not including current assets, property, plant and equipment,
intangibles, deposits, and loans made.
Miscellaneous NonCurrent Liabilities
An account for non-current liabilities not including long-term debt (mortgage debt,
lease debt, long-term borrowing, and shareholder loans) and deferred taxes.
Mortgage
A long-term debt instrument for the purchase of property by which the borrower
uses the property itself for collateral.
Net Book Value
The acquisition cost of an asset less any accumulated depreciation. See also book
value and contra accounts.
Net Cash Provided By

Operations
On a cash flow statement, net income plus non-cash transactions and the net amount
of changes in operating assets and liabilities.
Net Income
Total revenues minus total expenses, including taxes and depreciation, for a
specified time. Also known as profit, net profit, or net earnings.
Net Income Before Taxes
Total revenues minus total expenses except the income tax expense, for a specified
time. Also known as pretax income.
Net Operating Loss

(NOL)
The excess of business expenses over income in a given tax year.
Net Operating Loss

(NOL) Carryforward
The amount of Net Operating Losses accumulated over past tax years that is
available for offsetting taxable income in the current and future tax years.
Net Present Value (NPV)
A measure of a project's future value in current dollars. Future income and expenses
are summed and then discounted using a required rate of return to adjust for the time
value of money. Net present value is, theoretically, the best method for evaluating
projects.
Net Property, Plant and

Equipment
Gross property, plant and equipment minus accumulated depreciation. This number
represents that portion of PP&E acquisition cost that has not yet been recognized as
an expense. It is not the same as externally determined measures such as market
value.
Net Sales
Sales revenue less sales discounts and credit card fees.
Non-Current Assets
Assets that are not convertible to cash within one year in the normal course of
business. Property and Goodwill are examples of non-current assets. See also
current assets.
Non-Current Liabilities
Obligations that will not come due within one year of the current date. See also
current liabilities.
Non-Operating Expense
Expenses not related to the ongoing operations of a company; for example, interest
expense, one-time events, and taxes.
Non-Operating Income
Income not related to the ongoing operations of a company; for example, interest
income and sale of fixed assets.
Operating Expenses
All expenses related to the ongoing operations of a company, including research and
development, sales and marketing, and administrative expenses. Any costs directly
attributable to producing goods or services are not included. See also cost of sales.
Operating Income
Sales revenue minus cost of sales and operating expenses. Similar to earnings before
interest and taxes, operating income is examined when the earnings of the core
business are analyzed. Also referred to as operating profit, operating earnings, and
income from operations.
Operating Lease
A type of lease, normally involving equipment, classified as a rental not as a

purchase over time. An operating lease must be shown as an expense in the
Expenses Detail, unlike a capital lease, which is treated as a long-term debt.
Operating Profit
Another term for operating income.
Other Assets
Assets exclusive of current assets and property, plant and equipment. Other assets
can include intangibles, deposits, loans made, and miscellaneous non-current assets.
Other Expenses
Expenses due to activities outside the normal operations of the business, for
example, loss from foreign exchange and loss from investments.
Other Income
Income due to activities outside the normal operations of the business, for example,
dividends from investments and gain from foreign exchange.
Other Liabilities
Liabilities other than debt, line of credit, and accounts payable, for example,
deferred taxes, accrued expenses, and customer deposits.
Overhead
Expenses incurred in operating a business, such as rent, executive salaries, and

insurance, that are not directly related to the manufacture of a product or delivery of
a service. A portion of overhead can be attributed to cost of sales, usually on a
percentage basis; the remainder is considered an operating expense.
Owners' Equity
Another term for equity.
Par Value
The stated value of a share of stock. Par is usually a minimal value (such as $.01)
and bears no relation to the market value of the shares. See also contributed capital.
Payables
Another term for accounts payable.
Payroll
The total wages, not including benefits, paid by a business during each forecast
year.
Period Expenses
A term for expenses recorded in the period in which they occur regardless of
whether or not they pertain to a prior or later period. R&D and advertising
expenditures are examples of costs that benefit future periods but must be treated as
period expenses according to Generally Accepted Accounting Principles (GAAP).
Periodicity
The level of detail in terms of time at which data is forecast or reported, specified as
months, quarters, or years.
Periods
Discrete intervals of time. The word period generally refers either to the interval of
the entire forecast (as in forecast period) or the granularity of data in financial
statements (as in periodicity).
Plan Period
Another term for Forecast Period.
PP&E
See Property, Plant & Equipment.
Precision
The scale at which forecast numbers are displayed. Choices include dollars,
hundreds, thousands, and millions.
Prepaid Expenses
Services, goods, and intangibles paid for prior to the period in which they provide
benefit. Prepaid expenses are accounted for as assets until their benefit is realized.
Price List
A schedule that associates prices with individual products. This list allows you to
forecast sales in units and still create projections in dollars. See also Discount List.
Price/Earnings Ratio (PE)
The market value of a company's stock divided by net income.
Prime Rate
The interest rate that banks charge to their most creditworthy customers. The prime
rate is an important reference number, because loans to companies are often tied to
it on a percentage basis. See also London Interbank Offered Rate and interest basis.
Pro-Forma Financial
Statements
A set of financial statements and other schedules that show projected results for a
future period. They are called pro-forma financial statements because they have the
form of financial statements, but are not prepared from actual operating results. The
three major financial statements are the Income Statement, Balance Sheet, and Cash
Flow Statement. For external reporting, these statements must conform to Generally
Accepted Accounting Principles (GAAP).
Profit
Profit & Loss Statement

(P&L)
Another term for the income statement.
Prompt Payment
Discounts
Discounts that a business gives to credit customers who pay within a specified
period of time; also called sales discounts. On an income statement, this amount is
subtracted from Gross Sales to yield Net Sales.
Property, Plant and

Equipment (PP&E)
Assets used in the operations of a business that have a useful life greater than one
year, including land, buildings, machinery, equipment, and furniture. Also known as
fixed assets. See also depreciation.
Purchases of PP&E
The acquisition cost of new property, plant and equipment assets in a given year,
minus the proceeds from the sale of existing PP&E. See also depreciation.
Quick Ratio
Current assets, excluding inventory and prepaid expenses, divided by current

liabilities. Also known as the acid test ratio. Like the current ratio, the quick ratio is
used as a measure of a company's liquidity. It helps estimate a company's ability to
meet its current obligations using assets that can easily be converted into cash.
Although typical ratios vary from one industry and company size to another,
financial authorities recommend that the Quick Ratio should be 1.0 or greater.
Ratio
A comparison of financial statement elements in the form of a quotient. Ratios such

as the price/earnings ratio, return on assets, and quick ratio are often used for
analyzing financial statements.
Raw Materials
Another term for materials.
Receivables
Another term for accounts receivable.
Retained Earnings
Net profits kept within a business in the Owners' Equity account after stock
dividends are paid.
Retired Liabilities
Debt paid off within a given period of the forecast.
Retirement of LongTerm Debt
The repayment of a non-current liability.
Return on Assets (ROA)
Net income for a time period divided by total assets. This ratio is often used to
measure profitability or the efficiency with which assets are being employed. Higher
values for this ratio indicate better financial performance. The specific value
obtained for a business should be evaluated in relation to the returns that can be
obtained from alternative investments of capital.
Return on Tangible
Equity
Net income for a time period divided by tangible equity. This ratio is sometimes
used to measure profitability or the efficiency with which the owners' financial
investments are being employed. The value of intangible assets such as goodwill is
excluded from this ratio in order to better reflect actual operating profitability.
Higher values for this ratio indicate better financial performance. The specific value
obtained for a business should be evaluated in relation to the returns that can be
obtained from alternative investments of capital. An alternate form of this ratio can
also be computed using pre-tax income instead of net income.
Return on Equity (ROE)
Net income divided by equity. This ratio is often used as a measure of the return on
funds invested in a business.
Revenue
The total income received in exchange for goods or services during a specific
accounting period. Revenue can be recorded using either the cash basis (as
received), or the accrual basis (as earned). Also referred to as sales or sales revenue.
Salaries
Compensation provided by a business to employees, excluding benefits. On an

income statement, Salaries refers only to that portion of compensation (such as
administrative and management costs) that does not vary in direct proportion to
sales. See also labor.
Sales
Another term for revenue.
Salvage Value
The scrap value of an asset. Acquisition cost minus salvage value yields the total
amount that an asset is depreciated over its useful life.
Shareholder Equity
Short-Term Borrowing
Liabilities that represent money borrowed from banks or other institutions to fund
the ongoing operations of a business that will come due within one year.
SIC code
The four-digit code prescribed by the Standard Industrial Classification System to

categorize businesses according to the types of activities they perform.
Solvency
A company's ability to satisfy its obligations to creditors when they are due. A
company is "technically insolvent" if it has enough assets to pay creditors, but
cannot liquidate them quickly enough to meet payment deadlines.
Standard Costs
A target or average cost that can be used either to value inventory or as a basis of
comparison with actual costs. Standard costs can often be used to calculate cost of
sales, in which case standard cost refers to the average amount of materials, direct
labor and overhead required to produce a single product or service unit.
Standard Costs Plus

Variances
The method of calculating cost of sales that compares the amounts of materials,
direct labor and overhead projected in the Cost of Sales assumption (the standard
costs) to expenses allocated to the Production department in the Expenses, Property,
Plant and Equipment, Payroll and Benefits, and Other Assets assumptions (the
variances).
Statement of Cash Flows
Another term for cash flow statement.
Stockholders' Equity
Straight-Line Method
The simplest form of depreciation, in which an equal expense is recorded in each

year of an asset's useful life. For example, if the asset has a purchase price of
$1,200,000, a useful life of four years and a salvage value of $200,000, straight-line
depreciation would record $250,000 of depreciation each year. See also sum of the
years' digits and double-declining balance.
Sum of the Years' Digits

(SYD)
A method of recording accelerated depreciation. Also called the sum-of-digits

method, it allows the depreciation of an asset based on an inverted scale of the total
digits of the asset's useful life. For example, if the useful life is four years, the years'
digits (1, 2, 3, and 4) are summed to produce ten, and 4/10ths of the asset's
depreciable cost is recognized as an expense the first year, 3/10ths the second year,
and so on. See also straight-line method and double-declining balance.
Tangible Asset
An asset that represents a physical object such as land, furniture, and buildings.
Under accounting rules, a tangible asset must have a useful life greater than one
year, and must be used in business operations rather than being held for resale. The
following types of assets are not considered to be tangible assets: items held for
resale, which are considered to be inventory, cash and other liquid assets which are
considered as current assets, and abstract assets such as goodwill, which are
intangible assets. See also tangible equity.
Tangible Equity
Equity less intangible assets. See the ratios of debt to tangible equity, fixed assets to
tangible equity, and return on tangible equity.
Taxes
Levies on the annual income of a business imposed by federal and state

governments. On the income statement, this figure does not include property taxes,
which are considered an operating expense.
Treasury Stock
Stock that has been reacquired by the company that issued it and is available for
retirement or resale. Also called reacquired stock and treasury shares.
Turns
Another term for inventory turns.
Typical Collection
Pattern
A method used to calculate accounts receivable. This allows you to break down
receivables into categories that indicate what percentage of the total is paid within
specified lengths of time from the sales date. See also days sales outstanding.
Typical Payment Pattern
A method used to calculate accounts payable. It allows the user to break down
payables into categories that indicate what percentage of the total is paid within
specified lengths of time from the purchase date. See also days payable outstanding.
Useful Life
An estimate of the period of time over which an asset will be of use to a company.
Along with acquisition cost and salvage value, this measure is used to calculate the
amount that the asset is depreciated each year.
Variable Costs
Expenditures that change in proportion to increases or decreases in sales or

production volumes. See also fixed costs.
Variance
The difference between actual and targeted numbers for revenues, expenditures, or
productivity. Variances are usually described as either favorable or unfavorable. See
also standard costs.
Working Capital
The net amount of current assets and current liabilities. This is equivalent to a
company's liquid assets.
Z-Score
A bankruptcy predictor based on the formula derived by Dr. Edward Altman.

