A

AAATop rating awarded to qualifying corporate bonds by the bond rating agencies such as Standard & Poor's (AAA) and Moody's (Aaa). These ratings mean: (1) the bonds are of the highest quality (are 'giltedged'), (2) carry the least degree of investment risk, and (3) are fully expected to pay both interestand principal on time. Other rating agencies use different designations. See also bond ratings.

AAA is in the Accounting & Auditing, Banking, Commerce, Credit, & Finance, Disaster Planning & Risk Management, Investing and Securities & Futures Trading subjects.

AAA appears in the definitions of the following terms: Standard & Poor's Ratings, bond ratings, andinvestment grade bond.

absorption costingMethod of costing a product in which all fixed and variable costs (however remote) are apportioned

to cost centers where they are accounted for (absorbed) using absorption rates. This method ensures that

all incurred costs are recovered from the selling price of a good or service, (assuming the final price is

acceptable to the customers). Also called full absorption costing. See also direct costing, and marginal

costing.

Absorption costing is in the Accounting & Auditing, Strategy, Entrepreneurship and Technology subjects.

absorption costing appears in the definitions of the following terms: absorption variance, direct costing, full absorption costing, back flush costing, and full costing.

arbitrage houseA financial institution that engages in arbitrage. Such firms search for market inefficiencies and securities which they feel are mispriced, and then undertake tradeswhich allow them to make riskless profits. Arbitrage opportunities are often quite difficult to detect, since mispricings can be very small. Also, arbitrage opportunities tend to disappear almost immediately since market forces act to reverse the opportunity. Because of these characteristics of arbitrage, many arbitrage houses are equipped with very sophisticated computer software and hardware to help them identify potentialopportunities and act on them very quickly. Many arbitrage houses also develop complex software-driven mathematical models to find mispricings and market inefficiencies.Term of the Day

associate companyFirm over which another firm exercises a degree of control which is less than the degree of control exercised over a subsidiary. In accounting, such control is typically taken to mean the ownership of at least 20 percent of voting shares, and some say in the management of the associate firm. Associated companies  usually have interlocking directorates to ensure they have common policies and complementary objectives.

associate company is in the Accounting & Auditing, Entrepreneurship, Management, & Small

Business and Investing subjects.

alternative orderTwo orders given to a broker, for which the execution of either one automatically cancelsthe other. One

example is combining a buy limit order with buy stop order.The buy limit order will only be executed if

the market price is below a specified price, and the buy stop order will only be executed if the market price is

above a certain price. If one order is executed, the other is cancelled. also called either-or order.

Term of the Day

assignmentTransfer of ownership of a property, or of benefits, interests, liabilities, rights under a contract (such as an insurance policy), by one party (the assignor) to another (the assignee) by signing a documentcalled deed of assignment. Compare with novation. See also absolute assignment and collateral assignment.

assignment is in the Agreements & Contracts and Corporate, Commercial, & General Law subjects.

assignment appears in the definitions of the following terms: batch cost, assignment under documentary credit, insubordination, cost allocation, and surety.Term of the Day

annual percentage rate (APR)Standardized method of quoting the effective interest rate (actual cost of credit) on consumer loans, specially where interest is computed on monthly or other non-annual basis. An APR includes all fees(except penalties), and takes into account the continual reduction of principal amount throughamortization. See also add on loan.

annual percentage rate (APR) is in the Accounting & Auditing, Banking, Commerce, Credit, & Finance and Investing subjects.

annual percentage rate (APR) appears in the definitions of the following terms: truth in lending, add-on loan, introductory rate, and adequate notice.

average strike optionA type of stock option used on Asian exchanges. The strike price in this type of option is based on the average asset price during a certain period of time, defined by a range ofdates called the "fixings." This type of option is less volatile than traditional options, which have a predetermined strike price.

accrued market discountAn increase in the market price of a discounted bond resulting from an approachingmaturity date, rather than from declining interest rates. The increase occurs because thebond holder will also receive payout at par upon maturity, so the price of the bond will increase gradually as maturity approaches.

Term of the Day

accounting policiesPrinciples, rules and procedures selected, and consistently followed, by the management of an organization (theaccounting

entity) in preparing and reporting the financial statements. Accounting policies deal specifically withmatters such

as consolidation of accounts, depreciation methods, goodwill, inventory pricing, and research and development costs.

Accounting policies must be disclosed in the annual financial statements. See alsosummary of significant accounting

policies.

accounting policies is in the Accounting & Auditing, Banking, Commerce, Credit, & Finance andEntrepreneurship, Management, & Small Business subjects.

accounting policies appears in the definitions of the following terms: accounting bases, accounting practice, summary of significant accounting policies (SSAP), auditor's qualified opinion, and accounting error.Term of the Day

adjusted basis valueOriginal cost or base price of a fixed asset from which depreciation is deducted, and to which capital expenditureis added.

It is a taxpayer's equivalent of book value, and is used to arrive at capital gain or capital loss (resulting from the sale of

an asset) for computing applicable tax. Also called adjustable basis value.

adjusted basis value is in the Accounting & Auditing, Banking, Commerce, Credit, & Finance andInvesting subjects.

adjusted basis value appears in the definitions of the following terms: carryover basis value,standard of value, and adjustable basis value.

Average Directional IndexADX. An indicator used in technical analysis that shows strength of a trend. It smoothes the difference between the negative directional indicator (-DI) and positive directional indicator (+DI), and is on a scale of 0 to 100. Index values above 40 indicate that the particular trend is strong, while values less than 20 indicates that a trend is weak and that an investor should not use a trend following system. The index only shows the strength of the trend, not whether or not it is trending upwards or downwards.

appealRequest, usually by a party losing a case in a lower court to a higher (appellate) court, to reverse or modify thelower

court's decision. Appellate courts, in general, deal with a appeal by notionally rehearing the case through

the trial notes (transcripts) before calling any witnesses. The appellant usually has to post an appeal-bond, topay for

the appellee's expenses in case the appeal is unsuccessful. In some civil cases, a winning party may appeal for an award of

a larger sum in damages.

appeal is in the Corporate, Commercial, & General Law subject.

appeal appears in the definitions of the following terms: appellee, 30-day letter, settlement office, mass market, and undifferentiated marketing.

accounting information system (AIS)A system, typically computer-based, used for storing, collecting, and analyzing a

company's financial and accounting data. Accounting information systems are generally used by executives to

make decisions, develop company strategies, and generatereports for shareholders, internal personnel,

and regulatory agencies. Accounting information systems also streamline accounting cycles and reduce the

incidence ofaccounting errors.

appraisal valueAppraiser's opinion (not determination) of the current worth of a property based on factors such as

area, location,improvements, and amenities. Generally, this value is arrived at by using one of

three methods: (1) Cost approach, (2) Income approach, or (3) Market comparison approach. Not to be

confused with assessed value. Also called appraised value.

appraisal value is in the Accounting & Auditing, General, Marine, & Life Insurance, Investing and Real Estate & Buildings subjects.

appraisal value appears in the definitions of the following terms: appraisal, market approach,appraised value, Housing and Economic Recovery Act (HERA), and income approach.

adjusted debit balanceValue used to determine a margin account's position, as required by Regulation T. This is the amount a customer owes a broker, minus profits on short sales and balances in aspecial miscellaneous account. If the adjusted debit balance is very small, the customer can withdraw cash or securities from a margin account.

APTArbitrage Pricing Theory. An alternative asset pricing model to the Capital Asset Pricing Model. Unlike the Capital Asset Pricing Model, which specifies returns as a linear functionof only systematic risk, Arbitrage Pricing Theory may specify returns as a linear function of more than a single factor.Thus, there is no clear risk-return trade-off in this model.

account partyEntity (usually an importer) who applies to a bank to establish a letter of credit (L/C) in favor of another entity (the

'accredited party' or 'beneficiary,' usually an exporter). However, where a finance company applies for a L/C on behalf

of an importer, the finance company is usually called the 'applicant' and the importer is called the 'account party.' Also

called accountee or applicant.

account party is in the Banking, Commerce, Credit, & Finance and International Trade & Relationssubjects.

account party appears in the definitions of the following terms: soft clause, confirmed irrevocable letter of credit (L/C), assignment under documentary credit, red clause, and accountee.

allianceComing together of two or more firms to create a unique organizational entity (such as a joint venture), in which each firm

retains its individual identity and internal control. The purpose of an alliance is to (1) achieve jointstrategic goals, (2)

reduce risk while increasing rewards and/or, (3) leverage resources. Since an alliance is neither an acquisition nor

a merger, it requires new control methods and new management skills.

alliance is in the Decision Making, Problem Solving, & Strategy and Entrepreneurship, Management, & Small Business subjects.

alliance appears in the definitions of the following terms: North Atlantic Treaty Organization (NATO),European Union (EU), league, social network, and Hope Now Alliance.

annuity1. A contract sold by an insurance company designed to provide payments to the holderat specified intervals, usually after retirement. The holder is taxed only when they starttaking distributions or if they withdraw funds from the account. All annuities are tax-deferred, meaning that the earnings from investments in these accounts grow tax-deferred until withdrawal. Annuity earnings are also tax-deferred so they cannot be withdrawn without penalty until a certain specified age. Fixed annuities guarantee acertain payment amount, while variable annuities do not, but do have the potential for greater returns. Both are relatively safe, low-yielding investments. An annuity has adeath benefit equivalent to the higher of the current value of the annuity or the amount the buyer has paid into it. If the owner dies during the accumulation phase, his or herheirs will receive the accumulated amount in the annuity. This money is subject to ordinary income  taxes in addition to estate taxes.

Term of the Day

acid test ratioKey measure of a firm's liquidity, it answers the question "Can this firm meet its current obligations from its liquid

assets if suddenly all sales stop?" More stringent than 'current ratio,' it excludes inventories (typically the

leastliquid of current assets) to concentrate on the more liquid assets of the firm. Usually an acid test ratio of 1.0 or

higher is considered satisfactory by lenders and investors. Also called acid ratio or quick ratio. Formula: (Current

assets - inventory value) ÷ current liabilities. See also current ratio.

acid test ratio is in the Accounting & Auditing, Banking, Commerce, Credit, & Finance and Investing subjects.

acid test ratio appears in the definition of the following term: current ratio.Term of the Day

assurancePart of corporate governance in which a management provides accurate and current information to

thestakeholders about the efficiency and effectiveness of its policies and operations, and the status of

itscompliance with the statutory obligations. Insurance cover against an eventuality that (sooner or later) must

occur; death of the person covered under a life insurance policy being the common one.

assurance is in the Entrepreneurship, Management, & Small Business and General, Marine, & Life

Insurancesubjects.

assurance appears in the definitions of the following terms: call-back pay, customer-supplier partnership,HACCP

process, commitment, and objectivity.

American-style optionAn option which can be exercised at any time between the purchase date and theexpiration date. Most options in the U.S. are of this type. This is the opposite of aEuropean-style option, which can only be

exercised on the date of expiration. Since an American-style option provides an investor with a greater degree of flexibility than aEuropean style option, the premium for an American style option is at least equal to or higher than the premium for a European-style option which otherwise has all the samefeatures. also called American option.

affirmative obligationsNASD requirements imposed on Nasdaq market makers, including: maintaining two-sided markets on a

continuous basis, quoting firm bid and ask prices, participating in the Small Order Execution System, and

reporting price and volume data for each Nasdaq security transaction  within 90 seconds of execution.

