Glossary List

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Acquisition Loans

Loans made to finance a merger or acquisition.

Aging of Accounts Receivable

Analyzing accounts by the amount of time they have been on the books.

Agreement in Principle

An outline of the understanding between the parties, including the price and the major terms. It is often referred to as a letter of intent. Usually, the agreement is subject to the negotiation of a mutually acceptable definitive agreement.

Announced Deals

Mergers or acquisitions that are announced to the public, usually by a press release. The majority of middle market deals are unannounced.


A series of consecutive payments or receipts of equal amount.


Any possession that has value in an exchange.

Asset Depreciation Range (ADR)

The ADR represents the expected physical life of an asset. Generally, the midpoint of the ADR is utilized to determine what class an asset falls into for depreciation purposes.

Assets Retained

Assets that an owner would keep after a merger or acquisition.

Asset Utilization Ratios

A group of ratios that measures the speed at which the firm is turning over or utilizing its assets. We measure inventory turnover, fixed-asset turnover, total asset turnover, and the average time it takes to collect accounts receivable.


An invitation for bids on a business by a specified date. In practice, the date is often extended for the three or four top bidders, who then are invited to improve their offers.

Balance Sheet

A financial statement that indicates what assets the firm owns, and how those assets are financed in the form of liabilities or ownership interest.


The market value of a firm's assets are less than its liabilities, and the firm has a negative net worth. The term is also used to describe in-court procedures associated with the reorganization or liquidation of a firm.


A designated sum below which claims will not be made for breaches of representation and warranties (or other indemnification claims).


The price a prospective buyer is prepared to pay at a particular time for trading a unit of a given security.


The term used for the information memorandum that describes a private capital investment or informal term for a company's equity value based on accounting records ("book value").


A symbol, name or sign identifying suppliers of goods or services. The cost associated with establishing a brand are included in goodwill, and are amortizable for reporting but not for tax purposes.

Break-even Analysis

A numerical and graphical technique that is used to determine at what point the firm will break even (revenue = cost). To compute the break-even point, we divide fixed costs by price minus variable cost per unit.

Business Broker or Intermediary

Professionals who arrange mergers, acquisitions and various funding of companies with most of their transactions in the under $1 million market. Business brokers or intermediaries do not have their own fund to invest.

Buy Back Stock

Stock that is regained by the company that issued it.


Sources of long-term financing that are available to the business firm.

Capital Gains

Profits, either short or long term, from the sale of capital assets, chiefly non-inventory assets.

Capital Gains Tax

Taxes that must be paid on profits earned by sale of stock or other investments. Lowering the capital gains tax is a perennial political cause for economic conservatives when the federal budget is reviewed. Any serious lowering of the capital gains would favorably impact the merger market.

Capital Gains Distribution

Payments to mutual fund shareholders of profits from the sale of securities in a fund's portfolio. Capital gains distributions (if any) are usually made annually.

Capital Markets

A place or system in which the requirements for capital of a business can be satisfied. Market for long-term investment funds.

Capitalization of Earning Power

A method of determining the value of a business by dividing earnings or operating cash flow by a discount rate.

Cash Flow Lenders

Financial institutions that will base financing primarily on a multiple of cash flow generally defined as EBITDA (Earnings Before Interest and Taxes, Depreciation, and Amortization).

Combined Leverage

The total or combined impact of operating and financial leverage.

Comfort Letter

A letter provided by independent accountants reporting on the financial condition of a company, usually for an interim period since the last audit.

Commercial Paper

An unsecured promissory note that large corporations issue to investors. The minimum amount is usually $25,000.

Common Equity

The common stock or ownership capital of the firm. Common equity may be supplied through retained earnings or the sale of new common stock.

Common Stockholder

Holders of common stock are the owners of the company. They have a residual claim to the earnings.


A corporation that is made up of many diverse, often unrelated divisions. This form of organization is thought to reduce the risk, but may create problems of coordination.


The combination of two or more firms, generally of equal size and market power, to form an entirely new entity.

Corporate Acquirer

A company seeking acquisitions that provide more than the profits and cash flow of the acquisition target and may include the desire to acquire operational economies, additional market share, technology or some other synergy.


