-A-
AAA:
Triple A, the highest classification that an individual or company can receive from a credit-rating agency.
A and B Shares:
In countries such as the United States and the United Kingdom, Almost all shares in a public company have equal rights. But in some countries, such as Sweden and Denmark, companies can issue two different kinds of shares, A and B shares. B shares are frequently issued to members of a firm’s founding family, and each one has the same voting rights as several A shares. A and B shares inevitably have a different market value, although it is surprising what a small value investors put on voting rights.
Accounts:
The financial records of a company’s transactions kept according to the principles of double-entry bookkeeping. For every debit there is an equal and opposite credit. There are a number of different types of accounts.
Accrued Interest:
Interest that has been earned but not yet paid. If interest on a bank deposit is paid every six months, then five months after the last payment five-sixths of the next interest payment can be said to have accrued. None of it, however, will be paid for another month.
Acquisition:
The purchase by one company of a controlling interest in another; an alternative to organic growth for any company in a hurry to become bigger. Acquisitions can be friendly – when both companies reach agreement about a deal and it is called a merger – or hostile, when some shareholders and/or the management resist the attempt to buy them.
Actuary:
A person who calculates the risk associated with various kinds of long-term insurance policies. In particular, an actuary calculates the probability that someone of a specific age and profile will die within a given period of time. Actuaries are disparagingly said to be people who find accounting too exciting.
Added Value:
The concept behind value added tax (VAT); the idea that value is added to goods and services at many discrete stages during their production. VAT seeks to tax that value at each of those stages.
Addendum:
Something that is added to a contract as an afterthought.
Adjournment:
The brief postponement of a meeting in midstream. A board meeting, for example, might be adjourned for lunch. If an adjournement lasts longer than a few hours, the meeting has to be brought to a proper close and reconvened at another time.
Administrative Offices:
An administrative office is frequently located in a country other than that of the headquarters office, the parent company or a country of operation. The role of such an administrative office may be to co-ordinate international or regional activities, to provide particular services (such as management analysis, financial or other related services) or to perform a given function (such as marketing).
A number of otherwise high tax jurisdictions (such as the United Kingdom, France, Belgium and Greece) grant special tax treatment in order to attract the administrative offices of multinationals. In the case of Monaco, which has been particularly successful in this regard, not only may the administrative office benefit from favored tax treatment, but its employees resident in Monaco would not be subject to tax there.
Administrator:
Someone appointed by a court to run a company that is under administration. Also someone appointed by a court to handle a dead person’s affairs when there is no will, or when the executors appointed by the will are unable to carry out their responsibilities.
ADR:
Short for American Depositary Receipt, a certificate issued by an American bank to an American investor in lieu of a foreign surity. ADRs are traded in the United States as if they were domestic stock. In particular, the issuer (the bank) arranges for the dividends to be paid in dollars.
ADSL:
Asymmetric Digital Subscriber Line.
Ad Valorem:
Something (such as tax) that is based on the value of goods and not on their quantity. Thus VAT is an ad valorem tax; so too is sales tax in the United States. A fixed-sum tax levied on the owner of a car is not since it bears no relation to the value of the car or the use that it makes of the roads.
Adverse Trustee:
One who has a substantial beneficial interest in the trust assets as well as the income or benefits derived from the trust. Such a trustee could be related to the grantor by birth, marriage or in an employer/employee relationship.
Advisory Board of Directors:
An advisory board of directors are individuals appointed to advise the elected board of directors. An advisory board is not bound by the duties imposed upon elected board members, and the corporation is not required to follow the recommendations of the advisory board.
Affidavit:
A sworn statement made in front of a person authorised by the courts to witness statements made under oath.
Affiliate:
A company that is partly owned by another company. Non-corporate entities that have close links with each other are also sometimes said to be affiliates. Individual trade unions, for instance, are affiliated to their central organisation.
Agenda:
A written list of the items to be discussed at a meeting. An agenda is prepared before the meeting and is circulated in advance to all those who are attending. The last item is normally “any other business”, which provides those attending with an opportunity to raise unanticipated issues.
Agent:
An agent is anyone who is authorized to act on behalf of another. A corporation can only act through its agents; therefore, it is important to define what actions an agent is authorized to perform.
Air Waybill:
A document that lists goods that are to be transported internationally by a shipper. The air waybill constitutes an agreement between the shipper and the owner of the goods that the goods will be delivered to an agreed destination in the same condition in which they were received.
Akte Van Opricht:
Statutes of a Dutch company.
Aktiengesellschaft (AG):
German company limited by shares.
Allotment:
The amount of stock that is allocated to investors who have subscribed for a new issue of shares.
All Risk:
An insurance policy that covers all risks except for those specifically stated in the policy.
Alternate Director:
A person appointed to represent and vote on behalf of a director of a company when he is absent from a meeting of directors.
Amendment:
An alteration or an addition to a legal document that is signed by all the parties to the document. The amendment has the same legal status as the rest of the document.
Amex:
American Stock Exchange. Also an abbreviation for American Express.
Amortisation:
The preferred word in the United States for depreciation.
ANDIN:
Asociación Latino-Americana de Intergración.
Annual Report:
The printed document that contains the annual accounts of a company. The annual report is posted to all shareholders every year. The quality of companies’ annual reports varies greatly.
Annuitant:
The benficiary or benficiaries (in a last-to-die arrangement) of an annuity who receives a stream of payments pursuant to the terms of the annuity contract.
Annuity:
An investment that yields a fixed annual income for the investor until his or her death. The payment of an annuity used to be annual, but it is now frequently more frequent.
Anti-Trust:
Laws in the United States which make it illegal for firms to fix prices among themselves or to discriminate in the prices that they ask different buyers for the same goods. The same body of legislation makes it illegal for companies to form a monopoly.
Anstalt:
Establishment, a legal entity without shares established in Liechtenstein, with some features of a trust but with corporate personality. Does not have shares.
Anti-Avoidance Measures:
The object of anti-avoidance measures, insofar as they relate to tax havens, is to prevent the avoidance or reduction of tax through the displacement of one or more connecting factors (i.e. the basis of tax liability) from the taxing jurisdiction concerned to a tax haven jurisdiction.
Anti-avoidance measures may be of general application or may refer to specific tax havens. Any measures usually appear in domestic tax systems; they may however be imposed by tax treaties.
Apostille:
Certificate of Good Standing in connection with corporations according to the Convention of the Hague of October 05, 1961.
Arbitrage:
The buying and selling of goods or services on different markets to take advantage of variations in price. People who make their living by arbitrage are called arbitrageurs.
Arbitration:
A procedure for solving commercial disputes that avoids going to court. The parties to the dispute turn to an independent third party whose judgment they agree in advance to accept. A number of industries have set up special international bodies for the purpose of arbitrating in disputes within their industry.
Arbitrator:
A person who acts as an intermediary in a case of arbitration; an independent third party whose opinion the disputing parties agree to be bound by. In some cases the arbitrator may consist of a panel of individuals.
Arm’s Lenght:
A transaction between related companies at a price reflecting the cost of the manufacturing company or exporter plus a reasonable profit as deemed by Customs. “Reasonable profit” is determined by Customs based on a cost paid by the related company for a comparable transaction or goods. The “First Sale Rule” is recognized by United States Customs as an established method of valueing imported goods. It applies to transactions wherein a manufacturer or exporter sells a product destined for the United States to an intermediary distributor or trading company which in turn sells the product to an importing entity in the United States. In order to qualitfy, the First Sale invoice must reflect an arm’s lenght transaction wherein the manufacturing company or exporter recovers its full manufacturing cost plus a “reasonable profit.”
Arm’s Length Relationship:
An arm’s length relationship is a term used to describe a type of business relationship a corporation should have with a close associate to avoid a conflict of interest. For example, when you negotiate with your banker or your supplier, any agreement which results will likely reflect market value and commercially reasonable terms and conditions. When you loan money to your son or daughter, you may be inclined to provide much more favorable terms and conditions. The first example would be considered to be an arm’s length relationship, while the second example would not. When your corporation does business with or makes loans to corporate officers and directors, the relationship must be at arm’s length to avoid conflicts of interest.
Arrears:
The making of a regular payment (of rent or interest, for example) after the period to which it relates.
Articles of Association (also Bye-Laws or By-Laws):
The set of rules by which a company is run. They must contain: 1) the company’s name; 2) its registered address; 3) its objects and aims; 4) its capitalization; 5) a statement that the company is a limited liability organization.
The articles state, for instance, what percentage of the shareholders are required to vote in favour of major changes before they can be put into effect.Such changes frequently require more than a simple majority. The articles of association are lodged with the relevant authority at the time when a company is first registered. As such, they become a part of the public record.
Articles of Incorporation (US style):
The articles of incorporation, along with the bylaws and corporate minutes, make up a corporation’s charter documents and contain basic information about the corporation. Upon filing the articles with the secretary of state, the corporation comes into existence. Articles are a public record available for inspection ny anymore. Commonly, articles will provide the name of the corporation; the number of shares which the corporation is authorized to issue; and the classification of those shares, if any; the name and address of the registered agent; and the name and address of the incorporator. Additional information is also permitted.
Asset:
Something that a company or individual owns to which can be ascribed a value, from plant to patents, and from property to products.
Asset Management:
The business of managing assets to make them produce maximum revenue over the longer term. The expression is generally used in the context of financial assets.
Asset Manager:
A person appointed by a written contract between a company or trust to direct the investment program of the company or trust. It can be a fully discretionary account or limitations can be imposed by the contract. Fees to the asset manager can be based on performance achieved, trading commissions or a percentage of the valuation of the estate under his or her management.
Asset Protection Trust (APT):
A new type of trust which places the trust’s assets beyond the reach of potential foreign governments, litigious plaintiffs, creditors and contingent fee lawyers.
Asset Stripping:
A process in which a company or an individual buys an asset (frequently a quoted company) and then proceeds to sell it bit by bit. Asset stripping is most common when the stockmarket’s valuation of the whole of a business is less than the sum of its parts.
Assign:
To record the transfer of the ownerships of an asset from one person to another. Some contracts impose restrictions on the assignment of their benefits and obligations.
Associated:
Company A is an associated company of company B if more than 20%, but less than 50%, of its equity is owned by company B. Associated companies have to be consolidated into the accounts of the company that owns the equity stake only if that company also controls the composition of the board of the associated company.
ATM (Automatic Teller Machine; Cash Dispenser; Cash Point; Cash Machine; Cash Withdrawer):
Used for cash withdrawals with your credit card or debit card at approximately 820,000 ATMs in over 120 countries.
Audit:
The regular and systematic process of checking that a company’s accounts are true and fair. The audit is carried out by an independent accountant from a firm that has an arm’s length relationship with the company whose accounts it is auditing. The word comes from the Latin auditus, meaning hearing. In olden times it referred to the hearing that landowners gave to the manager of their land (urban or agricultural), while the manager accounted for his stewardship.
Auditors:
The last body needed in connection with a corporation: required to inspect the company’s bookkeeping and verify the correctness of annual accounts. Usually not employees or directors of the corporation but an outside firm.
Aussensteuergesetz:
Anti-avoidance German law whereby German citizens remain subject to the principal German taxes for a period of ten years if they emigrate to a country designated in the legislation (as from time to time amended) as a low tax country.
Authorised:
The shares that a company is legally permitted to issue under its articles of association. A company may issue fewer shares if it wishes, but it may not issue more without first changing its articles.
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
-B-
Back Office:
A business’s behind-the-scenes operations. In financial institutions it is the people who sort out the paperwork; in manufacturing operations it is the people who make the paperwork.
Back Pay:
A salary of wage that is unpaid from aprevious period. For weekly paid workers it is pay due from the week before last; for monthly paid workers it is pay due for work done in the month before last.
Back-to-Back:
An importer that wishes to establish its creditworthiness with an exporter from another country can set up a bank account in the exporter’s country and place funds in that account. Such funds act as collateral for goods that the importer subsequently buys from the exporter. They are referred to as a back-to-back facility.
Back-to-Back Loan:
Back-to-Back loans are matching deposit arrangements. They may be used in order to solve a financing or exchange control problem. However, in the case of certain tax havens, the function of back-to-back loans is to reduce the taxable base subject to withholding taxes on interest payments, by interposing an intermediary subsidiary company between the source of the income and the recipient. For example, an intermediary company located in the Netherlands or the Netherlands Antilles may be interposed so as to take advantage of a favorable tax treaty. In such cases the authorities usually require a certain spread or “turn” on the rates so as to create a small profit, which is subject to tax locally.
I.e., in this loan structure “A” deposits a sum of money with a bank in country “X” on condition that a related branch, agency, edge corporation or bank located in country “Y” will lend an equivalent sum to “A” or a designee in country “Y”.
Bad Debt:
A bill of loan that is not paid within a reasonable period of time after its due-by date. Such late payments are described as doubtful debts for a while, but eventually they become bad debts. When that haappens they have to be written off in the business’ accounts.
Badges of Fraud:
Conduct that raises a strong presumption that it was undertaken with the intent to delay, hinder or defraud a creditor.
Balance:
The difference between the credit and debit items in an account. If the credit items exceed the debit ones, the account is said to have a credit balance. If they do not, the account is said to be overdrawn.
Balance of Payments:
The record of a country’s transactions with the rest of the world. The current account of the balance of payments consists of visible trade in goods; invisible trade in services; private transfer payments, such as money sent home by nationals working abroad; and official transfers, such as payments to international organisations.
The capital account consists of long-term and short-term transactions relation to a country’s assets and liabilities (for example, loans and borrowings). Adding the current to the capital account gives the overall balance, which should be mathced by net monetary movements and changes in reserves. In practice, the data recorded never add up as they should in theory, and the gap is filled by an item called “errors and omissions”.
Balance of Trade:
A statement of a country’s trading account with the rest of the world. This covers the import and export of goods and services.
Balance Sheet:
The part of a company’s accounts which lists its assets and liabilities. Fundamental to all such accounts is the idea that assets and liabilities are in balance, that is, they are equal. The balance sheet is, of course, a snapshot of a company’s position. A short time after it is compiled that position can, and sometimes does, change significantly.
Balloon Payment:
The final payment on a loan that is being repaid in instalments. A balloon payment exceeds by some considerable amount the preceding payments. The repayments balloon as the maturity of the loan draws nigh.
Bandwidth:
Measure (in kilobytes of data transferred) of the traffic on a web site.
Bank:
A financial institution that carries out three basic functions:
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- Collects deposits from savers;
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- makes loans to borrowers; and
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- enables money to be transmitted from one bank account to another by means of cheques, standing orders, direct debits, and so on.
There are a number of specialised banks that carry out particular functions. For example, a central bank acts as banker of last resort to the banking system; and investment bank acts as banker of last resort to the banking system; an investment bank is concerned with advising companies on how to raise money in the capital market; and a clearing bank is the core of a country’s money transmission system.
Bank Charges:
The fees charged by banks for their services, such as money transmission (claring cheques and so on), currency conversion and arranging loans.
Bank Draft:
An order from a seller (or exporter) requesting the bank of the buyer (or importer) to pay to the seller a specified amount. A sight draft is payable on presentation; a time draft is payable at a named future date. A bank draft is also known as a bill of exchange.
Banking:
A considerable volume of international banking takes place offshore and many of the world’s major banks have banking and trust company operations in one or more tax havens.
Most tax haven jurisdictions have enacted legislative provisions and set up administrative authorities whose function it is to control banking and trust company activities.
Banking and Financing Controlled Foreign Corporation:
A foreign corporation which is a controlled foreign corporation conducting banking business, financing or similar business if it is primarily engaged in the active conduct of a business in which more than 50% of its gross income is derived from an activity consisting of one or more of the following services:
– receiving deposits of money from the public;
– making loans to the public;
– purchasing, or purchasing and discounting, accounts receivable, notes receivable, or installment contracts receivable; or
– Purchasing stock or debit obligations from the issuer or obligor (or from a person or persons controlling, controlled by, or under common control with, such issuer or obligor) thereof for the purpose of distributing such stock or obligations through resale to the public.
Banking and Financing Income Excluded from Subpart F Income:
Certain income earned from related persons by foreign personal holding companies that is excluded from Subpart F, or “tainted” income if it consists of:
– dividends and interest received from a related person which is created or organized under the laws of the same foreign country in which the controlled foreign corporation is created;
– interest received in the conduct of a banking, financing, or similar business from a related person engaged in the conduct of a banking, financing or similar business if the business of the recipient and the payer are predominantly with persons other than related persons. Since the United States accumulated earnings tax does not apply to a foreign personal holding ocmpany, overseas banks and finance companies are not under pressure to remit funds to their parent banks.
Banking Passport:
A banking passport is simply that you create a ‘new person’ with another nationality and a full set of ID, separate ‘legal entity’ through a second passport (or third) in a name of your choice.
Bank of International Settlements (BIS):
Structured like America’s Federal Reserve Bank, controlled by the Basel Committee of the G-10 nations’ Central Banks, it sets standards for capital adequacy among the member central banks.
Bankruptcy:
Being formally declared by a court unable to repay debts. A person who has been declared bankrupt is deprived of certain powers; for example, he or she cannot be a director of a company for a number of years. A bankrupt’s assets are taken over by a trustee who distributes them among th unpaid creditors.
Bank Secrecy:
In most countries one of the terms of the relationship between banker and customer is that the banker will keep the customer’s affairs secret. Staff members are normally required to sign a declaration of secrecy as regards the business of the banks.
Where numbered accounts are used their purpose is to limit the number of persons who know the identity of the client. In certain countries (e.g. Switzerland and the Cayman Islands) specific legislation makes breaches of bank secrecy subject to criminal law sanctions. However, in all legal systems (including Switzerland) there are specific cases where the duty of secrecy of a banker is discharged, e.g. where fraud, money laundering and narcotics are involved.
The exchange of information clause contained in most tax treaties may enable the tax administration of one treaty country to obtain information concerning bank accounts, which its residents have in the other country.
Bar Chart:
A diagram consisting of a number of vertical bars placed next to each other. For example, a chart showing the number of cars sold by a dealer each month might have the number of cars plotted along the vertical axis and the months of the year along the horizontal axis.
Bar Code:
A rectangle of vertical black lines of varying thickness displayed on the side of consumer goods. The lines are read by a laser beam which records electronically the product’s details, such as its price, size, model number and so on.
Bare Trusts:
Also known as dry, formal, naked, passive or simple trusts. These are trusts where the trustees have no duties to perform other than to convey the trust property to the beneficiary(s) when called upon to do so.
Bargain
There are two business-related meanings:
– Used as a noun, a bargain is a deal done at a price below the acknowledged market price.
– Used as a verb, it refers to the process whereby a buyer and a seller reach agreement on a price.
Barrier to Entry:
The obstacles that a company entering a market for the first time has to surmount to thrive in that market. These include things like a shortage of suitable sites (for retailing), the absence of economies of scale (for mass market goods), and government regulations that protect domestic producers (for imports).
Barrier to Exit:
The obstacles that prevent a company leaving a market when it no longer sees a prospect of making money in that market. These include things like the cost of laying off staff and of severing long-term supply contracts.
Barter:
Paying for goods and services with other goods and services: that is, transactions that do not involve and exchange of money. Barter can occur at a basic level (my eggs for your honey) and at a highly sophisticated level (Russian oil for American planes). The more sophisticated version is often referred to as countertrade.
Base Period:
A time in the past used as a yardstick against which to compare future performance of, for example, a business or an economy. It is easy to see how an economy has grown, for example, if its GDP is related to a base period in which it was assumed to be 100 units.
Base Rate:
A declared rate of interest that is used in the UK as a reference point for other rates. Thus a bank might say that its lending rate to a customer is base rate plus three (percentage points).
Basis:
Basis, a tax and accounting term, is the measuring rod against which gain or loss is measured. With stock, basis is what you pay for stock or the fair market value of property you contribute in exchange for the stock.
Basis Point:
The smallest unit in a measure of interest rates. Thus one basis point in 9.7% is 0.1; one basis point in 9.76% is 0.01.
Basle Practices:
A committee of central banks setting standards for conducting their business resulting in minimum standards, preventative money laundering measures etc.
Bean Counter:
An unflattering name for an accountant. It implies that accountants spend their time sitting around counting beans – beans once having been used as a primitive form of money to store and exchange value.
Bear:
An investor who thinks that the price of a security is going to fall. A bear sells securities in the expectation of being able to buy them back in future at a lower price.
Bearer Bond:
A bond issued in bearer form rather than being registered in a specific owner’s name. Ownership is d determined by possession.
Bearer Security:
A bond of share that gives the rights of ownership (such as voting rights or the right to receive dividends) to whoever holds (or bears) them. This is in contrast to registred securities, which belong to the person or organisation in whose name they are registered.
Bearer Share Certificate:
A negotiable share certificate made out in the name of the bearer and not in the name of a particular person or organization. This is a tremendously powerful feature for preserving anonymity and privacy, but can be very dangerous if the certificate falls into the wrong hands. Possession of the certificate constitutes ownership of the asset(s).
Bearer Shares:
A negotiable share made out in the name of the bearer and not in the name of a particular person or organization. The shares in the capital of a company, which are transferable by delivery of the certificate. Unlike registered shares, which are transferred by an instrument of transfer, the name of the holder is not registered in the books of the company.
Bearer Stocks/Shares:
A negotiable share certificate made out in the name of the bearer and not in the name of a particular person or organization.
Bellwether:
Items in a profit and loss account that appear below the net profit figure; that is, items that are taken into account after the figure for net profit has been calculated. Contrast with above the line.
Below the Line:
Items in a profit and loss account that appear below the net profit figure; that is, items that are taken into account after the figure for net profit has been calculated. Contrast with above the line.
Benchmark:
The measure of a business function or process that is considered to be best practice for a particular industry. The number of cars produced per month by the most efficient up-to-date car factory will be a benchmark for all car manufacturers. So will the lowest percentage of quality defects that any factory achieves.
