Glossary of Business, Corporate Finance and Investment Terms

Operating Profit (Or Loss)

This is the difference between the revenues of the firm and the related costs and expenses. Income from sources other than regular operations are excluded. Income taxes are excluded and cost unrelated to the operations of the business are also excluded. Operating Profit is also referred to as Net Operating Profit and Net Operating Income.

Operating Ratios

Operating Ratios measure a firm's operating efficiency and effectiveness by relating certain income and expense numbers from the income and expense statement to each other and to certain balance sheet numbers. Operating Ratios include: sales to cost of goods sold, operating expenses to income, and net profits to gross income. The ratios are particularly meaningful when comparisons are made to prior periods and with industry averages.


The right to purchase property, for a defined price, that is granted for consideration called the option price or option fee. If the option is not exercised by a certain date, it expires.

OTC Bulletin Board (OTCBB)

The OTCBB is the electronic listing of Bid and Asked quotations of Over the Counter (OTC) Stocks that do not meet the minimum net worth and other requirements of the NASDAQ stock listing system. It provides continuously updated data on domestic stocks that are not listed and traded on an organized exchange.

Outside Director

A director of a corporation who is not employed by the corporation. Outside Directors receive a fee for their service. They bring value to the board and corporation as a result of their knowledge, experience and sometimes relationships with third parties. Outside Directors are also usually unbiased.

Over the Counter Stocks (OTC)

These are stocks and other securities of corporations that do not meet the listing requirements of an organized exchange, or securities of corporations that have chosen Over the Counter trading. The rules of OTC securities trading are written and enforced by the National Association of Securities Dealers (NASD), a self-regulatory group. Prices of OTC securities are published in many daily newspapers.

Pac - Man Strategy

This is a defensive strategy used to defeat a hostile takeover bid where the target corporation begins buying the shares of the acquirer corporation or threatens to do so.

Parent Corporation

An operating corporation that owns or controls one or more subsidiary corporations through the ownership of voting stock. If the corporation is not an operating company, it is referred to as a Holding Company.

Participation Certificate

This is an interest in a single loan or a pool of loans evidenced by a written agreement or certificate.

Payment in Kind Securities

These are securities that pay their holders with more of the same type of security instead of cash. For example, bond holders will receive more bonds instead of cash payments.

Penny Stock

Penny Stocks are common shares of public companies that trade for under one dollar. They are generally thinly traded and are often targets for price manipulation.

Performance Stocks

A performance stock is also called a Growth Stock. These are stocks of fast growing companies that usually pay no dividends. All profits are reinvested in the company in order to help finance its growth. These companies generally take higher than average risks.

PIK Securities

See Payment in Kind Securities.
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