Glossary of Business, Corporate Finance and Investment Terms
Accounts Receivable Financing
Short term loan where accounts receivable are pledged as security for the loan.
Accounts Receivable Turnover
This is the ratio obtained by dividing total credit sales during an accounting period by average accounts receivable during that same period. The ratio indicates the number of times the receivables have been collected during the accounting period.
An investor wealthy enough to be exempt from SEC registration requirements. Generally, individuals or married couples need a minimum net worth of one million dollars or annual income of $200,000 for an individual, or $300,000 for a married couple for each of the two most recent years with the reasonable expectation that the minimum requirement will be met in the current year.
Two corporations are affiliated when one owns less than a majority of the voting stock of the other, or when they are both subsidiaries of the same corporation. A Subsidiary is always an Affiliate, but Subsidiary is always the preferred term.
Affiliated Person or Control Person
Someone who is in a position to exert direct control over the actions of a corporation. These persons include owners of 10% or more of the voting stock, senior level officers, directors, and people who are in a position to exert influence through them.
Refers to trading of a security after the Initial Public Offering.
This can mean overstating revenue in order to increase net income, or overstating expenses in order to reduce taxable income. Sometimes losses are hidden within subsidiaries. Other times, capital expenditures are written off as expenses. Also called "cooking the books." Often the purpose is to inappropriately inflate the price of the stock.
American Institute of Certified Public Accountants.
Air Pocket Stock
A stock that falls sharply usually after negative publicity, unexpected low earnings, or a loss.
A corporation incorporated under the laws of another country but operating in the United States. Compare to Foreign Corporation.
A real estate investment with a negative cash flow.
A contract sold by a life insurance company that guarantees a fixed or variable payment at a determined point in time.
The price at which a security is offered for sale on an exchange or in the Over the Counter market. Also called the Ask Price, Asking Price and Offering Price.
Asset Based Loan
This is a loan normally secured by accounts receivable, inventory, or balance sheet assets such as machinery or equipment. Interest rates on Asset Based Loans tend to be lower than unsecured loans because the lender has collateral that can be seized and liquidated if the loan is not repaid when due. Asset Based Loans are made by Finance Companies and Commercial Banks.
A stock that is desirable to purchase because the current price does not reflect the corporation's assets. Asset Play stocks are often takeover targets because they provide a way to acquire assets inexpensively.
This is a corporate raider that sells off major assets after acquiring control of a company. The proceeds are usually used to repay debt resulting from the acquisition. The object is to pay off the debt and still own a valuable operating company or other valuable assets.
Asset Test Ratio
See Quick Ratio.
This is an event that is nearly impossible to adequately prepare for, that occurs suddenly, and is a worst case scenario. It is the type of event that would likely make the corporation's stock price dive. An example would be the indictment of the CFO for securities violations.
Authorized Shares or Authorized Stock
The maximum number of shares of stock a corporation can issue under the terms of its Articles of Incorporation. A corporation is not required to issue all of its authorized shares of stock. Sometimes a corporation will hold back authorized stock for future acquisitions or other purposes.