A form of ownership in which a separate legal entity is created. A corporation may sue or be sued, engage in contracts and acquire property. It has a continual life and is not dependent on any one stockholder for maintaining its legal existence. A corporation is owned by stockholders who enjoy the privilege of limited liability. There is, however, the potential for double taxation in the corporate form of organization: the first time at the corporate level in the form of profits, and again at th

Cost-Benefit Analysis

A study of the incremental costs and benefits that can be derived from a given course of action.

Cost of Capital

The cost of alternative sources of financing to the firm.

Cost of Goods Sold

The cost specifically associated with units sold during the time period under study.

Deal Structure

The nature of the fee paid by the acquiring entity in a merger transaction. Typical deal structure may include stock or other valuables besides cash. The complex nature of deal structure is an important reason why middle market intermediaries are often hired.

Debt to Equity Ratio

Debt divided by shareholders' equity, showing relationship between funds provided by creditors and funds provided by shareholders; high ratio may indicate high risk, low ratio may indicate low risk.

Debt Utilization Ratios

A group of ratios that indicates to what extent debt is being used and the prudence with which it is being managed. Calculations include debt to total assets, times interest earned, and fixed charge coverage.

Deferred Annuity

An annuity that will not begin until some time period in the future.

Depreciation Base

The initial cost of an asset that is multiplied by the appropriate annual depreciation percentage to determine the dollar depreciation.

Discounted Cash Flow

Widely accepted method of business evaluation based on projected future earnings and cash flows, discounted for time, value of money, and risk.

Discounted Loan

A loan in which the calculated interest payment is subtracted or discounted in advance. Because this lowers the amount of available funds, the effective interest rate is increased.

Discretionary Items

Sample discretionary items may include bonuses, royalty payments, compensations to related individuals, pension plans, etc.Methods by which privately held business owners minimize taxation and maximize personal and family benefits.


Distribution of earnings to shareholders, prorated by the class of security and paid in the form of money, stock, scrip, or, rarely, company products or property. The amount is decided by the Board of Directors and is usually paid quarterly. Mutual fund dividends are paid out of income, usually on a quarterly basis from the fund's investments.

Dow Jones Industrial Average (DJIA)

A price-weighted average of 30 actively traded blue chip stocks, primarily industrials but including American Express Co. and American Telephone and Telegraph Co. Prepared and published by Dow Jones & co., it is the oldest and most widely quoted of all the market indicators. The components, which change from time to time, represent between 15% and 20% of the market value of NYSE stocks.

Due Diligence

The reasonable investigation performed by the acquirer prior to the purchase of a business.

Earn Out

A contractual provision enabling an entrepreneur to earn additional money upon the sale of a business if certain conditions are met.

Earnings Per Share (EPS)

EPS represents the portion of a company's profit allocated to each outstanding share of common stock. Net income (reported or estimated) for a period of time is divided by the total number of shares outstanding during that period.


Earnings before interest, taxes, depreciation, and amortization. This term is often used as a quick measure of operating cash flow.

Economies of Scale

The decrease in average production costs accompanying an increase in capital employment.

Economic Value Added

Value given to an item as a function of its usefulness and it scarcity.

EPA Compliance

Working within the rules and regulations of the Environmental Protection Agency so as not to create a liability for past and future share holders.

Equity Transfer

Refers to sale of private company equity.

Estate Tax

All assets owned by U.S. citizens are subject to a federal tax upon any post-death transfer. Assets held inside tax protective trusts can limit that tax.

Excess Earning Method

A valuation method that attempts to identify the value of goodwill by calculating earnings, if any, in excess of those earnings expected to be derived from the assets of the business.

External Reorganization

A reorganization under the formal bankruptcy laws, in which a merger partner is found for the distressed firm. Ideally, the distressed firm should be merged with a strong firm in its own industry, although this is not always possible.


An organization that services other institutions but does not take title to goods.

FIFO Inventory (First In, First Out)

A system of writing off inventory into cost of goods sold, in which the items purchased first are written off first. Referred to as first-in, first-out.

Financial Buyer

An individual, investment group or investment company seeking acquisitions that provide favorable profits and cash flow.