Beneficial Owner:
The actual or economic owner of an offshore company, as distinct from the registered (or nominal) owner.
Beneficiary:
A person to whom a trust’s proceeds are distributed.
Benefit:
An advantage gained by the addition of something extra. For example, customers gain a benefit when companies add extra staff to handle their enquiries; products benefit from the addition of new machinery that improves their quality. The addition of these extras bears a cost, however, and needs to be subjected to a cost benefit analysis.
BENELUX:
The countries of Belgium, the Netherlands, and Luxembourg, and the economic union between them. This exists within the rules and structure of the European Union, all three countries being EU members.
Berne Convention:
An international agreement on the protection of copyright. Signatory countries agree to treat artistic works from all member countries equally.
Berne Union:
An association of national export-credit agencies based in Berne, Switzerland. The agencies meet at the Berne Union to discuss issues of common concern.
Besloten Vennootschap met Beperkte aansprakelijkheid (BV):
Dutch limited company for small commercial enterprise, not required to publish accounts; used as a Substantial Holding Company.
Best Effort:
A designation that a certain financial result is not guaranteed but that a good faith effort will be made to provide the result that is represented.
BIC:
Bank Identifier Code. Related: IBAN and S.W.I.F.T.
Bid:
The price offered for security, a company or a painting. At the moment that it is offered, a bid is the highest price that any potential buyer is prepared to pay for what is on offer.
Big Brother:
Your (un)friendly local government watching over your shoulder. (Recommended reading: George Orwell‘s book Nineteen Eighty-Four, published 1948. Famous quote from the book: Big Brother is watching you!). Also visit Echelon‘s web site and CIA’s ‘The World Factbook 2003‘.
Big-Ticket Item:
Consumer goods that are of such a high price, such as cars or cookers, that customers often buy them on credit.
Bill:
There are at least two business meanings:
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- A written claim in respect of a debt.
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- An advertisement of goods or services for sale, as in bill of fare, or billboard.
Billboard:
Boards to which are attached bills; that is, advertisements. Billboards (also known as hoardings) are usually found close to major transport arteries. In some countries they are strictly controlled by law; in others less so.
Bill of Lading:
The documents giving title to goods in transit. They describe the goods, their condition and their destination. They are particularly important as backing for a letter of credit. A clean bill is a bill of lading that is attached by a shipping company to goods that are delivered in perfect condition. Hence the expression “a clean bill of health”. If the goods are not as they should be, then the bill contains a clause to that effect, and it is said to be a dirty bill.
BIS:
Short for the Bank for International Settlements, a Basle-based financial institution that acts as a central bank for central banks. Through it they can clear funds among themselves. The BIS also acts as a talking-shop for bank regulators from around the world.
Black List:
A list of individuals, companies or countries from which certain privileges are withheld. For example, companies that disobey a government-imposed boycott may find themselves blacklisted and unable to bid for future government contracts.
Black Economy:
The value of all the black market transactions that take place in an economy. By definition these are immeasurable, but many estimates are made nevertheless. In the United States, the black economy is reckoned to be worth less than 5% of GDP. In Italy some estimates put it as high as 25%; and in many low-income developing countries it is undoubtledly much higher.
Black Market:
A market that operates outside the law and government regulation. Black-market transactions are largely untaxed and unrecorded. They may involve the sale of smuggled goods, stolen goods, or illegally copied goods (watches, for instance).
Blank Cheque:
A cheque that is signed by the payer but is left blank as to the payee and/or the amount of money to be paid.
Blind Trust:
A trust in which the trustees are not allowed to provide any information to the beneficiaries about the administration of the assets of the trust.
Blister Packaging:
A form of packaging that allows a potential purchaser to see a wrapped-up product before purchasing it.
Blocked Account:
A bank account which a court or a government has blocked, thus preventing funds from being withdrawn from it.
Blocked Funds:
Term for “reserving” funds by one bank for the benefit of another bank. Blocking of funds is an often used banking procedure to ensure that the same funds are not used twice. Often more beneficial to an investor than a bank guarantee.
Block Trading:
Trading in big blocks of shares, an activity carried out more often by financial institutions than by individuals. It is the wholesale end of the equity market.
Blue Chip:
A quoted company that has a long record of steadily rising profits and uninterrupted dividend payments.
Blue Collar:
Employees who work in a factory are sometimes referred to as blue-collar workers to distinguish them from their managers (who work in offices and are known as white-collar workers). It was once customary for factory workers to wear blue overalls.
Blueprint:
Originally the rough outline of a drawing executed on blue paper and used by printers for guidance. More generally, it is a model of a business plan or process.
Bluetooth:
Bluetooth is a global de facto standard for wireless connectivity. Based on a low-cost, short-range radio link, Bluetooth cuts the cords that used to tie up digital devices. When two Bluetooth equipped devices come within 10 meters range of each other, they can establish a connection together. And because Bluetooth utilizes a radio-based link, it doesn’t require a line-of-sight connection in order to communicate. Your laptop could send information to a printer in the next room, or your microwave could send a message to your mobile phone telling you that your meal is ready. In the future, Bluetooth is likely to be standard in tens of millions of mobile phones, PCs, laptops and a whole range of other electronic devices. As a result, the market is going to demand new innovative applications, value-added services, end-to-end solutions and much more. The possibilities opened up really are limitless, and because the radio frequency used is globally available, Bluetooth can offer fast and secure access to wireless connectivity all over the world. With potential like that, it’s no wonder that Bluetooth is set to become the fastest adopted technology in history.
Board:
A group of people (called directors) who are appointed by the shareholders of a company to look after their interests. A board will usually have a number of executive directors, who are also fulltime managers of the business; a number of non-executive directors, who may represent particular groups of shareholders; and a secretary, who keeps the minutes.
Board Meeting:
A meeting of the board. Board meetings usually occur once a month and they follow a prescribed agenda and formal rules (which are often laid down by law).
Board of Directors:
The company’s “cabinet” – as specified in the Articles of Association – is supposed to make decisions on the issues that are too specific for the general meeting to discuss but which are beyond the day-to-day responsibility of the company management. They appoint officers, and they are elected by the shareholders of the corporation. Board members owe the corporation duties of ordinary care, good faith, and loyalty.
Board of Trustees:
A board acting as trustees to a trust. This board is in full control of the trust affairs. The board of trustees will manage the trust affairs based on the rights and responsibilities granted to them by the settlor’s trust deed.
Bond:
An iou issued by a company or a government in return for an interest-bearing long-term loan. These ious can be ought and sold by investorts ina secondary market.
Bonded:
When imported goods are held (duty-free) ind a secure depot, called a bonded warehouse, in their country of destination. The goods are removed from the warehouse as and when they are needed, and only then does any duty on them become due.
Bonds:
A bond certificate is simply an IOU. It certifies that you have loaned money to a government or corporation and describes the terms of the loan. Only corporations can issue stocks, but bonds can be issued by corporations or governments.
Bonus:
A payment to shareholders or employees that is over and above what they can contractually expect. In some companies, employees receive an annual bonus that is dependent on the company’s performance.
Book-Keeping:
The business of maintaining a financial record of a company’s day-to-day transactions. This record forms the basis of the company’s annual accounts.
Books:
A company’s basic accounting records in which are recorded the financial details of all transactions undertaken by the company.
Book Value:
The value of an asset as it is recorded in a company’s books. This value may be different from the asset’s market value because, for example, accounting convention may dictate that the asset be valued in the books at its purchase price. The purchase price may be well above or well below the asset’s current market value.
Boot:
The process of starting up a computer, running the small programs that enable the computer to run larger ones.
Bottom Line:
The net profit or loss figure in a company’s accounts. More generally, it is the final result of a series of actions or statements. “The bottom line is that the company is bankrupt.”
Bounce:
If a cheque is returned to the payee by the payer’s bank because of a lack of funds it is said to bounce. The payee is asked to represent the cheque in the hope that funds have appeared in the meantime and it can be cleared. If not, it might be returned to the payee yet again, like a rubber ball.
Bourse:
French for stock exchange, widely used in the non-English-speaking world.
Boycott:
A deliberate decision not to do business with somebody.
BPR:
Short for business process re-engineering, what happens when business processes are radically re-designed to achieve a dramativ improvement in a caompany’s performance.
Brainstorming:
An unstructured meeting in which the participants attempt to come up with original solutions to corporate problems. The first step is usually an attempt to gather as many ideas as possible. Only later are the ideas evaluated.
Branch:
The retail outlet of a financial institution. In many countries bank branches occupy the most prestigious (and expensive) sites on the high streets of towns and cities.
Branch Rule:
A controlled foreign corporation carrying on purchasing or selling activities by or through a branch or similar establishment located outside the country of incorporation is subject to regulation known as the “branch rule.” The branch or similar establishment is treated as a separate corporation in determining foreign base company income when its use for such activities has “substantially the same effect” means the difference in taxes paid to the country where the branch is located and those that would be payable if the income of the branch were allocated to a permanent establishment where the subsidiary is located.
Brand:
The set of values that are signified by a company’s name or symbol and that differentiate it from its competitors. The marketing potential of brands has received much attention in recent years as companies such as Nike, Virgin and Levi have gained great benefit from developing their brands so that they represent more a lifestyle than a product.
Brand Extension:
Extending a brand’s name to new products or services. For example, the Swatch car extends the use of the Swatch watch brand to a Mercedes car.
Brandicide:
The killing of a brand by over-extension. When many different products carry one brand name there is a danger that the failure of oneof the products will reflect badly on all of them.One rotten apple in the barrel can cause the lot to rot.
Brand Management:
The process of nurturing and marketing brands so that their value to the busines increases.
Breach:
The non-performance of something that has been agreed between the parties to a contract. A breach of contract by one party entitles the other to certain remedies prescribed in law.
Break-even Point:
The point in the life of a business where its revenue exceeds its costs. Any new venture’s business plan should contain a clear analysis of when its break-even point will be achieved, and how much it will cost to get there.
Break-up Value:
The value of a company when broken up into individual businesses or business units. This may be more or less than the value of the company as a whole. If the value is more and it is a quoted company, it is highly vulnerable to asset stripping.
Bretton Woods:
A conference held in the US town of Bretton Woods towards the end of the second world war. At the conference a design for the post-war international financial system was drawn up. This included the creation the world bank and the IMF.
Bridging Loan:
A short-term loan designed to act as a bridge between an item of expenditure and the revenue to meet that expenditure. Frequently used in housing finance to fund the purchase of a new home untill the borrowers are able to sell their old one.
British Commonwealth of Nations
The 54 member states, with year of admission:
Antigua and Barbuda (1981), Australia (1931) (1), Bahamas (1973), Bangladesh (1972), Barbados (1966), Belize (1981), Botswana (1966), Brunei (1984) (2), Britain (1931), Cameroon (1995), Canada (1931) (1), Cyprus (1961), Dominica (1978), Fiji Islands (1997) (3), Gambia (1965), Ghana (1957), Grenada (1974), Guyana (1966), India (1947), Jamaica (1962), Kenya (1963), Kiribati (1979), Lesotho (1966, Malawi (1964), Malaysia (1957), Maldives (1982), Malta (1964), Mauritius (1968), Mozambique (1995), Namibia (1990), Nauru (1968) (4), New Zealand (1931) (1), Nigeria (1960) (5), Pakistan (1989) (6), Papua New Guinea (1975), St Kitts and Nevis (1983), St Lucia (1979), St Vincent and Grenadines (1979), Samoa (1970), Seychelles (1976), Sierra Leone (1961), Singapore (1965), Solomon Islands (1978), South Africa (1994) (7), Sri Lanka (1948), Swaziland (1968), Tanzania (1961), Tonga (1970) (2), Trinidad and Tobago (1962), Tuvalu (1978), Uganda (1982), Vanuatu (1980), Zambia (1964) and Zimbabwe (1980).
(1): Independence given legal effect by the Statute of Westminster 1931. (2): Brunei and Tonga had been sovereign states in treaty relationship with Britain. (3): Fiji left 1987; but rejoined in 1997. It changed its name to ‘Fiji Islands’ in 1998. (4): Nauru was first a Mandate, then a Trust territory. (5): Membership suspended 1995. (6): Left 1992, rejoined 1989. (7): Left 1961, rejoined 1994.
Broker:
An agent who buys and sells assets (usually financial assets) on behalf of others, and who is rewarded by a commission related to the value of the transactions undertaken. A broker can be an individual or a firm.
Brownfield Site:
A site made available for industrial development which has already been used for commercial purposes. Contrast with Greenfield site.
Brown Goods:
Electrical consumer goods that used to be encased in brown veneer, such as radios and televisions.
Browser:
A program used to locate and view HTML documents (Microsoft Explorer, Netscape, Linux, for example).
Bubble:
An artificially inflated financial market. The most famous bubble in history was the South Sea Bubbl of 1720 in which the shares of the UK’s South Sea Company increased tenfold before collapsing to next to nothing.
Bucket Shop:
A firm of brokers that deals in securities (or airline tickets) of dubious provenance.
Budget:
An estimate of future revenue and costs over a specific period. Budgets are usually prepared on an annual or a monthly basis. They are drawn up for the finances of large countries and of tiny business units alike.
Buffer Stock:
A stock of materials held in reserve. Large commodity markets retain buffer stocks to smooth out the flow of supply and demand. Businesses aim to keep their buffer stocks as low as possible so that they minimise the cost of retaining materials unneccessarily.
Bull:
An investor who expects the price of a security (or of a securities market) to rise. Bulls buy securities now in the expectation of being able to sell them in the future for profit. Bulls who are changing their minds are known as stale bulls. Contrast with bear.
Bullet Loan:
A loan on which the borrower pays only interest during the life of the loan. The capital is repaid all at once (in a single bullet) at the end of the term of the loan.
Bullion:
Silver or gold that has not been turned into coins. Gold bullion is usually kept in the form of ingots of a standard shape and weight.
Bunching:
The practice of accelerating payments (and bringing them closer together) to take advantage of tax rules.
Bundling:
The practice of offering other products or services that are related to the product that is being sold at a special price. Software packages, for example, are often bundled with the purchase of hardware.
Bureaucracy:
The collection of officials (either within government or within corporate management) who see that the rules of an organization (or of a country) are obeyed. Such officials are the cause of much frustation and the butt of many jokes.
Business:
There are three overlapping meanings:
-
- An organization run for profit, be it a company, partnership or sole trader;
-
- The collection of all such organizations;
-
- The main activity of all of the above.
Business Class:
A class of service on airlines that is usually situated between first class and coach and offers amenities as larger seats, free cocktails, and early check-in.
Business Cycle:
The economies of most countries move in a cycle of recession followed by recovery, followed by another recession. This cycle is known as the business cycle, and it can vary greatly in duration.
Business Ethics:
The moral code by which businessmen and women conduct their professional relationships with shareholders, employees, suppliers, customers, and so on. Typical issues in business ethics today are:
-
- Is it acceptable to pay bribes in countries where this is standard practice?
-
- To what extent should businesses be held responsible for clearing up industrial sites that they abandon?
Business Plan:
An outline proposal of a new business venture which contains details of costs and revenues and an outline of proposed activity over the next 3-5 years. The plan is designed to persuade potential investors, or those in an organization with the power of decision over it, that the venture is going to make a handsome return.
Business Reply Card:
A prepaid postcard designed to elicit a response from a consumer. Consumers are often asked to reply to questions on the card relating to a product that they have just purchased.
Business School:
An educational institution that teaches courses on business and often provides customised management development programmes for companies. Most business education used to be done at postgraduate level or on the job. But a growing number of universities now offer undergraduate business courses.
Business-to-business Advertising:
Advertising which a business aims at other businesses. A supplier of metal hardness testers, for example, does not want to advertise directly to all consumers but only to companies that need to test metal, such as aircraft manufacturers. Business-to-business advertising generally uses written copy (which can sometimes be hightly technical) rather than eye-catching images.
Buy-Back:
A clause in a purchasing contract whereby a vendor agrees to buy back goods in certain circumstances. For example, a builder might agree to buy back a property at a prearranged price should the purchaser be relocated by his emplyer withing a prescribed period of time.
Buyer:
A person or organization that has decided to make a purchase.
Buyer’s Market:
A market in which the buyer has the upper hand, where there is more supply than demand. In such a market competition should bring prices down. This in turn should eliminate some suppliers (who are no longer able to make a profit) thus restoring the balance between buyers and sellers.
Bylaws – Bye-Laws (see also Articles of Association):
The bylaws are the rules and procedures which govern the corporation. Such things as director and shareholder meetings and procedures are described in the bylaws. In the event of a conflict between the articles of incorporation and the bylaws, the articles control. Bylaws can’t be inconsistent with the business corporation act as well.
By-Product:
Something sellable that is produced as an accidental side-effect of manufacturing something else. Sawdust, for example, is a by-product of carpentry, and gas is often a by-product of the oil industry.
Byte:
A unit for measuring the capacity of a computer. A byte is equal to eight bits (BI…nary digi…TS).
-C-
Cabotage:
Rights given by law which allow national shippers to carry all cargo (and passengers) transported within the country’s territory (by land and sea).
CAD/CAM:
Short for computer-aided design and computer aided manufacturing. These are software programs that assist in design and manufacturing, two business processes that have been dramatically changed by the introduction of computers.
Call:
A request made to company’s investors for payment of what they still owe on shares that the company originally issued as partly paid.
Call Centre:
A place where a number of telephone operators are gathered together to take orders on behalf of a company or to answer customers’ queries. Most call centres are part of a large corporation and are used exclusively by its customers and staff. But some work as independent organizations and have a number of different clients.
Call Option:
A contractual right to buy an asset (often shares) at a stated price (the strike price) within a specified period of time. If not exercised, a call option expires at the end of the period.
Campaign:
Usually used with reference to advertising. An advertising campaign is a concerted plan to use a number of media over given period of time to get a message – such as “this product or company is outstanding” or “don’t drink and drive” – from the advertiser across to the general public. A public relations campaign is a planned effort to improve the image of something (a company, a product or a politician) in the public’s eye.
CAP:
Short for Common Agricultural Policy, the european union’s scheme for protecting the incomes of farmers within EU.
Cap:
An upper limit placed on the interest or capital repayments on a loan. Capping can only apply to interest payments whose rates are adjusted according to market conditions. Fixed interest payments are automatically capped.
Capacity:
The maximum that can be produced by a given unit of labour or capital in a given period of time.
Capital:
The money that is invested in a business and that is raised by issuing shares or long-term bonds. People who invest money in businesses are known as capitalists, and an economic system that allows them to do this is called capitalism.
Capital Allowance:
A part (usually a percentage) of the cost of capital equipment that a company is allowed to set aginst its annual income for the purposes of calculating its tax bill. The rules on capital allowances are to be found in a country’s tax legislation.
Capital Flows:
The movement of capital between countries. Inflows come in, outflows go out.
Capital Gain:
The profit from the sale of a capital asset (property, art, securities, and so on). In many countries capital gains are subject to special tax rules.
Capital Goods:
Goods that are used in the production of other goods: all industrial machinery and office buildings, as well as road diggers and computers.
Capital Intensive:
A business, or business process, that needs a large input of capital to operate. Capital-intensive businesses include those like steelmaking and vehicle manufacturing which need expensive chunks of plant and equipment in order to function.
Capitalization:
The attribution of a capital value to a stream of income; the amount of money that someone is prepared to pay now in order to receive a stream due in the future.
A company’ market capitalisation is the value that is put on it by a stockmarket, that is the market’s value of one share multiplied by the number of shares that have been issued.
Capitalization Issue:
The process whereby money from a company’s reserves is converted into capital and then distributed to shareholders as new shares, in proportion to their original holdings, also known as bonus or scrip issue.
Capitalize:
To turn into capital. Companies sometimes capitalise expenditure and treat it as a balance sheet asset to be depreciated over a number of years rather than charge it all aginst the current year’s income statement. For example, many companies capitalise expenditure on R&D.
Capital Market:
A market in which are traded the financial instruments (such as shares and bonds) which represent the capital of companies.
Captive:
A service organisation (usually an insurance business) which is owned by a conglomerate and meets all the conglomerate’s needs in its own specialist area. Some captive insurance companies also provide services for customers outside their own conglomerate.
Captive Bank:
An international bank owned by a company in a high tax country but located in a tax haven country where restrictions are absent. A captive bank allows its parent company to pool funds in a tax haven and make loans to affiliates and finance the import or export transactions of related companies, or in some cases, factor receivables.
Captive Insurance Company:
An insurance company especially established for its own use by a large corporation subject to widespread risk. Usually the parent company pays normal premium rates to the house insurer and sometimes obtains tax relief on its premiums. The parent builds a reserve which can be invested on a tax-free basis. A captive can provide coverage against risks not covered by common insurance companies. Because income from the insurance and reinsurance of United States, a captive insurance company is usually assigned to insure only foreign risks.
Captive Market:
A market over which a supplier has special control. For instance, the only newspaper shop in a community of elderly retired people could be said to have a captive market.
Career:
A way of making a living, used by some to refer only to certain ways of doing so; for example, lawyers have careers; electricians have jobs.
Career Path:
The planned direction of a person’s career. Choosing a career path determines what trainingandfuture jobs a person should undertake to maintain that direction.
CARICOM (Caribbean Common Market):
Consists of 14 sister-member countries of the Caribbean community. Members include: Anigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kits and Nevis, St. Lucia, St. Vincent, Surinam, Trinidad and Tobago. Conspicuous by their absence are the Cayman Islands and the British Virgin Islands, two major players in international banking and finance.
Carnet:
A document authorising its holder to bring samples through customs and excise without incurring any duty (within prescribed limits).
Carry Forward/Carry Back:
The shifting of payments from one accounting period to another, usually to gain a financial advantage. Carrying a payment forward takes it into a future period; carrying it back takes it into a previous period.