Term of the Day

absorption costingMethod of costing a product in which all fixed and variable costs (however remote) are apportioned to cost centerswhere they are

accounted for (absorbed) using absorption rates. This method ensures that all incurred costs are recovered from the selling

price of a good or service, (assuming the final price is acceptable to the customers). Also called full absorption costing. See

also direct costing, and marginal costing.

absorption costing is in the Accounting & Auditing, Decision Making, Problem Solving, &

Strategy,Entrepreneurship, Management, & Small Business and Industries, Manufacturing, & Technology subjects.

absorption costing appears in the definitions of the following terms: absorption variance, direct costing, full

absorption costing, backflush costing, and full costing.

BTerm of the Day

business planSet of documents prepared by a firm's management to summarize its operational and financialobjectives for the near future (usually one to three years) and to show how they will be achieved. Itserves as a blueprint to guide the firm's policies and strategies, and is continually modified asconditions change and new opportunities and/or threats emerge. When prepared for external audience(lenders, prospective investors) it details the past, present, and forecasted performance of the firm. And usually also contains pro-forma balance sheet, income statement, and cash flow statement, to illustrate how the financing being sought will affect the firm's financial position.

business plan is in the Entrepreneurship, Management, & Small Business and Planning & Schedulingsubjects.

business plan appears in the definitions of the following terms: Small Business Development Center (SBDC), business concept, loan application, forecast, and pro forma statement.

buy-writeAn approach used by investors to profit from the price at which an option trades by originating and selling

an option contract while they hold an opposite and equal positionon the asset that gives value to the security.

When an investor owns the asset underlying the option and writes a call to make the asset available for sale to

the owner of the option if the option is exercised, it is termed a buy-write call option. When an investor writes

a put with enough cash to cover the sale if the put is exercised, it is termed a buy-write put option. Also

called covered option.

balance of paymentsAn accounting record of all transactions made by a country over a certain time period, comparing

the amount of foreign currency taken in to the amount of domestic currency paid  out.

Term of the Day

bankruptcyLegal procedure for liquidating a business (or property owned by an individual) which cannot fully payits debts out of its current assets. Bankruptcy can be brought upon itself by an insolvent debtor (called 'voluntary bankruptcy') or it can be forced on court orders issued on creditors' petition (called 'involuntary bankruptcy'). Two major objectives of a bankruptcy are (1) fair settlement of the legalclaims of the creditors through an equitable distribution of debtor's assets, and (2) to provide the debtor an opportunity for fresh start. Bankruptcy amounts to a business-failure, but voluntary winding up does not. See also insolvency.

bankruptcy is in the Banking, Commerce, Credit, & Finance and Corporate, Commercial, & General Law subjects.

bankruptcy appears in the definitions of the following terms: material information, fair and equitable test, protective trust, prepackaged bankruptcy, and adjustment bond.Term of the Weekend

black economyUsually untraceable, and hence untaxable, business dealings that are not reflected in a country's gross domestic product

(GDP) computations. An integral part of most third-world and many first-world economies, it is a cash based system in

which transaction records are kept in secret account books (called 'number two'accounts). Though it employs illegal (and

even criminal) methods, it is a survival practice in repressive tax regimens or where legitimate expression of

entrepreneurial activity is made unnecessarily difficult by a maze ofregulations. Black economy and black money go hand

in hand. Also called parallel economy, shadow economy, or underground economy. See also informal economy.

black economy is in the Economics, Politics, & Society subject.

black economy appears in the definitions of the following terms: underground economy, black money, and parallel economy.

back-end valueThe price that is paid to shareholders after the buyer already has control over acompany in a two tier tender offer. This is an offer to buy a company in which the buyer offers to purchase enough shares in order to gain control of the company at a certain price, and then offers to purchase the remaining shares at a lower price. The amountthat is paid to the remaining shareholders is the last stage of a two tier tender offer.

Term of the Day

byproduct

Output other than the principal product(s) of an industrial process, such as sawdust or woodchips generated

inprocessing lumber. Unlike joint-products, byproducts have low value in comparison with the principal product(s) and

may be discarded or sold either in their original state, or after further processing.

byproduct is in the Environment & Pollution Control and Industries, Manufacturing, & Technologysubjects.

byproduct appears in the definitions of the following terms: phenols, reactive, toxic waste, black liquor tax credit, and abatement cost.

business owner policy (BOP)An insurance package designed to cover both property and liability insurance which is in general more reasonably priced than other options. A BOP is typically attractive for small businesses that want to avoid the higher costs of separate insurance policies. Small and medium-sized businesses are usually eligible for this type of insurance package but largecorporations will not meet the eligibility requirements due to the greater risk involved in their business operations.

beneficial ownerEntity that enjoys the possession and/or benefits of ownership (such as receipt of income) of a property even though its

ownership (title) is in the name of another entity (called a 'nominee' or 'registered owner'). Use of a nominee (who may be

an agent, custodian, or a trustee) does not change the position regarding tax reporting and tax liability, and the beneficial-

owner remains responsible.

beneficial owner is in the Accounting & Auditing, Corporate, Commercial, & General Law, Investingand Real Estate & Buildings subjects.

beneficial owner appears in the definitions of the following terms: nominee, nominee shareholding,non-discretionary proposal, nominee account, and custodial agreement.

blue chipLarge, prestigious, prosperous, and stable corporation. Blue chip firms have a

solid record of earnings anddividend payments in both good and bad times, and have a strong long-term growth potential.

The term comes from the game of poker in which the highest value chip is blue. Called first section in Japan.

blue chip is in the Entrepreneurship, Management, & Small Business, Investing and Securities & Futures Trading subjects.

blue chip appears in the definitions of the following terms: large capitalization stock, opportunity cost of capital, junk bond, Nikkei stock average, and Dow Jones Industrial Average (DJIA).

blue collarRefers to employees whose job entails (largely or entirely) physical labor, such as in a factory or workshop. For a piece

of work to be termed blue collar, it should be directly related to the output generated by the firm, and its end result should

be identifiable or tangible. Historically, in the West, manual workers wore blue shirt collars but clerical workers wore

white. See also white collar.

blue collar is in the HR, Recruiting, Teams, & Training subject.

blue collar appears in the definitions of the following terms: white collar and working class.

barterTrading in which goods or services are exchanged without the use of cash. Resorted-to usually

in times of high inflation  or tight money, barter is now a common form of trading in deals such

as offers to buy surplus goods inexchange for advertising space or time. Advent of internet has transformed bartering from

largely person-to-person to mainly business-to-business exchange where items ranging

from manufacturing capacity to steel andpaper are bartered across international borders on a daily basis.

barter is in the International Trade & Relations and Purchasing & Procurement subjects.

barter appears in the definitions of the following terms: market, trade out, contra deal, informal economy, and 1099-B.

balloon maturityA repayment schedule for an issue of bonds in which a large number of the bonds comedue at the same time, typically the final maturity date. This term applies only to bonds which do not have a sinking fund provision. A balloon maturity can put company cash flow under stress if adequate preparations are not made.

Buttonwood AgreementAn agreement signed in 1792 between twenty-four stockbrokers that effectively created the New York Stock Exchange. The terms of the agreement indicated that stockbrokers were to only deal with each other (no auctioneers), and that they would use a set commission  rate of 0.25%. The agreement was so named because it was signed under a buttonwood tree outside of 86 Wall Street.

buyerParty which acquires, or agrees to acquire, ownership (in case of goods), or benefit or usage (in case ofservices),

in exchange for money or other consideration under a contract of sale. Also called purchaser. See also customer.

Professional purchaser specializing in a specific group of materials, goods, or services, and experienced

inmarket analysis, purchase negotiations, bulk buying, and delivery coordination.

buyer is in the Accounting & Auditing, Corporate, Commercial, & General Law and Purchasing & Procurement subjects.

buyer appears in the definitions of the following terms: minimum subscription, Loan Credit Default Swap (LCDS), confirmation, exclusive listing, and assumption fee.

broker recommendationAn opinion given by an analyst to his/her clients about whether a given stock is worthbuying or not. Wall Street investment firms employ thousands of analysts whose job is toissue reports and broker recommendations on specific stocks. These analysts typically look at the company's fundamentals and then build financial models in order to project future  trends, most notably future earnings. They then use these projections as a basis for issuing broker recommendations on whether or not they think the stock should bebought or sold. Each brokerage has its own terminology, which makes it

difficult to compare broker recommendations between brokerages, but the most common ratingsare (in descending order of quality) strong buy, buy, hold, and sell. also calledrecommendation.

bull trapA sign which supposedly indicates that a security is reversing its path, and is starting torise instead of decline, but in actuality the security continues to decline after this signal is seen. It is seen as a trap because some people will see this signal and purchase thestock because they believe they will benefit from this increase in value, but they are trapped with a poor performing stock when they find out that the stock is still falling.

bureaucracySystem of administration distinguished by its (1) clear hierarchy of authority, (2) rigid division of labor, (3) written and

inflexible rules, regulations, and procedures, and (4) impersonal relationships. Once instituted, bureaucracies are difficult

to dislodge or change. See also Parkinson's Law and Peter Principle.

bureaucracy is in the Entrepreneurship, Management, & Small Business subject.

bureaucracy appears in the definitions of the following terms: intrapreneurship, doublespeak,technocracy, buying structure, and standards.Term of the Day

business continuity planSet of documents, instructions, and procedures which enable a business to respond

to accidents, disasters,emergencies, and/or threats without any stoppage or hindrance in its key operations. Also

called business resumption plan, disaster recovery plan, or recovery plan. See also business continuity planning.

business continuity plan is in the Disaster Planning & Risk Management and Entrepreneurship, Management,

& Small Business subjects.

business continuity plan appears in the definitions of the following terms: disaster management andexecutive

succession plan.

bankruptcyA proceeding in a federal court in which an insolvent debtor's assets are liquidated and the debtor is relieved of further liability. Chapter 7 of the Bankruptcy Reform Act dealswith liquidation, while Chapter 11 deals with reorganization.

Buttonwood agreementAn agreement signed in 1792 between twenty-four stockbrokers that effectively created the New York Stock Exchange. The terms of the agreement indicated that stockbrokers were to only deal with each other (no auctioneers), and that they would use a setcommission rate of 0.25%. The agreement was so named because it was signed under a buttonwood tree outside of 86 Wall Street

buying hedge

Buying futures to hedge against the sale of a cash commodity. An investor might use a buying hedge if he/she expects to buy a certain amount of the commodity in the future, but is worried about price fluctuations. He/she will buy a futures contract in order to be able to buy the commodity at a fixed price later. also called long hedge.