Financial Capital

Common stock, preferred stock, bonds, and retained earnings. Financial capital appears on the corporate balance sheet under long-term liabilities and equity.

Financial Disclosure

Presentation of financial information to the investment community.

Financial Leverage

A measure of the amount of debt used in the capital structure of the firm.

Financial Ratios

The relationship that exist between various items appearing in balance sheets, income accounts, and occasionally other items. These ratios are used to measure and evaluate the economic condition and operating effectiveness of a firm.

Financing Contingencies

Conditions that preclude the completion of a transaction subject to obtaining financing satisfaction to the buyer and his creditors.

Fixed Costs

Costs that remain relatively constant regardless of the volume of operations. Examples are rent, depreciation, property taxes, and executive salaries.


The sale of a company within a year or two of its being bought.


The difference between the corporation's recorded cash balance on its books and the amount credited to the corporation by the bank.

Formula Values (formula investing)

An investment technique. One formula calls for shifting funds from common shares to preferred shares or bonds as the market average rises above a certain predetermined point and returning funds to common share investments as the market average declines.

Founders' Stock

Stock owned by the original founders of a company. It often carries special voting rights that allow the founders to maintain voting privileges in excess of their proportionate ownership.


Generally Accepted Accounting Principles

Golden Parachute

Highly attractive termination payments made to current management in the event of a takeover of the company.


An intangible asset that reflects value above that generally recognized in the tangible assets of the firm.

Historical Cost Accounting

The traditional method of accounting, in which financial statements are developed based on original cost minus depreciation.

Historical Earnings - Book Value

The value of an asset found in the company's records, not necessarily what it could bring in the open market.

Holding Company

A company that has voting control of one or more other companies. It often has less than a 50 percent interest in each of these other companies.

ICC Permits

Interstate Commerce Commission permits to transport goods across state lines.

Income Statement

A financial statement that measures the profitability of the firm over a time period. All expenses are subtracted from sales to arrive at net income.

In Play

Multiple bidders are acting on a company that is actively being marketed for sale.

Intellectual Property

Legal rights for intangible assets such as patents, trademarks, copyrights, etc.


One who is employed to negotiate a matter between two parties, and who for that purpose may be agent of both, (a broker, arbitrator or mediator).

Internal Corporate Funds

Funds generated through the operation of the firm. The principal sources are retained earnings and cash flow added back from depreciation and other non-cash deductions.

Internal Reorganization

A reorganization under the formal bankruptcy laws. New management may be brought in and a redesign of the capital structure may be implemented.

Initial Public Offering (IPO)

Process for the first time a company's stock is issued; when owners of the company are selling part ownership to the general public.

Inventory Profits

Profits generated as a result of an inflationary economy, in which old inventory is sold at large profits because of increasing prices. This is particularly prevalent under FIFO accounting.

Investment Banker

A financial organization that specializes in selling primary offerings of securities. Investment bankers can also perform other financial functions, such as advising clients, negotiating mergers and takeovers, and selling secondary offerings.

Investment Company/Group

Investment companies seek business investments that return favorable profits and cash flow. They may participate in venture, mezzanine, or leverage buyout stages and equity or debt financing. They do not usually provide advisory services during the term of their investment.

Investment Letter Stock

Unregistered (restricted) stock in which the issuer usually receives a letter from the purchaser stating that the purchase of the securities is for investment purposes only and is not being purchased with the intent of reselling.

No glossary data for letter 'J'
No glossary data for letter 'K'

A contractual arrangement between the owner of equipment (lessor) and the user of equipment (lessee), which calls for the lessee to pay the lessor an established lease payment. There are two kinds of leases: financial leases and operating leases.


The use of fixed-charge items with the intent of magnifying the potential returns to the firm.

Leverage Buy-Out (LBO)

Existing management or an outsider makes an offer to "go private" by retiring all shares of the company. The buying group borrows the necessary money, using the assets of the acquired firm as collateral. The buying group then repurchases all the shares and expects to retire the debt over time with the cash flow from operations of the sale of corporate assets.

Liabilities Not Assumed

Are those liabilities not transferred to the buyer in a transaction.