Cartel:
A group of suppliers who get toghether to control the supply or the price of their product. Some cartels, such as OPEC, operate overtly. Others are less easy to pin down. For example, if the prices for electrical goods are the same in most shops, is this because the makers have colluded in making retailers charge these prices? Or is it because the market forces retailers not to charge more than their competitors?
Cascade Tax:
A turnover tax that is applied on every stage of production cycle, frequently described as “economically”disadvantageous inducing unjustified vertical integration.”
Case Study:
A formal written description of a business problem. Case studies are much used by business schools as a method of teaching management. Most case studies are of real issues that have been faced by real companies; a few are fiction.
Cash:
Notes, coins are other assets that can be turned rapidly into notes and coins; for example, shortterm bank balances or highly liquid securities.
Cash and Carry:
A half-way house between wholesaling and retailing. An outlet that sells products to the general public at low prices but with a minimum of service. Cash-and-carry outlets frequently demand that customers buy in bulk.
Cash Book:
A company’s record of its cash transactions, both receipts and payments.
Cash Cow:
A business within a group of businesses that generates a lot of cash which can be used (like the milk of a cow) to nourish other businesses.
Cash Discount:
A discount in the price of a product granted by a vendor in return for payment in cash. Credit card companies often stipulate that outlets which accept their cards may not offer cash discounts to customers.
Cash Flow:
The amount of cash flowing through an organisation in a given period. A company’s cash flow is equal to its trading profit plus any depreciation, plus any new money raised through a share issue or a loan during the period.
Cash on Delivery:
Commonly known by the initials C.O.D. Goods that are shipped on C.O.D. terms to a customer must be paid for at the time they are delivered. In the United States the term used is collect on delivery.
Cash Register:
A machine which registers the cash received by vendors from their sales. Often known as the till.
Casting Vote:
When there is an equal number of votes in favour of and aginst a proposal, the voting procedures may lay down that somebody has a casting vote to end the deadlock. The chairman of a company’s board of directors, for example, frequently has a casting vote. In effect a person with a casting vote votes twice on issues where the votes are equally divided.
Casual Labour:
Workers who do not have full-time employment and who move from one job to another. In many cases casual labour also moves from one place to another to find paid work. It is often used in agriculture.
Catalyst:
Something which, when added to something else, creates a reaction which neither of the two things could have created on their own. In business, management consultants are often said to be catalysts, enabling firms by their mere presence to take action that they would not otherwise have done.
Caveat Emptor:
A Latin expression meaning buyer beware. The best legal advice for consumers in the days before legislation provided them with protection aginst the sale of shoddy or defective merchandise.
CD:
Committee on Disarmament.
CE:
Conseil de l’Europe.
Cedula:
National ID in Spanish speaking countries.
Central Bank:
An institution that acts as banker to a country’s banking system and to its government. Central banks are also in charge of issuing notes and coins, and they act as a lender of last resort should there be a crisis within the financial system.
Centralization:
The process of concentrating control of a business’s operations at its centre, usually its headquarters.
CEO:
Short for chief executive officer, the person in charge of the day-to-day running of an organisation. He (or, more rarely, she) is answerable to the board of directors for the organisation’s day-to-day performance.
CERN:
Conseil Européen pour la Recherche Nucléaire.
CERT:
= Computer Emergency Respons Team: Our information ranges from protecting your system against potential problems to reacting to current problems to predicting future problems. Our work involves handling computer security incidents and vulnerabilities, publishing security alerts, researching long-term changes in networked systems, and developing information and training to help you improve security at your site.
Certificate of Authority (U.S.):
The certificate of authority is a document issued by the secretary of state to a foreign corporation after approving its completed application to do business in the state.
Certificate of Deposit:
A document issued by a financial institution as proof of the ownership of a large deposit of money held with that institution. Certificates of deposit (know as CDs) are negotiable instruments and can be bought and sold in a secondary market.
Certificate of Incorporation:
The basic existence of a corporation usually derives from two documents: the Articles of Association and the Certificate of Incorporation.
Certificate of Inspection:
A document certifying that transported goods were in good condition when they began their journey.
Certificate of Origin:
A document signed by an exporter or by an official body (such as a chamber of commerce) establishing in which country the goods to which the document is attached originated.
CFO:
Short for chief financial officer, the person in charge of a company’s accounts and of its finances (raising loans or issuing new securities). The CFO is normally a director of the company and has a seat on the board.
Chaebol:
A type of conglomerate peculiar to South Korea. A chaebol is similar to a Japanese keiretsu, but it is usually family-owned and has less close ties to its suppliers and distributors.
Chair:
The function of leading a meeting, and also the office of the person who carries out that function. For example: “Today Mr. Jones will take the chair.”
Chairman:
The person who takes the chair at a meeting. A company’s chairman is the person who takes the chair at the company’s board meetings.
Chamber of Commerce:
A local grouping of businessmen who set out to promote trade in their area by acting as a contact point and by providing information.
Change Management:
The business of managing changes that are out of the ordinary – a takeover or the re-engineering of a company, for example.
Chapter 11:
A legal status for corporations in the United States that are half-way to bankruptcy. Companies can seek legal protection from their creditors under Chapter 11 of the 1978 Bankruptcy Act. This gives them some time to work out an acceptable solution to their financial difficulties.
Charge:
There are at least two meanings:
-
- The cost of certain goods and services. Bank charges, for example, are the price paid for receiving banking services.
-
- A legal document giving rights to property if certain prescribed conditions are met. Banks often take charges on a business’s assets when they lend it money. The loan is then secured and the bank gets its money back – from the sale of the assets – in the event of the business failing.
Charge Card:
A plastic card issued to consumers which enables them to make cashless purchases at outlets which accept the card. Some charge cards have a credit facilitiy attached which enables cardholders to pay for their purchases over an extended period of time. Charge cards without a credit facility demand that payment be made in full at the end of the month in which the purchases were made.
Charter:
Memorandum of Association. A document issued by a recognised authority setting up a corporation and establishing its right to carry on in business. In the UK, for instance, companies established by Royal Charter were set up on the authority of the king or queen of the time.
Charter is also used to refer to the hiring of a vehicle designed to carry a large number of passengers, such as an aircraft or a bus. It originally referred to space rented on a cargo ship.
Check:
A method of transferring funds from one party to another via the banking system. Technically, a check is a bill of exchange drawn on a bank and payable on demand.
Cherry Picking:
The practice of targeting (and obtaining) the best (that is, the most profitable) consumers in a market. Old-established firms in a market resent it greatly when new entrants start cherry picking among their customers.
Chinese Wall:
A barrier placed between two arms of a business so that they work independently of each other to avoid conflicts of interest. Chinese walls are often necessary in financial institutions – for example between the corporate finance and fund management sides of an investment bank, to ensure there is no risk of the fund managers benefiting from inside information or of helping their corporate finance colleagues out when a new issue of shares is going badly.
CICR:
Comité International de la Croix-Rouge.
Churn:
The practice by a broker of trading inappropriately on behalf of a client, purely to generate extra commission.
CID:
Custom ID card.
CIF:
Short for cost, insurance and freight. When added to shipping documents, the letters CIF indicate that the agreed price includes the cost of the goods, their insurance in transit and the freight.
Claim:
There are two business-related meanings:
-
- A demand; in particular, one made to an insurer for compensation for a loss suffered in accordance with the terms of an insurance contract.
-
- A right to exploit a piece of land, particularly for its minerals.
Class:
A group of people with something in common that enables them to take legal action as a group, in a class action. Shareholders, for instance, from whom vital information about their company is withheld, could sue as a class.
It is also a group of scurities with similar properties, as in Class A shares.
Classified Advertisement:
A small advertisements, usually in black and white, which is typically no more than one column wide and paid for on a per-line, per-centimeter or per-word basis. Such advertisements are often called small ads. They usually grouped together at the back of a newspaper or magazine.
Claw Back:
A clause in a contract that specifies circumstances in which the seller of goods may be entitled to share in unforeseen profits that are made by the buyer from those goods. Commonly used where state assets are sold off to developers.
Clear:
The process of adding and subtracting a series of amounts owing between organisations so that they can settle their debts with a single payment. Clearing banks clear checks among themselves at the end of each working day.
Goods are said to have cleared customs when they have passed through customs procedures. They are then free to be traded inside the country into which they have been imported.
Clearance Sale:
A special sale designed to get rid of all of a retailer’s stock, or a least all of a particular product line.
Clearing System:
A mechanism for calculation of mutual positions within a group of participants with a view to facilitating the settlement of their mutual obligations on a net basis.
Client:
Professional services firms, such as lawyers and accountants, have clients; everybody else has customers.
Close Company:
A company generally in the United Kingdom but also found in other sterling area or Commonwealth countries which are controlled by no more than five persons or by its directors and treated differently from normal companies for tax purposes in that all or part of its undistributed after-tax profits may be apportioned, with certain exemptions, among its participating members or shareholders according to the proportion or percentage of interest in the company whereby the income is taxed on personal income even though it is not actually distributed.
Close Corporation (U.S.):
A close coporation has less than 50 shareholders and elects in its artislec of incorporation to be treated as a close corporation. The state in which the close corporation is formed must have a close corporation statute. Close corporations can eliminate or limit the powers of the board of directors, and corporate formality requirements are relaxed.
Closed Shop:
A company where all the workers belong to one trade union, and where any job applicant has to be a member of that union before he or she can be employed. In many countries closed shops are illegal.
Closely held Corporation:
A closely held corporation is any corporation in which the stock is held by a relatively small group of people or entities. Stock of a closely held corporation is not publicly traded on any stock exchange.
Closing Price:
The last price at which astock was traded during a period (usually a day) on a recognised stock exchange.
Code of Practice:
A list of standards drawn up by an industry or professional association that the members of that association agree to be bound by. They do so in rogue pracitioners. Those who break the code stand to be disciplined or, in extreme cases, expelled from the association.
Cold Calling:
The making of unannounced calls on customers (actual or potential). In the past these involved salesman knocking on doors. Nowadays most cold calling is done by telephone, much of it when the recipient has just sat down for a meal.
Collar:
The simultaneous purchase of a cap and the sale of a floor with the aim of maintaining interest rates within a defined range. The premium income from the sale of the floor reduces or offsets the cost of buying the cap.
Collateral:
A contractual obligation that exists alongside (“collateral to”) another obligation. Collateral may take the form of a charge on preperty as security for a loan, or it may be a guarantee. For example, parents often provide collateral for bank loans to their student offspring.
Collective Bargaining:
The process of negotiating pay increases and working conditions between an employer or groups of employers and representatives acting on behalf of a group of employees. Most public-sector pay awards are settled by collective bargaining.
Comfort Letter:
A letter written by an independent auditor stating that there has been no material change in a company’s accounts between the preparation of a prospectus for anew share issue and the time that the prospectus is distributed to potential investors. Comfort letters are a requirement of US securities legislation.
Commercial:
There are two definitions:
-
- Of or to do with commerce; that is, trade between different people or organisations.
-
- An advertising message that is broadcast on television, on the radio or in the cinema.
Commercial Paper:
A short-term debt instrument (usually of 30-90 days maturity) issued by a large corporation. Commercial paper does not pay interest. It is sold at a discount to its face value and its reward comes from the capital gain on maturity.
Commingle:
Commingling is the sharing and pooling of personal and corporate assets. For example, rather than maintain separate corporate and personal bank accounts, you choose to use one account for personal and corporate purposes. This is considered commingling and an easy way to become personally liable for corporate acts.
Commission:
A performance-related payment. Sales staff may be paid partly on a commission basis under which they receive a percentage of the amount of sales they make. Agents usually make their money entirely from commission.
Commitment Fee:
A payment made to a lender in return for the lender’s commitment to make a loan available, up to a certain amount and for a prescribed period of time.
Commitment Holder:
A wealthy private party buying guarantees from the issuing banks, reselling them to other banks/brokers. Commitment holders are not allowed to trade or do business on their own behalf. Other designation: provider.
Committee:
A group of people who meet on regular occasions to discuss a specified topic. A company’s board often creates a number of subcommittees to which it delegates responsibility for different functions; for example, directors’ remuneration, the appointment of auditors, and so on.
Commodity:
A product which is sold in bulk and is virtually indistinguishable between one producer and another. Some raw material commodities (such as metals and grains) are sold on the floor of an exchange – like securities.
Common Trust Fund:
A trust that operates by the process of pooling funds from a number of participants in the trust, who as beneficiaries under the trust, share in the income or other gains derived from the acquisition, holding, management or disposal of assets acquired for the trust.
Companies Act- or Ordinance:
Legislation enacted by a tax haven to facilitate and regulate for the incorporation, registration an operation of international business companies (IBC’s). More commonly found in The Caribbean tax havens i.e. the Bahamas or the BVI.
Company:
A legal entity formed by a group of individuals for the purpose of doing business. A companny has a legal existence that is separate from the individuals who found it.
Company Secretary:
Called the corporate secretary in the United States, this is the person charged with seeing that a company fulfils its legal obligations: that it registers in the proper way; holds formal board meetings as and when it should; and keeps its shareholders properly informed.
Comparative Advantage:
An economic theory first put forward by David Ricardo in the early 19th century. The theory says that all countries will be better off if each of them concentrates on doing the things it does best, even if what it does second best is better than what another country does best.
Compensation:
There are two business-related meanings:
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- The total package of rewards received by an employee, including salary, pension and non-monetary perks such as holiday entitlement.
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- The award by a court or tribunal for damages caused to plaintiff.
Competency:
The collection of skills, knowledge and personal qualities required to carry out a job. For example, call centre operators need to have adequate computer skills and be good with people.
Competition:
The battle between individual firms to provide the best value for money to their customers. Competition encourages the most efficient firms to flourish. To maximise economic efficiency, national regulators attempt to create conditions in which competition is as fair as possible. Hence the anti-trust type of laws that exist in many countries across the world.
Competitive Advantage:
Something which gives one firm an edge in competing with others. Such an advantage could be the quality of its intellectual property or its ability to source high-quality, low-price raw materials or labour.
Competitor:
Any business that is chasing the same customers in the same market as you.
Component:
An integral part of another product that is required for its manufacture, such as a microchip in a computer or a headlamp in an automobile.
Compound Interest:
The interest that is earned during a period when calculated as a percentage of the capital sum plus any interest that has been earned in previous periods. Compound interest assumes that previous interest payments are added to the capital sum and thus increase it.
Compound Yield:
The total return on investment, consisting of the distribution (dividend, interest) and the capital gain or loss, in % of the investment amount.
Compromise:
A trade-off of points of equal value in an attempt to reach agreement with another party. The essence of any process of negotiation is a willingness to compromise.
Compulsory Retirement:
The enforced retirement of an employee because of company rules or national legislation; for example, that directors or judges retire at 70.
Concentration:
The extent to which a market is supplied by a small number of organisations. For example, the market for jet aircraft is highly concentrated while the market for chocolate bars is not.
Concert Party:
A small number of investors who act together in an attempt to control a company in which they hold shares. This is usually achieved by the investors between them obtaining over 50% of the voting rights in the company.
Concession:
A special right given to someone in return (usually) for a monetary consideration. For example, the right to mine a certain piece of land or to sell goods on a particular area of floorspace within a department store.
Conciliation:
The process of attempting to bring together negotiationg parties who have ceased to talk to each other, such as management and a trade union.
Conditional SWIFT:
A funds transfer method which uses Society for Worldwide Interbank Financial Telecommunications protocols to transfer funds conditionally between banks, subject to the performance of a specified party.
Conference:
There are two business-related meanings:
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- A formal gathering of people for the purpose of discussing a particular business issue.
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- An agreement between a group of international shippers about the routes that they will sail and the rates that they will charge; an oligopoly.
Conference Call:
A telephone call involving more than two people in more than two places. Conference calls enable managers in different offices of the same corporations to have extended discussions without having to travel long distances. Conference calls need to be carefully scheduled in much the same way as face-to-face meetings.
Conflict of Interest:
A clash between the best interests of a person or firm in one guise and their best interests in another; for example, as suppliers of services to two different clients who are competitors.
Conglomerate:
A large group of businesses that are held toegher in a single corporate structure by cross-share-holdings. The businesses within a conglomerate cover a wide range of unrelated industries.
Consensus:
In general, any agreement. Also generally known as the OECD Censensus or Arrangement, this is an unsigned agreement of February, 1976 between Canada, France, West Germany, Italy, Japan, the United Kingdom and the United States establishing guidelines for minimum cash down payment and interest rates, maximum repayment terms and procedures for notification when these guidelines are exceeded. The Consensus Arrangement was superseded by the Arrangement on Guidelines for Officially Supported Export Credits in April, 1978, which was subsequently accepted by 22 members of the OECD Export Credit Group.
Consent Resolution:
A consent resolution is any resolution signed by all of the directors or shareholders, which authorizes a particular action. This act eliminates the need for face-to-face meetings of directors and shareholders.
Consideration:
The money value of a transaction (number of shares multiplied by the price), before adding commission, stamp duty, etc.
Consignment:
The supply of goods to a vendor on the understanding that the vendor will pay for whatever goods he or she is able to sell, and will return the rest to the supplier.
Consignor:
The individual or company named in shipping documents as being the original shipper of the goods.
Consolidate:
To bring together into a single set of accounts the separate sets of all the companies within a single group. In effect, this nets out from the accounts those transactions that have been made between companies within the group.
Also, a number of shipments of freight can be consolidated into one in order to save costs – the larger the shipment, the lower (in theory) is the cost of freight. Moreover, small shipments are often subject to minimum charges.
Consortium:
A group of companies that come together in some shape for a specific purpose. Most commonly, the members of a consortium take shares in a new entity that is formed expressly for the purpose.
Constructive Dismissal:
When there are sufficient ground for an employee to leave his or her employment, even though he or she has not actually been formally dismissed from that employment. Someone who has been constructively dismissed may be entitled to compensation for unfair dismissal.
Consultant:
An individual (or a firm) that provides professional advice to an organisation for a fee.
Consumer:
Any individual that manufacturers target as a market for their output.
Consumer Credit:
Loans given to consumers to enable them to buy the output of producers.
Consumer Durable:
A large product sold to the general public and designed to last for a length of time, such as a washing machine.
Consumer Goods:
Products which consumers buy regularly to satisfy basic household demands. Contrast with luxury goods.
Consumer Price Index:
An index that measures increases in the prices of goods and services that are sold to the general public.
Container:
A standardised unit in which goods are transported by road, rail or sea.
Contingency:
A financial or commercial possibility. Thus contingency planning is the forming of a plan to seize a commercial opportunity or deal with setbacks in the future.
A contingency fee is a fee that is paid to a lawyer only if the outcome of the case is favourable; it is usually a percentage of the damages or compensation awarded in the case.
Contingent Liability:
Something that might become a liability if something else happens. If a company is involved in a lawsuit for damages, for instance, there is a liability contingent on the company losing the case.
Continuous Improvement:
A translation of the Japanese word kaizen, the management idea that by making small improvements to all processes all the time, a company can quite quickly make a dramatic change in its competitiveness.
Contract:
A legally binding agreement between two or more people in which each promises to do (or not to do) something. Nobody can be bound by a contract to do something which is itself illegal. Contracts in business are usually made in writing, although verbal contracts can be just as binding. The terms of a contract can be express or implied. Express terms have been explicitly stated. Implied terms are those that it is reasonable to imply that the parties agreed to even though they did not “express” them.
Contract Exit for Non-performance:
A condition in a financial agreement that enables the investor to take back his funds if the result represented is not achieved.
Contract Note:
The day that a transaction takes place, the broker sends the client a document detailing the transaction, including full title of the stock, price, consideration and stamp duty (if applicable).
Contribution:
The amount by which a business’s revenue exceeds its variable costs. This amount is a contribution to the business’s fixed costs. Only if the contribution exceeds the fixed costs will the business make a profit. The contribution after variable costs is sometimes referred to as the gross contribution, with the term net contribution being used to refer to the contribution after both variable and fixed costs; that is, the profit.
Control:
An investor is said to control a company when the investor owns 51% or more of the company’s share capital.
In marketing, a control is a standard response to a marketing effort against which other efforts can be measured.
Control System:
A method of ensuring that production or management processes are carried out correctly. Control systems may be embedded into computer programs, or they may be mechanical systems that are built into production lines to ensure that the right parts arrive at the right time.
Controlled Foreign Corporation (CFC):
An offshore company, which, because of ownership or voting control of U.S. persons, is treated by the IRS as a U.S. tax reporting entity. The company is incorporated outside the United States but under control of a United States resident and therefore subject to the anti-tax haven measures contained in Subpart F. IRC 951 and 957 collectively define the CFC as one in which a U.S. person owns 10 percent or more of a foreign corporation or in which 50 percent or more of the total voting stock is owned by U.S. shareholders collectively or 10 percent or more of the voting control is owned by U.S. persons.
Convenience Store:
A retail outlet whose unique appeal is its convenience for customers. To be successful it needs to:
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- be open for long hours;
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- be located near to its regular customers, and
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- sell proucts that those customers particularly need.
Convertible:
A security that can be changed from one form to another when certain circumstances occur. For instance, a bond that can be converted into equity after a certain date, or an ordinary share that can be converted into a preference share.
Conveyance:
A transfer of the title to property from one person to another.
COO:
Short for chief operating officer, the person who has hands-on responsibility for the day-to-day operation of a business.
Cookies:
Persistent Client-State HTTP Cookies are files containing information about visitors to a web site (e.g., user name and preferences). This information is provided by the user during the first visit to a web server. The server records this information in a text file and stores this file on the visitor’s hard drive. When the visitor accesses the same web site again, the server looks for the cookie and configures itself based on the information provided.