Term of the Day

Black FridayThe day after Thanksgiving Day that signals the beginning of the Christmas shopping season. Retailers kick off the

season by offering deep discounts on products for those shoppers lucky enough to obtain the limited supply. Brick

and mortar stores traditionally open much earlier than normal business hours, including a few at 12:00 AM

midnight. In recent years, e-commerce sites have begun offering discounts and free shipping on Black Friday, as

well as created their own shopping holiday in Cyber Monday.

Black Friday is in the Business Communications & Presentations, E-Commerce and General Businesssubjects.

Black Friday appears in the definitions of the following terms: Crash of 1929, cornering the market, cyber

Monday, and Crash of 1987.Term of the Day

binary systemNumber system that uses only two values (0,1; on, off) to represent codes and data. Since zeros and ones can be

easily represented by two voltages, the binary system is the foundation on which digital technology is built. Every

digital computer whether a pocket calculator or a mainframe uses the same binary notation.

binary system is in the Computer Hardware, Software, & Security and Information Science &

Technologysubjects.

CTerm of the Day

cyber MondayRefers to the first Monday following the Thanksgiving Holiday weekend, and is considered a

prime shopping dayfor online shoppers and retailers. Following Black Friday, retailers offer a number of specials

that are only available to online shoppers. Free shipping is often offered as an incentive for purchases made on cyber

Monday.

cyber Monday is in the Banking, Commerce, Credit, & Finance and Internet & World Wide Web subjects.

cyber Monday appears in the definition of the following term: Black Friday.

cash delivery

A requirement of certain futures contracts that the underlier should not be delivered to the buyer at maturity, and instead the value of the underlier should be paid out. Cash delivery  often occurs when the asset is difficult or impossible to deliver, such as in the case of a stock index. also called cash settlementTerm of the Day

complianceCertification or confirmation that the doer of an action (such as the writer of an audit report), or

the manufactureror supplier of a product, meets the requirements of accepted practices, legislation,

prescribed rules andregulations, specified standards, or the terms of a contract. See also conformance.

compliance is in the Corporate, Commercial, & General Law, Industries, Manufacturing, &

Technology,Purchasing & Procurement and Quality Control & Management subjects.

compliance appears in the definitions of the following terms: threat, time value map, security, operational

performance, and hotel.Term of the Day

confirmed irrevocable letter of credit (L/C)L/C that adds the endorsement of a seller's bank (the accepting-bank) to that of the buyer's bank (the issuing bank).

It provides the highest level of protection to the seller because not only the L/C cannot be canceled (or

itsterms changed) unilaterally by the buyer (the account party), but also both banks involved in

the transaction guaranty  its payment on its due (maturity) date.

confirmed irrevocable letter of credit (L/C) is in the Banking, Commerce, Credit, &

Finance andInternational Trade & Relations subjects.

confirmed irrevocable letter of credit (L/C) appears in the definitions of the following terms: letter of

credit (L/C) and irrevocable letter of credit (L/C).

crossover ruleA rule in technical analysis stating that an investor in a particular financial instrument, such as

a stock, takes a long position when the positive directional indicator (+DI) portion of the Directional

Movement Index (DMI) crosses above the negative directional indicator(-DI) portion. A short position is

initiated when the -DI crosses above the +DI.

Term of the Day

core competenciesA unique ability that a company acquires from its founders or develops and that cannot be easily imitated. Core

competencies are what give a company one or more competitive advantages, in creating and delivering value to

its customers in its chosen field. Also called core capabilities or distinctive competencies. See also core rigidities.

core competencies is in the Decision Making, Problem Solving, & Strategy and Entrepreneurship, Management,

& Small Business subjects.

core competencies appears in the definitions of the following terms: affiliate model, inside-out

strategy,competitive advantage, core capabilities, and asset-led.Term of the Day

certificate of originDocument that certifies a shipment's country of origin. It is used between members of a trading block or where

special privileges are granted to goods produced in certain countries. Certificate of origin is commonly issued by

a trade promotion office, or a chamber of commerce in the exporting country. Also called declaration of origin.

certificate of origin is in the Customs Documentation & Procedures, International Trade &

Relations andShipping, Transport, & Travel subjects.

certificate of origin appears in the definitions of the following terms: letter of credit (L/C), documentary

draft,shipping documents, evidence of origin, and documentary credit

Term of the Day

customs valueValue of imported goods as appraised by the customs and used as the basis for assessing the amount of import

duty and other taxes. It may be computed in several ways, but the most-preferred method is transaction-valuewhich

(in addition to the price paid by a buyer to a seller) includes other costs incurred by the buyer, such

aspacking costs, license fee or royalty, and any other sum(s) that accrue to the seller. It is the customs officer(and

not the importer, exporter, or customs broker) who has the final say in assigning this value. Also called customs

import value.

customs value is in the Accounting & Auditing, Banking, Commerce, Credit, & Finance, Customs

Documentation & Procedures and International Trade & Relations subjects.

customs value appears in the definitions of the following terms: transaction value and agreement on customs

valuation.

confidential informationPrivileged communication shared with only a few people for furthering certain purposes, such as with an attorneyfor

a legal matter, or with a doctor for treatment of a disease. Receiver of confidential information is generally prohibited from

using it to take advantage of the giver. Also called privileged information. See also proprietary information.

confidential information is in the Corporate, Commercial, & General Law subject.

confidential information appears in the definitions of the following terms: unauthorized access,accountant client privilege, trade secret, privileged information, and breach of confidence.

combined loan to value ratioCLTV Ratio. A ratio that indicates the risk of a homeowner going into default if a

homepurchase is funded by multiple mortgages. It is calculated by dividing the total value of the combined

mortgages by the value of the property. High values (75-85%) are usuallyrequired by creditors before

they extend a second mortgage or refinancing option to a homeowner, although lower values indicate that there

is less risk of default (the loan value is a smaller percentage of the overall home value).

corporate citizenshipThe legal status of a corporation in the jurisdiction in which it was incorporated.

A company's role in, or responsibilities towards society. See corporate social responsibility.

corporate citizenship is in the Corporate, Commercial, & General Law and Entrepreneurship, Management, & Small Business subjects.

corporate citizenship appears in the definition of the following term: corporate social responsibility.

consumer discretionaryA category of industries, made up of companies which deal with products or services that are not necessities. The degree of spending and amount of consumption of these products and services varies depending upon the individual. These industries includeautomobiles, high-end clothing, restaurants, hotels, and luxury goods.

currency in circulationThe total amount of paper currency, coins, and demand deposits that is held byconsumers and businesses rather than by financial institutions, central banks, and theU.S. Treasury. Currency in circulation is thus the sum of currency held by the public, and is a component of a bank's reserves. It is an important factor that the Federal Open Market Committee takes into account when setting the money supply, since a decline in the currency in circulation means that banks don't have as many demand deposits in their reserve. This can mean that fewer loans could be extended to borrowers because the bank will have to make up for a decline in reserves.

coattail investingA trading strategy in which an investor tries to duplicate the performance of a successful (and usually well-

known) investor by copying their trades as soon as they are madepublic. This is a risky strategy, since there is

a time delay between when the successful investor's trades occur and when they are made public, and because

the strategy disregards overall portfolio considerations, risk tolerance, and other unique circumstances.

constant dollar planAn investment strategy designed to reduce volatility in which securities, typically mutual funds, are purchased in fixed dollar amounts at regular intervals, regardless of whatdirection the market is moving. Thus, as prices of securities rise, fewer units are bought, and as prices fall, more units are bought. also called constant dollar plan. also calleddollar cost averaging.

currency overlayCurrency risk management that is outsourced to specialist firm otherwise called the overlay manager. Most

often used for international investment portfolios the overlay manager acts as risk manager to limit risk

from adverse movements and to assist in profit building . Hedging is conducted by overlay manager on behalf

of firm in order to achievefirm's objectives. Most currency overlay is specialized for example profiting from

currency movements.

covered warrantA right (but not an obligation) to buy or sell a set amount of stock, bonds or othersecurities from a financial

institution at a specific price and date. Unlike a regular warrant, which is issued by a company and allows

a holder to buy or sell that company's securities, a covered warrant is issued by a financial institution and

can apply to outsidesecurities. For example, a bank might issue a covered warrant on shares of Microsoft. The

warrant is "covered" because the issuing organization owns at least some of theunderlying securities.

certificate of deposit (CD)Receipt issued by a depository institution (such as a bank, credit union, or a finance or insurance company) to a depositor

who opens a certificate account or time deposit account. Issued in a negotiable or non-negotiable form, it states the (1)

amount deposited, (2) rate of interest, and (3) minimum period for which the deposit should be maintained without

incurring early withdrawal penalties.

certificate of deposit (CD) is in the Banking, Commerce, Credit, & Finance and Investing subjects.

certificate of deposit (CD) appears in the definitions of the following terms: deposit note, money market deposit account, certificate account, bank note, and discount certificate.

currency pairThe two currencies used in a foreign exchange transaction. The currency pair consists of a base currency and a counter currency. The value of the currency pair is determined by the rate at which one unit of the base currency is converted into units of the countercurrency. For example, a currency pair could be U.S. dollars/Japanese Yen or Swiss Francs/British pounds.

conflict of interestA situation that has the potential to undermine the impartiality of a person because of the possibility of a clash between

the person's self-interest and professional interest or public interest.

A situation in which a party's responsibility to a second-party limits its ability to discharge its responsibility to athird-

party.

conflict of interest is in the Corporate, Commercial, & General Law and Entrepreneurship, Management, & Small Business subjects.

conflict of interest appears in the definitions of the following terms: interest of director, control person, duties of directors, blind trust, and investment adviser.

counter currencyThe second currency in a currency pair. In a currency exchange, the exchange rate is quoted as the units of the counter currency in terms of a single unit of a base currency. For example, in a currency exchange of Japanese Yen for British pounds, the Yen is the counter currency. also called quote currency or terms currency.

Term of the Day

consolidated financial statementFinancial information presentation in which the assets, equity, liabilities, and operating accounts of a firm and

itssubsidiaries are combined (after eliminating all inter-firm transactions) and shown as belonging to a singlereporting

entity. Also called combined financial statement or consolidated accounts.

consolidated financial statement is in the Accounting & Auditing subject.

consolidated financial statement appears in the definitions of the following terms: group currency,consolidated accounts, consolidation, combined financial statement, and acquisition accounting.Term of the Day

clientGeneral: Customer of a professional service provider, or the principal of an agent or contractor.

Computing: Hardware device (such as a personal computer) or a software application (such as a word-processor) that

requests and makes use of services (such as file-transfer and storage) provided by another computer called the server.

Normally, a user interacts (interfaces) only with a client whereas the server might be out of sight. A user logged on to

a website is using a client computer (with the browser as the client software) that is connectedvia internet to a server

(website's computer).

client is in the Computer Hardware, Software, & Security and Entrepreneurship, Management, & Small Business subjects.

client appears in the definitions of the following terms: turnkey, contractee, concept statement, prime broker, and expense account.Term of the Day

chattelTransferable personal property. It includes leasehold land (called chattel real) and furniture, jewelry, movable

machinery, rights (such as copyright and patents), securities, vehicles, etc., (called chattel personal), but excludes freehold

land and items such as fixtures or equipment permanently affixed to a building or the ground.

chattel is in the Banking, Commerce, Credit, & Finance and Corporate, Commercial, & General Lawsubjects.

chattel appears in the definitions of the following terms: personal property, chattel real, and replevin.

commodity block currencyA currency of a country that maintains an economy strongly related to the price fluctuations  of a

certain commodity. An example of this currency is the strong tie between Canada's economy and its tie to the

price of oil which affects the price of the Canadian dollar.