Life Cycle Curve

A curve illustrating the growth phases of a firm. The dividend policy most likely to be employed during each phase is often illustrated.

LIFO Inventory (Last In, First Out)

A system of writing off inventory into cost of goods sold in which the items purchased last are written off first. Referred to as last-in, first-out.

Limited Partnership

A special form of partnership to limit liability for most of the partners. Under this management, one or more partners are designated as general partners and have unlimited liability for the debts of the firm, while the other partners are designated as limited partners and are only liable for their initial contribution.


A procedure that may be carried out under the formal bankruptcy laws when an internal or external reorganization does not appear to be feasible, and it appears that the assets are worth more in liquidation than through reorganization. Priority of claims becomes extremely important in a liquidation because it is unlikely that all parties will be fully satisfied in their demands.


The relative convertibility of short-term assets to cash. Thus, marketable securities are highly liquid assets, while inventory may not be.

Liquidity Ratios

A group of ratios that allows one to measure the firm's ability to pay off short-term obligations as they come due. Primary attention is directed to the current ratio and the quick ratio.

Liquid Wealth

Total value of wealth that can be converted to cash within 30 days.


Sale of assets into cash.

Letter of Intent (LOI)

From buyer outlining terms, timing, and value of a proposed transaction.

Long Term Gain

A gain on the sale of a capital asset where the holding period was six months or more and the profit was subject to the long-term capital gains tax.

Limited Market Penetration

Controlled distribution of opportunity to (hopefully) most qualified buyers.

Majority Voting

All directors must be elected by a vote of more than 50 percent. Minority shareholders are unable to achieve any representation on the board of directors.

Market Capitalization (MCAP)

Price per share multiplied by the total number of shares outstanding; also the market's total valuation of a public company.

Market Value

The market price; the price at which buyers and sellers trade similar items in an open marketplace. The current market price of a security as indicated by the latest trade recorded.

Market Value Maximization

The concept of maximizing the wealth of shareholders. This calls for a recognition not only of earnings per share but also how they will be valued in the marketplace.

Maturity Date

Date certain when a financial instrument achieves its posted full value.


The mathematical average of a range of numbers (calculated by dividing the sum total of all the items in the range by the total number of items in the range).


The middle number in a defined distribution; when looking at estimates, median refers to the estimate above and below which lie an equal number of estimates for the period indicated.


The combination of two or more companies, in which the resulting firms maintain the identity of the acquiring company.

Merger Arbitrageur

A specialist in merger investments who attempts to capitalize on the difference between the value offered and the current market value of the acquisition candidate.

Merger Premium

The part of a buy-out or exchange offer which represents a value over and above the market value of the acquired firm.

Mezzanine Finance

Borrowings that are generally subordinate to senior secured financing but have superior claims to equity.

Middle Market

Private or public business with sales of or between $10-$100 million.

Minimize Realized Taxable Income

Tax planning objective to minimize receipt of taxable income.

Money Market Fund

Open-ended mutual fund that invests in commercial paper, banker's acceptances, repurchase agreements, government securities, certificates of deposit, and other highly liquid and safe securities, and pays money market rates of interest. The fund's net asset value remains a constant $1 a share, only the interest rate goes up or down.

Mortgage Agreement

A loan which requires real property (plant and equipment) as collateral.

Multinational Corporation

A firm doing business across its national borders is considered a multinational enterprise. Some definitions require a minimum percentage (often 30 percent or more) of a firm's business activities to be carried on outside its national borders.

Mutual Fund

Fund operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities or money market securities.

Mutually Exclusive

The selection of one choice precludes the selection of any competitive choice. Several machines can do an identical job in capital budgeting, but only one machine is selected and used.

National Association of Securities Dealers, Inc. (NASD)

The self-regulatory organization of the securities industry responsible for the regulation of the over-the-counter markets.

Net Asset Value (NAV)

The market value of a fund share, synonymous with a bid price. In the case of no-load funds, the NAV, market price, and offering price are all the same figure, which the public pays to buy shares; load fund market or offer prices are quoted after adding the sales charge to the net asset value. NAV is calculated by most funds after the close of the exchanges each day by taking the closing market value of all securities owned plus all other assets such as cash, subtracting all liabilities, then di

Net Change

The difference between today's last trade and the previous day's last trade. The difference between today's closing Net Asset Value (NAV) and the previous day's closing Net Asset Value (NAV).