Cooling-off Period:
A period of time that is required to pass between the signing and the full coming into force of a contract. In particular, it applies to the time between the filing of a prospectus for a new issue of securities in the United States and the offering of those securities to the public. Cooling-off periods are designed to protect consumers from over-zealous sales techniques.
Co-operative:
A type of business organisation that is owned collectively by its members. Members run the business for their own mutual benefit rather than for profit. Co-operatives have been particularly popular in the agricultural industry and among savings banks.
Copyright:
An intellectual property right, copyright is the ownership of words or other things that can be written down or portrayed graphically.
Core Competence:
The set of skills and knowledge that sit at the heart of an organisation.
Corner:
To control so much of the market for a product that you control the price. For example: “Toghether, the two companies were able to corner the silver market.”
Corporate Bond:
A debt instrument issued by a private corporation.
Corporate Charter:
See Articles of Incorporation.
Corporate Finance:
The process of raising capital (equity or long-term debt) on behalf of corporations and governments. Corporate finance has traditionally been a speciality of merchant banks in London and of investment banks in New York.
Corporate Identity:
The collection of characteristics that uniquely identify an organisation; for example, the arches in the “M” of McDonald’s, the colour of the pumps at a Shell filling station, or the environmentally friendly ethos of the Body Shop.
Corporation Tax:
The tax that is charged on a company’s profit. Rates of corporation tax vary around the world and multinational companies organize themselves to minimise the amount that they have to pay.
Corporate Officers:
Another “cabinet like” institution, sometime part of the Board of Directors: president, secretary and treasurer etc. These individuals have the right to represent the company to third parties, to negotiate and make commitments in its name.
Corporation (Corp.):
The basic existence of a corporation usually derives from two documents: the Articles of Association and the Certificate of Incorporation.
Corporation Tax Company:
A company incorporated in Jersey but not trading in Jersey and thereby designated as non-resident for tax purposes; liable only to low fixed annual rate of tax.
Correction:
A sudden reversal in the movement of a market. For example, a stockmarket that has been rising strongly all day might have a correction at the end of the day as investors have second thoughts about the market’s optimism.
Cost:
The amount of money paid to purchase something (See also average, current, direct, fixed, historic, indirect, marginal, opportunity, replacement, transfer,unit and variable cost.)
Cost Accounting:
A detailed breakdown of the cost of producing goods or services to help calculate a price at which to sell them.
Cost-benefit Analysis:
A type of analysis that tries to measure the benefit to be gained from an extra cost. For example, what would be the cost of providing a same-day mail service within a major city centre, and how much would customers pay for it?
Cost Centre:
A business unit which costs can be specifically allocated. A cost centre can be as small as a single machine or as large as a major subsidiary.
Cost Effective:
Something that produces enough benefit to justify its cost is said to be cost effective.
Cost of Capital:
The average cost to a company of servicing its capital: its equity (through dividend payments) and its loans (through interest payments).
Cost of Living:
The average cost to a company of servicing its capital: its equity (through dividend payments) and its loans (through interest payments).
Cost Overrun:
The amount by which a project exceeds its budget.
Cost-plus:
A method of calculating the price at which something is to be sold based on the cost of manufacturing it. Cost-plus starts with this cost and then adds a percentage for profit and for any other hidden costs.
Countercyclical:
Something that occurs contrary to the normal business cycle. For example, when an economy is depressed the business of bankruptcy lawyers booms. Their business is said to be countercyclical.
Counterfeit:
To imitate the goods or services produced by another manufacturer so closely that they are mistaken for the goods of the other manufacturer. Luxury goods (like Rolex watches and Louis Vuitton bags) are particualrly susceptible to counterfeit. Some say it is mankind’s second-oldest profession – and no more likely to be stamped out than the oldest.
Counter offer:
An offer made in response to another offer. A counter offer has to be more generous than the original offer for it to stand a chance of being accepted.
Countertrade:
Similar to barter, countertrade is a form of exchange in which an exporter in one country accepts raw materials, equipment and technology from an importer in another country as payment for finished products. This type of trading is practiced especially by Communist countries but is gaining in use by China and in developing countries of South America and Africa. Countertrade also is a way to avoid reliance on tax haven operations for trading companies established in no-tax or low-tax countries so as to reduce burdensome taxes on profits. Countertrade arrangements may consist of counter purchase, reverse countertrade, buyback arrangements, switch transactions or swap deals.
Countervailing Duty:
A duty that is imposed by a country on imported goods to counting a subsidy that has been granted to the goods by the exporting country.
Country of Origin:
The country from which goods originate. Where quotas are in operation it is important that goods are marked clearly with their country of origin to keep imports within their quota.
Coupon:
A detachable part of a bearer bond. The coupon gives its holder the right to the interest payments that are due on the bond.
Couponsteuer:
Tax charged on distributions of certain Liechtenstein legal entities (AG and Anstalt with share capital).
Covenant:
A contractual promise to do (or not to do) some sort of business or financial activity. Someone working for a firm in a sensitive industry, such as defence, might covenant not to work for any of the firm’s rivals for a certain period of time after their employment has ended.
Cover:
There are two business-related meanings:
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- Protection against financial loss, as provided by insurance or by buying assets that reduce the risk of future loss.
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- The number of times that a company.
CPM:
Short for cost per mille (that is, cost per thousand), a basis for comparing the costs of advertising in different media. The CPM is the cost of reaching an audience of 1,000. It does not take into account how many of the 1,000 are awake when the message is conveyed.
Creative Accounting:
Since many of the things that accountants measure are subject to interpretation, it is possible to put a more (or less) favourable tint on a company’s accounts by being creative with that interpretation.
Creator, Settolo or Grantor:
A person who creates/settles a trust.
Credit:
A sum of money made available for a person’s (or a company’s) use. “His credit is good” means that a person has access to funds which enable him to pay his bills as and when they fall due. “She bought it on credit” means that the purchaser will have a sum of money available in future that will enable her to pay for the goods.
Credit Card Validation Codes (CVC/CVV):
Credit card companies are now using an extra three or four digit code on the back of your credit card to authorize credit card charges: American Express (AMEX) has placed a four-digit number on the front of the credit card above the credit card number. VISA‘s Card Verification Value (CVV) is a three-digit number on the back of your card. The full credit card number is reprinted in the signature box and at the end of the number is the CVV. MasterCard Validation Code (CVC) is a three-digit number on the back of your card. The full credit card number is reprinted in the signature box and at the end of the number is the CVC.
Credit, Credit Card:
A rectangular plastic card issued to a consumer by a financial institution. Credit cards empower their holders to buy goods or services on credit from organizations, which accept such cards as a method of payment. With an old-fashioned credit card, you charge to your heart’s content and receive a bill at the end of the month. The credit card company hopes that you will eventually pay off the balance. In other words, the card company trusts you pay.
Credit Control:
The process of controlling the total amount of credit granted by either a firm or an economy. Governments or central banks can control credit by raising the interest rate; firms can control credit by calling in overdue debts.
Credit Equivalent:
Value amount representing the credit risk exposure in off-balance sheet transactions. In the case of derivatives, credit equivalent value represents the potential cost at current market prices of replacing the contract’s cash flows in the case of default by the counter-party.
Credit Line:
An amount of credit that a bank agrees, in principle, to a customer’s account. The customer is then able to draw funds from the account at any time, and up to that limit. In some cases the bank lays down the purposes for which the money may be used.
Credit Note:
Formal notice that a customer’s account with a supplier has been credited with a specific amount. The credit may have arisen because the customer has returned faulty goods, or was supplied less than the amount invoiced for.
Credit Rating:
The contentious practice of ranking the debt instruments of corporations and governments according to an independent analyst’s assesment of the debtor’s ability to repay them on time.
Credit-rating Agency:
An organisation that assesses the ability of borrowers to repay their debts on time, and that ranks their ability along the lines of old-fashioned exam results: A+, B-, and so on.
Creditor:
An individual or organisation to whom money is owed. The opposite of debtor.
Credit Risk:
The risk that a counter party to a transaction will fail to perform according to the terms and conditions of the contract, thus causing the holder of the claim to suffer a loss.
Crisis Management:
The process of managing a crisis, an event or a series of events that are out of the ordinary.
Cross-default:
A condition in a loan contract that says that if the borrower defaults on any of its other loans or securities it may be deemed to have defaulted on this one. The lender is then free to seek repayment of the loan as if it were in default.
Cross-rate:
The exchange rate between two currencies calculated via a third rate. For example, if there are 2 dollars to 1 pound and 1,000 lira to 1 dollar, the pound/lira cross-rate is 2,000 lira to the pound.
Cross-selling:
The practice of placing products that are linked together in the consumer’s mind next to each other on a retailer’s shelves; for example, the bacon next to the eggs, or the ties next to the shirts. Also, the attempt to sell one product to a customer who has already bought something completely different from the same seller – when a bank that gave you a loan attempts to sell you insurance as well.
Cross-subsidising:
Purposely selling one product at a loss in the knowledge that is being subsidised by another; for example, a café selling coffee at a low price to entice customers in to buy its cakes at a high price.
Cuba Clause:
The so-called “Cuba Clause” allows the situs and proper law of a trust to be transferred from one jurisdiction to another.
Culture:
The unique ways of doing things and of thinking about things that differentiate one organisation from another. These are influenced by the organisation’s history (by notorious disasters, for example),by its more powerful managers (“Remember P.J.?”) and by its habits (who gets access to the corporate car park).
Cum Dividend:
A share that is being sold together with the rights to a dividend that has been announced by the company but not yet paid.
Cumulative Voting (U.S.):
Cumulative voting is a voting right which, when applicable, is intended to preserve the voting strength of minority shareholders. For example, if John has 25 voting shares and there are three directors to be elected, John has 75 votes which he may allocate in any manner chooses. In some states, cumulative voting exists unless the articles reject it. In other states, cumulative voting does not exist unless the artciles permit it.
Currency:
The donomination of the notes and coins in circulation in an economy. The UK currency is the pound sterling; the US currency is the dollar; the new European currency is the euro.
Currency Swaps:
A transaction involving the exchange of cash flows and principal in one currency for those in another with an agreement to reverse the principal swap at a future date.
Current Account:
A bank account, known in the United States as a checking account, the funds of which are used mainly for the purposes of money transmission. Checks are drawn on current accounts, and standing orders are debited against them. Current accounts rarely pay significant rates of interest on credit balances.
Current Asset:
Assets on a company’s balance sheet that are likely to be sold or transferred (if they are financial assets) during the next accounting period. Current assets include things like cash, stock and accounts receivable.
Current Cost:
The present market value of an asset.
Current Exposure Method:
Term used in the Basle Capital Accord to denote a method of assessing credit risk in off-balance sheet transactions, consisting of adding the market to market replacement cost of all contracts and an amount for potential credit exposure arising from future rice- or volatility changes.
Current Ratio:
The ratio of a firm’s current assets to its current liabilities (that is, its short-term loans and trade debts). The ratio is used as an indicator of a company’s ability to pay its debts on time, and thus of its liquidity.
Custodian:
A bank, financial institution or other entity that has the responsibility to manage or administer the custody or other safekeeping of assets for other persons or institution.
Custodian Trustee:
A trustee that holds the trusts assets in his or her name. I.e. under common law it is the norm for a trustee to hold the trust assets in his or her name. In the civil law countries i.e. Liechtenstein the trust holds the underlying assets in it’s own right.
Customer:
A person or organisation who buys finished goods or services, and at whom, therefore, all industrial activity is directed.
Customer Care:
A systematic attempt by an organisation to take greater care of its customers, and to teach its employees the value of so doing.
Customized:
A product or service that is adapted specially to suit an individual customer.
Customs duty:
A tax imposed on imported goods.
Customs Union:
An alliance of a number of countries that agree to remove customs and excise controls on goods and services that pass among them.
CV:
Short for curriculum vitae, a summary of a person’s career and educational achievements. (Course of career.) CVs (or résumé) are invariably required when looking for a new job.
Cyclical:
The occurrence of events in accordance with a cycle, in particular, the business cycle. A cyclical stock is one that rises and falls in line with the rhythms of the business cycle.
-D-
D&O
Short for directors’ and officers’ liability insurance, a type of insurance policy taken out to protect the directors and seniors executives of corporstions against being sued as individuals for negligence on the part of their company. The cost of such insurance can be high, especially in the litigious United States where such suits can result in multi-million-dollar awards. It is sometimes known as indemnity insurance.
Damages:
A legal award of monetary compensation to a person or business who has suffered loss or injury caused by another. For example, a business may have suffered a loss as a result of a breach of contract, or an employee may have been injured as a result of using an unsafe pice of equipment at his or her place of work.
Database:
A collection of information stored electronically on a computer.
Data Mining:
The use of sophisticated computer programs to seach systematically through a large database. Such programs are particularly useful to marketing departments which want to identify a subset of a large population (all the males in Arkansas, for instance, whose birthdays are next Monday).
Data Warehousing:
The process of organising the storage of large quantities of electronic data in such a way that it best meets the needs of the organisation to whom It belongs.
Data Protection:
The right of individuals to have access to information about themselves that is held by other parties, such as financial institutions, credit-rating agencies or government offices. Individuals usually have to submit a formal request to gain access to the information. Such rights are established in many countries by so-called data protection legislation.
Date Stamp:
A mark on perishable goods indicating the date by which they should be sold, and also the date by which they should be consumed. In many countries date stamping is required by law.
Dawn Raid:
The purchase in the early hours of the morning, as soon as the stockmarket opens, of a substantial chunk of a company’s shares, frequently to strengthen a subsequent takeover bid. Hence, any early-morning business practice that is designed to catch someone (especially a competitor) unawares.
D.E.A.
The Drug Enforcement Agency (U.S.).
Deadline:
A time scheduled for the completion of a task commonly used to describe the time by which journalists must file their stories to their newspapers. If deadline that has been set in a contract is not met, legal consequences may follow.
Dealer:
A person who deals in goods or services, buying them in his own right to sell them on to someone else. Contrast with a broker, who never takes title to the goods he is broking.
Debenture:
A debt that is secured only on the good name of the borrower. It has no charge on the borrower’s assets.
Debit Card:
A rectangular plastic card with a black magnetic strip on the back that can be used to purchase goods and services. A debit card is a bit like a credit card, but with one crucial difference. A debit card pays for the goods immediately out of a bank account womewhere. If there is no credit in the account the purchase will not be authorised. A credit card, however, allows payment to be made later and provides the user with a loan to make the purchase.
Debriefing:
A management practice in which an employee describes their experience (with, say, a potential overseas customer) to others within their organisation. The idea is that everyone should learn from the experience of each individual. This is at the heart of a learning organisation.
Debt:
An obligation on a person or organization to pay something (usually money) to another person or organization.
Debt-equity Ratio:
The ratio of a company’s debt to its equity, more commonly known as gearing, or in the United States as leverage. If the ratio is high, banks are reluctant to lend the company more money.
Debt Service:
The ability of an organization (be it a company or a country) to service its debts – that is, to pay interest and capital as and when due – out of its cash flow.
Debtor:
A person or organization that owes somebody something.
Debenture:
An unsecured bond backed only by the general credit of the issuing corporation.
Debit, Credit Card:
Almost as tricky to get these days as the good old ‘Credit, Credit Card’‘, a debit card is directly tied to a bank account. Whatever charges the user runs up are debited to the bank account, and monthly statements do not carry a remittance slip. The same account may have a checkbook tied to it as well. Credit as such, however, is not extended since you are not allowed to use the card if the balance on the bank account wanders into the red.
Decentralisation:
The process of moving corporate functions (and the decision-making powers that go with them) away from a company’s head office. Many companies are highly decentralised in some respects (say, marketing) and highly centralised in others (accounts or human resources).
Decision Tree:
A diagram that illustrated the consequences of making different decisions, and of the decisions that flow from those consequences.
Declaration of Trusts:
A document creating a trust. For ultimate anonymity, a trust may be created in certain jurisdictions by a trustee or a trust company without the settlor either being identified or being a signatory to the declaration. In contrast settlor and trustees sign a trust deed.
Declining Balance:
A method of depreciation that depreciates an asset by a fixed percentage of its outstanding value at the end of each year, instead of by a fixed percentage of its original value.
Deductible:
An expense that can be deducted from a company’s revenue for the purposes of calculating its tax liability.
Deep Discount:
A large discount on the price of goods or services, probably more than 25%.
Deelnemingsvrijstelling:
Substantial Holding Company (in the Netherlands).
Deemed-Paid Credit:
An offset against an income tax payable to the country of the parent corporation for income taxes paid by the foreign subsidiary in the foreign country on the earnings and profits out of which the dividend is distributed. The deemed-paid credit is also known as an indirect credit and is computed according to a specific formula as designated by the income tax laws of the country in which the offset is taken.
Default:
Not legally binding, as in defective title to a property. A defective title may have been obtained fraudulently, or there may have been an error in drawing up the contract.
Defective goods are those that do not meet the standard that a consumer might reasonably expect. In most countries a consumer is legally entitled to exchange defective goods or obtain a refund.
Deferred:
The postponement of a payment (or receipt) from one accounting period into another; for example, deferred tax.
Deferred Share:
A share in a company that receives no payment in the event of a liquidation until all preference and ordinary shareholders have been paid the nominal value of their shares in full. Deffered shares are usually held by people who have a special relationship with the company, such as its founders.
Deficit:
An excess of spending over revenue. This may be by a government (as in the federal budget deficit), by a country (as in a trade deficit), or by a company (which then needs to fund its deficit).
Deflation:
An across-the-board decrease in prices. Falling prices are dangerous for business since they can result in acompany having to sell its output for less that its cost.
Delayering:
The removal of layers of management from the middle levels of an organisation, thus flattening the organisation and shortening the lines of communication whithin it.
Delegation:
The transfer of authority from one person to another (who is generally lower down the corporate hierarchy). Delegation involves the transfer of authority but not of responsibility. Empowerment attempts to transfer both.
Delinquency:
In business, the filure to make payments as and when they fall due.
Delisting:
The removal of a quoted share from a stock exchange’s list, usually for failing to follow the rules of the exchange. A companyøs shares may also be delisted if the company has been taken over by another and has ceased to have an independent existence.
Delivery:
The transfer of the title to an asset from one owner to another. Thus a delivery note is the document authorising the transer; the delivery date is the date on which the transfer formally takes places.
Demand:
A fundamental concept in economics (see also supply). The extent to which consumers are prepared to pay for goods and services. It is also the right to instantaneous gratification, as in payable on demand or demand deposit – money in an account that can be withdrawn on demand.
Demand Guarantees:
General term for payment undertakings arising on the presentation of a written demand (plus possible other documents specified in the guarantee), not conditional on proof of default by the principal in the underlying transaction. They ensure often that the lender will be paid the principal on maturity and possibly, depending on the instrument, interest when due. Example: SLC’s.
Demerger:
The unravelling of a merger, or the separation of companies (or of business units) that are being run under one corporate umbrella.
Demographics:
The study of populations according to social characteristics such as their age, income, family ize, and so on. Demogrpahics is particularly helpful to advertisers and marketing departments.
Denomination:
The number of units of a single note or coin; for example, 1 D-mark, 10 francs, 100 dollars.
Department Store:
A large retail outlet that stocks a wide range of goods, from kitchen utensils to make-up. Traditionally located in the centre of big cities, department stores have been hit by the growth of out-of-town shopping malls and of city-centre rents.
Deposit:
There are several meanings including:
-
- Money left as security before the receipt of a service, as when renting an apartment.
-
- Money left with a bank for safe-keeping.
-
- Raw materials found underground, such as mineral deposits.
Deposit Account:
An account at a bank in which a customer leaves money for some period of time and on which the earns interest.
Depository Trust Company (DTC):
A custodial clearing facility owned by the major banks and securities firms and monitored by various banking regulatory agencies and the Securities and Exchange Commission.
Deposit protection:
A form of insurance which covers depositors against the loss of their money should their bank go bust. Deposit protection schemes are usually backed by the state, and they usually over only a percentage of the total deposits.
Depreciation:
The loss of an asset’s value as a result of wear and tear and the passage of time. Companies are allowed to set off this amount against their taxable profits – in theory enabling them to put aside untaxed funds with which to replace the depreciating asset at the end of its useful life.
Depression:
A prolonged and steep decline in a country’s GCP, a period when much industrial activity ceases.
Deregulation:
The removal of government regulations and of red tape that restrict the ability of firms within an industry to compete freely. Industries such as telecoms, banking and aviation have been considerably deregulated in recent years.
Derivatives:
Financial contracts whose values are based on, or derived from, the price of an underlying financial asset or price – for example, a stock or an interest rate. Thus an option to buy a share is a derivative. The option could not exist without the share, from which it is derived. Some derivatives are extremely complex creations.
Derived Demand:
Demand for things that occurs because of the demand for other things. Thus the demand for capital goods can be said to be derived from the demand for consumer goods. Once consumers start spending, producers begin to invest in plant and equipment.
DES:
Department of Education Standards (U.K.).
Desktop Publishing:
Using a collection of computers, software and printers that can fit on a desk in order to produce publications of a quality that used to be possible only in printing plants.
Devaluation:
A lowering of the value of a country’s currency vis-à-vis other countries’ currencies. This can be done either by market forces or by government forces.
Developer:
Someone who adds value to land by building on it or by otherwise turning it into an asset that can produce a stream of income.
Differentiation:
The process of establishing the way in which a company’s products or services differ from those of its rivals (how Pepsi tastes different from Coke, for example), and then reinforcing that difference in the consumer’s mind by advertising and promotion.
Digital:
The representation of data by a series of digits. In a digital computer, information is transmitted as a row of binary digits, 0 or 1, represented by “on” or “off”. In an analogue (or analog) computer, information is represented by some variable physical property (such as an alectric voltage).
Dilute:
To reduce the value of existing shares in a company by issuing new shares at a price lower than the shares’ current market value.