Term of the Day

consistency principleAccounting: The idea in accounting that once an accounting method is adopted, it should be followed consistently from

one accounting period to the next. If, for any reason, the accounting method is changed, a full disclosure of the change and

an explanation of its effects on the items of the financial statements must be given.

One of the duties of an auditor is to make sure the consistency principle is being followed because, without this, any

change might make correct interpretation of the financial data impossible. Also called consistency concept. See

also accounting concepts.

consistency principle is in the Accounting & Auditing subject.

consistency principle appears in the definition of the following term: consistency concept.

currency tradingThe act of buying and selling world currencies. Currency trading is most often engaged in by banks and

other institutions, for the purposes of international trade. Individual investors may engage in currency trading

as well, attempting to benefit from variations in the exchange rates of the currencies.

clearinghouse fundsFunds represented by a personal or business check that pass between Federal Reserve

System banks prior to approval of credit. Clearinghouse funds are in the process of being transmitted and

reconciled through a central processing mechanism. Since these funds have to be processed by the

central clearing mechanism, they might not beavailable as soon as the check is deposited in an account (there

is often a delay of a few days ).

Term of the Day

chairman of the boardHighest ranking officer in a firm's board of directors who presides over the board's meetings, but may or may not have actual executive authority. In smaller firms, usually the same person holds the positionof chairman and chief executive officer. Also called chairperson of the board. See also board of directors.

chairman of the board is in the Entrepreneurship, Management, & Small Business subject.

chairman of the board appears in the definitions of the following terms: Buffett, Warren andchairperson of the board.

covered straddleA straddle constructed on shares of stock already owned by the holder. A covered straddle consists of writing a call and a put with the same strike price and expiration against stocks that the holder owns. A covered straddle is not a true covered position, since assignment for the short put would actually require additional stock.

Term of the Day

collection letterSeller or exporter's order that accompanies a demand draft or time draft (with shipping and othercollection documents) and instructs the collecting and remitting banks on interest charges, demurragecharges, case of need, protest, etc. Also called collection order. Not to be confused with letter of collection.

collection letter is in the Banking, Commerce, Credit, & Finance and International Trade & Relationssubjects.

collection letter appears in the definitions of the following terms: advice of acceptance, collection order, and letter of collection.

consumer sentiment indexAn index which measures consumers' attitudes towards the economy. The index was normalized to

the value of 100 in 1964. The index surveys people on their feelings about their individual financial situation,

and the overall economy's situation in the present and in the future. This index is published monthly by the

University of Michigan.

covered callThe selling of a call option while simultaneously holding an equivalent position in theunderlier. This is an attempt to take advantage of a neutral or declining stock. If theoption expires unexercised, the writer keeps the premium. If the holder exercises the option, the stock must be delivered, but, because the writer already owns the stock, riskis limited. This is the opposite of an uncovered call, when the writer sells a call for a stock that he/she does not already own, a dangerous strategy with unlimited risk.

CLUChartered Life Underwriter. A designation granted by the American College in Bryn Mawr, Pennsylvania to individuals who have completed training in life insurance and personal insurance planning. To obtain the designation, individuals have to completeadvanced courses and exams in several topics including insurance, investments,taxation, employee benefits, estate planning, accounting, management and economics.

Term of the Day

commissionMutually agreed upon, or fixed by custom or law, fee accruing to an agent, broker, or salesperson for facilitating,

initiating, and/or executing a commercial transaction.

Formal body comprising of one or more experts formed on an ad hoc or continuing basis to address, debate, and/or

exhaustively investigate matters within the expertise of its members or within the scope of the commission's mandate.

Unlike councils, commissions may have advisory, quasi-judicial, or regulatory powers.

commission is in the Accounting & Auditing and Corporate, Commercial, & General Law subjects.

commission appears in the definitions of the following terms: compensation plan, International Standards Organization (ISO), renewal commission, compensation structure, and flat commission.

D

DSP1. Direct Stock Purchase Plan. A SEC-regulated program which enables

a company tosell shares of stock directly to investors, rather than through a broker, enabling the investors

to avoid paying a commission. DSPs are a good way to invest small amountssince you don't even have to be a

current shareholder in order to purchase the shares. The company will not charge you a commission, but they

may charge you a small fee in order to set up a stock purchase account. Direct Stock Purchase Plans are

not related toDirected Share Programs (which have the same acronym, DSP).

2. Directed Share Program. A plan designed to allow company employees, their relatives, and

other parties with a relationship to the company to purchase stock as part of a public offering. The

directed share program sets aside a quantity of stock for this purpose which qualified parties may purchase at

the public offering price.

Term of the Day

demand loanLoan (such as an overdraft) with or without a fixed maturity date, but which can be recalled anytime (often on a 24-hour notice) by the lender and must be paid in full on the date of demand. Also, theborrower can pay off a demand loan at any time without incurring early-payment penalties. Also calledcall loan or money at call.

demand loan is in the Accounting & Auditing and Banking, Commerce, Credit, & Finance subjects.

demand loan appears in the definitions of the following terms: time loan, money at call, statute barred debt, call loan, and on demand.

dual-purpose fundA closed-end fund which distinguishes between common shareholders and preferredshareholders for distribution purposes. Common shareholders receive all distributions from capital gains, while preferred shareholders receive all distributions from dividendand interest income. The class of shares sold to common shareholders is called capital shares, and this group of shareholders generally has a less stable payment stream. Theclass of shares sold to preferred shareholders is called income shares, and their income stream is relatively more stable. When a dual-purpose fund is set up, a liquidation date is specified. On the liquidation date, preferred shareholders have the first right to payoutsfrom the fund, but they can only be paid up to the par value of their shares. Common shareholders have rights to all the remaining capital from the fund.

declining balance depreciationMethod of computing depreciation in which the written down or book value (purchase price - accumulated

depreciation) of a capital asset is reduced by a fixed percentage rate. This method results in larger depreciation amounts in

the earlier years of an asset's useful life and progressively lower amounts in later years, and isemployed where the usage of

an asset remains generally uniform despite the asset's age. Formula: 1- (Residual value ÷ Cost)^1/N where N is the

number of years in the asset's estimated useful life. Also called diminishing balance depreciation, and reducing balance

depreciation. See also straight line depreciation.

declining balance depreciation is in the Accounting & Auditing and Banking, Commerce, Credit, &

Finance subjects.

declining balance depreciation appears in the definitions of the following terms: straight line depreciation, reducing balance depreciation, and accelerated depreciation.

debt<p>A duty or obligation to pay money, deliver goods, or render service under an express or implied agreement. One who

owes, is a debtor or debitor; one to whom it is owed, is a debtee, creditor, or lender.</p> <p>Use of debt in

an organization's financial structure creates financial leverage that can

multiply yield on investmentprovided returns generated by debt exceed its cost. Because the interest paid on debt can be

written off as anexpense, debt is normally the cheapest type of long-term financing.</p>

debt is in the Accounting & Auditing and Banking, Commerce, Credit, & Finance subjects.

debt appears in the definitions of the following terms: factoring, cash flows from financing activities,agency cost view, sinking fund provision, and risk-based pricing.

Directional Movement IndexDMI. An indicator used in technical analysis to determine if a financial instrument, such as a stock, is trending in particular direction. It is broken into the positive directional indicator (+DI), negative directional indicator (-DI) and Average Directional Index (ADX). The value of the index can be zero. The higher the value of the DMI, the better thechance that the stock will move.

down-and-in barrier optionA type of barrier option in which the spot price of the underlying is set above the barrier level , and the price of the underlying must close lower in order for the option to be exercised. It is named "down-and-in" because the right to exercise the option appears if the price of the underlying is below the barrier.

dividend yieldAnnual rate of return on common stock (ordinary shares) or preferred stock (preference shares), computed by dividing the

annual dividend by the shares' market price. Dividend yield reflects the return on the current'opportunity value,' and not on

the historical cost of the investment. As the price of the shares declines, the dividend yield goes up indicating that the

shares are priced cheaply and are a 'good buy.' Such shares usually attract risk averse investors.

dividend yield is in the Accounting & Auditing, Banking, Commerce, Credit, & Finance, Investing andSecurities & Futures Trading subjects.

dividend yield appears in the definitions of the following terms: equity fund, growth investing, fixed income security, value stock, and Garman Kohlhagen model.

debenture<p>A promissory note or a corporate bond which (in the US) is backed generally only by the reputation andintegrity of

the borrower and (in the UK) by the borrower's specific assets.</p> <p>When unsecured, it is called a bare debenture

or naked debenture; when secured by a charge on a specific property, it is called a mortgage debenture.</p>

debenture is in the Banking, Commerce, Credit, & Finance and Securities & Futures Trading subjects.

debenture appears in the definitions of the following terms: convertible debt, unsecured debt,redeemable debenture, shareholder loan, and average life.

demergerThe act of splitting off a part of an existing company to become a new company, which operates completely separate from the original company. Shareholders of the original company are usually given an equivalent stake of ownership in the new company. A demerger is often done to help each of the segments operate more smoothly, as they can now focus on a more specific task. opposite of merger.

Term of the Day

debentureA promissory note or a corporate bond which (in the US) is backed generally only by the reputation and integrity of

theborrower and (in the UK) by the borrower's specific assets. When unsecured, it is called a bare debenture or naked debenture;

when secured by a charge on a specific property, it is called a mortgage debenture

debenture is in the Banking, Commerce, Credit, & Finance and Securities & Futures Trading subjects.

debenture appears in the definitions of the following terms: convertible debt, unsecured debt, redeemable

debenture, shareholder loan, and average life.Term of the Day

discoveryPre-trial disclosure process during which several legal devices can be employed by any

litigating party to obtain relevant  non-privileged information from the opposing or non-opposing party/parties. These

devices includedepositions, examinations of witnesses, inspection of documents, and interrogatories. If any party is

unwilling to cooperate, the court may subpoena the party or the documents, or (after failure to make discovery)

dismiss theaction or enters a summary judgment.

discovery is in the Corporate, Commercial, & General Law subject.

discovery appears in the definitions of the following terms: oil and gas limited partnership, protective

order,recension, appreciative inquiry, and marketing research.

daily trading limitThe highest and lowest prices that a commodity or option is permitted to reach in a giventrading session. Once reached, no trading occurs on that commodity or option until the following session. also called fluctuation limit or price limit

Term of the Day

demographic factorsSocioeconomic characteristics of a population expressed statistically, such as age, sex, education level,income level,

marital status, occupation, religion, birth rate, death rate, average size of a family, average age at marriage.

