Glossary of Business, Corporate Finance and Investment Terms
A tenant or company leasing equipment owned by the Lessor.
A landlord or company leasing its equipment.
Leverage is a technique that can multiply gains and losses. The most common leverage method involves borrowing funds in order to reduce the need for equity capital when making an investment. Leverage always involves increasing risk.
Leveraged Buyout (LBO)
A LBO of a corporation exists when the buyer uses borrowed funds that are secured by the assets of the company being acquired. The buyer may be required to use other funds to supplement the LBO funds.
Cash or assets readily converted into cash. Examples would be U.S. Treasury Bills and investment quality corporate bonds or other marketable securities.
This is the ability to quickly sell an asset without an affect on the price of the asset. Treasury securities would be highly liquid. Raw land would not be a liquid asset. Highly liquid assets tend to have a lower rate of return, but are safer because they can easily be converted to cash.
Mark to Market Accounting
Mark to Market Accounting or Fair Value Accounting refers to accounting for the fair market value of assets rather than the historical cost. This can change the values on the balance sheet of a firm as market conditions change. Historical cost accounting does not reflect the current market value of assets. Balance sheets primarily made up of marketable securities can change dramatically when economic conditions are unstable.
Multi - level Marketing (MLM)
Multi - level marketing is a marketing strategy whereby salespeople are compensated for both their sales and the sales of others they have recruited for the firm. MLM creates a downline of salespeople and a hierarchy of levels of compensation. MLM is sometimes referred to as network marketing, referral marketing, and pyramid selling. MLM strategies vary considerably. Most are legitimate business strategies. A few border on Pyramid Schemes. Examples of firms that utilize MLM are Amway, Avon Products, Herbalife, Mary Kay, Pre - Paid Legal Services, Primerica, and Shaklee Corporation.
Negative Working Capital
A situation where current liabilities exceed the current assets of a company. If the situation is not corrected, the company will find itself in a position where it cannot pay its obligations when due. This could result in insolvency and / or bankruptcy.
Net Current Assets or Working Capital
This is the difference between current assets and current liabilities.
Net Operating Income (NOI)
The amount of cash generated by a business after deducting operating expenses. NOI is calculated without considering loan payments.
Net Operating Profit (Or Loss)
See Operating Profit (Or Loss).
Also referred to as Net Cash Flow, the amount of cash generated by a business after deducting operating expenses and loan payments.
Net Quick Assets
These liquid assets are cash, marketable securities, and accounts receivable, less current liabilities. See Quick Ratio.
The amount determined by deducting total liabilities from total assets.
Non Current Asset
This is an asset that is not expected to be converted into cash, sold, or exchanged within one year. Examples are (1) Intangible Assets such as goodwill, trademarks, and patents, and (2) Fixed Assets such as machinery, equipment, and real estate.
A loan where the repayment obligation is tied directly and exclusively to the security for the loan. A loan where no personal guaranty is provided.