Diminishing Returns:
The phenomenon whereby the addition of extra resources to a production process fails to produce the same additional value. The law of diminishing returns is said to have set in.
Direct Cost:
A cost that can be directly attributed to a particular production process. Direct costs rise in proportion to the number units produced.
Direct Debit:
An instruction from a customer to a bank requesting the bank to debit the customer’s account with whatever sums are demanded by a named creditor. Direct debits make life easier (and therefore cheaper) for organisations like telephone and electric utilities which receive payments that are regular in time but irregular in amount.
Direct Mail:
The sale and promotion of goods and services by mail. Direct mail is a fast-growing distribution channel in many countries, despite a widespread belief that most direct mail is thrown away unread.
Direct Marketing:
The selling of products and services directly to the final consumer by the original producer. Direct marketing cuts out intermediatries (such as shops) in the supply chain. But it often involves substantial costs in reaching the consumer in other ways; for example, by direct mail.
Direct Taxation:
Taxation that is imposed directly on an individual (for example, income tax) or a company (corporation tax). Contrast with indirect taxation.
Director:
Strictly speaking, a member of the board of a company who has been properly appointed by the company’s shareholders to look after their interest. In many companies, however, people have titles containing the work director even though they are not on the board. In this context, a director is no more than a senior manager.
Dirty Float:
A government policy of generally allowing its currency’s exchange rate to float freely according to market demand, but on occasions deciding to intervene in order to adjust the rate to suit other priorities. This is also known as a managed float.
Discharge:
The fullfilment of (and release from) an obligation. In many countries the restrictions on people declared bankrupt apply only for a certain length of time. At the end of that time, the bankrupt is said to be discharged.
Disclosure:
The legal requirement of companies to reveal information to certain parties at certain times. Hence, for example, a director must disclose to fellow directors if he has a financial interest in a company to which the board is about to award a contract.
Discount:
The verb to discount means to sell at a reduced price; the noun discount is the amount by which the price is reduced.
Discount Rate:
In general, the rate of interest that is represented by the discount to its value on maturity at which a financial instrument is sold. Thus if a $100 bond is due to be repaid in a year’s time, and somebody is prepared to pay $95 for it today, the discount rate is the $5 discount at which the bond is being sold, divided by the $95 that is being paid for it (that is, 5.26%).
Discount Store:
A store selling a wide variety of goods, many of them at a discount to their normal retail price.
Discounted Cash Flow:
Popularly known as DCF, a method of calculating the present value of a future stream of income and/or capital. It discounts the future value of expected flows of cash in order to find their net present value.
Discretionary Trust:
A highly flexible arrangement in which the beneficiary has no fixed interest in any part of the income of the trust or its assets except perhaps at the termination of the trust. The Trustees usually hold the property and income for a broad class of beneficiaries to whom they distribute the assets at their discretion. However, the Trustees may be guided by an informal memorandum written by the settlor which outlines his wishes but has no legal status. One advantage of this arrangement is that benefits can be varied according to changes in circumstances with little difficulty. Another is that the beneficiary has a somewhat nebulous hope of receiving anything and therefore it is difficult for any creditors to find an interest to which to attach a liability.
Discrimination:
Treating someone differently because of a particular attribute that they have, such as their sex, their religion, or their colour. In many countries discrimination in the workplace is illegal.
Disinflation:
A slowing down in the rate of inflation. Not to be confused with deflation.
Disintermediation:
The process by which financial intermediaries are cut out of the business of allocating savings. This happens in a number of ways; for example, when companies raise equity directly from the public, or when governments promote savings schemes that attract money directly from consumers.
Disk:
The part of a computer where information is stored and which acts as its memory. Floppy disks are light and detachable (but far from floppy) rectangular pieces of plastic and metal on which can be stored electronic data. They enable information to be transferred easily from one stand-alone computer to another. Optical disks and compact disks are disks that hold considerably more data than floppy disks . The non-detachable part of a computer’s memory is called the hard disk.
Dismissal:
The ending of an individual’s contract of employment with an organization. Depending on the nature of the dismissal (for example, by redundancy) the individual may be entitled to a lump sum on the termination of the contract. If individuals think that they have been unfairly dismissed they may have the right to sue their employer.
Dissenters’ Rights (U.S.):
Dissenters’ rights or shareholder appraisal rights are a mechanism designed to protect minority shareholders. Business corporation laws prescribe the procedures by which these rights may be exercised. If a corporation proposes to sell substantially all of its assets or merge with another corporation, minority shareholders may be able to force the corporation to purchase their shares.
Dissolution/Liquidation:
Dissolution and liquidation are procedures by which a corporation concludes its activities and prepares to liquidate its assets for the purpose of paying bills and creditors, and if funds remain, make distributions to shareholders. Dissolution can be voluntary, initiated by the corporation, or involuntary, initiated by creditors. When in dissolution, activities of the corporation must be geared to winding up corporate business, not expanding it.
Distress Sale:
A sale that occurs when owners of goods find themselves in a position of having to sell those goods at a deep discount – often because of cash flow difficulties.
Distribution:
There are two meanings:
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- The process of getting finished goods into the hands of consumers.
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- The way in which something is shared out; a product in a particular market, for example, or wealth in a country.
Distribution Channel:
A route by which goods are distributed by a manufacturer to a final consumer.
Diversification:
The spreading of a company’s risk by its participation in a number of different businesses. A move by an insurance company into retailing is one example of difersification. It is a way of ensuring that not all the company’s eggs are in one industrial basket.
Divestment:
The selling off by a company of businesses that do not fit in with its general strategy.
Dividend:
A dividend is a distribution of cash or property by a corporation to a shareholder. Dividends are paid out of the corporation’s net earnings and profits. If there are no earnings and profits, dividends cannot be paid. Generally, there is no right to have a dividend declared, and the board of directors can decide whether or not to declare a dividend. Certain classes of preferred stock may limit this discretion of the board.
Dividend Cover:
The number of times that a company’s annual dividend is covered by its annual earnings, that is, its profit divided by its dividend.
Division:
An independent unit whithin a company.
Division of Labour:
The breaking up of a production process and its distribution among a number of workers so that it is carried out in the most efficient way.
DMV:
Department of Motor Vehicles (U.S.).
Documentary Collection:
A payment mechanism in which a seller uses a bank as the “agent” in collecting payment from a buyer located overseas.
Documentary Credit:
A method of financing trade in which the documents proving that a sale has been made are used as collateral for a loan.
Dollar Premium:
See Investment Currency Premium.
Domain Name:
The text name corresponding to the numeric IP address of a computer on the Internet (i.e., www.webtrends.com).
Domain Name Lookup:
The process of converting a numeric IP address into a text name (for example, 204.245.240.194 is converted www.webtrends.com).
Domicile:
The deemed place where an individual has his permanent home and the means by which that person is connected to a specific legal system encompassing marriage, divorce, succession of estate, and taxation. Or the place to which that individual intends to return, or in some cases the country of origin. In other jurisdictions the place where an individual has a long established residence or in relation to a company, where it is incorporated. Each person or company can have only one domicile (so it is not the same as residence or nationality). Many high-tax jurisdictions make themselves quite difficult to eliminate as domiciles for those wishing to escape their grasp for taxation or other reasons.
Door-to-door:
A once-popular but now little used method of selling in which a salesman goes from one house to the next, attempting to persuade the occupier to purchase goods or services. Traditionally used for selling insurance and encyclopaedias.
Dormant Company:
A company that is not currently trading. It has a registered name, directors, articles of association, and so on. But it has no turnover.
Double-entry Book-keeping:
A fundamental principle of accounting whereby every entry into a company’s balance sheet has an equal and opposite counterpart: Every asset has a balancing liability. A new factory is recorded as an asset; the money used to buy it is recorded as a liability.
Double Exit:
Use of two passports for the purpose of confusion or convenience.
Double-taxation Agreement:
An agreement between two countries designed to ensure that companies and individuals are not taxed on the same bit of income in both jurisdictions. The agreements lay out rules as to who has the right to tax which bit of profit, dividend, income or whatever.
Double Taxation Agreement (or Double Tax Treaty):
Agreement between two countries intended to relieve persons who would otherwise be subject to tax in both countries from being taxed twice in respect of the same transactions or events.
Doublethink:
To forget any fact that has become inconvenient, and then, when it becomes necessary again, to draw it back from oblivion for just so long as it is needed.
Double Time:
Any period of time during which an employee is paid double the normal rate – for example, for working on a Sunday or a public holiday.
Double Trust:
A foreign trust known as Trust No. 1 where the assets are held by a custodian outside the United States and Canada and whose creator is an offshore corporation, generally a Panamanian corporation, with Trust No. 2 acting as creator and designated as sole beneficiary of Trust No. 2, a second trust, usually a United Kingdom trust. A United States Internal Revenue Service ruling of June, 1981 challenges the use of double trusts in which there is a foreign trust with income-producing property that has the trustee of Trust No. 1 as the same person owning the property and then putting the property in Trust No. 2, with itself, the trustee. In addition, a double trust ruling of 1980 (Revenue Ruling 80-74) also flashes a warning signal for double trusts in which the creator of a foreign trust names the taxpayer as trustee in the same country. If two trusts should be used as a result of the Internal Revenue Service positions taken above, it is extremely important to make certain that a United States trust is not used as Trust No. 2, and there are no United States beneficiaries, trustees or creators. Since all double trusts are carefully scrutinized by the United States Internal Revenue Service, it is necessary to make certain they are not sham operations. Double trusts have been used in the past mainly to make use of any benefits offered in a United States Income Tax Convention but they should be avoided when United States beneficiaries are involved.
Dow Jones:
The best-known index of movements in the price of US stocks and shares. The main index, the Dow Jones Industrial Average, was founded in October 1896 and measures the price movements of leading shares quoted on the New York Stock Exchange.
Download:
To transmit electronically stored information from one computer to another, or from a hard disk to a floppy disk.
Downmarket:
A marketing term based on a theoretical division of markets into a top, a middle and a bottom. A product aimed to appeal to the bottom end of the market is said to be downmarket. The division of markets can be based on social class, wealth or lifestyle. Contrast with upmarket.
Downsizing
A corporate strategy aimed at producing the same amount of output from a smaller quantity of resources (of land, labour or capital). The resource that gets hit first in downsizing is usually labour. In the early 1990s downsizing became almost synonymous with redundancy.
Downstream:
An expression used (particular in the oil industry) to indicate an activity that is close to the final consumer. A filling station is much more downstream than an oil rig, for example.
Downtime:
The amount ot time that is lost during a production process in maintaining the machinery or in waiting for essential inputs. In most companies the amount of downtime has been falling sharply in recent years.
Draft:
A signed, written order by which one party (the drawer) instructs another party (the drawee) to pay a specified sum to a third party (the payee), at sight or at a specific date.
Dual Pricing:
Asking different prices for the same goods and services in different markets. Dual pricing may give rise to accusations of dumping.
Due Date:
The date on which an obligation is due to be met; for example, the payment of interest or principal on a loan.
Due Diligence:
A thorough search of a company’s businesses carried out by the manager of a new issue of the company’s securities or by representatives of another company that is interested in taking it over. If the searchers find that things are not as they had been led to belive, they have gournds for withdrawing from the deal.
Dummy Corporation:
A corporation set up to avoid usury tax laws or to keep property out of the hands of creditors and seeming to act independently but in reality controlled by a third party.
Duty:
A tax imposed on goods or services as they are traded (for example, import duties) or as they are consumed (for example, the duty on tobacco or alcohol.
-E-
Earnings:
A commonly used expression in America for a company’s net profit.
Earnings per Share:
The net profit (or earnings) of a company divided by the number of ordinary shares in issue. Earnings by the number of ordinary shares in issue. Earnings per share (EPS) is a useful way to measure a company’s performance over time, and its performance relative to other companies.
Earnout:
A method of buying a company which relates the price to its future earnings. This is popular when the company is being sold by its present managers to an outsider who is keen to ensure not only that the managers stay on, but also that they are motivated to maximise the company’s earnings in the future.
EBRD:
Short for the European Bank for Reconstruction and Development, a London-based international financial institution set up to help channel funds from the West to Russia and other countries of eastern Europe as they emerged from decades of communism.
Echelon:
Almost all phone calls in the world are routinely scanned for “suspicious words” by various governmental agencies’ computers. You have probably heard of Echelon, the international surveillance system. And there are other, and more to come! The European Union is planning its own EU Phone, Fax & Internet Surveillance System. In Germany, all international calls are already automatically scanned by the Bundes-Nachrichten-Dienst. Even Austria is following suit.
E-Commerce:
Short for electronic commerce, the transacting of business electronically, largely via the internet.
Economic Life:
The length of time during which a machine or a piece of equipment will produce more revenue than it costs to maintain it.
Economics:
How the world makes a living or, more specifically, how resources (land, labour and capital) are used to produce goods and services to meet human wants. When one early economist, Thomas Malthus, believed that resources were so scarce that the world was permanently on the edge of famine, economics came to be known as the dismal science.
Economies of Scale:
Factors which cause the average cost of producing something to drop as output is increased, or the savings that can be made by manufacturing goods or supplying services in large quantities. This is the principle behind all mass production. Whereas a company’s direct costs increase in direct proportion to the volume of its output, its overheads do not. Whatever number of widgets a company produces, it needs only one headquarters, one board, and one CEO.
Economies of Scope:
The savings that can be made by producing a broad range of goods or services. A bank, for instance, may find that it costs only a little bit more for it to sell insurance products at the same time and the same place as it sells loans.
ECOSOC:
Economic and Social Council.
ECOWAS:
Economic Community of West African States. Member states: Nigeria, Niger, Benin, Togo, Ghana, Burkina Faso, Cote d’Ivoire, Mali, Liberia, Sierra Leone, Guinea, Guinea Bissau, Gambia, Senegal, Mauritania and Cape Verde.
ECU:
European Currency Unit.
EDC:
Electronic Debit Card.
EDF:
European Development Fund.
Edge Act Corporation:
A United States corporation organized for the purpose of engaging in international or foreign banking or other financial operations. It may be engaged in banking or other financial operations. It may be engaged in banking or financial operations in a dependency or similar possession of the United States, either directly or through an agency, ownership, or control of local institutions in foreign countries, or in such dependencies or in insular possessions.
EEC:
European Economic Community.
Efficiency:
The relationship between the input into a machine and the output from the machine. The term is extended to refer to human machines: some workers are more efficient than others.
EFTA:
European Free Trade Association.
EGM:
Short for extraordinary general meeting, a special meeting of company’s shareholders called to consider matters that cannot wait until the company’s next annual general meeting.
E.I.N.:
U.S. Federal Employer Identification Number.
Elasticity:
The amount by which one thing changes for each unit change in something else. The elasticity of supply and demand are the amounts by which the production or consumption of goods or services change for each unit change in price.
Email:
Short for electronic mail, the production and distribution of messages electronically; literally, a form of paperless post. There are semi-public ways of sending e-mail (via the internet) and there are private networks for sending e-mails, between employees of the same firm, for example. Such a private network is referred to as an intranet.
Embargo:
A ban on transferring something from one party to another. It may be goods, such as a trade embargo preventing the export of arms to a particular country. Or it may be information, for example: “This news is embargoed until midday tomorrow”.
Emerging Economy:
A country that is on the way to becoming a developed economy in terms of its GDP per head, and its financial and industrial structure.
EMI:
Short for European Monetary Institute, the Frankfurt-based central bank established as part of EMU.
Emigration:
Emigration to a tax haven or to a country offering special retirement incentives may serve to break totally or in part the link between a taxpayer and the high tax jurisdiction from which he is emigrating. Normally, it is the change in the place of residence which is material; however, in other cases a change in domicile or even citizenship (in the case of the United States) may be necessary. Anti-avoidance provisions or exchange controls may delay or render extremely difficult the coming into effect of the fiscal advantages of the act of emigration.
Employee:
Someone who works for an organization doing a defined job for an agreed amount of compensation.
Employer:
Someone who employs others to perform stipulated tasks in return for monetary rewards.
Employment Agency:
An agency that tries to match the needs of employers with those of employees. Many agencies specialize in finding workers with particular sorts of skill, such as computer, secretarial or accounting.
Empowerment:
The concept of giving employees the freedom to take as many decisions for themselves as possible.
EMS:
Europan Monetary Unit.
EMU:
Short for Economic and Monetary Union, a series of steps whereby the members of the European Union bring their monetary and exchange-rate policies into line. Members: Germany, France, Spain, Portugal, Belgium, The Netherlands, Luxembourg, Italy, Greece, Finland, Austria and Ireland.
Endorsement:
A signature on the back of a cheque or other financial instrument by the payee. It effectively transfers the ownership of the instrument from the signatory to the bearer. In advertising, an endorsement is the recommendation of a product by a well-known person.
End User:
The ultimative user of a product who is not necessarily the purchaser of it; for example the driver of a company car.
Entrepot:
A warehouse for the storage of imports or goods in transit from which they may be reexported or shipped to a final destination. An especially important concept in Hong Kong where only merchandising and manufacturing profits realized within the Colony are subject to income tax.
Entrepreneur:
A person who recognizes a market opportunity, raises the resources necessary to exploit it, and personally bears some of the risk. The term was used by a French economist, Jean-Baptiste Say, to describe someone who “shifts economic resources out of an area of lower and into an area of higher productivity and greater yield”.
Environmental Audit:
An audit of a company’s impact on the environment. The International Chamber of Commerce’s definition is: “A management tool comprising a systematic, documented, periodic and objective evaluation of how well (the company’s) environmental organization, management and equipment are performing.
Equal Opportunity:
The idea that all men and women should have an equal opportunity to do any particular job. Much progress has been made in ensuring that this is the case, but there are still exceptions, as is apparent from the small number of women in senior positions in big corporations.
Equity:
The risk capital supplied by shareholders to a business and the balancing item in a company’s balance sheet – the amount by which its assets exceeds its other liabilities (to bankers, suppliers, and so on). This is the company’s surplus funds, which belong equitably to its shareholders.
Equity Options:
A class of options giving the purchaser the right but not the obligation to buy or sell an individual share, a basket of shares or an equity index at a predetermined price, on or before a fixed date.
Equity Swaps:
A transaction that allows an investor to exchange the rate of return (or a component thereof) on an equity investment (an individual share, a basket or index) for the rate of return on another non-equity or equity investment.
Ergonomics:
The study of the way in which people work, and of the ways in which this (and the machines that they use) can be improved in order to make them more more efficient.
ESA:
European Space Agency.
Escrow:
When a contract or an asset such as money is placed with a third party until certain conditions are met, it is said to be held in escrow. Parties that are in dispute over the ownership of an sset may agree to place the asset in escrow until an arbitrator has had time to decide who is the rightful owner.
Establishment:
See Anstalt.
Estimate:
An approximate price given by somebody for something that they with to sell to a potential customer.
Ethical Investment:
The idea, promoted particularly by certain funds in the United States, of investing only in companies that meets specific ethical criteria. Companies that do not do business with fascist regimes, for example, or do not massively pollute the environment.
EU
European Union. Member states: Belgium, Eire, Denmark, France, Italy, Luxembourg, The Netherlands, Great Britain, Germany, Greece, Spain, Portugal, Sweden, Finland, Austria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia.
Euro:
European Currency Union. A single common unit of currency (€, EUR, Euro) designated and accepted as legal tender as of January 1, 2002, by most of the member countries of the European Union, whether or not they qualify to participate in the European Monetary Union. Members: Germany, France, Spain, Portugal, Belgium, The Netherlands, Luxembourg, Italy, Greece, Finland, Austria and Ireland. However, each member country’s own currency also will be accepted as legal tender until year 2002, at which time the only valid legal tender will be the euro. The euro will be the official exchange for cross-border transactions as well as for domestic purposes as will have a fixed value at the outset yet to be set but expected to be in the range of approximately one euro equals United States $.
Eurobonds:
A bond issued in a currency other than that of the country or market in which it is issued. Interest is paid without the deduction of tax. Eurobonds are long-term loans issued in terms of the United States dollars or other currencies or in terms of composite units of account. They may take the form of loans, debentures or convertible debentures and are issued at a fixed rate of interest. Eurobonds are normally issued in countries where interest payments are not subject to withholding tax. Major issues are frequently handled by international underwriting syndicates.
Eurocurrency/-dollar:
Eurocurrencies are currencies held outside the country of origin by non-residents of that country and made available to the Eurocurrency market for lending. The market originally developed in Eurodollars, but other currencies, e.g. Deutschmarks, Swiss francs and Yen, now form a major part of the market. The market is not subject to exchange controls or other restrictions, although investors and borrowers may be so subject in their own countries.
Eurodollar:
Dollars originally deposited in United States banks that are acquired by persons residing outside the United States and held abroad, mainly in Europe, but also frequently in other areas. Depositories of Eurodollars include foreign branches of United States banks, where a large percentage is deposited. Owners of Eurodollars may be Americans residing abroad, who may have accounts in banks outside the United States. Of approximately $700 billion of Eurodollars now in existence, approximately $400 billion is held by United States persons, particularly foreign subsidiaries and branches of United States parent corporations. Although London remains the Eurodollar center, such other cities as Paris, Zurich, Amsterdam, Nassau in the Bahamas, Hong Kong and Singapore have increased in importance as depositories. Eurodollars are used by foreign banks as a method of financing loans to other local or foreign banks or to commercial borrowers. This type of lending has played a significant part in the rapidly expanding volume of foreign trade, which is now approximately $1.6 trillion annually. The bank that lends the Eurodollars, or Eurocurrency if it is in German Deutschemarks, Swiss francs or another foreign currency, charges an interest rate ranging from ¾% to 2% over the rate it is paying the Eurodollar depositor. There is approximately $1.2 trillion of Eurocurrencies, including the $900 billion of Eurodollars. The name Asiadollars has been coined for the dollars deposited in banks in Asia, particularly in Singapore. Afrodollars are dollar deposits in various foreign banks in Africa.