According to the Altman model, a Z-Score of 3.0 or higher indicates that the
company is most likely safe based on the financial data; a score below 1.8 means
that the firm is probably headed for bankruptcy. In studies, the Z-Score has been
shown to have 90% accuracy of prediction of bankruptcy in the first year of the
forecast, and 80% accuracy in the second year.
SHARE MARKET GLOSSARY

1. AGM
Annual General Meeting is the annual meeting held for shareholders. If you are holding the share of a company,
you should be getting a notice about the AGM. As a share holder you will also receive a copy of the annual report
of the company.
2.AMC
Asset Management Company used in context with Mutual Funds.
3.AMFI
Association of Mutual Funds of India.
4.BOLT
BSE on-line trading system.
5.BSE
Bombay Stock Exchange.
6.Bearish and Bullish
Terms used to indicate the mood of the market, if the sensex zooms it is referred as Bullish Market.
7.Book Closure
Book closure is defined as the period during which a company stops the transfers of shares from one person to
another person and makes a note of all the share holders in their register to enable the share holders for rights issue or
bonus issue etc., Instead of a period, if it is done on a single day it is known as record date.
8.Bid Price
The price at which shares may be bought in the secondary market.
9.Bonus issue
A bonus issue is the issue of free shares to existing shareholders as per the record available with the company. After
the issue of the bonus shares, the value of the share is reduced to the extent of the bonus declared. The face value of the
share remains the same. Bonus shares at the ratio of 1:1 means, one share will be given free for every one share held by
the investor.
10.Broker
Stockbroker - As per Indian law, stockbroker is a member of a recognized stock exchange.
11.Sub-brokers
Stock brokers were allowed to have sub-brokers to assist their clients in investing. However due to evolution of
internet based online trading, internet has eliminated the need for sub-brokers.
12.CRR
Cash Reserve Ratio.
13.DEMAT
Short form Dematerialization of the process of conversion of physical stock document into
an electronic document.
14.Digital Contracts
Same as Demat. The shares are held in electronic records.
15.Dividend
Out of the company's earnings some part of cash may be paid to the share holders of the
company, this may be an
interim
dividend
or
a
final dividend.
16.Dividend Yield
The dividend paid on a share expressed as a percentage of its market price.
17.Earnings
The profit after tax of the company is indicated as earnings.
18.Earnings
Per
Share
It is a value indicating the profit after tax divided by the weighted average number of shares
in issue.
19.EBIT (Earnings
before Interest
&
Tax)
EBIT is the profit or earnings of a company, before taking into account interest, tax and
dividends. EBIT is often known as operating profit or PBIT (profit before interest and tax).
20.EGM
Extraordinary General
Meeting.
21.Equity
The equity in a company is the capital put in by the shareholders plus the profits retained in
the business on their behalf. Alternatively, equity can be regarded as the assets minus the
liabilities i.e. what is left after the assets have been used to repay the liabilities. The term is
also used to refer to shares.
22.Ex-dividend
It is an opposite term of cum-dividend, that means the buyer will not have the rights on the
bonus or dividend.
The seller retains the
benefits.
23.F&O -
Futures
and
Options.
24.FCD -
Fully Convertible
25.FDI -
Foreign
Direct Investment.
26. FII -
Foreign
Institutional
Debenture.
Investors.
27.GDP -
Gross Domestic
Product.
28.GDR - Global Depository Receipt.

29.Initial
Public Offering
Initial Public Offering or IPO is when shares in a company are offered to outside investors for
the first time and simultaneously the company arranges to have its shares listed on a
recognized stock exchange. This is also known as flotation.
30.Institutional
investor
Large financial institutions such as pension funds, unit or investment trusts and insurance
companies.
31.Interim
results
Unaudited first half figures that provide an indication of the company's trading and profit
performance since the last full year accounting period. These figures are reviewed by the
Auditors.
32.IPO
The IPO or Initial Public Offering is when shares in a company are offered to outside
investors for the first time and simultaneously the company arranges to have its shares listed
on a recognized stock exchange. This is also known as flotation.
33.Liquidity
It is referred as the average number of a company's shares available to be freely traded on the
share market.
34.Listed company
A listed company is one whose shares are listed on a stock exchange.

35.Margin money
Minimum money required to buy shares during intraday or futures contract.
36.Market Capitalisation
The market capitalisation or shortly known as the market cap of a company is the current
share price multiplied by the number of shares in issue.
37.MF - Mutual Fund. Please refer Mutual Fund page in this website for more details.
38.NSDL - National Securities Depository Limited.
39.NSE - National Stock Exchange.
40.Offer Price
The price at which shares may be sold in the Market. The offer price varies as per the demand
in the market.
41.Open interest
Open interest is defined as the total number of futures contracts or option contracts that have
not yet been exercised, expired, or fulfilled by delivery. If the open interest crosses 95% of
the market-wide position ( the number of shares available in the cash market ) then stock
exchange system will impose a ban on fresh positions in F & O segment.
42.Operating margin
Operating profit as a percentage of the company's turnover or sales.
43.Operating Profit
Operating profit is the profit that the company makes, before taking into account interest, tax
and dividends. Operating profit is also known as EBIT (earnings before interest and tax) or
PBIT (profit before interest and tax).
44.Option
An option gives the holder the right, but not the obligation, to buy or sell a specified amount
of an asset, probably ordinary shares, at a specified price within a specific time period.
45.PAN - Permanent Account Number.

46.PCD - Partly Convertible Debenture.
47.PBIT
PBIT is the profit that the company makes, before taking into account interest, tax and
dividends. PBIT is also known as operating profit and EBIT (earnings before interest and
tax).
48.P/E Ratio
The price/earnings ratio. Higher the P/E ratio indicates that every thing is moving well and
share holders are after this stock. P/E ratio serves as an indicator for the investor to make a
purchase decision.
49.P & L
The profit and loss account of the company.
50.P N ( Participatory Notes )
PNs are participatory notes or the financial instruments used by FIIs ( foreign investors ) that
are not registered with Security Exchange Board of India, to invest in Indian capital market.
FIIs and their sub-accounts buy Indian securities and then issue PNs to foreign investors with
these securities as the underlying.
51.Profit Before Tax
Profit before tax is the profit of a company after adding or deducting interest, but before
deduction of corporation tax.
52.Proxy
A person who is authorized by the share holder to attend the AGM etc., the proxy need not be
a share holder of the company.
53.Record date
The purpose of the record date is to finalize the list of the share holders of the company to
qualify them for a forthcoming bonus or dividend.
54.Registrar
The appointed agent of a company who keeps a register of shareholders .
55.Rights issue
Offer of shares to the existing shareholders of the company to increase the capital.
56.ROC - Registrar of Companies.
57.SEBI - Securities & Exchange Board of India
It is the Securities Exchange Board of India, it carries out regulatory functions pertaining to
the Capital Market. SEBI was setup by the Govt. of India in the year 1988.
58.Sensex
BSE Sensitive Index.
59.Shareholder
A shareholder is a person who holds shares in a company.
60.Shares
A share is issued to a shareholder in exchange for cash or assets. The shares can either be got
from primary market(IPO) or secondary market.
61.Stockbroker
The person, who buys and sells equities on a stock exchange on behalf of his clients.
67.Stock Exchange
A stock exchange is an organized market for shares to enable buying and selling.
68.Stock Split
Stocks are split to provide more liquidity in the market, shares are sub divided as per the split
ratio. The face value of the shares gets divided according to the stock split ratio.
69.Stop loss - A trigger price placed in the order form to minimize the unexpected loss.
70.T2T - Trade to AGM

Annual General Meeting is the annual meeting held for shareholders. If you are holding the
share of a company, you should be getting a notice about the AGM. As a share holder you
will also receive a copy of the annual report of the company.
Book Closure
Book closure is defined as the period during which a company stops the transfers of shares
from one person to another person and makes a note of all the share holders in their register
to enable the share holders for rights issue or bonus issue etc., Instead of a period, if it is done
on a single day it is known as record date.
Bid Price
Bonus issue
A bonus issue is the issue of free shares to existing shareholders as per the record available
with the company. After the issue of the bonus shares, the value of the share is reduced to the
extent of the bonus declared. The face value of the share remains the same. Bonus shares at
the ratio of 1:1 means, one share will be given free for every one share held by the investor.
Broker