Net Income

Income after all expenses and taxes have been deducted, and used in calculating a variety of profitability and stock performance measures.

Net Income (NI) Approach

Under the net income approach, it is assumed that the firm can raise all funds it desires at a constant cost of debt and equity. Since debt tends to have a lower cost than equity, the more debt utilized the lower the overall cost of capital and the higher the valuation of the firm.

Net Operating Income (NOI) Approach

Under this approach, the cost of capital and valuation do not change with the increased utilization of debt. Under this proposition, the low cost of debt is assumed to remain constant with greater debt utilization, but the cost of equity increases to such an extent that the cost of capital remains unchanged.

Net Present Value (NPV)

The NPV equals the present value of the cash inflows minus the present value of the cash outflows with the cost of capital used as a discount rate. This method is used to evaluate capital budgeting projects. If the NPV is positive, a project should be accepted.

Net Trade Credit

A measure of the relationship between the firm's accounts receivable and accounts payable. If accounts receivable exceed accounts payable, the firm is a net provider of trade credit; otherwise, it is a net user.

Net Worth (or Book Value)

Stockholders' equity minus preferred stock ownership. Basically, net worth is the common stockholders' interest as represented by common stock par value, capital paid in excess of par, and retained earnings. If you take all the assets of the firm and subtract its liabilities and preferred stock, you arrive at net worth.


Directs that the parties to that particular agreement are not bound or exclusively committed by its provisions.


Directs that the signing party will not engage in any activities that compete with the organization being departed from.

Nonlinear Break-Even Analysis

Break-even analysis based on the assumption that cost and revenue relationships to quantity may vary at different levels of operation.


Referring to expenses that are classed as not relating to on-going operations.


Referring to expenses that are classed as not anticipated to be repeated in subsequent accounting periods.

No-Shop Clause

An agreement between the prospective buyer and the potential seller to stop discussing the sale of the business to others for a predefined period of time.

Notes (Secured)

A note for which security in the form of either real or personal property has been pledged or mortgaged.

Notes (Unsecured)

Note evidencing an indebtedness for which no security has been pledged or mortgaged.


New York Stock Exchange

Net Tangible Asset Value (NTAV)

The book value of physical or material assets net of depreciation as represented on a company's balance sheet.

Operating Lease

A short-term, non-binding obligation that is easily cancelable.

Operating Leverage

A reflection of the extent to which fixed assets and fixed costs are utilized in the business firm.

Optimum Capital Structure

A capital structure that has the best possible mix of debt, preferred stock, and common equity. The optimum mix should provide the lowest possible cost of capital to firm.


Occupational Safety and Health Act


A form of ownership in which two or more partners are involved. Like the sole proprietorship, a partnership arrangement carries unlimited liability for the owners. However, there is only single taxation for the partners, an advantage over the corporate form of ownership.


A value that indicates the time period required to recoup an initial investment. The payback does not include the time-value-of-money concept.

Pledging Receivables

Using accounts receivable as collateral for a loan. The firm usually may borrow 60 to 80 percent of the value of acceptable collateral.

Pooling of Interests

A method of financial recording for mergers, in which the financial statements of the firms are combined, subject to minor adjustments, and goodwill is not created.


Conditions or events that are activated after a transaction is finalized.

Price/Book Ratio (P/B Ratio)

A stock analysis statistic in which the price of a stock is divided by the reported book value (as of the date specified) of the issuing firm.

Price/Cash Flow Ratio (P/C Ratio)

A financial ratio that compares stock price with cash flow from operations per outstanding shares.

Price/Earnings Ratio (P/E Ratio)

A stock analysis statistic in which the current price of a stock (today's last sale price) is divided by the reported actual (or sometimes projected, which would be forecast) earnings per share of the issuing firm; it is also called the "multiple".

Price/Sales Ratio (P/S Ratio)

A financial ratio that compares stock price with sales per share (or market value with total revenue).

Pricing Assessments

A financial review that focuses on the pricing of a privately held business in anticipation of a transaction.