Euromarket:
A market in financial instruments that are denominated in a currency other than that of the market in which they are traded; for example, a Zurich-based market in dollar-denominated corporate bonds.
European Commission:
The executive organ of the European Union, run by 20 commissioners (two each from France, Germany, Italy, Spain and the UK, and one from each of the other ten member states). The commission drafts legislation in the form either of regulations of directives. Regulations are passed through the European Parliament and apply in all member states. Directives leave the means of achieving the desired result up to individual, member states.
European Union (EU):
The community of powerful European countries set up in 1957 by the Treaty of Rome and fired by the desire of its founders to avoid yet another pan-European war. European Union member countries: Spain, Italy, Ireland, Netherlands, Luxembourg, United Kingdom, Austria, Germany, Finland, Portugal, France, Sweden, Belgium, Denmark and Greece. The members of the EU are gradually bringing their economic and monetary affairs closer and closer together. They were joined by Denmark, Ireland and the UK in 1973, Greece in 1981, Portugal and Spain in 1989, and Austria, Finland and Sweden in 1995. As of May 01, 2004 also: Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. Applicant countries: Bulgaria, Romania and Turkey.
Eurozone:
Effective January 01, 2002, European Union (EU) member states: Belgium, Eire, Denmark, France, Italy, Luxembourg, The Netherlands, Great Britain, Germany, Greece, Spain, Portugal, Sweden, Finland and Austria – except: Great Britain, Sweden and Denmark.
Ex:
Latin for ‘without’, the opposite of Cum. Used to indicate that the buyer is not entitled to participate in whatever forthcoming event is specified, for example, ex cap, ex dividend, ex rights.
Exempted Company:
Companies that formally declare to the Government of a respective country that they will not trade within that country for any reason may obtain a guarantee from the Government that they will not be subject to any income, capital or capital gains, estate, inheritance or similar taxes for designated periods up to as long as 30 years.
Expatriation:
The removal of one’s legal residence or citizenship from one country to another. Expatriates from Third World countries enter OECD countries to search for better income opportunities than they can pursue at home. Expatriates from OECD countries search for better capital preservation opportunities than they can pursue at home.
Exchange Control:
Government-imposed controls that restrict the amount of currency (domestic and foreign) that can be brought in or out of a country by individuals and corporations.
In some jurisdictions (e.g. Australia, Japan and the United Kingdom) the regulations may render a contract void unless prior consent is obtained.
Exchange Rate:
The amount of money denominated in one currency that can be obtained for a unit of another. Most countries express their currency first and foremost in terms of the US dollar.
Excise:
A selective tax imposed on the consumption of goods and services.
Ex-Dividend:
An expression used to refer to a share price that does not incorporate a dividend payment that has been declared by the company but not yet paid. The dividend in question goes to a previous owner of the share.
Executive:
Someone who has the power to decide that tasks should be executed. The word usually refers to managers at senior levels.
Executive Director:
Strictly speaking, a company executive who is also a director, that is, who serves on the company board. The term director is, however, sometimes used loosely as a title for someone not on the board. In this case an executive director is just a senior executive.
Exempt Company:
A company exempted from tax or from compliance with specified regulations of the country in which it is established.
Exempt Gilt:
Security issued by the British Government with the condition that they will be free of United Kingdom tax when beneficially owned by non-residents.
Exempt Trust:
A trust established in a country where the Government issues a guarantee that the trust income and property will not be taxed for a specified number of years no matter what laws are subsequently passed relating to income, inheritance, estate duty, or capital gains taxes.
Exempt Gilt:
Security issued by the British Government with the condition that they will be free of United Kingdom tax when beneficially owned by non-residents.
Exequatur:
Recognition of a country’s consul by a foreign government.
Exercise:
Making use of a right given under the terms of a contract. For instance, the option to purchase as share at a certain price and within a certain time; or the right to take up a rights issue.
Ex-Factory:
An annotation added to a price to indicate the point at which the price applies, in this case when it leaves the factory. In other words, the cost of delivery is extra. Similarly, a price could be ex-warehouse or ex-customs.
Ex Gratia:
An extra payment made to an employee “out of thanks”. A feature of an ex-gratia payment is that the payer is under no contractual obligation to make it.
Exit Route:
The way in which an investor hopes to realize a capital gain from an investment. With investment in a business, this usually involves floating the business on a stockmarket and selling shares to the general public. In a more general sense, an exit route can be any strategy for withdrawing from a particular course of action.
Ex Officio:
A Latin expression for something that arises “out of the office” – belonging to somebody because of the office that they hold rather than because of the person that they are. For example, many of the duties of the chairman of a company (such as making the casting vote at a board meeting) arise from the fact that he or she occupies the office of chairman, not because they have been chosen as individuals to carry out that duty.
Expatriate:
A person living and working in a foreign country. The tax position of expatriates can become complicated because they fall under at least two jurisdictions. Expatriates often enjoy a lifestyle above what they might expect at home because they get perks to compensate for the “hardship” of their posting.
Expense:
A person living and working in a foreign country. The tax position of expatriates can become complicated because they fall under at least two juristdictions. Expatriates often enjoy a lifestyle above what they might expect at home because they get perks to compensate for the “hardship” of their posting.
Expense Account:
An allowance given to an executive for the purposes of entertaining and/or travelling in pursuit of business.
Export:
Goods or services that are sold to someone or some organization outside the country in which they are produced.
Export Credit:
A loan given to an exporter in which the goods being exported provide security for the loan. An export credit is designed to bridge the gap between the time when an exporter receives an order and the time when it receives payment. With large capital goods this can be many months, if not years.
Export Credit Agency:
An organization set up to administer export credit guarentees. Such agencies also sometimes lend money directly to foreign buyers to enable them to buy goods from the country of the agency. These loans are frequently granted at favourable rates of interest, involving an element of subsidy to the overseas buyer.
Export Credit Guarantee:
A scheme set up (usually by a government or government agency) to help its countries’ exporters by giving gurantees to bankers that their loans to those exporters will be repaid.
Export:
An insurance policy taken out to reduce the risk of loss of exported goods while they are in transit.
Exposure:
The extent to which a creditor is vulnerable to a particular debtor. For example, a bank is exposed to the textiles industry if it has lent considerably more to that industry than to others.
Ex-rights:
A note added to the quotation of a share price to indicate that anybody buying the share at that price does not get the benefit of a declared (but not yet issued) rights issued.
External Debt:
The financial obligations of a company or a country to overseas (that is, non-domestic) creditors.
External Funds:
The funds available to an organization that come from outside the organization, usually in the form of bank loans, trade credit, bonds or shares.
Extraordinary Item:
An item in a company’s accounts which is out of the ordinary, that is, which does not appear as a matter of course in every year’s accounts. Extraordinary items need to be explained to shareholders in the company’s annual report.
Extraordinary Resolution:
A resolution, or statement of intent, to do something that falls outside a company’s ordinary course of business. For example, a resolution to take over another company, or to dismiss a director for fraud.
Ex-works:
The same as ex-factory.
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Face Value:
The value that is written on the face of a financial instrument. The face value of a share (also known as the nominal value, the value at which it was issued) need bear no relation to its market value.
Facility:
A service made available to customers or employees to use as and when they please. Hence an overdraft facility is a bank overdraft made available to customers to use whenever they need it. A canteen facility is a place serving food for employees to take advantage of as they wish.
Factor:
Originally, an agent sent from Europe by the East India Company to run its trading posts in far-flung parts of the British Empire. Today a factor is any agent who is buying and selling something on commission.
Factoring:
A service in which a factoring house or other financial institution purchases a customer’s accounts receivables and assumes all the credit risk of the customer’s debtors and the responsibility of collection payments.
Factors of Production:
The essential elements – land, labour and capital – required for any wealth-creating process.
Factory:
Originally, a trading post that was run by a factor. Subsequently, any site where factors of production are used in the manufacture of goods.
Fallback:
An alternative plan of action devised in case a primary plan fails.
Family Firm:
A company owned and run largely by the members of one or two families. Such firms have special characteristics and special problems, such as how to motivate non-family employees when the most senior positions in the company are probably closed to them.
Family Foundation:
A foundation (see Foundation below), used to designate heirs, establish the rules and limitations, administer assets after the death of a founder, guarantee administration when heirs are indapable of doing so, avoid the waste of assets by irresponsible heirs, and to eliminate any formal arrangements between the assets of the foundation and the founder during his or her life.
Family Holding Trust:
A trust specifically created and managed to hold a family’s assets consisting or real and/or personal property and/or investment portfolios. Such trusts usually own underlying companies to hold assets thus limiting the associated risk to the individual assets.
Family Limited Partnership (FLP):
A limited partnership created for family estate planning and some asset protection. It is family controlled by the general partners. A hightly appreciated asset is transferred into the FLP to achieve a capital gains tax reduction. Usually, the parents are the general partners holding a 1 or 2 percent interest. The other family members are the limited partners holding the balance of the interest in the partnership.
Fast Track:
There are two meanings:
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- A separate career path in an organization designed to cater for particularly able people who might not be prepared to wait and make the standard ascent of the corporate ladder.
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- A procedure in the United States which allows for the fast passage of legislation concerning trade agreements.
FATF:
America’s Financial Action Task Force on money laundering set up in 1989. See also NCCT.
Fax:
A facsimile machine, a machine that makes paperbased copies of messages that have been transmitted electronically via telephone lines and computer networks.
F. B. I.:
The Federal Bureau of Investigation (U. S. A.).
FDIC:
Federal Deposit Insurance Corporation: a U.S. government-sponsored corporation that insures accounts in national banks and other qualified institutions.
Feasibility Study:
A paper-based analysis of the likelihood that a project will meet its planned targets.
FED:
Federal Reserve, the US Central Banking system, established in 1913 and responsible for managing the US Dollar, both within and outside the US:
Fee:
A payment for the provision of professional services; for example, the lawyer’s fee and the accountant’s fee. Other service providers, such as window cleaners and bus conductors, are not paid fees. They are paid cash.
FIBV:
World Federation of Stock Exchanges.
Fiduciary:
Somebody (or something) that is holding assets on behalf of another person; for example, a Swiss bank holding money in trust for a customer in another country. See also Trustee.
Fiduciary Account:
An amount typically deposited with a Swiss Bank which will redeposit the sum with a third party bank outside Switzerland in its own name (to eliminate Swiss withholding tax on interest).
FIFO:
Short for first in, first out, a fundamental accounting principle which says that any fungible raw materials being used in a business are to be costed on the basis that the first to come in (probably the cheapest) are deemed to be the first to go out. Contrast with its opposite, LIFO.
Filters:
A means of narrowing the scope of a computer report or view by specifying ranges or types of data to include in or exclude.
Final Assembly:
The last stages in an assembly process before a product rolls off the production line.
Final Dividend:
The dividend paid by a company at the end of its financial year.
Finance Company:
A company engaged in making loans to individuals and businesses. Unlike a bank, a finance company does not collect deposits from retail customers. Rather, it raises funds by borrowing from other financial institutions and from the wholesale money markets.
Finance Director:
The executive director on a company’s board who is in charge of the company’s financial position.
Financial Engineering:
The process of reorganising a company’s finances, either by raising money from one source (a bank, say) to pay off another (trade creditors, perhaps); or by extending the maturity of the company’s borrowing, raising long-term bonds, for instance, in order to repay short-term bank loans.
Financial Institution:
Any company or organization whose business is finance. This includes banks, insurance companies, pension funds and factoring companies.
Financial Statement:
A written record of the financial position of an organization, consisting normally of a balance sheet, an income statement and a cash flow statement.
Financial Year:
The 12-month period for which an organization prepares its financial statement. This may or may not coincide with the calendar year.
FINCEN:
Read the pages of the U.S. Government’s Financial Crimes Enforcement Network and see how they view your rights to financial privacy, based on the spurious ‘war on drugs’ policy!
Finder’s Fee:
A fee paid to someone for bringing together two (other) parties who make a deal and do businss together. The fee may be a flat fee, or it may be calculated as a percentage of the value of business arising from the meeting.
Finished Goods:
Goods which have completed the manufacturing process and are now ready to be sold to a final consumer.
Fire:
To bring someone’s employment contract to an end, often an abrupt one.
Firm:
Strictly speaking, a business entity that is not incorporated; for example, a firm of lawyers who do business as a partnership and not as a company. The word has come to be used more widely, however, to refer to all but the largest business organizations.
First Refusal:
A right given by the owner of an asset to a potential purchaser to match anybody else’s offer for that asset. Such rights are often given, either by contract or by law to tenants of state-owned apartment blocks.
Fiscal:
Of the public finances, particularly in relation to the raising and collecting of taxes.
Fiscal Year:
The 12-month period used by governments for their accounting purposes.
Fixed Asset:
An asset that is used in a business for some period of time and that is not easy to move, such as a building, land or machinery.
Fixed Cost:
A cost that does not vary in proportion to the amount of goods or services that are produced; the opposite of variable cost. Fixed costs, such as the amount paid for rent and depreciation, are unrelated to a company’s turnover. They are incurred whether it is selling a lot or a little.
Fixed Rate:
An interest rate that does not vary until the financial asset to which it is attached comes to maturity. A ten-year fixed-rate loan has its interest rate fixed once and for all at the beginning of its ten-year life.
Flag of Convenience:
The flag of a ship is the flag of the country of its registration. The term “flag of convenience” refers to the flag of a country (in particular Liberia and Panama) which is chosen for ship registration in order to achieve fiscal benefits (no income tax being levied by such countries on international shipping operations) and other non-tax advantages relating to lower labor costs and manning scales, officer and crew requirements, trade union practices, etc. Ownership of the ship is normally vested in a company incorporated in the country of the flag.
In addition to Liberia and Panama, the following countries offer or are preparing incentives to offer flag of convenience facilities: the Cayman Islands, Costa Rica, Cyprus, Gibraltar, Haiti, Honduras, Hong Kong, Malta, Morocco, the Netherlands Antilles, Madeira, Vanuatu and Singapore.
Flat Rate:
A fixed price for goods or services. For example, the unit price for goods is the same whether you buy 10 units or 10,000; there is no discount for buying in bulk. Or the price charged for auditing a firm’s accounts is fixed at a flat rate, regardless of how many hours it takes.
Flexible Manufacturing:
A manufacturing system that can be rapidly switched from making product A to making product B, as and when market demand dictates.
Flexitime:
A schedule of working that allows employees to choose their working hours around a core period, usually in the middle of the day. They can thus work from 8am to 4pm if they with, or from 10.30am to 6.30pm. Within this framework, employees have to fit a fixed number of working tasks that require a team effort.
Flight Capital:
The movement of large sums of money from one country to another to a) escape political or economic turmoil; b) avoid aggressive taxation; or c) to earn higher rates of interest or capital gains.
Money that flows offshore likely never returns. Flight is exacerbated by a lack of confidence as government grows without bounds.
Floating Charge:
A charge that floats over all a borrower’s assets. If the borrower should fail to repay the debt to which the charge relates, the lender can lay claim to any of the borrowers’ assets up to the value of the loan.
Floating Rate:
An interest rate that fluctuates according to market rates, the opposite of fixed rate.
Floor:
There are two business-related meanings:
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- The floor of a stock exchange is the physical room in which brokers transact their business. As their business nowadays almost all takes place by telephone or computer, this sort of floor is becoming increasingly rare.
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- A lower limit placed on a variable price in a contract. This can be a minimum interest rate to be paid on a floating-rate loan, for instance, or it can be the lowest acceptable bid on a painting at auction.
Flotation:
The obtaining of a quotation for a company’s shares on a recognised stock exchange. Exchanges have extensive rules on how this can be done.
Flow Chart:
A diagrammatic representation of any process involving a series of steps. It may be a manufacturing process, such as the production of an automobile, or a strategic process, such as the way in which a company intends to enter a new market. The flow chart will show which steps need to be taken first and which can wait until later.
Flow of Funds:
The ways in which money moves around a country’s financial system, from banks to consumers, to producers, to government, and back to banks again.
FMCG:
Short for fast-moving consumer goods, things like foodstuffs and toothpaste that do not stay on shop shelves for long. The key to selling FMCGs profitably lies in the logistics of getting them from producer to consumer.
FOB:
Short for free on board, a term attached to a price quotation given by an exporter. FOB signifies that the exporter undertakes, for the given price, to deliver the goods as far as the buyer’s chosen means of transport – a port or railway station, for example. The French expression is franco à bord.
Focus Group:
A small group of consumers who are brought together for the purposes of market research, usually to discuss in some detail the merits of a particular product or service.
Footprint:
The area on the ground that is reached by a signal from a satellite. For satellite broadcasters this is their potential market, the bait with which they try to entice advertisers.
Force Majeure:
A clause in a contract which abrogates the parties from responsibility in the case of events beyond their control – such as an earthquake or the outbreak of war – that prevent them from fulfilling their side of the contract.
Forced Sale:
Any sale that has to take place immediately, denying the seller the opportunity to look around and wait for a better price.
Forecast:
An estimate of future economic or market data.
Foreign Bank Accounts (U.S.):
Every United States resident, partnership, corporation, estate or trust must advise the United States Treasury of any financial interest in or signature authority over a foreign bank, securities or other financial account in a foreign country and must report that relationship each calendar year filing Form 90-22.1 with the Treasury Department on or before June 30 of the succeeding year. This report must be at the following address: United States Treasury Department, P.O. Box 28309, Central Station, Washington, DC 200005.
A “foreign country” includes all geographical areas located outside the United States, Guam, Puerto Rico, and the U.S. Virgin Islands.
Foreign Base Company Sales Income:
Gross income in the form of profits, commissions, fees, or otherwise, derived by a controlled foreign corporation (CFC) from the purchase or sale of personal property on behalf of a related person, or from the sale of personal property acquired by purchase and with respect to which either the customer or the supplier or both are related persons.
Foreign Base Company Service Income:
Income derived from services performed for or on behalf of a related person and performed outside the country where the controlled foreign corporation of property manufactured by it and performed prior to the time of the sale, or services related to an offer or effort to sell such property do not constitute foreign base company services income but are considered to be sales income.
Foreign Controlled Corporation:
A foreign controlled corporation is a United States corporation or foreign corporation engaged in trade or business within the United States which must file an information return on Form 5472 subject to a $1,000 annual penalty for each year the information is not reported.
Foreign Corporation:
A corporation organized under the laws of a foreign country and whose parent company in the home country may participate in any percentage of shares of the affiliate corporation.
Foreign Currency:
The currency of a foreign country. For everybody but Americans and Puerto Ricans, the US dollar is a foreign currency.
Foreign Currency Account:
An account maintained in a bank in another currency than the currency of the country in which the bank is located. Foreign currency accounts can be maintained for depositors by banks in the United States.
Foreign Direct Investment:
A substantial investment by a resident of one country in the industry of another. Foreign direct investment (FDI) includes all purchases of stakes of more than 10% of a foreign company, and all investment in greenfield sites abroad.
Foreign Exchange:
Methods of making payment from one country in the currency of another, either electronically or by the exchange of notes and coins.
Foreign Investor in Real Property Tax Act of 1980 FIRFTA) US only:
Under FIRPTA and the US Economic Recovery Act of 1981, unless an exemption is granted by the IRS, upon the sale of real property owned by an offshore (foreign) persons, the agency/attorney or excrow officer handling the transaction is required to withhold capital gains taxes at the closing of the sale transaction. Unless withheld and submitted to the IRS, the party handling the sale transaction is personally liable for the taxes.
Foreign Personal Holding Company Income:
Investment income such as dividends, interest, royalties, annuities, gain from the sale or exchange of stock or securities, gains from futures transactions in commodities, rents or royalties (other than rents and royalties derived in the active conduct of a trade or business or rent and royalty income received for the use of property within the country under which the laws of the controlled foreign corporation is created or organized) and certain miscellaneous types of income not relevant to tax haven background.
Foreign Sales Corporation:
A foreign subsidiary corporation of a United States parent company that exports goods to the aforementioned subsidiary at arm’s lenght transactions but with a 30% or 32% reduction of corporate income taxes on the profits representing the sale to the foreign subsidiary located in a designated country qualifying under the Caribbean Basin Inititative Exchange of Information Agreements or double taxation agreements of the United States.
Foreign Trust:
A trust with the same basic qualities as a domestic trust, it is distinguished by these special features: (1) it has a foreign trustee, possibly a bank, that holds the assets on the terms set out in the trust deed but need not keep them in the tax haven; (2) it is established by an individual in another country than that in which he maintains his domicile; and (3) it is subject to the laws of the country in which the trust instrument is drawn up. No tax or a low rate of tax is paid on income accruing to the trustee. The trust is a living (“inter vivos”) and is usually created in a country having common law jurisdiction, with provision for a change of jurisdiction in case of unfriendly legislation. The agreement may provide for accumulation of income for some years before distribution. Trusts are not subject to exchange control regulations. A common law trust established in a present or former British territory is more flexible than a civil law (statutory) trust. A foreign trust must be properly registered and created in a foreign country by a person (resident or citizen) of another country which represents that portion of the foreign trust attributable to money or property transferred to it directly or indirectly by a person outside the country which represents that portion of the foreign trust attributable to money or property transferred to it directly or indirectly by a person outside the country where the trust is registered and created. Generally it is peferable to transfer cash since many countries require a record of the property transferred or other assets because of the possibility of capital gains tax upon sale of securities or gift taxes on donated assets. The Internal Revenue Service proposed regulations reflecting the changes made in the Small Business Job Protection Act of 1996 define a “foreign trust as any trust (1) if a Court within the United States is able to exercise primary supervision over the administration of the trust and (2) one or more United States fiduciaries have the authority to control all substantial decisions of the trust.” Under the regulation, a foreign trust is taxed the same as a non-resident alien. As a result of the changes, many inbound trusts that were grantor trusts are now non-grantor trusts. Thus, distributions of trust income to the United States beneficiaries of non-grantor trusts are taxable to United States beneficiaries and are subject to the interest charge on accumulation distributions.