Sub-brokers
Stock brokers were allowed to have sub-brokers to assist their clients in investing. However
due to evolution of internet based online trading, internet has eliminated the need for subbrokers.
Dividend
company, this may be an interim dividend or a final dividend.
DividendYield
Earnings
Earnings Per Share
in issue.
EBIT (Earnings before Interest & Tax)
Equity
also used
to
refer
to
shares.
Ex-dividend
bonus or dividend. The
seller retains the
benefits.
Initial Public Offering

recognized stock exchange. This is also known as
flotation.
Institutional investor
Large financial institutions such as pension funds, unit or investment trusts
and,insurance.companies.
Interim
results
Auditors.
IPO
Liquidity
share market.
Listed company
Margin money
Market Capitalisation
Offer Price
in the market.
Open interest
Operating margin
Operating Profit
Option
PBIT
tax).
P/E Ratio
purchase decision.
P N ( Participatory Notes )
Profit Before Tax
Proxy
Record date
Registrar
Rights issue
SEBI -
(Securities & Exchange Board
ofIndia)
Shareholder
Shares
Stockbroker
StockExchange
StockSplit
Stop loss
A trigger price placed in the order form to minimize the unexpected loss.
Share
share in which there are frequent and day-to-day dealings, as distinguished from partly active
shares in which dealings are not so frequent. Most shares of leading companies would be
active, particularly those which are sensitive to economic and political events and are,
therefore, subject to sudden price movements. Some market analysts would define active
shares as those which are bought and sold at least three times a week. Easy to buy or sell
Arbitrage :
Business of buying in one exchange and selling in another to take advantage of price
differences.
Auction :
A mechanism used by the Stock Exchange to fulfill its obligation to the buyer of a security. It
is done when the seller is unable to deliver the scrips sold by him. The security in question is
offered by a member who has ready possession of the scrips.
Bear :
An operator who expects the share price to fall
Bear Market :
A weak and falling market where buyers are absent
Blue Chips :
Shares of financially sound, well established companies with a track record of good growth
and regular payment of dividends.
Bonus Shares :
Shares allotted to the existing shareholders by capitalising the reserves into additional capital.
When market expects a company to come out with a Bonus Issue, the price of the shares
normally goes up.
Book Closure:
A company closes its register of members for updating the records to facilitate payment of
dividends or issue of rights of bonus shares. Book closure is the period during which this
process is done and deliveries are not affected in the clearing house.
Bourse :
A Stock Exchange
Bull :
An operator who expects the share price to rise and takes position in the market to sell at a
later date.
Bull Market :
A rising market where buyers far outnumber the sellers
Call Option :
An option where the buyer gets the right to buy the underlying security at a specified future
date.
Carry Forward :
Settlement where positions are carried forward from one settlement to another settlement.
Cash Settlement :
Payment for transactions done in one settlement on the due date.
Circuit Breaker :
A mechanism used to restrain the market when it gets overheated. The Exchange may relax
the limit after a cooling off period of about half an hour.
Clearing House :
It is a legal counter party to both legs of every trade. The netted purchase and sale positions
of the trading Members are settled through the Clearing House.
Company Objection :
In some cases, the companies send back the certificates received for transfer citing reasons
for their inability to do so. The letter sent by the Company is known as Company Objection.
Cum Bonus :
A share is described as cum bonus when the purchaser is entitled for current bonus
Cum Dividend :
A shares is described as cum dividend when the purchaser is entitled for current dividend
Cum Rights :
A share is described as cum rights when the purchaser is entitled for current rights
Day Order :
The quantity that remains untraded is not cancelled until the end of the day.
Dealer :
A Dealer is a user who works on behalf of the Trading Member
Delivery Based Trading :
When a share is bought or sold for the purpose of receiving or effecting deliveries.
Dematerialisation :
Process of converting a security from physical form to electronic form
Derivatives :
A financial contract between two or more parties and it is derived from the future value of an
underlying asset.
Disclosed Quantity :
An order entered in the system wherein only a fraction of the order quantity is disclosed to
the market.
Dividend :
Cash payment made to the shareholders out of the profits of the company
Ex Bonus :
A share is described as Ex Bonus when the buyer is not entitled for the Bonus. The seller
remains the beneficiary.
Ex Dividend :
A share is described as Ex Dividend when the buyer is not entitled for the Dividend. The
seller remains the beneficiary.
Ex Rights :
A share is described as Ex Rights when the buyer is not entitled for the Rights. The seller
Expiry Date :
The date and time after which a writer of an option cannot exercise his rights.
Exposure Limit :
The limit allowed to the Broker by the Exchange or to the customer by broker. It is the total
value upto which one is allowed to hold open positions at any point of time.
Futures Contract :
An agreement between parties for a specified asset for performance Hedging :
It is protecting an existing asset position from an adverse future position. A hedger takes an
equal and opposite position in the futures market to the one he holds in the equity market on a
fixed date in future.
Insider Trading :
Trading carried out by people who have access to non public price sensitive information.
Limit Order :
A buy or sell order where price is specified at the time of order entry
LoMargin :
An upfront payment made by the customer to take position in the market. His exposure limit
is fixed based on the margin money brought in by him.
Mark To Market :
A notional profit or loss of a long or short position as compared to the current market price.
Market Order :
An order where no price specification is mentioned at the time of placement
Offer :
The price at which a share is available in the market
Offer Price :
The price at which a company offers its shares to the public through issue of a prospectus
Order Cancellation :
A facility available in the trading system where one is allowed to cancel the order placed
earlier.
Order Modification :
A facility available in the trading system where one is allowed to modify an earlier order.
Pay In :
The designated day on which the members pay securities and funds to the clearing house
Pay Out :
The designated day on which the Clearing House effects payment and deliveries to the
members
Price Band :
It sets up the upper and lower limits for a share's movement on any given day. It is based on
the previous trading day's closing price. The system will not accept the orders that are out of
bound.
Price Rigging :
A process where persons collude to artificially increase or decrease the price of a security
Put Option :
An option where the buyer gets the right to sell the underlying security at a specified future
date
Quote :
Prices at which a share can be bought or sold
Record Date :
The date on which the beneficial owner of the Corporate Benefits is determined.
Rematerialisation :
Process of converting the shares from electronic form to physical form
Rights Issue :
Issue of new share to the existing shareholders at a price which is normally lower than the
current market price of the old shares. It is issued in a fixed ratio to the those shares which are
already held
AnnualYield
Also known as Dividend Yield. Annual yield represents the dividend return from an
investment. It is calculated by dividing the dividend per share by the share price, converted to
a percentage.
Yield = (Dividend per share / Last market price) x 100
Bollinger Bands
Charting method used to analyze and project a stock's price movement. A Bollinger Band
marks one standard deviation above the stock's moving price average, and another band
marks one standard deviation below this average. Investors use the amount of space between
the two bands to gauge the volatility of the market and to guide them in their investment
decisions. Developed by John Bollinger, these bands are among the indicators available
through our charts features.
Cash Settled Warrant
Cash settled warrants are settled by a cash payment by the warrant issuer to the warrant
holder, e.g. most index warrants. The cash payment will be calculated as determined by the
terms and conditions of the warrant. Some warrants may offer the choice to investors for cash
settlement or physical delivery (e.g. currency warrants).
Cash Settlement
The procedure by which index futures and index options contracts are settled. Because an
investor cannot directly buy or sell an index, index futures and option contracts are cash
settled by allocating a dollar amount to each index point.
Trade segmen AGM

Book Closure
Bid Price
Bonus issue
Broker
Sub-brokers
Dividend
DividendYield
Earnings
Earnings Per Share
in issue.
Equity
also used
to
refer
to
shares.
Ex-dividend
seller retains the
benefits.

flotation.
Interim
results
Auditors.
IPO
Liquidity
share market.
Listed company
Margin money
Offer Price
in the market.
Open interest
Operating margin
Operating Profit
Option
PBIT
tax).
P/E Ratio
purchase decision.
Profit Before Tax
Proxy
Record date
Registrar
Rights issue
SEBI -
ofIndia)
Shareholder
Shares
Stockbroker
StockExchange
StockSplit
Stop loss
Share
Arbitrage :
differences.
Auction :
Bear :
Bear Market :
Blue Chips :
Bonus Shares :
normally goes up.
Book Closure:
Bourse :
A Stock Exchange
Bull :
later date.
Bull Market :
Call Option :
date.
Carry Forward :
Cash Settlement :
Circuit Breaker :
Clearing House :
Company Objection :
Cum Bonus :
Cum Dividend :
Cum Rights :
Day Order :
Dealer :
Dematerialisation :
Derivatives :
underlying asset.
the market.
Dividend :
Ex Bonus :
Ex Dividend :
Ex Rights :
Expiry Date :
Exposure Limit :
Futures Contract :
Insider Trading :
Limit Order :
LoMargin :
Mark To Market :
Market Order :
Offer :
Offer Price :
earlier.
Pay In :
Pay Out :
members
Price Band :
bound.
Price Rigging :
Put Option :
date
Quote :
Record Date :
Rematerialisation :
Rights Issue :
already held
AnnualYield
a percentage.
Bollinger Bands

Cash Settlement
MUTUAL FUND-GLOSSARY
1. Active Management
Ongoing supervision of a portfolio and its holdings to achieve maximum results.
Active management is one of the main benefits of investing in a mutual fund.
2. Adjustable Rate Mortgage Funds (ARMs)
A fund that invests primarily in adjustable rate mortgage securities. Funds in this
category usually attempt to maintain a relatively stable net asset value, but can still be
volatile in times of rising or falling interest rates. During periods of rising interest
rates, investors stand to make more money, but homeowners faced with the prospect
of paying more tend to prepay, prematurely canceling the investor's expected income.
During periods of falling interest rates, the value of adjustable rate mortgages
decreases relative to other fixed income securities.
3. Adviser
The company that takes primary responsibility for managing a mutual fund. The
adviser receives an annual fee for this service, usually ranging between 0.50% and 1%
of a fund's total assets.
4. Aggressive Growth Funds

A fund with an investment objective of rapid growth of capital. Aggressive growth
funds usually include funds
that invest in smaller companies, funds that invest heavily in a single industry, and
funds that employ riskier investment techniques such as leveraging and short selling.
5. AMBAC Indemnity Corporation
One of the largest private insurers of municipal bonds. This insurance provides that
the bonds will be purchased from an investor at par value should the bond issuer
default. Municipal bond funds featuring insured bonds tend to provide a higher degree
of safety than funds without such insurance, but they also tend to offer a lower yield.
6. Annual and Semi-annual Reports
Reports issued twice a year to a fund's shareholders detailing the fund's performance,
portfolio holdings and current investment strategy.
7. Appreciation
An increase in a fund's value.
8. ARMs (Adjustable Rate Mortgage Funds)
ARMs are mortgages that require the real estate buyer to pay an interest rate that is
periodically adjusted. The amount of the rate is tied to some index outside the control
of the lender, such as the interest rate on U.S. Treasury bills. Like fixed-rate
mortgages, ARMs are often grouped by a government agency and sold as a single
security, with investors receiving payments out of the interest and principal on the
underlying mortgages. Funds that invest primarily in these ARM-backed securities are
called Adjustable Rate Mortgage Funds.
9. Asian Funds
A fund that invests primarily in the stocks of companies located in Asia. These funds
appeal to investors who believe that Asia potentially represents a growth area, and
want to capitalize on that growth.
10. Ask Price
Also known as the offering price, the ask price is the amount at which a mutual fund's
shares can be purchased. To calculate the ask price, add a fund's current net asset
value per share to its sales charge, if any.
11. Asset allocation fund
A fund that invests in a variety of asset classes, including domestic and foreign stocks
and bonds, money market instruments, precious metals, and real estate. Some asset
allocation funds maintain a relatively fixed allocation between asset classes, while
others actively alter the mix as market conditions change.
12. Asset-backed security
A debt instrument collateralized by credit card receivables, auto loans, or other assets
and securitized by a bank or other financial institution.
13. Assets
A fund's investment holdings and cash. Holdings can include stocks, rights, warrants,
options, bonds, CDs, RANs TANs and BANs.
14. Automatic Investment
A shareholder service that allows the periodic withdrawal of a specified amount from
the shareholder's bank account to be invested in his or her mutual fund account. Some
mutual fund groups also offer this service as a payroll deduction plan. (See also
"dollar cost averaging.")
15. Automatic Reinvestment
A shareholder service that authorizes dividend and capital gain distributions to
automatically purchase more fund shares. Taxes still must be paid on the amount
reinvested even though no funds are received directly by the investor.
16. Automatic Withdrawal
A shareholder service that entitles an investor to fixed payments, every month or
quarter. The payment comes from the dividends, income and/or realized capital gains
on securities held by the fund. This service is often chosen by retirees who want to
receive a regular income supplement.
17. Average Annual Total Return
A standard measurement of fund performance that includes dividends, gains, and
changes in share price.
18. Average Life
The weighted average maturity date of a portfolio of bonds.
19. Backdating
Backdating is used in relation to funds that offer declining proportional sales charges
of larger purchases. This permits investors to count previous purchases of the fund's
shares in qualifying for reduced loads or sales charges on subsequent purchases.
20. Back End Load
One of three possible sales charge schedules imposed by funds that charge fees. A
back end load, or "deferred sales charge," is a fee charged when fund's shares are sold.
The amount of the fee usually varies depending on how long the investment is held-generally the longer the time period, the smaller the fee. Funds sold under several
sales charge options usually refer to the shares sold with a back end load as class B
shares.
21. Balanced Fund
A fund with an investment objective of both long-term growth and income, through
investment in both stocks and bonds. Typically, the stock/bond ratio ranges around
60%/40%. This broader diversification across asset classes tends to further reduce
risk.
22. Balanced Target Maturity Funds