A census is a collection of the demographic factors associated with every member of a population.

demographic factors is in the Economics, Politics, & Society and Statistics, Mathematics, & Analysissubjects.

demographic factors appears in the definitions of the following terms: demographic environment,demographics,

and demographic segmentation.

dynamic asset allocationAn investing strategy that seeks to expose an investor to a wide variety of investmentswithout putting the principal at risk. The allocation is dynamic because the investmentshifts between a zero-coupon bond or interest-bearing security and an underlying equity investment. A dynamic asset allocation is used in constant proportion portfolio insurance.also called guaranteed linked notes

distribution channelA path through which goods and services flow in one direction (from vendor to the consumer), and the paymentsgenerated

by them that flow in the opposite direction (from consumer to the vendor). A marketing channel can be as short as being

direct from the vendor to the consumer or may include several interconnected intermediariessuch

as wholesalers, distributors, agents, retailers. Each intermediary receives the item at one pricing point and moves it to the

next higher pricing point until it reaches the final buyer. Also called channel of distribution or marketing channel.

distribution channel is in the Advertising, Marketing, & Sales and Distribution & Logistics subjects.

distribution channel appears in the definitions of the following terms: push promotional strategy,channel width, distribution, node, and marketing channel.

E

EBITDARAn approximate measure of a company's operating cash flow based on data from the company's income statement. Calculated by looking at earnings before the deduction ofinterest expenses, taxes, depreciation, amortization, and rent. Similar to, but less common than, Earnings Before Interest, Taxes, Depreciation, and Amortization.

Term of the Day

exchange ratePrice for which the currency of a country can be exchanged for

another country's currency. Factors thatinfluence exchange rate include (1) interest rates, (2) inflation rate, (3) trade

balance, (4) political stability, (5) internal harmony, (6) high degree of transparency in

the conduct of leaders and administrators, (7) general state of economy, and (8) quality of governance.

exchange rate is in the Banking, Commerce, Credit, & Finance, Currency Trading and Economics, Politics, &

Society subjects.

exchange rate appears in the definitions of the following terms: exchange rate mechanism (ERM), two tier

market, current rate method, foreign exchange contract, and managed float.

externalitiesFactors whose benefits (called external economies) and costs (called external diseconomies) are not reflected in the market

price of goods and services. Externalities are a loss or gain in the welfare of one party resulting from an activity of another

party, without there being any compensation for the losing party. Externalities are an important consideration in cost-

benefit analysis

externalities is in the Decision Making, Problem Solving, & Strategy, Economics, Politics, & Societyand Planning & Scheduling subjects.

externalities appears in the definitions of the following terms: external economies, pure private good, and external diseconomies.

expenditurePayment of cash or cash-equivalent for goods or services, or a charge against available funds in settlement of

anobligation as evidenced by an invoice, receipt, voucher, or other such document. See also revenue expenditure,capital

expenditure.

expenditure is in the Accounting & Auditing and Banking, Commerce, Credit, & Finance subjects.

expenditure appears in the definitions of the following terms: surplus reserve, joint return, benefit principle, mirroring and matching, and taxation principles.

export subsidyGovernment help to exporters, generally in

two forms (1) Service subsidy: trade information, trade shows,feasibility studies,

foreign representation, etc. (2) Cash subsidy: (a) rebate on imported raw materials and duty-

free import of manufacturing equipment (called indirect cash subsidy); or (b) drawback as a

percentage of thevalue of exports (called direct cash subsidy). Although World trade

Organization (WTO, formerly GATT)recognizes that subsidies hinder fair competition and

distort trade practices, it has not been able to defineprecisely what kind of assistance constitutes a

subsidy.

export subsidy is in the Banking, Commerce, Credit, & Finance, Economics, Politics, & Society andInternational Trade & Relations subjects.

export subsidy appears in the definitions of the following terms: drawback, Cairns group, trade liberalization, and non tariff barrier (NTB).

electronic commerce (E-Commerce)Business conducted through the use of computers, telephones, fax machines, barcode readers, credit cards,automated teller

machines (ATM) or other electronic appliances (whether or not using the internet) without theexchange of paper-

based documents. It includes activities such as procurement, order entry, transaction

processing, payment, authentication and non-repudiation, inventory control, order fulfillment, and customer support.

When a buyer pays with a bank card swiped through a magnetic-stripe-reader, he or she is participatingin e-commerce.

electronic commerce (E-Commerce) is in the Banking, Commerce, Credit, & Finance, E-Commerceand Internet & World Wide Web subjects.

electronic commerce (E-Commerce) appears in the definitions of the following terms: authentication key, social commerce, Rivest Shami Adleman (RSA) method, Open Financial Exchange (OPX), andelectronic hub.

exchange offerAn offer made by a company to give one security in return for another security. Most commonly, for various

reasons a company will offer to give shares of a certain heldcompany if the shareholders will return shares of

another held company. An exchangeoffer can also be performed on other securities, such as bonds.

Term of the Day

environmental sanitationActivities aimed at improving or maintaining the standard of basic environmental conditions affecting the well-being of

people. These conditions include (1) clean and safe water supply, (2) clean and safe ambient air, (3) efficient and safe

animal, human, and industrial waste disposal, (4) protection of food from biological and chemical contaminants, and

(5) adequate housing in clean and safe surroundings. Also called environmental hygiene.

environmental sanitation is in the Economics, Politics, & Society and Environment & Pollution Control subjects.

environmental sanitation appears in the definitions of the following terms: environmental health andenvironmental hygiene.Term of the Day

exchange rate mechanism (ERM)Process by which member countries of an economic community (such as the European Union) maintain exchange rate  parity among their currencies. The currencies are allowed to fluctuate with respect to one another within a specified limit. If the exchange rate between any two currencies reaches the limit, the central banks of both countries intervene to bring it back within the limit.

exchange rate mechanism (ERM) is in the Banking, Commerce, Credit, & Finance, Currency Trading and Economics, Politics, & Society subjects.

exchange rate mechanism (ERM) appears in the definition of the following term: Black Wednesday.

ECBEuropean Central Bank. The bank created to administer monetary policy for the countries that have converted to the euro

exante returnThe expected return of a portfolio, calculated from a proportional weighting of theexpected returns of its

component assets. In calculating this return, the probabilitiesassumed for each possible expected return must

be calculated as accurately as possible in order for the exante return to be close to the actual return.

extraordinary itemAccounting entry which reflects materially-large cost (such as that incurred for plant shutdown) or materially-large revenue (such as that realized from sale of a piece of land) that is unlikely to recur and which does not derive from a firm's normal line of business. All extraordinary items must be disclosed and explained by the management in the financial statements, showing the firm's earnings before and after taking into account the effects of extraordinary items. Some firms use them to 'massage' their financials in order to make them look better or worse then they actually are (see creative accounting). Also called special item. See also exceptional item.

Extraordinary item is in the Accounting & Auditing and Finance subjects.

extraordinary item appears in the definitions of the following terms: unusual item, earnings, exceptional, extraordinary repair, and special item.

extreme point ruleA technical analysis rule that looks at the highest point or the lowest point at which thenegative directional indicator (-DI) and positive directional indicator (+DI) cross for a particular financial instrument. The extreme point is the highest point for a particulartrading day if +DI is above -DI, and is at the lowest point if -DI is above +DI. An investorwould be signaled to buy if the price of a share of stock is above the extreme point.Term of the Day

equitable remedyCourt order that forces a defendant to perform his or her part of a contract, instead of imposing a fine (for non-

performance or breach of contract) that lets the defendant 'buy' himself or herself out of his or her obligationsunder

the contract. Courts take this step when they are of the opinion that a payment of damages only is not good enough

for a just settlement of the case.

equitable remedy is in the Corporate, Commercial, & General Law subject.

F

FIRREAFinancial Institutions Reform, Recovery and Enforcement Act of 1989. A federal law created to improve the

situation after hundreds of U.S. Savings and Loan institutionsfailed. This act created the Resolution Trust

Corporation (RTC), a company which provided funds to the savings and loan institutions which needed help.

These funds were generated by the Resolution Funding Corporation (REFCORP).

Term of the Day

flat organizationAn organizational structure in which most middle-management levels and their functions have been eliminated, thus

bringing the top management in direct contact with the frontline salespeople, shop floor employees, andcustomers.

Despite their breadth, flat organizations can benefit from most of the advantages enjoyed by small companies, such as

faster response time to changing conditions and customer preferences.

flat organization is in the Decision Making, Problem Solving, & Strategy and Entrepreneurship, Management, & Small Business subjects.

flat organization appears in the definitions of the following terms: middle management and tall organization.

forex swapA type of foreign exchange swap consisting of two parts, completed at the same time. One part is a foreign exchange spot trade, and the other is a foreign exchange forward transaction . Forex swaps are most often used by investors for either hedging orspeculation purposes.

Term of the Day

free trade agreementTreaty (such as FTAA or NAFTA) between two or more countries to establish a free trade area wherecommerce in goods and services can be conducted across their common borders, without tariffs or hindrances but (in contrast to a common market) capital or labor may not move freely. Member countries usually impose a uniform tariff (called common external tariff) on trade with non-member countries.

free trade agreement is in the Banking, Commerce, Credit, & Finance, Economics, Politics, & Societyand International Trade & Relations subjects.

free trade agreement appears in the definitions of the following terms: free trade area, closer economic relations (CER), Trade and Investment Framework Agreement (TIFA), trading bloc, andGroup of 3 (G-3) (Latin America).

free and clearA title that is free of liens and legal questions as to ownership of the property. A requirement for the sale of real estate. In general, a company that specialize in checking title claims for clients (a title company) will be hired to ensure that a title is clear when a sale of real estate is taking place. also called just title or good title or perfect title orclear title

flowchartPictorial summary (graphical algorithm) of the decisions (such as production, storage, transportation)

and flows(movement of information and materials) that make up a procedure or process from beginning to end. One of

theseven tools of quality, a flowchart shows how the entire system functions, and where error and wastes occur. This

information is used in defining, documenting, studying, and improving the system. Also called flow diagram,flow process

chart, or network diagram.

flowchart is in the Planning & Scheduling, Project Management, Quality Control & Management andStatistics, Mathematics, & Analysis subjects.

flowchart appears in the definitions of the following terms: backward chaining, algorithm, seven tools of

quality, flow diagram, and simulation.

fraptionAlso known as an interest rate guarantee, this type of option allows an investor to set upa forward rate agreement during an agreed amount of time that triggers in response to a pre-set strike price. Fraptions are used to protect investors from dramatic declines ininterest rates.

Federal Unemployment Tax ActFUTA. A federal law that taxes businesses in order to fund the unemployment benefits set  forth by the Social Security Act of 1935. In times of economic growth, revenues from the tax increase but are used less frequently because unemployment levels are low, creating a cushion of funds. During times of slowing growth and rising unemployment, this cushion can provide benefits to the unemployed

financial statementSummary report that shows how a firm has used the funds entrusted to it by its stockholders (shareholders) andlenders,

and what is its current financial position. The three basic financial statements are the (1) balance sheet, which shows

firm's assets, liabilities, and net worth on a stated date; (2) income statement (also called profit &loss account), which

shows how the net income of the firm is arrived at over a stated period, and (3) cash flow statement, which shows the

inflows and outflows of cash caused by the firm's activities during a stated period.

financial statement is in the Accounting & Auditing and Banking, Commerce, Credit, & Financesubjects.

financial statement appears in the definitions of the following terms: annual earnings change,noncash item, billings in excess of costs, accounting noise, and contingent asset.

forex hedgeTactic used by a forex trader to protect a current position from undesirable changes inexchange rates. For

example, if a trader predicted that the dollar may take a turn for the worst, he/she

may implement a forex hedge to protect the investment.

forex arbitrageA forex trading strategy which consists of locating an incorrectly priced currency pair and buying

or selling it against another currency pair for a profitable trade. Theseopportunities are small windows caused

by an inefficient trading environment lackingliquidity and do not last long.