Foreign Trust Beneficiary:
The person for whose benefit a foreign trust is created.
Foreign Trust Fiduciary:
An individual or corporation holding a position of trust and having the right and power to act for the benefit of another person. A trustee of a foreign trust is said to have a “fiduciary relationship” with the individual who sets up a trust and those who benfit from it.
Foreign Trust Grantor (also known as Creator or Settlor):
The person who establishes a foreign trust.
Foreign Insurance Trust:
A particular kind of “living” consisting partly or wholly of trust life insurance policies during the insured’s lifetime and/or life insurance proceeds after the insured’s death. A “living trust” is a personal trust created by an individual during his or her lifetime.
Foreign Irrevocable Trust:
A foreign trust that cannot be changed by the person setting up the trust. This type of a trust must run for a specified term. A revocable trust, the opposite of an irrevocable trust, may be revoked or amended at the option of the person who sets it up.
Foreign Testamentary Trust:
A foreign trust created under a person’t will. It does not become effective until after the grantor’s death, when the will itself becomes effective.
Foreign Trustee:
A person or institution holding legal title to property held in trust for the benefit of another.
Forfaiting:
Buying without recourse of obligations, usually trade drafts or promissory notes, arising from international transactions. The buyer of the obligations explicitly foregoes his legal right to a claim upon any previous owner of the debt when endorsing “without recourse.” The seller of forfeitable trade drafts or promissory notes usually is an exporter who has taken the obligations in full or part payment for goods supplied and who wishes to pass on all risks immediate cash. Forfeiting is at fixed rates, medium-term, and generally covers bank or Government-related risks. Transactions are not limited in amount and usually are concerned with capital goods financing.
Forward:
There are at least three meanings:
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- A forward contract is a contract that specifies the details of a deal to be consummated in the future, such as the sale of wheat next September.
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- Forward cover is the buying today of the means to meet an obligation in the future.
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- To forward something is to act as an intermediary by sending on to a third party something that you have received.
Forwarding Agent:
A business or an individual that arranges for the shipment of freight.
Foundation:
A body organized under legal rules, usually statutory, allowing a founder to effect the management of wealth or other property for the benefit of another person or for a purpose. Chieftly used in civil law jurisdictions for many of the same functions as trust, foundations have legal personality and are liable for their own obligations. They must be administered by a managing council composed as a corporation or members who are individuals but they do not have shareholders. The founder donates the initial assets to a foundation and may be a beneficiary. Varieties of foundations used as trust surrogates include family foundatios and private foundations. (Also see Stiftung)
Franchise:
A contractual agreement in which one party (the franchisee) buys the rights from another (the franchiser) to sell goods and services as specified by the franchiser. McDonald’s and Benetton are well-known examples of franchises.
Fraud:
An act of deception that is aimed at gaining financial benefit at the expense of others. Tinkering with companies’ accounts is a common form of fraud.
Freelance:
Originally, a medieval mercenary who lent his lance and fighting skills to the highest bidder. Then used to refer to a journalist with no affiliation to any particular publication. Now it is used to refer to any person who works for themselves rather than for an employer.
Free Port:
A port where no duties are imposed on ships that unload cargo. Free ports are designed to be places where cargoes are transferred from ship to ship, in transit to their ultimate destination.
Free Trade:
The economic principle that optimal growth is achieved when trade among countries is unhindered by tariffs or visible barriers.
Free Trade Area:
A region, such as the European Union, where a number of national governments agree to remove any existing barriers to trade between them.
Free Zones:
Free zones are designated areas, which receive special treatment through their exclusion from the area to which the country’s normal customs rules apply. A free port is one at which imports may be landed without paying customs duties. The system of free zones or free ports favors export processing, transshipment and the entrepot trade since there is no need to pay and then reclaim customs duties.
Though free zones are often part of a tax incentive package in what would otherwise be a high tax jurisdiction, they may also be found in tax havens, e.g. Freeport in the Bahamas.
Freight:
Any goods that are in the process of being transported by road, rail, sea or air.
Freight Forwarder:
An agent who handles the shipment of exports, in particular the documentation required to get goods from their point of manufacture to their shipper.
Fringe Benefits:
Benefits that employees receive in addition to their normal wage or salary. They include such things as pensions, private health insurance, cars, low-interest loans and canteen facilites. In some companies they are worth as much as one-third of a person’s total remuneration.
Front Office:
The opposite of the back office, the place where a business has direct contact with its customers, be it a shop, a showroom, or a telephone sales operation.
Frozen Assets:
Assets that a court has decreed cannot be used by their owner. The freeze may be only temporary, to be removed once the reason for its imposition has gone. Assets are often frozen when the ownership of the assets is in question.
FTP:
File Transfer Protocol is a standard method of sending files between computers over the Internet.
FTSE 100:
The most commonly used stockmarket index in the UK, based on the price movements of the 100 largest companies quoted on the London market. Its name is an amalgam of its two founders, the Financial Times and the London Stock Exchange.
Fulfillment:
The process of satisfying an order received by direct mail. Much of the fulfillment process these days is carried out by computer.
Fulfillment Houses:
A fulfillment house will take orders for your products through their 1-800 number, provide a “live” operator for your buyers, package your goods, and then ship them… all while providing you with a complete online record of the transactions.
Full Employment:
An economy is said to have full employment when there are jobs available for every citizen who wants to work.
Function:
The work done by a self-contained part of division of a business; for example, the marketing function or the personnel function.
Funded:
Usually seen in the phrase “fully funded”, to refer to a pension fund whose investments are sufficient to pay all its obligations as and when they become due. In other words, the fund does not need to rely on future contributions to meet its present obligations.
Funds:
Money set aside for some specific purpose, often in a tax-advantageous way.
Fungible:
The quality of things, such as notes and coins or grains of sand, where any one individual specimen is indistinguishable from any other. Anything to be used as a store of value (be it beads or gold coins) has to be fungible.
Futures:
Contracts agreeing to buy something in the future for a price that is fixed in the present. Futures began in agricultural markets in order to enable farmers to sell in advance crops that had not yet ripened. They have spread more recently into financial markets.
-G-
G-7:
A forum for the finance ministers of the seven largest developed economies – Canada, France, Germany, Italy, Japan, the United Kingdom and the United States – to discuss economic and financial matters.
G-8:
The G-7, plus Russia.
G.A.O.
General Accounting Office (U.S.A.).
Gap Analysis:
A technique used by a market researcher to identify gaps in a particular market. Once identified, companies can set out to fill the gaps, thereby meeting unrequited consumer demand.
GATT:
The acronym for General Agreement on Tariffs and Trade, the GATT was established in 1947. In it member countries agreed systematically to reduce the trade barriers between them. This was achieved in a series of rounds (the Tokyo Round, the Uruguay Round, and so on) which have taken trade liberalisation further and further. Since 1997 the GATT has been the responsibility of the WTO.
GCC:
Gulf Co-operation Council. Member states: Saudi Arabia, the United Arab Emirates (UAE), Qatar, Kuwait, Bahrain and Oman.
G.C.P.:
“Gross Criminal Product”.
GDP:
Short for gross domestic product, the sum of all output of goods and services produced by a nation. GNP (gross national product) is GDP plus net income from abroad, (for example, the rent and profit received from other countries minus the rent and profit paid to those other countries).
General Strike:
A strike involving almost all sectors of the economy. General strikes are usually organised as workers’ protests against general social conditions rather than aginst their own specific pay and contract.
Generation X:
A lifestyle defined in a book of the same name. Generation Xers are, roughly, people born between 1965 and 1980, and they differ from other generations in that they are less inclined to seek full-time, lifetime employment. Instead, they prefer a series of short-term contractual arrangments.
Generic:
A product that is sold with no brand name. Pharmaceuticals are said to become generic when they are no longer protected by patent and can be manufactured and sold by anybody.
Gesellschaft mit beschränkter Haftung (GmbH):
German private limited company without shares.
Gilt:
Security issued and guaranteed by the Government.
Gilt-edged:
A bond that is believed to be exceptionally high quality (in terms of its ability to pay interest and capital as and when they fall due). The term is applied particularly to British government securities, once known as gilts.
GIF:
Graphics Interchange Format is an image file format commonly used in HTML documents.
Glass Ceiling:
The invisible barrier that prevents women from reaching the top echelons of organisations in the proportion that their numbers in business suggest they should.
Glass-Steagall Act:
A portion of the Banking Act of 1933 which prohibits banks from entering into the securities business and prohibits security firms from accepting deposits. However, securities issued or guaranteed by a bank are not subject to the Securities Act of 1933. Therefore, bank instruments, by virtue of being issued by a bank, are not considered a form of securities.
Globalisation:
A strategy in which companies aim to sell their products and services all around the world. Driven by the convergence of consumer tastes from Tvilisi to Timbuctoo, globalisation presents companies with opportunities for achieving economies of scale.
GmBH:
Short for Gesellscaft mit beschrankte Haftung, a German form of incorporation roughly equivalent to alimited liability company.
G.N.P.:
General National Product.
Going Concern:
An assumption made by an accountant when preparing a company’s books that the company is going to continue in business for the foreseeable future. If this assumption were not made the company’ assets would have to be valued at the (low) price that they would realize in a forced sale.
Golden Parachute:
Provisions in the employment contracts of executives guaranteeing substantial severance benefits if they lose their position in a corporate takeover.
Gold Card:
A credit card or charge card with a number of special privileged (such as a higher credit limit) that are not granted to the holders of ungilded cards.
Gold Clause:
A clause in a loan agreement that relates the borrower’s repayment to the value of a fixed volume of gold. Such clauses appear in times of high inflation and when the price of gold is stable.
Golden Handcuffs:
The terms of an employment contract designed to deter a key employee from leaving. A stock option which is forfeited (or which has to be realized when the employee leaves) is one form of golden handcuff.
Golden Handshake:
A generous upfront payment designed to persuade a person to leave their current employment and to join the organization offering the payment.
Golden Parachute:
A clause written into the contract of senior employees guaranteeing them a generous payment if they should lose their job for any reason, or be downgraded. Golden parachutes provide protection to senior executives in the case of a takeover. They also discourage new owners from laying off the existing management and replacing them with their own employees.
Golden Share:
A share which gives the holder special rights, in particular the right of veto when there is a takeover bid for the company. Governments often like to retain such shares when privatising sensitive industries, such as telecoms or defence.
Gold Fixing:
A twice-daily agreement among the biggest dealers in the gold market as to what the market price of the precious metal should be. This was an important event when governments pegged their currencies to a fixed amount of gold (the days of the so-called gold standard). It is not so any more.
Good Faith:
The principle of acting reasonably and honestly. In many countries there is a legal duty for all parties to agreements to act in good faith.
Goods:
Movable property manufactured for the purpose of being sold to customers.
Goodwill:
An accounting term for the difference between the amount that a company pays for another company and the market value of the other company’s assets. Goodwill is thus an intangible asset representing things like the value of the company’s brand names and the skills of its employees.
Governance:
The form and style in which a company is governed, by the law, by its own statutes and by custom. This can vary greatly from country to country. The roles of the state in France, of banks in Germany and of shareholders in the United States in the governance of corporations are uniquely powerful.
GPOA:
General Power of Attorney.
GPRS:
With GPRS (General Packet Radio Service) you can be continuously connected to data networks and access your favorite information and entertainment services. Just turn on, tune in, and download – whenever you like. GPRS is the perfect bearer for many kinds of applications: Multimedia messaging, Imaging and browsing.
GPRS utilizes packet switching technology where information is transmitted in short bursts of data over an IP-based network. GPRS provides a quick session set up and fast data transmission speeds. GPRS can use multiple time slots for data transfer as opposed to a normal single time slot.
Grace Period:
The time between the granting of a loan and the first repayment. It is also the amount of time allowed by a loan or insurance contract between an overdue payment and cancellation of the contract.
Grandfather Clause:
A clause in an agreement (especially in the GATT) which allows the parties to the agreement to exempt certain things that were in existence in their own laws before the agreement was reached.
Grant:
Money provided for a business project from outside normal commercial sources. For example, a government grant that is given to encourage a company to build a new factory in a particular place.
Grantor Trust:
Under US tax law, income of the trust is taxed as the income of the grantor.
Greenfield Site:
A previously agricultural site outside an urban area on which a company builds a factory or office.
Greenmail:
A company buying back its own shares for more than the going market price to avoid a threatened hostile takeover.
Grey Market:
A market for trading in shares not yet issued; before a new issue has been allocated to investors the shares are traded on a basis of “when issued”, denoted by the letters WI.
Gross:
The total amount of something – gross sales, gross profit, and so on – before taking into account a number of costs, such as tax or depreciation.
Grossing Up:
Calculation of the amount that would be required in the case of an investment subject to tax to equal the income from that investment as if it were not subject of tax.
Group:
A number of companies which are owned by each other or by a common holding company. Most groups consist of a parent company and several subsidiaries.
Group Accounts:
The accounts of a group in which all transactions between members of the group are netted out. So the group’s sales, for example, are less than the sum of the sales of the individual companies withing the group, assuming that at least one of them has sold something to one of the others.
Groupware:
A software program which links people with a common interest and enables them to communicate rapidly and easily with each other.
Growth:
An increase in some measure or other of a company’s performance between one accounting period and another, most often the increase in the value of either its sales or its profit. A country’s economic growth rate is the percentage by which its GDP changes over a given period, usually a year.
GSM:
Short for global system for mobile, a telecommunications project that aims to link national mobile phone systems in a way that will enable cutomers to call around the world with their mobile phones as easily as they do with fixed-line phones.
GSP:
Short for generalized system of preferences, and agreement among developed countries that they will give preferential treatment to certain imports from developing countries. The GSP allows countries to break the no favouritism rules of the GATT.
Guarantee:
An undertaking by someone that they will be responsible for an obligation (a debt or a promise of good behaviour) if the person who is bound by the obligation fails to fulfil it. To be binding in court, a guarantee needs to be made in writing.
Guarantees are often given by manufacturers, promising consumers that their goods will meet certain standards for a certain length of time. These days, however, such promises often provide little more protection to consumer than the ordinary law of the land.
Guru:
A business academic or management consultant who is known for his or her expertise in a particular business area. Gurus are much in demand in the media.
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Hack:
To gain unauthorised access into somebody’s computer system from a computer outside it.
Hacker:
A person, often young, who is skilled at gaining unauthorised access into other people’s computer systems.
Hard Currency:
A currency that does not normally depreciate (that is, loose its value) against other currencies over time. It is sufficiently sound so that it is generally accepted internationally at face value. For this reason hard currencies – the US dollar, the D-mark and the Swiss franc – are favoured for denominating international trade. The Euro is widely expected to become a hard currency to rival the dollar.
The term “hard currency” is a carry-over from the days when sound currency was freely convertible into “hard” metal, i.e. gold.
Hardware:
The bits and pieces of any computer system that can be kicked, that is, they take up physical space. The opposite of software.
Hard Sell:
An exceptionally forceful attempt by a salesman to sell goods or services to a consumer. A hard sell can backfire it is intimidates the consumer to such an extent that it puts him off making a purchase.
HCSD:
High-speed circuit-switched data.
Headhunter:
A person or firm employed by a company to help recruit someone to fill a senior post, usually by persuading skilled employees elsewhere to change jobs. Headhunters are more pompously known as executive search consultant.
Headquarters:
The place where a company’s senior executives have their offices and where its board holds its meetings. It may or may not be the officially registered addresss of the company.
Headquarters Company:
A company organized in a foreign country, usually a tax haven, which exclusively services its affiliate companies through managing or administering activities. It does not buy or sell products and does not involve itself in financing activities as may be practiced by offshore holding companies. A headquarters company is a fixed installation belonging to a foreign enterprise or an international company having its registered office in a specific foreign country selected because its laws permit it to act for the sole benfit of one or more companies in a group for the purpose of performing management control, servicing or coordination functions, usually in a specified geographical area. The headquarters company generally is allowed a tax deduction by granting permission to base its taxation on a national profit amounting to approximately 5% to 8% of the total operating expenses incurred in the particular country where it is organized to operate as a headquarters company. In some countries, i.e., the Philippines, there is no taxation on income and expenses are not used as any base of computation. In other countries, i.e., France, the headquarters company may be either an incorporated company of the host country or a branch of an international company.
Heavy Industry:
An industry which produces heavy goods and uses heavy equipment to do it. Examples are the steel, automobile and shipbuilding industries, which are both labour intensive and capital intensive. The opposite of light industry.
Hedge:
A means of reducing the risk of loss from future good hedge against the reduction in the value of money that occurs at a time of inflation. International businesses seek to hedge aginst the risk from movements in foreign-exchange markets. Those that do not have on occasions lost out badly.
Hedge Fund:
A flexible investment fund for a limited number of large investors (the minimum investment is typically US$1 million). Hedge funds use almost all investment techniques, including those forbidden to mutual funds, such as short-selling and heavy leveraging.
Hedging:
A technique of protecting an individual or firm from future risk of loss due to price fluctuations by means of buying and selling commodities or securities and, in recent years, foreign exchange in increasing amounts. Although commodity dealers have resorted to hedging for centuries, particularly because of possible losses from such unforeseen circumstances as inclement weather, many multinational corporations, banks and individuals have been forced to rely heavily on hedging since 1970 because of the inception of floating exchange rates. By purchasing commodities or foreign exchange at the current market price, or the so-called spot rate, for delivery at some future date, usually 30, 90 or 180 days later, the owner is protected from losses if the price rises. However, if the price falls, the purchaser losses if the price rises. However, if the price falls, the purchaser loses on inventories but gains on future sales, because he has contracted to buy the commodities or foreign exchange at a later date for a price already fixed at the time the contract was signed. In a world economy of rising prices and fluctuating exchange rates, as experienced in recent years, hedging is becoming an essential part of business life and is destined to be an ever increasingly important element of profitability in the future.
Hidden Agenda:
The undisclosed objectives that a person has, usually when participating in a meeting.
Hidden Reserves:
The reserves of a company that are not disclosed in its balance sheet. These may arise from an undervaluation of its assets or from hidden bank accounts (abroad).
High Net Worth Person/Individual:
Jargon used in the investment world for an individual with more than $1,000,000 in liquid assets to manage.
High Tech:
Short for high technology, modern advances in science that have found industrial and commercial uses. Often associated with developments in information technology.
Historic Cost:
The cost of an asset on the day that it was purchased; its original cost. Contrast with replacement cost. In the United States it is known as historical cost.
Hit:
An action on the Web site, such as when a user views a page or downloads a file.
Holding Company:
A company whose activity is limited to holding and managing investments or property but not having ordinary commercial or trading activities. The requirements to achieve holding company status vary in different countries (in particular Liechtenstein, Luxembourg, Nauru and the Netherlands).
Holding Company (Luxembourg):
A Luxembourg holding company is exempt from all forms of Luxembourg taxation but its activites are restricted to the holding of shares and certain other investments. In particular the company may not advance funds to its shareholders, invest in commodities or futures or carry out any sort of commercial or industrial activity. The company may only hold property in so far as it is necessary for its own use but could, for example, own the shares of a property investment company. This type of company is specifically excluded from the tax treaties signed by Luxedbourg except the treaty signed by China.
Home Page:
The main page of a Web site. The home page provides visitors with an overview and links to the rest of the site. It often contains or links to a Table of Contents for the site.
Home Page URL:
The local path or Internet URL to the default page of the Web site for which WebTrends reports will be generated.
Home Worker:
A person who works from home using some basic sort of equipment, for example, a computer, a telephone or a knitting machine.
Horizontal Integration:
The integration of companies that are in more or less the same line of business. Daimler-Benz merging with Chrysler is a case of hirizontal integration; Daimler-Benz getting into the defence industry is not.
Hostile Takeover:
A takeover in which the company being taken over does not wish to be bought. A company subject to such an offer sets about resisting it or finding an alternative.
Hot Money:
Capital with no allegiance to any particular market. It flows rapidly and frequently across borders in search of nothing more than the highest shortterm return. Hot money may also be moving rapidly because it is being chased by tax inspectors or fraud investigators.
HTML:
Hyper Text Markup Language is used to write documents for the World Wide Web to specify hypertext links between related objects and documents.
HTTP:
Hyper Text Transfer Protocol is a standard method of transferring data between a Web server and a Web browser.
Human Resources:
The people who make up the workforce of an organization with their various strenghts and weaknesses. Human-resource management is concerned with getting the best out of these resources for the benefit of the organization.
Hurdle Rate:
The rate of return that has to be achieved by an investment for it to be considered a success. This may be its cost of funds, or it may be the return on equity (roe) achieved by other firms in the same industry.
“Hybrid” Branch:
As defined by the temporary regulations of the Internal Revenue Services, a hybrid entity is an entity that has (1) a single owner (including ownership through branches) that is either a controlled foreign corporation or a partnership which is a controlled foreign corporation in which a controlled foreign corporation is a partner (either directly or indirectly) through one or more branches of partnerships; and (2) is treated as fiscally transparent by the country in which the payor entity, any owner of a fiscally transparent payor entity, the controlled foreign corporation, or a intermediary partnership is created, organized or has substantial assets.
“Hybrid” Company:
Companies which are limited by guarantee but which also have a share capital having shareholding members and non-shareholding members with control designated in the corporate Articles to either or both of these groups of members may be used as regular companies. Many “hybrid” companies are especially popular because disclosure of identity of the members (including shareholding members) is not required in the annual return. Membership control may be granted to non-shareholders without reference in the unusual provisions in the Articel. “Hybrid” companies are used for charitable organizations, professional and trade associations as well as for small or leisure clubs.