A fund with an investment objective of both long-term growth and income, through
investment in both stocks and bonds. Typically, the stock/bond ratio ranges around
60%/40%. This broader diversification across asset classes tends to further reduce
risk.
23. Barbell
A bond management strategy where the portfolio is invested primarily in short-term
and long-term bonds, but in few bonds with intermediate maturities. In theory, this
approach allows one portion of the portfolio to take advantage of high yields, while
the other portion tempers risk.
24. Basis Point (BP)
The smallest measure used in quoting yields on fixed income securities. One basis
point equals one percent of one percent, or 0.01%.
25. Benchmark Index
Indicators used to provide a point of reference for evaluating a fund's performance.
The most common benchmark for equity-oriented funds is the S&P 500 Index. For
fixed-income funds it is the Lehman Brothers Aggregate Bond Index.
26. Beta
A measure of a fund's risk, or volatility, compared to the market which is represented
as 1.0. A fund with a beta of 1.20 is 20% more volatile than the market, while a fund
with a beta of 0.80 would be 20% less volatile than the market.
27. Bid Price
Also known as the "sell" price, the bid price is the price at which a fund's shares are
bought back by the fund. The bid price of a fund share is usually its net asset value.
28. Bond Fund
A fund that invests primarily in bonds, whether they are issued by corporations,
municipalities, or the U.S. government and related agencies. Bond funds generally
emphasize income over growth, and can generate either taxable or tax-free income.
29. Bottom-Up
An investment strategy that first seeks individual companies with attractive
investment potential, then proceeds to consider the larger economic and industry
trends affecting those companies.
30. Breakpoint
Dollar levels of investment in a fund that qualify you for reduced sales charges. The
purchases may either be made in a lump sum or by accumulating shares.
31. Call Risk
The possibility that bonds will be re-paid (or "called") prior to maturity. This
possibility increases during periods of falling interest rates.
32. Capital Appreciation
The profit made on an investment, measured by the increase in a fund share's value
from the time of purchase to the time of sale.
33. Capital Appreciation Funds
A fund that invests primarily in common stocks the manager believes will provide
maximum capital appreciation. Capital appreciation funds often resort to aggressive
investment techniques, such as rapid portfolio turnover, leveraging, and investing in
unregistered securities in order to achieve their objectives.
34. Capital Gain Distributions
A distribution to shareholders of profits realized from the sale of securities in a fund's
portfolio. Capital gain distributions are usually paid yearly, and are currently taxable
at a rate up to 28%.
35. Capital Growth
Also called capital appreciation, capital growth is an investment objective of many
stock funds. Capital growth is achieved when the market values of a fund's holdings
increase, causing the fund's net asset value per share to increase.
36. CDSC (Contingent deferred sales charge)
A type of back end load sales charge, a contingent deferred sales charge is a fee
charged when shares are redeemed within a specific period following their purchase.
These charges are usually assessed on a sliding scale, with the fee reduced each year
the shares are held.
37. Certificate
A physical document representing the mutual fund shares owned. Certificates are
rarely issued, in the interest of economy and convenience. Shares are now recorded by
the Transfer Agent, or in a brokerage account (known as "street name.")
38. Classes of Shares
Various classes of a single portfolio are distinguished by the type of sales charge they
levy. In general: -- Class A shares carry a front-end load. -- Class B shares carry a
back-end load (also known as a contingent deferred sales charge). -- Class C shares
carry an ongoing charge (usually in the form of an annual 12b-1 charge).
39. Clone Fund

A fund launched to mirror a closed fund. For example, fund managers may decide to
close a fund that has grown so large it is no longer able to establish positions in
smaller securities. They could then launch a new fund in the closed fund's image.
While both funds would have the same investment objective, they would generally be
run by different managers and would invest in different securities.
40. Closed-End Fund
A fund that offers a limited number of shares. The shares of closed-end funds, which
are typically listed on one of the major stock exchanges, are bought and sold through
brokers. The price of the shares is determined by the pressures of supply and demand
rather than by the value of underlying assets.
41. Closed to New Investors
Occasionally a manager may declare a fund "closed to new investors" which means
that no new investments will be accepted. This is often a temporary designation,
prompted by a tremendous amount of money invested in the fund in a short period of
time. The portfolio manager may be concerned about finding enough appropriate
securities to add to the fund's portfolio.
42. Collateralized Mortgage Obligation (CMO)
A security collateralized with mortgages or mortgage-backed securities. Many CMOs
backed by a U.S. government agency are rated AAA. Non-agency CMOs may be
lower rated.
43. Commercial Paper
Debt instruments that are issued by established corporations to meet short term
financing needs. Such instruments are unsecured and have maturities ranging from 2
to 270 days. Commercial paper is rated by Standard & Poor's and Moody's Investor
Service.
44. Commission
A fee imposed when funds are bought or sold to compensate the broker for his or her
role in the transaction.
45. Common Stock Fund
A fund that invests primarily in common stocks. The investment objectives of
common stock funds may vary greatly.
46. Compounding
Interest earned on interest previously earned and reinvested. For example, if a security
paid a fixed interest rate of 10% annually and an investor invested $500, by the end of
the first year the investor would have earned $50 in interest. If that interest was
reinvested, the investor would enter the second year with $550 invested. At the end of
the second year, the investor would have earned $55 in interest -- earning an extra $5
in interest thanks to the reinvestment of the first year's interest.
47. Contingent Deferred Sales Charge (CDSC)
A type of back end load sales charge, a contingent deferred sales charge is a fee
charged when shares are redeemed within a specific period following their purchase.
These charges are usually assessed on a sliding scale, with the fee reduced each year
the shares are held.
48. Contractual Plan
A program in which a legal vehicle (plan company or participating unit investment
trust) agrees to invest a fixed amount in a fund at regular intervals for 10 or 15 years.
In exchange, investors in these plans commonly receive other benefits, such as
decreasing term life insurance.
49. Convertible Securities Funds
A fund that invests primarily in convertible bonds and/or convertible preferred stocks.
50. Convertible Security
Corporate securities (usually preferred shares or stock or bonds) that are exchangeable
for a set number of another form of security (usually common stock) at a prestated
price.
51. Corporate Bond Funds
A fund that invests primarily in corporate bonds. In general, corporate bond funds
seek income over capital growth.
52. Country Funds
A fund that invests primarily in the securities of a single country. In some cases,
country funds also invest in securities outside the single country if those securities are
expected to benefit by growth in that country.
53. Country Risk

The potential for price fluctuations in stocks sold in foreign countries due to events
(political, financial, etc.)
in these countries.
54. Credit Rating
A measure of a bond issuer's creditworthiness as rated by an independent agency,
such as Standard & Poor's or Moody's Investor Services. Ratings are set as a
reflection of the perceived financial stability of the issuer, from AAA to D. Bonds
rated Baa or higher by Moody's, or BBB or higher by S&P, are considered
"investment grade." Conservative investors tend to select funds composed of all AAA
rated bonds, or "investment grade" bonds. More aggressive investors, looking for high
yields, are more interested in funds that invest in lower rated bonds.
55. Credit Risk
The possibility that a bond issuer will default, failing to repay principal or interest as
promised. "Credit risk" is also known as "default risk."
56. Currency Risk
The potential for price fluctuations in the dollar value of international stocks due to
changing currency exchange rates.
57. Current Yield

Annual interest or dividend payments expressed as a percentage of a bond's current
price.
58. CUSIP (Committee on Uniform Securities Identification Procedures)
A standard nine-digit code used to identify securities.
59. Custodian
The organization (usually a bank) that keeps custody of securities and other assets of a
fund.
60. Deferred Sales Charge