Prime Rate

The rate that a bank charges its most creditworthy customers.

Principal Orders

Refers to activity by a broker/dealer when buying or selling for its own account and risk.

Private Equity Group (PEG)

Invests funds collected from various private sources as equity in privately held companies with the objective of exceeding by 3 times the prime rate.


Businesses whose ownership is held by up to 35 private individuals or shareholders. The stock of the company has not been offered for public sale under the rules and guidelines of the S.E.C.

Professional Intermediary

Experienced equity transfer professional who knows how to value, market, and close sale of a privately held business.

Profitability Ratios

A group of ratios that indicates the return on sales, total assets, and invested capital. Specifically, we compute the profit margin (net income to sales), return on assets, and return on equity.

Pro Forma Balance Sheet

A projection of future asset, liability, and stockholders' equity levels. Notes payable or cash is used as a plug or balancing figure for the statement.

Pro Forma Financial Statements

A series of projected financial statements. Of major importance are the pro forma income statement, the pro forma balance sheet, and the cash budget.

Pro Forma Income Statement

A projection of anticipated sales, expenses, and income.


Belonging to ownership; belonging or pertaining to a proprietor; relating to a certain owner or proprietor. Made or marked by a person or persons having the exclusive right to manufacture and sell such.

Proprietary Overrides

Defining business conditions that buyers want or do not want in their business or acquisition candidates, i.e. no unions, no government contracts, no raw materials management, etc.

Public Limited Company (PLC)

British designation or equivalent to a U.S. public company.

Public Warehousing

An inventory financing arrangement in which inventory, used as collateral, is stored with and controlled by an independent warehousing company.

Publicly Traded

Company went public to offer ownership shares for trade on the public exchanges NYSE, AMEX/NASDAQ.

Purchase of Assets

A method of financial recording for mergers, in which the difference between the purchase price and the adjusted book value is recognized as goodwill and amortized over a maximum time period of 40 years.

Pure play

An acquired company that is in only one business.

Quarterly Report (10 Q)

A report, which public companies are required to file quarterly with the SEC, that provides unaudited financial information and other selected material.

Ratio Analysis

Analysis of financial statements through a comparison of one figure, such as net profit, to another, such as sales or total investment.

Real Capital

Long-term productive assets (plant and equipment).

Realized or Taxable Income

Income that is subject to tax at the federal, state, and local level as appropriate.

Recast Statements

Reconstruction of business' past and current financial statements to focus on demonstrated earnings capability not tax avoidance.

Regulatory Environment

Refers to the level of federal and state regulatory zeal towards private business process and audits.

Reinvestment Assumption

An assumption must be made concerning the rate of return that can be earned on the cash flows generated by capital budgeting projects. The NPV method assumes the rate of reinvestment to be the cost of capital, while the IRR method assumes the rate to be the actual internal rate of return.

Required Rate of Return

That rate of return that investors demand from an investment (securities) to compensate them for the amount of risk involved.


Redeploying the asset and liability structure of the firm. This can be accomplished through repurchasing shares with cash or borrowed funds, acquiring other firms, or selling off unprofitable or unwanted divisions.

Retained Earnings

Net profits kept to accumulate in a business after dividends are paid.

Return of Capital

A distribution of cash resulting from depreciation tax savings, the sale of a capital asset or of securities in a portfolio, or any other transaction unrelated to retained earnings.

Return on Equity

Net income divided by shareholders' equity. A measure of the net income that a firm is able to earn as a percent of stockholders' investment.

Return on Investment (ROI)

Amount earned per year on an investment.

Return on Total Assets

Net income divided by total net assets. A measure of the net income that a firm's management is able to earn with the firm's total assets.


A measure of uncertainty about the outcome from a given event. The greater the variability of possible outcomes, on both the high side and the low side, the greater the risk.

Risk Adjustment

A percentage that expresses the probability of the actual return on an investment, will vary from its expected return.

Risk-adjusted Discount Rate

A discount rate used in the capital budgeting process that has been adjusted upward or downward from the basic cost of capital to reflect the risk dimension of a given product.