Term of the Day

fiduciary dutyA legal obligation of one party to act in the best interest of another. The obligated party is typically a fiduciary, that

is, someone entrusted with the care of money or property. Also called fiduciary obligation.

fiduciary duty is in the Corporate, Commercial, & General Law subject.

fiduciary duty appears in the definitions of the following terms: fiduciary obligation, breach of trust,independent

contractor, corporate opportunity doctrine, and business judgment rule.

Term of the Day

foreign exchange marketGlobal market in convertible currencies are traded and their conversion rates are determined. It is the world's

largest financial market in which every day, on average, some one and one-

half trillion dollar worth of currenciesare bought and sold. Out of this only about 15 percent is traded

for goods or services, the balance 85 percent is traded by the individual and institutional speculators.

foreign exchange market is in the Banking, Commerce, Credit, & Finance and Currency Trading subjects.

foreign exchange market appears in the definitions of the following terms: special drawing rights

(SDR),foreign exchange (Forex or FX), effective exchange rate (EXR), Herstatt risk, and exchange stabilization

fund (ESF).

flexible exchange option (FLEX)An option contract instrument offered by market clearing houses that allows the investorto

customize key terms. These contract terms include the exercise style, strike price, andexpiration

dates. Flexible exchange options grant investors a wider variety of choices to fit specific investment goals.

financial accounting standards (FAS)Definitive benchmarks prescribed by a country's Accounting Standards Board (as in the UK), or Financial Accounting

Standards Board (as in the US) for reporting of accounting data in financial statements. These rulesmust be applied to all

financial statements in order to provide a true and fair view of the firm's financial position, and a standardized method of

comparison with financial statements of the other firms.

financial accounting standards (FAS) is in the Accounting & Auditing and Banking, Commerce, Credit, & Finance subjects.

financial accounting standards (FAS) appears in the definitions of the following terms: financial reporting standards (FRS), World Congress of Accountants (WCOA), and accounting standards.

GTerm of the Day

glass ceilingInvisible but real barrier through which the next stage or level of advancement can be seen, but cannot be reached by

a section of qualified and deserving employees. Such barriers exist due to implicit prejudice on the basis of age,

ethnicity, political or religious affiliation, and/or sex. Although generally illegal, such practicesprevalent in

most countries.

glass ceiling is in the HR, Recruiting, Teams, & Training subject.

glass ceiling appears in the definition of the following term: build.

GAOGovernment Accountability Office. The arm of Congress that investigates theperformance of the federal government. GAO evaluates the use of public funds and the performance of federal programs, while also providing analytical, investigative and legal services  in order to support to Congress in its policy formulation and decision making processes. Most GAO reports are initiated at the request of Congress, while some are initiated by the agency itself or are required by law. Until 2004, GAO stood for GeneralAccounting Office.

guaranteed stockPreferred or common stock of one corporation whose dividends are guaranteed by another corporation. Since the dividends are guaranteed, investors are generally willing to pay a higher amount for the stock than if the stock was not backed up by a guarantee. How valuable the actual guarantee is will depend on the guarantor's financial and credit history. The guaranteed stock arrangement has frequently been used by railroads.

going shortSelling a share, bond, or commodity before actually buying it. This normally happens when an investor or dealerbelieves

the price of the item (on the date of its delivery to the buyer) will be lower than its current price. He or she expects to

make a profit by buying the item on or just before its delivery date. See also going long.

going short is in the Commodities & Precious Metals Trading, Currency Trading, Disaster Planning & Risk Management, Investing and Securities & Futures Trading subjects.going short appears in the definition of the following term: going long.

grievanceLaw: (1) Injury, injustice, or wrong that affords reason for resistance or a formal expression as a complaint. (2) The

complaint itself.

HR: Specific complaint or formal notice of employee dissatisfaction related

to adequacy of pay, job requirements , work conditions, other aspects of employment, or an alleged violation of a collective

bargaining agreement.

grievance is in the Corporate, Commercial, & General Law and HR, Recruiting, Teams, & Trainingsubjects.

grievance appears in the definitions of the following terms: trade union, insubordination, duty to bargain, employee relations, and directors and officers (D&O) insurance.

gambleTo engage in any activity in which money is put at risk for the purpose of making a profit, and which is characterized by some or most of the following (in approximately descendingorder of importance): little or no research has been conducted; the odds are unfavorable; the behavior is risk-seeking; an unsystematic

approach is being taken; emotions such as greed and fear play a role; the activity is a discrete event or series of discrete events not done as part of a long-term plan; the activity is significantly motivated by entertainment or compulsion; ownership of something tangible is not involved; no net economic  effect results

Term of the Day

generic strategiesBasic approaches to strategic planning that can be adopted by any firm in any market or industry toimprove its competitive performance. The three fundamental marketing strategies (which, though different, are not mutually exclusive) are: differentiation strategy, focus strategy, and low cost strategy.

generic strategies is in the Advertising, Marketing, & Sales and Decision Making, Problem Solving, & Strategy subjects.

H

hard sellingApplying psychological pressure (by appealing to someone's fears, greed, or vanity) to persuade the prospect to make a

quick purchase decision. This approach is justified on the ground that most people are lazy and willpostpone making a

decision even if it were in their best interest to make the commitment. This practice is, however, reviled when its sole

purpose is the salesperson's gain at the customer's detriment. Also called high pressure selling.

hard selling is in the Advertising, Marketing, & Sales subject.

hard selling appears in the definitions of the following terms: high pressure selling, soft selling, andboiler room.Term of the Day

hierarchical organizationCommon, pyramid-like organization where one person is in charge of a functional area (engineering,

finance,marketing) with one or more subordinates handling the sub-functions. In an hierarchical organization

(whetherbusiness, military, political, or religious) higher levels imply greater superiority and domination than the

lower ones, and the chain of command extends straight from the top to the bottom.

hierarchical organization is in the Entrepreneurship, Management, & Small Business subject.

hierarchical organization appears in the definition of the following term: vertical management.

ITerm of the Day

implied contractA legally enforceable agreement that arises from conduct, from assumed intentions, from some relationship among

the immediate parties, or from the application of the legal principle of equity.

For example, a contract is implied when a party knowingly accepts a benefit from another party in circumstances where

the benefit cannot be considered a gift. Therefore, the party accepting the benefit is under a legal obligation to give fair

value for the benefit received. Opposite of express contract. See also express contract, implied in fact contract, and implied

in law contract.

Implied contract is in the Agreements & Contracts and Law subjects.

implied contract appears in the definitions of the following terms: express contract, organizational culture, loan for exchange, bailment, and loan for consumption.Term of the Day

intermediate termContractual term the breach of which does not automatically discharge the innocent party from itsobligations under the contract or entitle an injured party to damages. A court or an arbitrator must evaluate the seriousness of the breach and its effects before any such decision can be made. See alsoinnominate term.

intermediate term is in the Agreements & Contracts and Corporate, Commercial, & General Lawsubjects.

intermediate term appears in the definitions of the following terms: condition, innominate term,technical analysis, Arms index, and warranty.

insiderPerson who (by virtue of his or her employment or other close association) has insider information on a publicly

traded firm. The opportunity of an insider to profit from such information is commonly restricted or prohibited bylaw. In

the US, anyone who holds ten percent or more of the voting shares of a firm is automatically considered an insider.

insider is in the Corporate, Commercial, & General Law, Investing and Securities & Futures Tradingsubjects.

insider appears in the definitions of the following terms: close period, insider trading, and Insider Trading Sanctions Act of 1984.

investment clubA group of retail investors who pool some of their money and make joint investments.Investment clubs

attempt to enable individuals to become individual investors by pooling their funds in small groups and

collectively deciding how to invest the money. Like-minded investors come together to make investments

based upon the input andresearch of the entire group, often providing a more complete foundation for

subsequentdecisions. Of course, members of investment clubs do not need to invest only through the club, so

the club can make an excellent addition to a portfolio or it can serve as an excellent introduction to investing as

an individual. Clubs can be a benefit to investors of all skill and experience levels. It can be difficult

to gain a spot in an existing club withoutconnections or the opportunity to replace a departing member.

Fortunately, starting a new club is as simple as finding a dozen or so people in one geographic area

who wantto participate. Members should plan to, and may be required to, contribute at least a certain amount

to the club's investment budget at certain intervals. Some clubs allow members to exceed the minimum and

others do not. All investments should be researched as carefully as an individual would research them, but,

because more people are involved, research can be more thorough and cover more investment opportunities.

insurance company dividendOne of a series of periodic (usually annual) payments made to a cash value life insurance policy holder. The amount of the payment depends on the insurance company's costs and investment returns. The payments are considered to be a partial refund  of the policy holder's premium and are therefore tax-free income.

impact feeIndustrial: Charge imposed on industrial projects to compensate for their negative social or environmental costwhich will

eventually be borne by the public.

Real estate: Charge imposed on land developers to cover the cost of infrastructure and related services that will have to be

provided by the local or national government.

impact fee is in the Environment & Pollution Control and Real Estate & Buildings subjects.

implied-in-law contractFictional contract imposed by a court as a legal remedy to prevent injustice. It is forced in favor of the wrongedparty, and

against the party that obtains an undue advantage or gains at the expense of the other. The wrongdoer is considered to be

under an obligation 'quasi ex contractu' (Latin for, as if from a contract) to makerestitution.

implied-in-law contract is in the Agreements & Contracts and Corporate, Commercial, & General Lawsubjects.

implied-in-law contract appears in the definitions of the following terms: contract and implied contract.

interest rateThe annualized cost of credit or debt-capital computed as the percentage ratio of interest to the principal. Eachbank can

determine its own interest rate on loans but, in practice, local rates are about the same from bank to bank. In general,

interest rates rise in times of inflation, greater demand for credit, tight money supply, or due to higher reserve

requirements for banks. A rise in interest rates for any reason tends to dampen business activity(because credit becomes

more expensive) and the stock market (because investors can get better returns from bank deposits or newly

issued bonds than from buying shares)

interest rate is in the Accounting & Auditing, Banking, Commerce, Credit, & Finance and Investingsubjects.

interest rate appears in the definitions of the following terms: positive yield curve, disintermediation,monetary policy, loanshark, and secured note.

indexed loanA loan in which payments change in response to changes in an index such as theConsumer Price Index. Indexed loans are usually long-term, since such loans might potentially be affected by many different market factors. One of the most common factorsthat a loan might be indexed for is inflation, since prices typically rise over time and theprincipal amount of the loan thus loses value with every time period, benefitting theborrower and hurting the lender. The maturity, interest or principal of an indexed loan may all be adjusted, depending on the structure of the loan.

iron condorOptions trading strategy that requires the traders to buy and hold four different options. An iron condor has a similar structure to an iron butterfly, but two of the options located in the center have different strike prices. In order to create an iron condor, the tradermust hold a long and short position in two different strangle strategies. Two vertical spreads (bull call spread and bull put spread) with the same expiration date are also utilized with an iron condor.

inflationThe overall general upward price movement of goods and services in an economy (often caused by

a increase in the supply of money), usually as measured by the Consumer Price Index and the Producer Price

Index. Over time, as the cost of goods and services increase, the value of a dollar is going to fall because

a person won't be able topurchase as much with that dollar as he/she previously could. While the annual rate of

inflation has fluctuated greatly over the last half century, ranging from nearly zeroinflation to 23% inflation,

the Fed actively tries to maintain a specific rate of inflation, which is usually 2-3% but can vary depending on

circumstances. opposite of deflation.

indirect loanLoan deal in which the actual lender may not be known to the borrower. For example, most automobile purchase loans are not financed by the car dealers (where the carbuyers fill out and submit the loan applications) but by a third party. This party (usually afinance company, called the loan owner) is the one that approves the loan terms, receives the loan payments installments from the car buyers, and sues defaultingborrowers.