A type of back end load sales charge, a deferred sales charge is a fee charged when
shares are redeemed within a specific period following their purchase.
61. Depreciation
A decline in an investment's value.
62. Derivative
A financial security whose value is based on, or "derived" from, a traditional security,
asset, or market index.
63. Distribution
The payment of dividends and capital gains to shareholders
64. Distributor
The organization arranging for the sale of fund shares either directly to the public or
through intermediaries, such as financial advisers.
65. Diversification
The practice of spreading investments among different securities to reduce risk.
Diversification works best when the returns of the securities are varied, so that losses
incurred by securities falling in price are offset by gains of those rising in price. By
nature, mutual funds are a diversified investment.
66. Dividend
Short-term profits, stock dividends or interest income which funds distribute to
shareholders.
67. Dollar Cost Averaging
A method of investing that calls for the investment of a set dollar amount at regular
intervals, regardless of the fund's share price. As a result, more fund shares are bought
when prices are low than at high prices, usually bringing down an investor's average
cost per share over time. Dollar cost averaging does not, however, guarantee a profit
or protect against a loss.
68. Double Exempt Fund
A fund that only invests in tax-exempt bonds of issuers from a single state. Income
from a double exempt fund is free of federal and state income taxes for investors
residing in the same state as the issuers of the bonds. Double-exempt funds have been
particularly popular in the high-tax states of California and New York. Double tax
exempt funds are usually subject in part or whole to the Alternative Minimum Tax
(AMT). AMT percentage calculations for income tax purposes are available after each
year end by contacting the fund directly.
69. Dow Jones Industrial Average (DJIA)
The oldest, best known, and most widely quoted stock market index. The DJIA
reflects a price-weighted average of 30 actively traded blue chip stocks. These 30
securities represent between 15-20% of the market value of the New York Stock
Exchange traded stocks.
70. Dual Purpose Fund
A closed-end fund offering two classes of stock in approximately equal amounts. One
class (income shares) is entitled to all the income from the fund's portfolio (i.e.,
dividends from investments). The second class (capital shares) is entitled to all of the
capital appreciation from the fund's holdings. At the time a dual purpose fund is
established, a date is set on which the fund will be liquidated. At that time, income
shareholders receive preference up to the par value of their shares and capital
shareholders receive any excess.
71. Emerging Markets Funds
A fund that invests primarily in the stocks of companies in, or doing business in,
developing countries and emerging markets. Emerging market funds usually have an
investment objective of long-term growth and are generally considered aggressive
stock funds.
72. Energy Stock Funds
A fund that invests primarily in the stocks of companies in the energy business.
73. Environmental Securities Funds
A fund that invests primarily in securities issued by environmental-related companies.
These include companies involved in hazardous waste treatment, waste recycling, and
other related areas.
74. Equity Income Funds
A fund that seeks to provide relatively high current income and growth of income by
investing a large portion of its assets in stocks.
75. Ethical Fund
A fund that only invests in the securities of firms meeting certain social standards. For
example, an ethical fund might exclude securities of companies that are known to
practice discrimination, that operate in certain countries, or that produce specific
products such as alcohol, tobacco, or nuclear weapons.
76. European Stock Funds

A fund that invests primarily in the stock of Western European companies.
77. Exchange Privilege

A shareholder service that allows shareholders to move their assets from one fund to
another fund within the same mutual fund family, usually without any additional sales
charge or fees. Fund groups vary in the specific parameters detailing when or how
many times an investor may use the exchange privileges.
78. Ex-Dividend Date
The date on which a fund's net asset value will fall by an amount equal to a dividend
or capital gains distribution. The ex-dividend date is usually the business day
immediately following the record date.
79. Expense
A fund's cost of doing business. All of a fund's expenses are disclosed in the
prospectus as a percentage of assets.
80. Expense Ratio
A fund's operating expenses, expressed as a percentage of its average net assets.
Funds with lower expense ratios are able to distribute a higher percentage of gross
income returns to shareholders.
81. 401(k) Plan

An employer-sponsored retirement plan that enables employees to defer taxes on a
portion of their salaries by earmarking that portion for the retirement plan. Several
investment options, including a range of funds, are generally offered.
82. 403(b) (7) Plan
A type of individual retirement account (IRA) designed specifically for employees of
qualifying nonprofit organizations (i.e., public schools, public hospitals, churches). A
403(b)(7) plan enables these employees to defer taxes on a portion of their salaries by
earmarking that portion for the retirement plan. Several investment options, including
funds, are generally offered for investment.
83, Family of Funds
A fund's cost of doing business. All of a fund's expenses are disclosed in the
prospectus as a percentage of assets.
84. Financial Services Funds

A fund that invests primarily in the stocks of companies engaged in providing
financial services, including banks, finance companies, insurance and securities or
brokerage firms.
85. Fixed Income Security
A security that pays a fixed rate of return. This term is usually used in reference to
government, corporate or municipal bonds, which pay a fixed rate of interest until the
bonds mature, and to preferred stock, which pay a fixed dividend. Fixed income
securities offer the guarantee of a fixed return, but do not offer an investor much, if
any, potential for growth.
86. Flexible Portfolio Funds

A fund that can invest in stocks, bonds and cash in whatever proportion the manager
deems appropriate, providing the manager total flexibility to achieve maximum
returns. Flexible portfolio funds are sometimes called asset allocation funds.
87. Front-End Load
One of three possible sales charge schedules imposed by funds that charge fees. A
front end load, or "upfront charge" is a fee charged on the initial purchase of fund
shares, and can range from 3% to 8% of the purchase amount. Funds sold under
several sales charge options usually refer to the shares sold with a front end load as
"Class A shares."
88. Fully Invested
The investment of nearly all available assets in securities other than short-term
securities (such as savings and money market accounts). When a fund is said to be
"fully invested," it usually implies that the fund's manager is confident that the
securities markets will be improving.
89. Fund of Funds
A fund that invests only in the shares of other open-end funds. Fund of funds were
popular during the 1960s but have subsequently fallen out of favor with most
investors.
90. General Bond Funds
A fund that invests in bonds without any quality or maturity restrictions.

91. General Municipal Bond Funds
A fund that invests primarily in bonds issued by municipalities throughout the
country, and which generate federally tax-exempt income.
92. Global Mutual Fund
A mutual fund that invests anywhere in the world, including within the United States.
These can be either stock or bond funds.
93. GNMA (Government National Mortgage Association)

Nicknamed Ginnie Mae, the Government National Mortgage Association is a
government owned corporation with the authority to fully guarantee the full and
timely payment of all monthly principal and interest payments on the mortgage
backed securities collateralized by registered holders.
94. Gold Fund
A fund that invests primarily in securities associated with gold, including gold
mining, refining and production concerns. Gold funds are also sometimes referred to
as precious metals funds.
95. Government Income Fund
A fund that invests primarily in securities associated with gold, including gold
mining, refining and production concerns. Gold funds are also sometimes referred to
as precious metals funds.
96. Growth
An investment objective of many stock funds. Current income, if considered at all, is
a secondary concern for these funds. Capital growth is achieved when the market
value of a fund's holdings increases, causing the fund's net asset value per share to
increase.
97. Growth and Income Fund
A fund that seeks to provide both growth of capital and a stream of income. This is
done by investing primarily in the common stock of companies that have had not only
increasing share value, but also a solid record of paying dividends.
98. Growth Fund
A fund that invests primarily in the stocks of companies whose long-term earnings are
expected to grow significantly faster than the earnings of the market in general (as
represented by the S&P 500 Index). In general, growth funds seek to provide capital
gains, rather than dividend income.
99. Growth Index Fund
A fund that invests primarily in growth stocks included in one of the major
unmanaged stock indices. Growth index funds generally seek to match or exceed the
investment performance of the targeted index.
100. Growth Investing

An investment strategy to increase capital by buying stocks the manager believes will
go up in price, regardless of the stock's current price relative to its underlying value.
Growth investing is often discussed in contrast to value investing.
101. Health and Biotechnology Funds
A fund that invests primarily in the stocks of companies in the medical industry.
102. Hedge Fund
A mutual fund that uses futures to offset investment risk. For example, a fund
manager concerned about declining stock prices might hedge his or her holdings by
buying a put option of some stocks. Put options, call options and selling short are
widely used hedging tools for stock fund managers. Hedging is also used extensively
in international funds that attempt to minimize currency risks. The fund's prospectus
discloses whether or not a fund engages in hedging.
103. High Current Yield Fund
A fund that seeks to provide a relatively high current yield. High current yield funds
tend to invest primarily in lower grade fixed income securities without any quality or
maturity restrictions.
104. High-Yield Bond Fund
A fund that invests primarily in high yield bonds, also referred to as junk bonds. High
yield bond funds generally seek high returns and tend to be one of the riskier bond
fund investments.
105. Historical Yield

Yield provided by a fund (typically a money market fund) over a specific time period.
106. Inception Date
The date a fund was first made available to investors.
107. Income
1) Payments of dividends, interest, and/or short term capital gains earned by securities
held by a fund. Income dividends are paid after deducting operating expenses. 2) An
investment objective of many fixed income funds. Capital appreciation is not a
consideration for these funds.
108. Income Fund
A fund that invests primarily in fixed income securities and/or high-yielding stocks.
In general, income funds seek to provide current income rather than growth of capital.
109. Index
.
Indicators used to provide a point of reference for evaluating a fund's performance.
The most common indices for stock funds are the Dow Jones Industrial Average and
the S&P 500 Index. For fixed-income funds it is the Lehman Brothers Aggregate
Bond Index.
110. Index fund
A fund that invests in a collection of securities intended to match that of a broadbased index (NOTE: It is not possible for investors to actually invest in the actual
index, such as the S&P 500). In general, index funds seek the same or a slightly better
return that the index they mirror. Index funds tend to charge low administrative
expenses.
111. Individual Retirement Account (IRA)
A personal savings plan that offers tax advantages to save and invest for retirement.
Contributions are often tax deductible in whole or in part, depending upon individual
cirumstances, including compensation levels and participation in an employer
sponsored qualified retirement plan. Income derived from investments in a traditional
deductible or nondeductible IRA are tax deferred until withdrawn. Under certain
circumstances, withdrawals from a Roth IRA are tax free. Tax penalties may apply to
IRA distributions taken before age 59 1/2. Contributions to an IRA may not exceed
$2,000 per year. Individuals with earned income may contribute up to $2,000 to the
IRA of a nonemployed spouse.
112. Inflation Risk

The possibility that the value of assets or income will be eroded by inflation (the
rising cost of goods and services). Inflation risk is often mentioned in relation to
conservative fixed income funds. While these types of fixed income funds may
minimize the possibility of losing principal, they expose an investor to inflation risk.
113. Insured Bond
A guarantee on a municipal bond that interest and principal will be paid timely and in
full. Insured bonds tend to carry a high credit rating but to pay a lower return than
comparably rated uninsured bonds. The largest municipal bond insurers include: The
Municipal Bond Investment Assurance Corp. (MBIA), Federal Guarantee Insurance
Corp. (FGIC), and AMBAC Indemnity Corp. (AMBAC).
114. Intermediate Investment Grade Bond Fund
A fund that invests primarily in investment grade fixed income securities with dollarweighted average maturities of five to ten years.
115. Intermediate U.S. Government Fund
A fund that invests primarily in government guaranteed fixed income securities with a
dollar-weighted average maturity of five to ten years.
116. Intermediate U.S. Treasury Fund
A fund that invests primarily in U.S. Treasury bills, notes and bonds with a dollarweighted average maturity of five to ten years.
117. Inter national Fund
A fund that invests primarily in the securities of companies located outside of the
United States. In general, international investing not only offers diversification and
the potential for high returns, but also involves special risks, such as currency
concerns, and rapidly changing political scenarios.
118. Investment Company