Risk Premium

A premium associated with the special risks of an investment. Of primary interest are two types of risk, business risk and financial risk. Business risk relates to the inability of the firm to maintain its competitive position and sustain stability and growth earnings. Financial risk relates to the inability of the firm to meet its debt obligations as they come due. The risk premium will also differ (be greater or less) for different types of investments (bonds, stocks, and the like).


A roll-up is a term used to describe a transaction where several individual businesses are combined to create a larger entity.

Seamless Transition

Describes the most advantageous method of completing all the necessary tasks to absorb and manage all the operations, finances, and organization of an acquisition.

Secured Debt

A general category of debt, which indicates that the loan was obtained by pledging assets as collateral. Secured debt has many forms and usually offers some protective features to a given class of bondholders.

Securities and Exchange Commission (SEC)

The federal agency created by the Securities Exchange Act of 1934 to administer that act and the Securities Act of 1933. The statutes administered by the SEC are designed to promote full public disclosure and protect the investing public against fraudulent and manipulative practices in the securities markets. Generally, most issues of securities offered in interstate commerce or through the mails must be registered with the SEC.


Any note, stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, reorganization certificate or subscription, transferable share, investment contract, voting trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, or, in general, any interest or instrument commonly known as a "security," or any certificate of interest or participat

Self-liquidating Assets

Assets that are converted to cash within the normal operating cycle of the firm. An example is the purchase and sell-off of seasonal inventory.

Selling Memorandum

A description of the business including its history, products, markets, management, facilities, competition, financial statements, product literature, and a review of its prospects.

Semivariable Costs

Costs that are partially fixed but still change somewhat as volume changes. Examples are utilities and "repairs and maintenance."

Seven-Day Yield

Yield for seven-day period including the day reported.

Short Interest

The total number of shares of a security that have been sold short by customers and securities firms that have not been repurchased to settle short positions in the market.

Short Term Gain

The loss realized from the sale of securities or other capital assets held six months or less.

Short Term Liquidity

Refers to instruments that can be converted to cash within 90 days. Measured by the "acid test" used by bank credit analysts to indicate the ratio of combined cash, cash equivalents and receivables with total current liabilities.

Site Visits

Are the scheduled visits by lawyers who have given an indication of value. These are an important measured part of the purchase process.

Small Business Investment Companies (SBIC)

SBICs are licensed and regulated by the Small Business Administration to provide funding for businesses. They may borrow funds from the government at low interest rates. They prefer debt lending over equity so that their loan repayments can cover their borrowing from the government.

Sole Proprietorship

A form of organization that represents single-person ownership and offers the advantage of simplicity of decision making and low organizational and operating costs.

Standard and Poor's 500 ($SPX)

More formally known as the S&P 500 Composite Stock Price Index, is a European-style, capitalization-weighted index (shares outstanding multiplied by stock price) of 500 stocks that are traded on the New York Stock Exchange, American Stock Exchange and NASDAQ National Market. The advantage of "cap-weighting" is that each company's influence on index performance is directly proportional to its relative market value. It is this characteristic that makes the S&P 500 such a valuable tool for

Standard Industrial Classification (SIC) Code

A numbering system established by the Office of Management and Budget that identifies companies by industry. It is used to promote the comparability of economic statistics from various facets of the U.S. economy.

Strategic Capital 

Capital takes many forms: distribution, marketing, management, infrastructure, access and cash. Strategic Capital is the combination of the individual components of capital weighted and valued to reflect the individual needs of a specific business.

Stock Dividend

Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividend are not taxed until sold.

Stockholders' Equity

The total ownership position of preferred and common stockholders.

Stockholder Wealth Maximization

Maximizing the wealth of the firm's shareholders through achieving the highest possible value for the firm in the marketplace. It is the overriding objective of the firm and should influence all decisions.

Straight-line Depreciation

A method of depreciation, which takes the depreciable cost of an asset and divides it by the asset's useful life to determine the annual depreciation expense. Straight-line depreciation creates uniform depreciation expenses for each of the years in which an asset is depreciated.

Strategic Acquisition

The purchase of an operating business that supplements the buyer's strengths or complements the buyer's weakness matrix.

Strategic Target Identification Matrix

The proprietary Emerge process by which a buyer identifies strategic acquisition candidates.