Term of the Day

intermediaryFirm or person (such as a broker or consultant) who acts as a mediator on a link between parties to

a business deal , investment decision, negotiation, etc. In money markets, for example, banks act as intermediaries

between depositors seeking interest income and borrowers seeking debt capital. Intermediaries usually specialize in

specific areas, and serve as a conduit for market and other types of information. Also called a middleman. See

also intermediation.

intermediary is in the Banking, Commerce, Credit, & Finance and International Trade & Relations subjects.

intermediary appears in the definitions of the following terms: upstream industries, back to back letter of credit

(L/C), finder's fee, direct marketing channel, and market spoiler.Term of the Day

initial public offering (IPO)First offering of a firms' stock (shares) on the stockmarket, at the time it 'goes public.' Because a stockmarket

usually values the stock on the expectations of the firm's future growth and income, IPOs are typically

anopportunity for the founders and other early investors to make high profits by cashing their stockholdings.

initial public offering (IPO) is in the Banking, Commerce, Credit, & Finance, Investing and Securities &

Futures Trading subjects.

initial public offering (IPO) appears in the definitions of the following terms: green shoe, registration

statement, third stage, venture capitalist, and exit strategy.

interval measureA calculation to measure the approximate number of days a company could operatesimply on the cash it currently has on hand. It is equal to quick assets divided by dailyoperating expenses, and the value it returns is the average number of days that company could use those assets to meet all its expenses. The interval measure is similar to both the current ratio and the quick ratio, in that it gives an idea of how easily a company could fulfill its obligations. The interval measure is sometimes preferred to the other ratios because it returns an approximation of the actual number of days, as opposed to the other ratios, which just return a value that indicates the ease of making the payments.

J

jobless claimsThe number of people who file for unemployment benefits in a given week. This data is collected by the Department of Labor, and published as a weekly report. The number ofjobless claims is used as a measure of the health of the job market, as a series ofincreases indicates that there are fewer people being hired.

J-curve1. The theory that the Internal Rate of Return of a fund will be low in its early stages, particularly due

to costs incurred in starting the fund, but then as the firm becomes morestable and profitable, that its internal rate of return will increase. The shape of this, if graphed over time, would look like a J.

2. The shape of a country's trade balance after it devaluates its currency. The immediateeffect of a devaluation is an increase in the trade deficit, though this will shift into an increased international demand for the country's exports due to a lowered exchange rate, as well as a decrease in the demand for more expensive imports. An appreciation in the value of a country's currency can result in an inverted J-curve.

Term of the Day

justificationDefendant's lawful or sufficient reason for having acted (or having failed to act) what he or she is charged with. In

a defamation case, the truthfulness of a defamatory statement is a sufficient justification to have made it. Manner of

spacing words on a column or page so the rows are aligned in a specified way.

justification is in the Corporate, Commercial, & General Law, Decision Making, Problem Solving, &

Strategyand Printing, Packaging, & Publishing subjects.

justification appears in the definitions of the following terms: color, malice, accelerated depreciation, Delphi

technique, and concept selling.

joint tenancyJoint ownership of property by two or more related or unrelated entities (joint-tenants) which is effected only when

four conditions interest, possession, time, and title (called four unities) are fulfilled. Unlike in tenancy-in-common, joint-

tenants have right of survivorship: the entire share of a deceased joint-tenant automatically (without probate) passes on to

the surviving joint-tenant(s), the last survivor becoming the absolute and sole owner. Property in joint-tenancy is

not subject to probate or claims of anyone (except due taxes) and passes on free. Also calledjoint tenancy with right of

ownership in common. See also tenancy in common and time sharing.

joint tenancy is in the Banking, Commerce, Credit, & Finance, Corporate, Commercial, & General Lawand Real Estate & Buildings subjects.

joint tenancy appears in the definitions of the following terms: joint account, tenancy by the entirety,probate assets, tenancy in common, and joint tenancy with right of ownership in common.

journal voucher<p>A written authorization prepared for every financial transaction, or for every transaction that meets

definedrequirements.</p> <p>A journal voucher is an integral part of the audit trail, and carries (1) a serial number,

(2)transaction date, (3) transaction amount, (4) ledger account(s) affected, (5) reference(s) to documentary evidence(such

as invoices or receipts) supporting the entry, (6) brief description of the transaction, and the (7) signature(s) or initials of

one or more authorized signatories. A journal is, in effect, a collection of financial dataculled from journal vouchers.</p>

journal voucher is in the Accounting & Auditing subject.

journal voucher appears in the definitions of the following terms: journalizing, journal, and journal entry.

KKeltner channelAn advanced technical analysis method, which uses an upper and lower band to indicatea 10-day moving average around the typical market price. A close around the upper band it is said to signify a bull market, and a close around the lower band is said to signify a bear market. This analysis technique is named for Chester Keltner, although it is uncertain if he was actually the originator of the idea.

L

longevity risk1. The risk that a pension fund or life insurance company takes on by offering its plans, due to the

chance that the company could end up paying out more than anticipated due to increasing life expectancy. The risk is particularly high for any plans that ensurelifetime benefits for the recipient.

2. The risk that the amount of money an individual saves for retirement might not be enough to sustain them, due to increased life expectancy.

Term of the Day

long term debtAmount owed for a period exceeding 12 months from the date of the balance sheet. It could be in theform of a bank loan, mortgage bonds, debenture, or other obligations not due for one year. A firm must disclose its long-term debt in its balance sheet with its interest rate and date of maturity. Amount of long-term debt is a measure of a firm's leverage, and is distinguished from long term liabilities which may include supply of services already paid for.

long term debt is in the Accounting & Auditing and Banking, Commerce, Credit, & Finance subjects.

long term debt appears in the definitions of the following terms: term out and net debt per capita.Term of the Day

linear relationshipStatistics: A relationship of direct proportionality that, when plotted on a graph, traces a straight line. In

linearrelationships, any given change in an independent variable will always produce a corresponding change in

thedependent variable. For example, a linear relationship between production hours and output in a factory meansthat a

10 percent increase or decrease in hours will result in a 10 percent increase or decrease in the output.

linear relationship is in the Statistics, Mathematics, & Analysis subject.

linear relationship appears in the definitions of the following terms: least-squares regression, linear programming, coefficient of correlation (r), and log-linear least-squares method.Term of the Day

laborThe aggregate of all human physical and mental effort used in creation of goods and services. Labor is

a primary factor  of production. The size of a nation's labor force is determined by the size of its adult population, and the

extent to which the adults are either working or are prepared to offer their labor for wages.

labor is in the Accounting & Auditing, Banking, Commerce, Credit, & Finance and Economics, Politics, & Society subjects.

labor appears in the definitions of the following terms: hot cargo, Rucker plan, labor rate (price) variance, slowdown strike, and subcontractor bond.

Lorenz curve

A model developed by economist Max Lorenz in 1905. It represents a probability distribution of statistical values, and is often associated with income distribution calculations . For example, a Lorenz curve can show that the bottom 40% of households bring in  25% of a country's income. If income distribution were perfectly equal, 40% of households would bring in 40% of income

Term of the Day

legacyGift of personal property through a will by the writer of the will (the 'testator') to an individual or organization (the

'legatee'). Legacies are generally classified as (1) Demonstrative: paid out of specific funds, or portioned out of a

specific property. (2) General: not clearly identified, such as, "a house." (3) Pecuniary: specified sum of moneyor

an annuity. (4) Residuary: what is left out of a personal estate. (5) Specific: clearly identified, such as, "My beach-

house." See also inheritance.

legacy is in the Accounting & Auditing, Banking, Commerce, Credit, & Finance and Corporate, Commercial, &

General Law subjects.

legacy appears in the definitions of the following terms: inheritance, devise, legatee, and bequest.Term of the Day

level payment amortizationRepayment of a loan through a fixed number of fixed-amount monthly installments. While the amount of the

installment is same every month, however, it is apportioned unequally between interest and principal payments. In

the early years, the major proportion (as much as 90 percent) of the installment amount goes towardspayment of the

interest. It is only in later years, when most of the interest has been paid off, that the principal balance begins to

reduce significantly. Also called straight line amortization.

level payment amortization is in the Accounting & Auditing and Banking, Commerce, Credit, &

Financesubjects.

level payment amortization appears in the definitions of the following terms: level payment

mortgage,straight line amortization, level debt service, and amortization.

labor marketThe nominal market in which workers find paying work, employers find willing workers, and wage

rates are determined.

Labor markets may be local or national (even international) in their scope and are made up of smaller,

interacting labor markets for different qualifications, skills, and geographical locations. They depend

on exchange of informationbetween employers and job seekers about wage rates, conditions of

employment, level of competition, and joblocation.

limited discretionary accountAn arrangement in which a client has given his/her broker the ability to make certain types of trades without

prior consent. An investor must sign a

specific agreementallowing brokers to undertake discretionary transactions. Such an arrangement is only

recommended if the investor has a high degree of trust in the broker's professional ability.

MTerm of the Day

manufactureTo make a good with tools and/or machines by effecting chemical, mechanical, or

physical transformation ofmaterials, substances, or components, or by simulating natural processes, usually

repeatedly and on a largescale with a division of labor. Manufactured items often are, or are made out to be,

different from other similargoods in one or more aspects, and are sold commonly under a particular brand name. See

also produce.

manufacture is in the Industries, Manufacturing, & Technology subject.

manufacture appears in the definitions of the following terms: Silicon Valley, deionized water, product data

management (PDM), produce, and secondary industry.

money flow indexMFI. An indicator used to show the percentage of a stock's price on up days compared to the total of up and down days. It is an oscillator of money flow. MFI can be calculated following these steps:

Typical price = (high + low + close)/3Money flow = typical price * volumeMoney ratio = positive money flow / negative money flowMFI = 100 - (100 / (1+ money ratio)) ORMFI = positive money flow / (positive and negative money flow) * 100(Both formulas arrive at the same MFI value.)