An investment company invests the pooled funds of investors in securities appropriate
for its stated investment objectives. For a fee, the investment company provides more
diversification, liquidity, and professional management service than is normally
available to individual investors. Mutual funds, known as open-end investment

companies, have portfolios that can grow or be reduced, based upon market
conditions and investor investment/redemption patterns. Hence the name: they have
limitless numbers of shares outstanding. Closed-end funds, also called unit investment
trusts, have a fixed portfolio, and a pre-set number of shares outstanding.
119. Investment Grade
High quality bonds that are rated Baa or higher by Moody's, or BBB or higher by
Standard & Poor's. Investment grade bonds are considered safe, because the rating
reflects the perceived financial stability of the issuer. Usually, however, the higher the
bond's rating, the lower the interest it must pay to attract buyers.
120. Investment Objective
A fund's investment goal. For example, a growth fund typically has an investment
objective of providing long-term growth of capital.
121. Investment Style
A description of a fund's investment strategy. For example, a growth fund might have
a growth oriented style, a value-oriented style, or a blend of the two. Fixed-income
funds tend to be managed with either an interest-rate sensitive style or a creditsensitive style.
122. Junk Bond
Bonds rated BB or below by Standard & Poor's Corporation and Ba or below by
Moody's Investor Service. Junk bonds tend to be more volatile and higher yielding
than bonds with higher quality ratings.
123. Junk Bond Fund
A fund that invests primarily in lower rated bonds (BB or below by Standard & Poor's
Corporation and Ba or below by Moody's Investor Service), also referred to as junk
bonds. Junk bond funds generally seek high returns and tend to be one of the riskier
bond fund investments.
124. Ladder
A fixed income investment strategy that seeks to reduce interest rate risk by investing
in fixed income securities with a wide variety of maturities. Though this strategy
assures continuous cash flow, there may be some sacrifice of total return, since
shorter-term bonds tend to have lower yields than longer-term bonds.
125. Large-Caps
Stocks of companies with market capitalizations of more than $1 billion. Large-caps

tend to be well established companies, so that their stocks entail less risk than smallercaps, but which also offer less potential for dramatic growth.
126. Latin American Fund
A fund that invests primarily in the securities of companies in Latin American
countries.
127. Letter of Intent
An agreement calling for an investor to invest a specific amount in a fund over a
defined period in order to qualify for reduced sales charges. The reduced sales charge
may apply to an individual fund or to all the funds operated by a single investment
management firm.
128. Lipper Analytical Services Inc.
A leading mutual fund research and tracking firm. Lipper categorizes funds by
objective and size, and then ranks fund performance within those categories.
129. Lipper Indices
The Lipper Analytical Indices are equally weighted indices of typically the 30 largest
mutual funds within their respective investment objectives. Returns are adjusted for
the reinvestment of capital gains distributions and income dividends.
130. Liquidity
The ease with which an investment can be converted into cash. Shares in a fund are
generally considered highly liquid investments because they can be sold on any
business day for their then current value (which may be more or less than an investor's
original cost).
131. Load
A sales charge assessed by certain mutual funds (load funds) to cover selling costs. A
front-end load is charged at the time of purchase. A back-end load is charged at the
time of sale.
132. Long-Term Funds
All funds other than short-term funds (i.e., money market funds).
133. Low-Load
A sales charge of 3% or less.
134. Management Fee
The amount a fund pays to its investment adviser for its services. The average annual
fee industry wide is about one half of one percent of fund assets. A fund's
management fee must be listed in its prospectus.
135. Manager
The Firm that provides the fund with investment research and portfolio management
services.
136. Manager Tenure
How long the portfolio manager has been responsible for a fund's management.
137. Market Capitalization
Also referred to as "market cap." Market capitalization is a measure of a corporation's
value, calculated by multiplying the number of outstanding shares of common stock
by the current market price per share. Market capitalization is usually grouped into
four main categories: large-cap, mid-cap, small-cap, and micro-cap.
138. Market Timing
Attempting to time the purchase and sale of securities to coincide with ideal market
conditions. Mutual fund investors may switch from stock funds to bond funds to
money market funds as the strength of the economy and interest rate directions
change.
139. Maturity Date

The date on which the principal amount of a bond is to be paid in full.
140. Maximum Front-End Load
The fee an investor pays when purchasing shares of a fund. A fund has different load
breakpoints depending on the purchase total. For example, a fund may charge: 4.5%
to $100,000 - 4.0% to $250,000 - 3.0% to $500,000 - 2.0% to $1 Million - 0.0%
thereafter
141. Micro-Caps
A subset of small-caps. Stocks of companies with a market capitalization of less that
$50 million are "micro caps." Micro-caps tend to be new, relatively untested
corporations that can offer greater growth potential than larger caps, but also entail
greater risk.
142. Mid-Cap Fund
A fund that invests primarily in the stocks of companies with a medium market
capitalization (mid caps).
143 .Mid-Caps
Stocks of companies with a medium market capitalization, usually defined as between
$500 million and $3-5 billion. Mid-caps are often considered to offer more growth
potential than larger-caps (but less than small caps) and less risk than small-caps (but
more than large-caps).
144. Minimum Purchase
The smallest investment amount a fund will accept to establish a new account. Most
fund groups also impose a minimum for additional purchases to an existing account.
145. Money Market Fund

Money market funds seek to maintain a stable net asset value by investing in the
short-term, high-grade securities sold in the money market. These are generally the
safest, most stable securities available, including Treasury bills, certificates of deposit,
and commercial paper. Money market funds limit the average maturity of their
portfolio to 90 days or less. They seek to generate monthly income, and to maintain a
stable $1.00 per share net asset value. Some money market funds offer checkwriting
privileges. No fees are generally charged to purchase or redeem shares in a money
market fund. Several different portfolio types are available: Taxable, taxable
government securities, and national or state tax-free.
146. Morningstar
An independent mutual fund rating agency that tracks over 7,200 mutual funds. Of
those, Morningstar publishes full-page research reports on 1,500. Morningstar's rating
system calls for the awarding of between 1 (the lowest) and five (the highest) stars to
a fund for its risk adjusted performance over a 3, 5, and 10-year period.
Approximately 10% of the funds rated earn five stars. Star ratings are recalculated
monthly.
147. Mortgage-Backed Security
A security that returns principal and interest monthly as payments are received on the
underlying mortgages. They are made up of individual home mortgages guaranteed by
the government agencies. The mortgages are packaged into pools by agencies such as:
Government National Mortgage Assn. (GNMA), Federal National Mortgage Assn.
(FNMA), Federal Home Loan Mortgage Corp. (FHLMC). Unscheduled repayment of
principal can shorten the maturity of the bonds. (See "Prepayment Risk.")
148. Municipal Bond
A bond issued by a municipality to finance schools, highways, hospitals, airports,
bridges, water and sewer works, and other public projects.
149. Mutual Fund
An open-end investment company that combines the money of thousands of people
and invests it in a variety of securities in an effort to achieve a specific objective over
time. Mutual funds offer the benefits of portfolio diversification (which provides
greater safety and reduced volatility), professional management, and stand ready to
buy back its shares at the current net asset value. Every fund's prospectus details
information on the fund's objectives, fees, the management company, and more.
150. Natural Resources Fund
A fund that invests primarily in securities of companies that own, process, transport,
or market natural resources, which can include metals, minerals, and forest products.
151. Net Assets
The net worth of a fund.
152. Net Asset Value (NAV)
The current market worth of a mutual fund's share. A fund's net asset value is
calculated daily by taking the funds total assets, securities, cash and any accrued
earnings, deducting liabilities, and dividing the remainder by the number of shares
outstanding.
153. No Load Fund
A fund that sells its shares directly to investors without a sales charge.
154. Objective
A fund's investment objective states the financial goals it is aiming for, such as
"growth," or "income."
155. Offering Price
Also known as the "ask" price, the offering price is the amount at which a mutual
fund's shares can be purchased. To calculate the offering price, add a fund's current
net asset value per share to its sales charge, if any.
156. Open-End Fund

(Also known as "mutual fund.") An investment company that pools money from
shareholders and invests in a variety of securities, including stocks, bonds, and money
market instruments. They offer growth, income, or both, and the opportunity to invest
in everything from a country or industry to the movements of the markets themselves.
A mutual fund continually sells new shares to investors and redeems those that are
tendered by shareholders.
157. Operating Expenses

The normal costs a mutual fund incurs in conducting business, such as the expenses
associated with maintaining offices, staff, and equipment. There are also expenses
related to maintaining the fund's portfolio of securities. These expenses are paid from
the fund's assets before any earnings are distributed.
158. Option Fund
A fund which trades options to increase the value of its shares. The fund may either
be conservative or aggressive. A conservative fund, commonly called an "option
income fund," may buy stocks and increase shareholders' income through the
premium earned by writing options on the stocks within the portfolio. An aggressive
fund, commonly called an "option growth fund," may buy options in securities that
the fund manager thinks will fall or rise sharply in the near term.
159. Pacific Basin Fund
A fund that invests primarily in the stocks of companies located in the Pacific Basin,
which includes Australia, Hong Kong, Japan, Malaysia, New Zealand, Singapore, and
Taiwan.
159. Pacific Ex Japan Funds
A fund that invests primarily in the stocks of companies whose primary trading
markets or operations are concentrated in the Pacific region (including Asian
countries), and which specifically does not invest in Japan.
160. Payment Date
The day on which a mutual fund pays income dividend or capital gains distributions
to its shareholders.
161. Penalty Plan
A mutual fund accumulation plan in which sales fees for the entire obligation are
deducted from shares purchased in the first few years that the plan is in effect. In the
event that the investors redeem the shares after a short time, only a small portion of
the purchase price will be refunded. Sales charges and penalty plans are regulated by
the Investment Company Amendments Act of 1970.
162. Performance
A measure of how well a fund is doing. Two commonly used mutual fund
performance measures are yield (which measures dividends) and total return (which
measures dividends plus changes in net asset value).
163. Periodic Payment Plan
A plan in which an investor agrees to make monthly or quarterly investments in a
mutual fund as a method of accumulating shares over a period of years. Fixed
periodic contributions result in dollar cost averaging.
164. Pooling
Pooling is the basic concept behind mutual funds. A fund pools the money of
thousands of individual and institutional investors who share common financial goals.
The fund uses this pool to buy a diversified portfolio of investments
165. Portfolio
A collection of securities owned by an individual or an institution (like a mutual
fund). A fund's portfolio may include a combination of stocks, bonds, and money
market securities.
166. Portfolio Manager
The individual who is responsible for managing a mutual fund's assets.
167. Portfolio Turnover
A measure of the trading activity in the fund's portfolio of investments. In other
words, how often securities are bought and sold.
168. Precious Metals Fund
A fund that seeks an increase in the value of its holdings by investing at least twothirds of its portfolio in securities associated with gold, silver, and other precious
metals. Also known as "gold funds."
169. Prepayment Risk