Strategic Value

The exceptional value placed by a willing buyer on a willing seller who fits the buyer's strategic matrix.

Subchapter S Corporation

A special corporate form of ownership, in which profit is taxed as direct income to the stockholders and thus is only taxed once, as would be true of a partnership. The stockholders still receive all the organizational benefits of a corporation, including limited liability. The Subchapter S designation can only apply to corporations with up to 35 stockholders.

Subordinated Debenture

An unsecured bond, in which payment to the stockholder will take place only after designated senior debenture holders are satisfied.


The feature of a system whereby, when the parts are properly interrelated and functioning, an output is achieved that is greater than or superior to the effects obtained when the parts function independently.

Tax Loss Carry-forward

A loss that can be carried forward for a number of years to offset future taxable income and perhaps be utilized by another firm in a merger or an acquisition.

Technical Insolvency

When a firm is unable to pay its bills as they come due.

Temporary Current Asset

Current Assets that will be reduced or converted to cash within the normal operating cycle of the firm.

Tender Offer Takeover

An unfriendly acquisition that is not initially negotiated with the management of the target firm. A tender off is usually made directly to the stockholders of the target firm.

Term Loan

An intermediate-length loan, in which credit is generally extended from one to seven years. The loan is usually repaid in monthly or quarterly installments over its life, rather than with one single payment.

Term Structure of Interest Rates

The term structure shows the relative level of short-term and long-term interest rates at a point in time.

Terms of Exchange

The buy-out ratio or terms of trade in a merger or an acquisition.


An announcement of a closed transaction containing language that could include a public or private offering, placement of debt, or merger or acquisition of a company.


Term which describes a professional intermediary.

Trend Analysis

An analysis of performance that is made over a number of years in order to ascertain significant patterns.

Trust Receipt

An instrument acknowledging that the borrower holds the inventory and proceeds for sale in trust for the lender.

Two-step Buy-out

An acquisition plan in which the acquiring company attempts to gain control by offering a very high cash price for 51 percent of the shares of the target company. At the same time the acquiring company announces a second lower price that will be paid, either in cash, stocks, or bonds, at a subsequent point in time.



Unannounced Deals

Many buyers and sellers do not want their transactions announced to avoid notifying customers, creditors, suppliers until both parties to the transaction are prepared for the outcomes.


The investment banking firm that brought the company public. In the IPO Summary section we include both the primary Underwriter, called the Lead Manager and the Co-Manager, when available.

Unrealized Taxable Income

Income from tax free sources such as bonds or annuities.

Unsecured Debt

A loan that requires no assets as collateral, but allows the bondholder a general claim against the corporation, rather than a lien against specific assets.

Valuation Pricing

Setting a value for anything.

Variable Costs

Costs that move directly with a change in volume. Examples are raw materials, factory labor, and sales commissions.

Value-added tax (VAT)

A government tax on the value added; a tax on the selling price of manufactured items less the cost of the materials and expenses used in their production.

Venture Capitalist

Venture capitalists raise capital (commonly known as risk capital) to invest in a business and provide advisory services during the term of their investment. The capital raised may be in the form of debt or equity and may be from private or public sources. They usually specialize in specific stages of investment and/or specific industries that they know well.


The degree of price fluctuation for a given asset, rate, or index; usually expressed as a variance or standard deviation.

Weighted Average Cost of Capital

The computed cost of capital determined by multiplying the cost of each item in the optimal capital structure by its weighted representation in the overall capital structure and summing up the results.

White Knight

A firm that management calls upon to help avoid an unwanted takeover offer. It is an invited suitor.

Working Capital Management

The financing and management of the current assets of the firm. The financial manager determines the mix between temporary and permanent "current assets" and the nature of the financing arrangement.

No glossary data for letter 'X'

In general, a return on an investor's capital investment. For bonds, the coupon rate of interest divided by the purchase price, called current yield. Also, the rate of return on a bond, taking into account the total of annual interest payments, the purchase price, the redemption value, and the amount of time remaining until maturity.Arbitrageur : A market trader who buysshares in takeover targets,usually after1 a bid is announced, where he believes there will be ahigher bid. Arbitrageurs ha

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