Values below 50 indicate that the stock is undersold, while values above 50 indicate that a stock is overbought.

McClellan OscillatorA technical analysis indicator which uses NYSE market breadth to judge the strength of amarket move in

the near term. Calculated by subtracting a 39-day exponential moving average of the difference

between advancing issues and declining issues on the NYSE from a 19-day exponential moving average of

the same difference.

marginal riskThe risk assumed by the issuer of a foreign exchange contract or debt in the event that the investor goes

into default. It is the risk of the marginal, or final, dollar of a transactionor asset going into default.

medical savings account

MSA. An account into which tax-deferred funds are contributed. The money from this account can be used to pay for a variety of the individual's medical expenses, such as aninsurance copay or deductible. This account is often used by people who are self-employed, so the funds are contributed by the individuals, either for their own use or their employees, if they have any.

Term of the Day

memorandum of understanding (MOU)<p>A document that expresses mutual accord on an issue between two or more parties.</p> <p>Memoranda of

understanding are generally recognized as binding, even if no legal claim could be based on

the rights andobligations laid down in them. To be legally operative, a memorandum of understanding must (1)

identify thecontracting parties, (2) spell out the subject matter of the agreement and its objectives, (3) summarize the

essential terms of the agreement, and (4) must be signed by the contracting parties. Also called letter of intent.</p>

memorandum of understanding (MOU) is in the Agreements & Contracts and Corporate, Commercial, &

General Law subjects.

memorandum of understanding (MOU) appears in the definitions of the following terms: international

agreement, letter of intent (LOI), and memorandum of agreement.

Margrabe optionFutures contract based on exchange of one asset for another, such as in cross currency option. Invented in 1978 by the

US risk-management consultant William Margrabe who also devised a formula for determining its price. Also

called exchangeable option or outperformance option. See also rainbow option.

Margrabe option is in the Commodities & Precious Metals Trading, Currency Trading, Disaster Planning & Risk Management, Investing and Securities & Futures Trading subjects.

Margrabe option appears in the definitions of the following terms: cross-currency option,exchangeable option, and rainbow option.

monetary reserveA government's stockpile of foreign currency and precious metals. Monetary reservesare useful both for

settling transactions involving foreign counterparties and forundertaking trading in foreign

exchange and commodity markets. In general, the larger the monetary reserve, the better the country is able

to engage in transactions with foreign countries.

married putThe purchase of a put option on a stock that is already owned. A married put protects against  a decline in

the price of the underlying stock. If the price declines, the stock can be sold at the higher price any time

before expiration. Of course, if the stock priceremains neutral or increases, the option is worthless and

the premium is lost.

micro-hedgeHedge designed to reduce or eliminate risk resulting from a particular asset or liability, as opposed to the risk

arising from an entire portfolio. If the asset or liability is part of a large portfolio with a number of correlated

risks, then micro-hedging is less likely to be aneffective technique. opposite of macro-hedge.

medical savings accountMSA. An account into which tax-deferred funds are contributed. The money from this account can be used

to pay for a variety of the individual's medical expenses, such as aninsurance copay or deductible. This account

is often used by people who are self-employed, so the funds are contributed by the individuals, either for

their own use or their employees, if they have any.

multiple exchange ratesA system where a country will have both fixed and floating foreign exchange rates at thesame time, and both

can be used when exchanging currencies in that country. In this situation, the market is divided into

any number of segments, each with its own exchange rate. This is frequently used to

give preferential treatment to people dealing with goodsand products that are the most important to the

country; people importing these goods can be given a better exchange rate than people who are importing

goods that are not as necessary for the country. If a country only imposes two different exchange rates at the

same time, it is referred to as a dual exchange rate system.

matrix managementMultiple command-and-control structure in which some employees have dual responsibilities and dual bosses.

These employee report to one boss (a project manager, for example) for day to day operations, and to another boss (the

departmental head, for example) for functional responsibilities. This approach is most suited to situations with

fluctuating workloads, such as managing large projects or product development processes. See also matrix organization.

matrix management is in the Decision Making, Problem Solving, & Strategy and Entrepreneurship, Management, & Small Business subjects.

misrepresentationFraudulent, negligent, or innocent misstatement, or an incomplete statement, of a material fact. If a specific

misrepresentation induces the other party to enter into a contract, that party may have the legal right to rescindthe contract

or seek compensation for damages. The guilty party avail of the defense that the wronged party could have checked

the facts and have discovered what was wrong. A misstatement of an intention or opinion is generally not considered a

misrepresentation.

misrepresentation is in the Corporate, Commercial, & General Law subject.

misrepresentation appears in the definitions of the following terms: commercial crime coverage form,affirmation of contract, interstate land sales act, puffery, and contractor fraud

money market

Network of banks, discount houses, institutional investors, and money dealers who borrow and

lend among themselves for the short-term (typically 90 days). Money markets also trade

in highly liquid financial instrumentswith maturities less than 90 days to one year (such

as bankers' acceptance, certificates of deposit, andcommercial paper), and government

securities with maturities less than three years (such as treasury bills),foreign exchange,

and bullion. Unlike organized markets (such as stock exchanges) money markets are largely

unregulated and informal where most transactions are conducted over phone, fax, or online.

Long-term borrowingand lending markets are called capital markets.

money market is in the Banking, Commerce, Credit, & Finance, Economics, Politics, & Society andInvesting subjects.

money market appears in the definitions of the following terms: money market deposit account,interbank dealings, official cash rate, money center banks, and capital IQ.

mean reversion1. The theory that a given value will continue to return to an average value over time,

despite fluctuations above and below the average value. This theory can be applied to any measurable value, including interest rates and the return on a certain investment.

2. A purchasing strategy based on the above theory, which assumes that prices will return to an average value. This strategy encourages purchasing underperformingsecurities, under the premise that the market will eventually rebound, and the value of the security will increase.

muni fundA mutual fund which invests in municipal bonds. These bond funds are popular amonginvestors in high income tax brackets because they are exempt from federal taxes and, in some cases, from state taxes as well. As with U.S. government bond funds, theunderlying securities in muni funds are backed by the government and thus are considered to have a high credit rating. However, municipalities have been known todeclare bankruptcy on occasion, making these funds more risky than U.S. government bonds. also called municipal bond fund.

managing underwriterThe commercial or investment bank which has primary responsibility for organizing a given credit or bond issuance. This bank will find other lending organizations orunderwriters to create the syndicate, negotiate terms with the issuer, and assess market conditions. also called syndicate manager, lead manager or lead underwriter

Term of the Weekend

management prerogativeEmployer's or management's unqualified-authority to exercise its discretion in certain areas without discussions with or

the agreement of a union. Also called management rights, they are not subject to negotiations and may be expressly stated

as such in a collective bargaining agreement. They include the rights to (1) assign and directworkforce, (2) determine

the method to discipline employees for just cause, (3) increase and reduce the workforce according to the demand for

firm's outputs or availability of money, (4) decide what products are offeredfor sale, at what price, and by which method.

management prerogative is in the Corporate, Commercial, & General Law and Entrepreneurship, Management, & Small Business subjects.

management prerogative appears in the definition of the following term: mandatory bargaining issue.Term of the Day

mechanic's lienClaim on the improved property by the contractor, subcontractors, laborers, and material suppliers for the monies owed to

them. In general, a mechanic's lien takes precedence over any mortgage on that property because, it is assumed,

the value of that property has increased to the extent of the lien. Also called materialman's lien.

mechanic's lien is in the Agreements & Contracts, Banking, Commerce, Credit, & Finance andCorporate, Commercial, & General Law subjects.

mechanic's lien appears in the definitions of the following terms: construction lien, lien waiver, home lien, material man, and retainage.

mini manipulationIllegal practice that causes the price of a security underlying an option contract to be altered to provide a

deceptive depiction of the true market value of the option. Theindividual creating the mini manipulation does

so as a method of increasing the value of the options and thus increasing the amount of money that will be

received for the options.

matched bargainA system for trading stocks that matches a buy offer directly with a sell offer, rather than using a market maker. In a market maker system, buyers and sellers deal with anintermediary (the market maker). This arrangement provides greater liquidity than a matched bargain system.

Term of the Day

measured day work (MDW)Production standard or quota instituted as an alternative to incentive payment or pay-for-resultsschemes. Workers receive a regular, guaranteed rate of pay in return for quantity and quality, based on work measurement and capabilities of the equipment. Output falling below the required standards is paid pro rata, output exceeding the standards is rewarded with a bonus.

measured day work (MDW) is in the Accounting & Auditing, HR, Recruiting, Teams, & Training andIndustries, Manufacturing, & Technology subjects.

minimum balance

The minimum amount a bank or other financial institution requires a customer to maintain in his or

her account. The institution can set a minimum balance level for any of itsaccounts, and this amount will vary

by institution. Usually, if the required minimum balance is not maintained, the customer

is charged various fees for failing to meet the requirements.

Mello-RoosA unique form of financing used by cities, counties, and other similar districts in order tofund large-scale products in that district such as the construction of schools or roads. In order to be able to use this kind of financing, the voters in the district must approve the formation of a Mello-Roos district by a vote (two-thirds must be in favor of the decision). Once the district has decided to become a Mello-Roos district, the money spent tofinance one of these projects is repaid by the voters through taxes. This is officially called the Community Facilities District Act, but is commonly called Mello-Roos due to Senator Mello and assemblyman Roos who co-authored the act.

matrix tradingBond swap strategy designed to profit from unusual yield curve differentials betweenbonds of different ratings or classes. This strategy tries to take advantage of situations in which differences in yields between different bond classes are not reflective of the differences in risk associated with those bond classes.

Term of the Day

marketing myopia<p>A short-sighted and inward looking approach to marketing that focuses on the needs of thecompany instead of defining the company and its products in terms of the customers' needs and wants. It results in the failure to see and adjust to the rapid changes in their markets.</p> <p>The concept of marketing myopia was discussed in an article (titled "Marketing Myopia," in July-August 1960 issue of the <i>Harvard Business Review</i>) by Harvard Business School emeritus professor of marketing, Theodore C. Levitt (1925-2006), who suggests that companies get trapped in this situation because they omit to ask the vital question, "What business are we in?"</p>

Marketing myopia is in the Advertising, Marketing, & Sales and Decision Making, Problem Solving, & Strategy subjects.

marketing myopia appears in the definition of the following term: generic need.Term of the Day

Multi-brand strategyMarketing of two or more similar and competing products by the same firm under different and unrelated brands. While these brands eat into each other’s' sales (see cannibalism), multi-brand strategy does have some advantages as a means of (1) obtaining greater shelf space and leaving little for competitors' products, (2) saturating a market by filling all price and quality gaps, (3) catering to brand-switchers users who like to experiment with different brands, and (4) keeping the firm's managers on their toes by generating internal competition.

Multi-brand strategy is in the Advertising, Marketing, & Sales and Decision Making, Problem Solving, & Strategy subjects.