The possibility that, as interest rates fall, homeowners will refinance their home
mortgages, resulting in the prepayment of GNMA securities, and possible decline in
net asset values of GNMA Funds.
170. Principal
The basic amount actually invested, exclusive of earnings.
171. Professional Management
The pool of shareholder dollars invested in a fund is managed by full-time,
experienced professionals who decide which securities to hold, when to buy, and
when to sell.
172. Prospectus
The official document that describes a mutual fund. It contains information required
by the Securities and Exchange Commission on such subjects as the fund's investment
objectives, policies, services and fees. A prospectus must be given to every investor.
A more detailed document, known as "Part B" of the registration statement, (or
"Statement of Additional Information,") is available at no charge upon request.
173. Real Estate Fund
A fund that invests primarily in stocks of companies that participate in the real estate
industry, such as mortgages and real estate investment trusts, but not real estate itself.
174. Real Return
The actual return earned on an investment after factoring in the rate of inflation.
175. Record Date
The date on which a shareholder must officially own a stock's shares in order to
receive a company's declared dividend or to vote on company issues.
176. Redeem
To cash in shares by selling them back to the mutual fund. Mutual fund shares are
redeemable on any business day.
177. Redemption Fee
A fee charged by some funds when shares are sold (redeemed).
178. Redemption Price

The price at which a mutual fund's shares are redeemed (bought back) by the fund.
The value of the shares depends on the market value of the fund's portfolio of
securities at the time. This value is the same as "net asset value per share." In the
newspaper, this amount is shown as the "bid" price.
179. Reinstatement Privilege
A shareholder who redeems fund shares, and then changes his or her mind, may have
a onetime privilege of reinstating the investment by investing the proceeds of the
redemption at net asset value (with no sales charge). There is generally a 30-day time
limit for this service.
180. Repurchase Agreement (REPO)
A contract under which an investor sells a United States security to a bank or
Corporation, and agrees to repurchase the security later at a specified time and price.
Purchaser earns interest competitive with money market rates.
181. Revenue Bond
A municipal bond used to finance public works such as bridges, tunnels, or sewers.
Principal and interest on the bond are paid directly from the revenues of the project,
such as tolls. (Opposite: G.O., or General Obligation Bond, which relies on the
taxpayers of a municipality to repay the debt.)
182. Right of Accumulation (ROA)
A right granted by some mutual funds that allows a shareholder to count existing
holdings of the fund along with new purchases in determining the size of the sales fee
on the new shares. This right applies to funds that offer discounts on high-volume
investments. Thus the fee charged on succeeding purchases is determined by all
purchases, past and present, not just by new purchases.
183. Rollover
The reinvestment of funds into another, often similar, investment. Often used when
securities are maturing, or when moving an Individual Retirement Account
184. R-Squared
The degree to which an asset's correlation with "the market" has explained its
fluctuations over a specified period of time. Alpha and beta coefficients are calculated
using a procedure known as "regression analysis," where points in a system of
coordinates are generated by measuring "market" movements (the "independent
variable") along the horizontal "X" axis and correlating them with movements in the
asset (the "dependent variable") measured along the vertical "Y" axis. If the plot
points clearly defines a straight line, the model will have an R-squared value of close
to 1.0, meaning that fluctuations in the market explain close to 100% of the relative
volatility in the asset. If the pattern of plot points is largely random, the R-squared
value will be near zero, meaning that fluctuations in the market explain virtually
nothing about fluctuations in the asset.
185. Russell 2000
A commonly cited index of small-cap stocks.
186. S&P
An unmanaged group of stocks often considered representative of the stock market in
general. This index is composed of 400 industrial, 20 transportation, 40 utility, and 40
financial companies.
187. S&P 500 Index (Monthly Reinvestment)
A broad-based measurement of changes in stock market conditions based on the
average performance of 500 widely held common stocks. Performance figures assume
that all dividends are reinvested.
188. S&P 500 Index Fund
A fund that invests primarily in the stocks included in the S&P 500 Index. Sometimes
referred to as "blue-chip" stocks, they tend to be of large, well-established companies.
189. SAI (Statement of Additional Information)
An attachment to the fund's prospectus that contains more detailed, supplementary
information. Also referred to as "Part B," the SAI is available at no charge upon
request from a fund.
190. Sales Charge

An amount charged to purchase shares in many mutual funds sold by brokers or other
sales agents. The maximum allowable charge is 8.5% of the initial investment.
191. Science and Technology Fund
A fund that invests primarily in the stocks of companies engaged in science and
technology industries.
192. Sector Fund
A fund that invests primarily in securities of companies engaged in a specific
investment segment. Sector funds entail more risk, but may offer greater potential
returns than funds that diversify their portfolios. For example, a sector fund may limit
its holdings to securities from a particular country or geographic region, or it may
specialize in the securities of energy-related firms, or in companies that produce
precious metals.
193. SEC Yield
A standardized calculation that the Securities and Exchange Commission requires
mutual funds to use when advertising rates of income return. This standardized rate
ensures that investors are comparing "apples to apples" when comparing ads from
different mutual fund companies.
194. Series Fund
Funds that are organized with separate portfolios of securities, each with its own
investment objective
.195. Settlement Date
The date agreed upon by the parties to a transaction for the payment of funds and the
delivery of securities.
196. Shareholder
An investor. The shareholder is the owner of shares of a mutual fund.
197. Short-Term Fund
A fund that invests primarily in securities with maturities of less than one year. Shortterm funds include taxable money market funds and tax-exempt money market funds
(also known as short-term municipal bond funds).
198. Signature Guarantee
A stamp or seal given by a bank or member of a domestic stock exchange that
authenticates a signature. A signature guarantee is typically required by a mutual fund
sponsor to conduct certain transactions, such as the change in ownership of an
account.
199. Small-Caps
Shorthand for small capitalization stocks, small-caps usually have a market
capitalization of $500 million or less. In general, small caps tend to be less established
companies that offer more growth potential than larger capitalized companies, but
which also entail greater risk.
200. Small Company Growth Fund
A fund that seeks aggressive growth of capital by investing primarily in stocks of
relatively small companies with the potential for rapid growth.
201. Spread-Load Contractual Fund
A contractual plan for purchasing shares of a mutual fund in which sales charges are
not concentrated in the first payment or in the first few payments made by the
investor.
202. Standard Deviation
A measure of the degree to which a fund's return varies from the average of all similar
funds.
203. Statement of Additional Information (SAI)

An attachment to the fund's prospectus that contains more detailed, supplementary
information. Also referred to as "Part B," the SAI is available at no charge upon
request from a fund.
204. State Municipal Bond Funds
These funds invest in bonds issued by municipalities located all in one particular state.
Residents of that state earn income that is exempt from federal, state, and sometimes
city income taxes.
205. Stock Fund

A fund that invests primarily in stocks.
206. Strip
A brokerage house practice of separating a bond into two separate securities: a
principal portion (PO) and an interest portion (IO). A variation known by the acronym
"STRIPS" (Separate Trading of Registered Interest and Principal of Securities) is a
stripped zero-coupon bond that is a direct obligation of the U.S. Treasury. Other strips
include Treasuries stripped by brokers, such as TIGERS, and Salomon Brothers' taxexempt M-CATS.
207. Switching
The movement of assets from one fund to another. Also know as "exchanging." An
investor will switch mutual funds when their investment objectives change or because
of market conditions. This is usually done within a family of funds, but can be done
between different fund families. There usually is no charge for a certain number of
transactions per year, after which a transaction fee may apply.
208. Symbol
The 5-digit identifier code assigned to each mutual fund by NASDAQ. This code is
used to identify the correct fund in all transactions. This symbol may only loosely
resemble the newspaper listing--these tend to be phonetic abbreviations of fund
names.
209. Systematic Withdrawal System
An optional service often available to shareholders that would arrange for a fixed
amount to be redeemed from an account and sent to the shareholder on a regular basis
(usually monthly, quarterly, or semi-annually).
210. 12b-1 Fee
The fee--named for an SEC rule--charged by some funds to pay for distribution costs,
such as advertising and dealer compensation. The fund's prospectus outlines 12b-1
fees, if any.
211. Target Maturity Fund
A fund that invests primarily in zero coupon U.S. Treasury securities, or in couponbearing U.S. government securities targeted to mature in a specific year.
212. Taxable Equivalent Yield

The yield that would have to be earned on a security to pay as much, after tax, as what
is earned from a tax-exempt bond.
213. Tax-Exempt Bond Fund
A fund that invests in municipal bonds. While investors do not pay federal income
taxes on the income from these funds, they may be subject to state or local taxes.
214. T-Bill (Treasury Bill)
A fixed-income security issued by the U.S. Government.
215. Technology Fund
A fund that invests primarily in the stocks of companies engaged in the technology
industry.
216. Telephone Switching

The movement of an investor's funds from one mutual fund to another on the basis of
an order given via telephone.
217. Top Down
An investment approach that first seeks to define major economic and industry trends,
and then proceeds to identify specific companies that are likely to benefit from those
trends. (See also "bottom-up.")
218. Total Return
A measure of a fund's performance that takes three factors into account: income
dividends, capital gains distributions, and share price appreciation/depreciation.
219. Trade Date
The date on which a purchase or redemption of mutual fund shares is conducted.
220. Transfer
The process of changing ownership of an account within the same fund.
221. Transfer Agent

The organization employed by a mutual fund to prepare and maintain records relating
to the accounts of its shareholders. Some funds serve as their own transfer agents.
222. Treasuries
Fixed income securities issued by the U.S. government. Treasuries include: Treasury
Bills (T-Bills), Treasury Notes, and Treasury Bonds.
223. Triple Tax-Exempt Fund
A municipal bond mutual fund whose dividends and interest are exempt from federal,
state and local income taxes for residents of a particular state.
224. Turnover Rate
The rate at which the fund buys and sells securities each year. For example, if a fund's
assets total $100 million and the fund bought and sold $100 million of securities that
year, its portfolio turnover rate would be 100%.
225. U.S. Treasury Fund
A fund that invests primarily in financial instruments issued or guaranteed by the U.S.
Treasury or its agencies.
226. Underwriter
The organization that acts as the distributor of a mutual fund's shares to broker/dealers
and investors.
227. Unrealized Gain or Loss
Increases or decreases in the prices of securities held by the fund.
228. Utility Fund
A fund that invests primarily in securities issued by companies in the utilities
industry.
229. Value Investing
The investment style of attempting to buy underpriced stocks that have the potential
to perform well and increase in price.
230. Variable Annuity

A type of insurance contract that guarantees future payments to the holder, or
annuitant. Capital accumulates tax-free, often through investment in a mutual fund,
and is converted to an income stream at a future date (usually retirement). All monies
held in the annuity accumulate on a tax-deferred basis.
231. Volatility
The amount by which the price of a security fluctuates as market conditions change.
232. Voluntary Accumulation Plan
A plan to acquire additional shares in a mutual fund on a more or less regular basis, at
the discretion of the shareholder.
233. Withdrawal Plan
A program in which shareholders receive payments from their mutual fund
investments at regular intervals.
234. Yield
Current income (interest or dividends) paid by a fund, expressed as a percentage of
the investment's price.
235. Yield Curve
A graph depicting yield as it relates to maturity. If short-term rates are lower than
long-term rates, it is called a positive yield curve. If short-term rates are higher, it is
called a negative, or inverted, yield curve. If there is little difference, it is called a flat
yield curve.
236. Yield to Maturity (YTM)
The effective annual rate of return earned by a bond if held to maturity. This rate
takes into account the amount paid for the bond, the length of time to maturity, and
assumes coupon payments can be reinvested at the yield to maturity.
237. Zero Coupon Bond
Bond issued at a discount which accrues interest that is paid in full at maturity.
AGM
Book Closure
Bid Price
Bonus issue
Broker
Sub-brokers
Dividend
DividendYield
Earnings
Earnings Per Share
in issue.
Equity
also used
to
refer
to
shares.
Ex-dividend
seller retains the
benefits.

flotation.

Interim
results
Auditors.
IPO
Liquidity
share market.
Listed company
Margin money
Offer Price
in the market.
Open interest
Operating margin
Operating Profit
Option
PBIT
tax).
P/E Ratio
purchase decision.
Profit Before Tax
Proxy
Record date
Registrar
Rights issue
SEBI -
ofIndia)
Shareholder
Shares
Stockbroker
StockExchange
StockSplit
Stop loss
Share
Arbitrage :
differences.
Auction :
Bear :
Bear Market :
Blue Chips :
Bonus Shares :
normally goes up.
Book Closure:
Bourse :
A Stock Exchange
Bull :
later date.
Bull Market :
Call Option :
date.
Carry Forward :
Cash Settlement :
Circuit Breaker :
Clearing House :
Company Objection :
Cum Bonus :
Cum Dividend :
Cum Rights :
Day Order :
Dealer :
Dematerialisation :
Derivatives :
underlying asset.
the market.
Dividend :
Ex Bonus :
Ex Dividend :
Ex Rights :
Expiry Date :
Exposure Limit :
Futures Contract :
Insider Trading :
Limit Order :
LoMargin :
Mark To Market :
Market Order :
Offer :
Offer Price :
earlier.
Pay In :
Pay Out :
members
Price Band :
bound.
Price Rigging :
Put Option :
date
Quote :
Record Date :
Rematerialisation :
Rights Issue :
already held
AnnualYield
a percentage.
Bollinger Bands
Cash Settlement
ACCOUNTING is primarily a system of measurement and reporting
of economic events based upon the accounting equation for the purpose of
decision making. Generally, when someone says "accounting" they are
referring to the department, activity or individuals involved in the application
of the accounting equation.
AMALGAMATION is a consolidation or merger, as of several corporations. In business,

the distinction being that the surviving entity incorporates the asset base of others into its
base.
Debenture is a long-term debt instrument used by governments and large companies to
obtain funds
ASSET is anything owned by an individual or a business, which has commercial or exchange
value. Assets may consist of specific property or claims against others, in contrast to
obligations due others.
Bank reconciliation is a routine / process / method, etc, by which you reconcile the bank's
balance of your account to your balance of your account as of a specific date
BLUE CHIP COMPANY, in the equities market, is typified by a large and creditworthy
company. Such a company is renowned for the quality and wide acceptance of its products or
services. Blue chip companies consistently make money and pay dividends.
RIGHT ISSUE, According to sec. 81 (1) of the Indian companies act 1956 when the
company wants to increase the subscribed capital by issue of further shares, such shares must
be issued first of all to existing share holders these shares are called right issue.
UNDERWRITTING, The act of ensuring the sale of shares or debentures of a company
even before offering to the public.
ROYALTY. Is a periodical payment for the use of certain property or right. I t is periodical
payment in the nature of rent for the use of certain assets or right such as mine, quarries,
patent, copy right etc.
BOND A Long term debt instrument on which the issuer pays interest periodically, known as
Coupon. Bonds are secured by collateral in the form of immovable property.
OPTION is the formal reservation of the right to buy or sell property / assets at a certain
price and / or within a given time in the future.
Demat account, the abbreviation for dematerialized account, is a type of banking account
which dematerializes paper-based physical stock shares. The dematerialized account is used
to avoid holding physical shares: the shares are bought and sold through a stock broker.
TRAIL BALANCE, The list of ledger account balances prepared for checking the
arithmetical accuracy of books of accounts.
SUNK COST is the cost expended that cannot be retrieved on a product or service.
Accrual basis of accounting, The accounting method under which revenues are
recognized on the income statement when they are earned (rather than when the cash is
received).
IMPUTED COSTS refer to the cost of an asset, service, or company that is not physically
recorded in any accounts but is implicit in the product.
BUDGET, Is the monetary or/ and quantitative expression of business plans and policies
to be pursued in the future period of time.
Zero Base Budget, Is the latest technique of budgeting and it has an increased use as a
managerial tool. In this method every year is taken as a new year and previous year is
not taken as a base.
Pay Back Period, It represents the length of time required to recover the initial cost of a
project.
RATIO Is a mathematical relationship between two related items expressed in

quantitative form.
LIABILITY. A claim against a company or an individual acknowledged as due.
Deferred Tax Liability It occurs when a company underpays its taxes due to a difference
between how it accounts for asset on its book versus how it accounts for it on a tax basis.
Letter of Credit, A financial instrument issued by a bank on behalf of a purchaser of

goods, undertaking responsibility to pay a certain amount during a specified period, for
goods delivered.
Opportunity Cost The value or benefits form an alternative proposal.
Par Value The nominal value of a security, also termed as face value.
Forfeiture It means cancellation of shares due to the non payment of call money or allotment
money.
VAT stands for Value added tax, meaning you pay tax only on the Value addition done; be
you be a manufacturer, trader of goods or a service provider
Base Currency
The currencies against which other currencies are quoted. Example, the primary base
currency is the U.S. dollar.
Bear Market
A market in which prices decline sharply against a background of widespread pessimism
(opposite of Bull Market). Bear Markets are generally shorter in duration than Bull Markets.
Bid
The rate at which a dealer is willing to buy the base currency.
Bull Market
A market characterized by rising prices.
Broker
An agent who handles investors' orders to buy and sell currency.
Counterparty
The customer or bank with which a foreign exchange deal is executed.
Cross Rate
An exchange rate between two currencies, usually constructed from the individual exchange
rates of the two currencies, measured against the United States dollar.
Day Trading
Refers to opening and closing the same position or positions before the close of that day's
trading (3:00p.m. EST).
Flat / Square
Where a Client has not traded in that currency or where an earlier deal is reversed thereby
creating a neutral (flat) position. Example: bought $100,000 then sold $100,000 = FLAT.
Forex
An abbreviation of foreign exchange.
Fundamental Analysis
Analysis based on economic factors.
GTC
"Good Till Cancelled." An order left with a Dealer to buy or sell at a fixed price. The order
remains in place until it is cancelled by the client.
Interbank Rates
The FX rates large international banks quote other large international banks. Normally the
public and other businesses do not have access to these rates. Global Forex is one of the few
companies able to provide clients with rates provided by multiple global banks.
Limit Order
An order given which has restrictions upon its execution, where the client may specify a price
and the order can be executed only if the market reaches that price.
Long
A market position where the Client has bought a currency he previously did not own.
Normally expressed in base currency terms. For example: long Dollars (short Japanese Yen).
Margin
Margin is a cash deposit provided by clients as collateral to cover possible future losses that
may result from the clients Foreign Exchange trades.
Margin Call
A demand for additional funds. A requirement by a clearing house that a clearing member (or
by a brokerage firm that a client) brings margin deposits up to a required minimum level to
cover an adverse movement in price in the market.
Offer
The rate at which a Dealer is willing to sell the base currency.
Open Position
Any deal which has not been offset or reversed by an equal and opposite deal.
Pip or Points
Depending on context, normally one basis point, i.e. 0.0001.
Short
A market position where the Client has sold a currency he does not already own. Normally
expressed in base currency terms, example, short Dollars (long D. Marks).
Spread
The difference in prices between bid and offer rates.
Stop Loss Order
An order to buy or sell at the market when a particular price is reached, either above or below
the price that prevailed when the order was given.
Technical Analysis
Analysis based on market action through chart study, moving averages, volume, open
interest, formations, and other technical indicators.
Volatility
A measure of price fluctuations.

Corporate Finance Terminology Glossary

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Corporate Finance Terminology Glossary

Uploaded by

Copyright:

Available Formats

Corporate Finance Terminology Glossary

Acquisition - the purchase of one company by another business entity.

assets, incur liabilities, and issue stock.

Property, Plant and Equipment to derive a net figure.

See quick ratio.

After Tax Income

Another term for net income.

Average Annual Return

The expected annual return on an investment, including interest and dividends,

Bad Debt Expense

Losses for uncollectible accounts receivable.

insurance, and 401(K) plans.

A long-term lease of property, plant, or equipment in which the lessee acquires

Cash & Equivalents

Cash Flow Statement

A financial report that expresses a company's performance in terms of cash

In an accounting system, the list of accounts to which transactions are posted.

sheet might show all values as a percentage of total assets.

Accounts, such as Accumulated Depreciation, that offset a related account, usually

Another term for expenditure. See also expenses.

Cost of Goods Sold

Another term for cost of sales.

Current assets divided by current liabilities. This ratio is a measure of a company's

The number of days a business takes to collect on its accounts receivable, on

Debt to Equity Ratio

Debt to Tangible Equity

An entity defined for reporting purposes.

Double Declining Balance

A method of recording accelerated depreciation. Also called the 200 percent

See days payable outstanding.

See days sales outstanding.

Earnings Before Interest

Earnings Per Share

See earnings before interest and taxes.

See earnings before interest, taxes, depreciation, and amortization.

All purchases made by a business, whether in cash or on credit; not equivalent to

See first in, first out.

Inventory ready for sale.

First In, First Out (FIFO)

A method of inventory valuation whereby the goods first purchased or manufactured

Fiscal Year End

The last month of a company's fiscal year.

Fixed Assets to Tangible

Forecast Start Date

Financial forecasting is the process of estimating future financial performance. The

An acronym for Generally Accepted Accounting Principles. Accountants follow

Another term for net income.

A financial report that shows a company's performance over a specified period of

Income Tax Expense

A long-term asset that represents a financial, legal, or accounting concept rather

Goods purchased or manufactured by a business and held for production or sale.

Last In, First Out (LIFO)

A method of inventory valuation whereby the goods most recently purchased or

The relationship between debt and equity. A company is considered highly

Obligations used to fund the operations of a business, including bank loans,

See London Interbank Offered Rate.

See last in, first out.

The amount of short-term credit available to a business from banks.

A company's ability to generate cash in a timely manner in order to meet its

A set of conditions a business is striving to achieve. These may include

Miscellaneous NonCurrent Assets

Miscellaneous NonCurrent Liabilities

Net Book Value