Hyperinflation:
A level of inflation that is so extraordinarily high that paper money becomes worthless almost overnight. Under such conditions, with no recognizable store of value, it is virtually impossible to do business in conventional ways.
Hypertag:
A Hypertag is a new way of allowing you to access info and content on your mobile phone directly from objects like Adverts and Signs. It works by allowing infra-red mobile phones, and PDAs (e.g. Palm Pilots or Pocket PCs) to interact with a small electronic tag which is attached to the Advert or Sign. To use the system, you enable the infra-red port on your mobile phone and point it at the flashing lights. You wait a few seconds, and then a piece of content will be downloaded to your phone. This can be a word and number or a prompt to remind you of an important event. In the future, you will able to download pictures, ring tones and games from a Hypertag.
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IATA or IATAN:
International Air Transport Association or International Airlines Travel Agency Network.
IBAN:
Your International Bank Account Number. Check with your bank.
I.B.C. (International Business Company):
A company exempted from tax or from compliance with specified regulations of the jurisdiction in which it is established but not allowed to trade or own real estate there.
IBIT (International Business and Investment Trust):
The IBIT is formed as a Trust in an English Common Law tax haven jurisdiction that does not compel the registration of Trusts. The ownership is controlled by bearer depository receipts for the shares of beneficial interests of the Trust. This eliminates the need for any governmental registration or filing and thus makes the Trust totally anonymous! Click here to order your own 100% anonymous and tax-free International Business and Investment Trust!
IBRD:
International Bank for Reconstruction and Development.
ICAO:
International Civil Aviation Organization.
ICC:
Short for International Chamber of Commerce, a Paris-based organization that acts as the international forum for national chambers of commerce. The ICC also acts as an arbitrator in many international trade disputes.
ICES:
International Council for the Exploration of the Sea.
ICJ:
The International Court of Justice.
Icon:
A small graphic motif on a computer screen that directs the user to a software program.
Idle Capacity:
Industrial capacity that is lying idle for some reason, such as a shortage of Raw Materials or labour, or a lack of orders.
I.D.A.:
Irish Development Authority.
I.F.C.:
International Finance Companies.
IMF:
International Monetary Fund – aims to promote international monetary cooperation and currency stabilization and expansion of international trade. The IMF was designed to enable to enable member countries to borrow from each other in order to iron out irregularities in their exchange rates and reserves. Countries are required to meet strict economic and financial conditions if they want to become borrowers.
Imports:
Goods or services that are bought by someone or some organization in a country other than the one in which they are produced.
Impulse Buying:
The purchase of goods on impulse; buying something because it has been seen in a shop window rather than because of a predetermined need for it. We buy chocolates on impulse; but rarely diamonds.
Incomplete/Imperfect Gift:
“Equity will not perfect an imperfect gift”. Where the settlor does not transfer the property to the trustee the trust is not constituted. Common law rules that the settlor has to do all in his power to transfer the gift in order to create a valid trust.
Incorporation Havens:
An incorporation haven is a country, such as Liberia and Marshall Islands, which has no infrastructure of local attorneys or accountants. It is simply in the business of registering corporations and ships. There are no other services offered and the tax haven clientele never goes there. The registration of new companies is carried out by representative offices in New York, Zurich, Hong Kong, Tokyo, Rotterdam and Piraeus, in the case of Liberia and Marshall Islands.
Incorporator:
An incorporator is the person who signs the articles of incorporation. Incorporators may have personal liability for false statements contained in the articles of incorporation.
In-House:
Within the company or organisation. Doing something in-house means that it is being done by somebody on the company’s payroll rather than by an outsider. The opposite of outsourcing.
In Play:
An expression used to refer to a quoted company that is known to be vulnerable to a contested takeover.
Incentive:
A promised reward that motivates an employee to work harder and be more productive. An incentive bonus is a payment made for production that is in excess of an agreed amount.
Income:
The monetary reward that comes from the productive use of land, labour and/or capital.
Income Statement:
Called the profit and loss account in the UK, this is the US term for the accounting statement that shows an organisation’s revenue and its costs over a period (usually the organizations’s financial year), and its resulting profit or loss.
Income Tax:
A tax imposed on individuals or businesses and calculated as a proportion of their income. For most governments it is the largest revenue-earner of all taxes.
Incorporation:
The process of obtaining the approval of the authorities to organize and run a corporation. In the United States an organization that is incorporated must include the letters Inc after its name.
Indemnity:
Indemnity means to reimburse or compensate. Many corporate directors and officers will require that they be reimbursed for all cost, expenses, and liability which they incur while acting on behalf of the corporation.
Independent Trustee:
A trustee who is independent of the settlor. Independence is generally defined as not being related to the settlor by blood, through marriage, by adoption or in an employer/employee relationship.
Index:
A way of comparing disparate things (often their prices) related to an earlier base period, which is often given the value of 100. The things may be consumer goods (as in the consumer price index) or stocks and shares (as in the stockmarket index).
Indexation:
The process of linking the cost or price of something to an index. Wages that move in line with the consumer price index (to enable them to take account of generally rising prices, that is, inflation) are said to be indexed.
Indirect Cost:
The costs involved in manufacturing or in providing a service which cannot be attributed to a particular product or service. The cost of the electricity required to heat a company’s headquarters, or the premiums paid to insure factories against fire damage, are both examples of indirect costs. An indirect cost is also known as an overhead.
Indirect Taxation:
A tax that is not imposed directly on an individual or organization. For example, VAT in Europe or sales tax in the US, which are levied on the turnover of a product. Also customs duty, which is an ad valorem tax on imported goods.
Induction:
A formalised way of introducing someone to a new place of work. An induction course can include lectures about the history of the company, a guided tour of its premises and visits to customers.
Industrial Relations:
The relations between employers, employees, trade unions and government.
Industrialisation:
The process of becoming an economy that is based on industry: one with a large number of factories involved in manufacturing goods.
Industry:
A sector of the business world, such as manufacturing industry or the steel industry. Also all these sectors taken together.
Inflation:
An increase over time in the prices of goods and services, Inflation is usually measured by the consumer price index, a basket of the goods and services bought by the average householder.
Inflation Accounting:
A way of coping with inflation when preparing a company’s accounts; a way of addressing the fact that the dollar that bought something at the beginning of the year is not worth the same as the dollar that it was sold for at the end of the year. On paper it could look as if there was no loss on the purchase and sale, but that would be misleading.
Information Technology:
The technologies that enables the rapid and widespread dissemination of information, essentially the technology of the computer and the telephone, and the interplay between them. Frequently abbreviated to IT.
Infrastructure:
The basic plant and services underpinning the operation of business or of a country.
Injunction:
A legal measure to restrain someone from doing something on the grounds that it may, for example, cause injury or inequity.
Innovation:
The addition of new elements to products and services, or to the methods of producing and marketing them. Innovation is a continuous process of adding improvements at the margin. It is not the same invention, which involves an element of sudden and dramatic discovery.
I.N.R.:
The State Department’s Bureau of Intelligence and Research (U.S.A.).
Inside Information:
Information which is received because the recipient is in a privileged position. Thus an investment banker working on a takeover will know about it before the general public, and so will the directors of the company doing the taking over. They would all be deemed to be in possession of inside information.
Insider:
A person who is in possession of inside information.
Insider Dealing:
Dealing in stocks and shares on the basis of inside information. In many developed countries this is illegal. Although hard to prove, a few people have served time in prison for it.
Insider Information:
Important facts about the conditions or plans of a corporation that have not been released to the general public.
Insolvency:
The state of a company that is unable to pay its debts on time. If the company can manage to reschedule its debts before any of its debtors press their claims through the courts, it may avoid going into liquidation.
Instalment Credit:
A loan provided for the purchase of consumer goods which is repaid in a number of regular equal instalments over an agreed period of time.
Institutional Investors:
Any organization that trades securities in large volumes over a long period of time; for example, pension funds, insurance companies and investment banks. The market behaviour of institutional investors is very different from that of retail investors.
Insurance:
A contract between one party (the insurer) and another (the insured) in which the insurer agrees to reimburse the insured for defined losses over a defined period of time. This is called casualty insurance to differentiate it from life assurance.
Insurance Premium:
A payment made to obtain insurance.
Intangible Asset:
A business asset which cannot be kicket, such as goodwill, a brand name, or the inventiveness of a company’s R&D department. Intangibles obviously have considerable value, but it is hard for an accountant to put a number on it.
Intellectual Property:
Ideas, designs or inventions – the fruits of the intellect. By means of a patent, a trademark and copyright law, intellectual property can be protected from commercial exploitation by copycats. It can also be bought and sold like real estate.
Ownership conferrint right to possess, use or dispose of products created by human ingenuity, including patents, trademarks and copyrights.
Interactive:
Any means of communication between two parties in which both parties can communicate simultaneously with each other. So the telephone is interactive, but the television is not (yet)
Interbank Rate:
The rate of interest that banks charge each other for borrowing and lending money among themselves.
Inter-Company Pricing:
Tax havens may be used for the purpose of inter-company pricing in a number of ways. In the first place, a manufacturing company located in a high tax jurisdiction could effect sales to a related company in a tax haven jurisdiction at cost or at prices involving a very small profit margin; the tax haven company could then in turn sell the goods to one or more related marketing companies in high tax jurisdictions at high prices which would produce a low profit in the hands of the latter company or companies. A variation of this technique would involve selling to unrelated marketing companies at arm’s length prices, the primary object of the exercise still being achieved since the manufacturing company would have avoided taxation on the real profits that would otherwise have accrued to it.
Secondly, raw materials or goods or components manufactured at a very low cost abroad, could be purchased by a tax haven company and then sold to a related company in a high tax jurisdiction at high prices which would give the latter company a substantially lower profit than if purchases had been effected directly.
Often inter-company pricing takes place by companies merely passing invoices without the subject matter of the sale actually being transferred to or by the intermediary company.
Interest:
There are two business-related meanings:
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- The money paid for the privilege of borrowing money. The cost of borrowing money.
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- A share in an asset. For example: “They had a 50% interest in the building.”
Interest Cover:
The number of times a company can cover (out of profits) the cost of the interest payments it has to make on loans. In other words, profit over the year (before interest and tax) divided by the amount of interest paid out over the same period. The lower the interest cover, the lower is the likelihood that a company will be able to pay its shareholders a dividend.
Interest Rate:
The amount charged for borrowing money for a year, expressed as a percentage of the amount borrowed.
Interest Rate Swap:
An agreement involving exchange of interest coupons at a fixed rate for coupons at a floating rate. Both parties’ liabilities under the swap are in the same currency and for an equal amount. Thus, there is no exchange of principal. Interest swap transactions are arranged between entities, one of which wishes to reduce the cost of its floating rate obligation and/or to obtain other benefits and the other wishes to borrow fixed rate funds without recourse to the bond market.
Interface:
The hardware and software that lie between two computers and that allow them to communicate with each other. From this specialist meaning the word has come to be used for any bridge that connects things, people or ideas.
INTERFIPOL (International Financial Police):
A slang synonym for the Convention on Mutual Assistance in Tax Matters drafted by the Organization For Economic and Cooperation Development designed to facilitate exchange of information between the twelve member countries of the O.E.C.D but not yet approved by at least five of the participants. However, because some of the activities are believed to go beyond the normal borders of the competent authorities of various countries, particularly in seeking records and collection payments, some international tax specialists have given it this name as in their opinion it alludes to Interpol (international fiscal police).
Interim Accounts:
Accounts produced somewhere between the beginning and the end of a company’s financial year. Some stock exchanges demand that quoted companies produce interim accounts six months after their full-year accounts. Banks may demand that companies produce interim accounts to support a request for a loan.
Interim Dividend:
Part of a company’s annual dividend that is paid in stages (usually six-monthly or three-monthly) during the year.
Interim Manager:
A manager who is employed by a company at a senior level for only a short period of time. An interim manager’s job usually focuses on sorting out a particular problem or seeing through a particular strategy or course of action.
Intermediary:
Any organization or individual that acts as a go-between.
Intermediate Goods:
Goods which lie somewhere on the production line between raw materials and finished products. Rolls of steel, for example, are intermediate goods in the manufacture of cars. Iron ore is the raw material; the car is the finished product.
Intermediate Technology:
Technology which is appropriate to the state of development of a country or an industry, particularly used with reference to developing countries that are not at the frontier of technical knowledge. For example, encouraging the use of handicraft skills and tools for the manufacture of furniture in cantral Africa, rather than investing in high-tech factories full of robots.
Intermediation:
The addition of new intermediaries into a business process.
Intermodal:
The use of several different modes of transport (road, rail, sea or air) to ship goods from one place to another.
Internal Funds:
Funds which a company generates from its own efforts. These are available to be paid out as dividends to shareholders or for investment. Compare with external funds.
Internal Rate of Return:
The rate at which a future cash flow has to be discounted to give an amount exactly equal to the investment in the project. If the internal rate of return (IRR) is higher than the interest that could be earned from leaving the money in a bank, than the project would appear to be a reasonable one.
International:
Anything that is carried on between two or more different nations.
International Business Corporation (IBC):
In addition to its everyday usage, this term has a special meaning in the legislation of Antigua, Barbados, Grenada and St. Vincent and refers to companies, which, though resident in one of these countries, do not carry on business in goods or services originating in such country.
International Business Corporation IBC (Channel Islands and Isle of Man):
Like the international IBC, the IBC found in this region is designed for foreign companies and individuals to the jurisdiction in which it is registered, providing a maximum of privacy, combined with a comprehensive freedom from local taxation. An IBC pays every year filing fees and domiciliary fees in order to remain registered. This company has a special form of tax rate, designed to defeat the controlled foreign company legislation of the neighboring larger countries. This type of company will pay taxes on local, as well as international revenue at a very competitive tax rate.
International Business Corporation IBC (International):
IBC stands for International Business Corporation. It is a company designed for foreign companies and individuals to the jurisdiction, in which it is registered, providing a maximum of privacy, combined with a comprehensive freedom from local taxation. An IBC pays governmental fees and domiciliary fees each year in order to remain registered. In some jurisdictions an additional tax-exempt charge payable. Such charges are denoted in the e-offshore list for every jurisdiction. An IBC is like any other company subject to local law.
International Financial Centers:
The term “International Financial Center” which is occasionally used – incorrectly – as a synonym for “tax havens” refers more correctly to centers such as London, Luxembourg, Paris, Singapore and Zurich. One of the important requirements of a successful international financial center is that international financial business transacted there should not be subject to inconvenient controls or withholding taxes.
International Tax Planning:
The object of international tax planning is to determine, from the tax point of view, whether or not to embark on a project; and, if it is embarked upon or has already been commenced, then to minimize or defer the imposition of the tax burden falling on taxable persons and events and to do so lawfully, in the attainment of the desired business and other objectives, while taking into consideration all relevant tax factors with particular regard to the danger of double taxation and the advantages which may be derived from the inter-relationship of two or more tax systems, and in the light of the material non-tax factors.
The role of tax havens in international tax planning lies in the possibility of situating a taxable person or a taxable event in a tax haven with a view to displacing the connecting factor with a high tax jurisdiction and thus permitting a modification in the incidence of tax.
Internet:
A worldwide network of interlinked computers that can be accessed by anybody with a personal computer and a modem. The internet is used to disseminate information (via the world wide web), to send messages (by e-mail), and to enable groups with common interests to communicate.
Intranet:
A network of computer links set up within an organization to enable the members of that organization to communicate (exclusively) with each other. An intranet may also have a link to the internet and the outside world.
Inventory:
The inputs a company holds that are necessary for its production processes plus the unsold finished goods that it holds in its warehouse or wherever. In the UK the term used is stock.
Investment:
The purchase of a capital asset with the intention of gaining an income from it or of making a capital gain. Buying stocks and shares is investment, so too is buying property for rent or a company for its profits. By and large, buying jewellery is not an investment.
Investment Appraisal:
The process of determining the likely rate of return of an investment.
Investment Bank:
A financial institution that arranges the initial issuance of stocks and bonds and offers companies advice about acquisitions and divestitures.
Investment Currency Premium:
Premium payable to persons resident in the Scheduled Territories for exchange control purposes in order to purchase investment currency, namely foreign currency from a limited pool of such currency designated as eligible for use for certain investments and payments abroad (in particular for portfolio or property investment and direct investment which cannot be shown to provide benefits over a short period to the balance of payments of countries in the Scheduled Territories).
Investment Grade:
The rating that a security needs to obtain from credit-rating agencies if institutional investors are to be allowed (by their statutes) to buy it.
Investment Grant:
A grant given for the purpose of investment.
Investment Holding Company:
A company organized in a tax haven country by an investor, which purchases and subsequently handles for him his personal investment portfolio through the anonymity of a nominee company. Consideration for the purchase is the establishment on the investment company’s books of a debt to the investor equivalent to the value of the investments transferred whereby the income generated from the investment holding company’s assets are not taxable.
Investment Incentive:
Investment incentives are incentives of various kinds which are granted in order to attract local or foreign investment capital to certain activities (e.g. exports, technological development) or particular areas (e.g. backward regions or designated areas as part of a decentralization policy). Such incentives may be of various types, e.g. grants, interest-free loans, factory sites, exemption from exchange restrictions, and are frequently granted as a package together with tax incentives.
Investment Trust:
A company whose sole business consists of buying, selling and holding shares.
Investor:
An organization or an individual who makes an investment.
Investor Relations:
That part of a company’s activity designed to maintain good relations with its shareholders.
Invisibles:
Traded items that never see the inside of a container, such as banking services, tourism and software design.
Invoice:
A document prepared by a seller of goods and sent to the buyer demanding payment.
Invoice Discounting:
The selling of a company’s invoices to a financial firm at a discount to their face value. Companies do this to improve their cash flow.
I.O.U.:
= I owe you. Signed document bearing these letters followed by specified sum, constituting formal acknowledgement of debt.
IP Address:
Internet Protocol address identifying a computer connected to the Internet.
IPO:
Initial Public Offering. The first offering of a company’s securities to the general public.
I.R.C.:
Inland Revenue Commissioners (United Kingdom tax authority).
I.R.S.:
Internal Revenue Service (United States tax authority).
ISDN:
Short for Integrated Services Digital Network, a telecommunications technology that promises to revolutionize the way in which voice and data communications are transmitted.
ISO:
Short for International Standards Organization, an association of almost 100 countries that tries to standardize technical and industrial processes. It publishes a series of International Standards which recommend a minimum quality and/or performance for manufactured goods.
Issue:
A large block of securities that are sold all together at one go.
Itemized Billing:
Invoices for things like telephone calls that are broken down item-by-item. Computerized analysis allows customers to receive details of each call to which the invoice relates.
Itinerary
Day by day plan.
ITU:
International Telecommunications Union.
-J-
Java:
Java technology is both a programming language and a platform. With most programming languages, you either compile or interpret a program so that you can run it on your computer. The Java programming language is unusual in that a program is both compiled and interpreted. With the compiler, first you translate a program into an intermediate language called Java bytecodes, the platform-independent codes interpreted by the interpreter on the Java platform. The interpreter parses and runs each Java bytecode instruction on the computer. Compilation happens just once; interpretation occurs each time the program is executed.
Jet Lag:
The physical condition resulting from long distance travel and changes in time zones, the symptoms include insomnia, lack of appetite, and a short temper.
JIT:
The acronym for just in time, a Japanese management system based on the principle that no stock should arrive for processing until the minute that it is actually required. JIT saves large sums of money by eliminating unnecessary inventory, but it requires highly sophisticated logistics systems to operate properly.
Jobbing:
A system of production used when the quantity of goods to be manufacutred is too small to justify the cost of setting up a system of mass production.
Job Description:
A formal written description of a job, laying down all that is expected of the person who is employed to do that job.
Job Evaluation:
A regular, systematic process in which employees’ performances in their jobs are assessed by senior managers. The assessment includes recommendations about training and individual development.
Job Lot:
A collection of miscellaneous goods of uncertian value. The goods may, for example, have been soiled in a fire or be past their sell-by date.
Job Security:
The extent to which there is a risk of redundancy attached to a particular job, or the extent to which an employee believes that there is such a risk.
Job Sharing:
The division of one job between two or more part-time employees. Job sharing particularly suits jobs which involve serving a list of clients, such as home nursing.
Job Specification:
A detailed description of the qualifications, skills and experience required to do a particular job.
Joint and Several Liability:
A liability which is the responsibility of a group of people and for which the people can be sued either jointly or individually.
Joint Liability:
A type of liability which is the responsibility of a whole group of people (a guarantee of a bank loan to a company that has been signed by all the company’s directors, for example). Anyone wishing to take legal action for the liability must sue the group as a whole.
Joint Stock Company:
A company that is owned jointly by its stockholders, that is, its shareholders.
Joint Venture:
A type of business partnership involving joint management and the sharing of risks and profits as between two or more enterprises based in different countries. When the capital of the partnership is known as a joint venture.
Junk Bonds:
Bonds issued by companies with low credit ratings. They typically pay relatively high interest rates because of fear of default.
Junk Mail:
Unsolicited promotional and advertising material that is delivered by mail. Increasingly, the expression embraces such mail delivered electronically, as well as by the postman.
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
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Keiretsu:
A type of corporate structure found in Japan in which a large number of companies own small stakes in each other. These companies work together in a vertically integrated chain that provides everything from the raw materials to the consumer credit that enables the final consumer to buy the keiretsu’s finished products. The keiretsu model has aroused much interest in the West.
Key Money:
Money that has to be paid in advance as a deposit to secure a rented property.
Key Person:
A senior executive in a company whose life and/or health is insured by the company. If the person should die or be ill within a certain period the company receives compensation from the insurer.
Key Tested Telex (KTT):
An older form of transferring funds between banks, using telex machines in addition to verification of messages thorugh the use of key code numbers.
Keyword:
The words, or sequence of symbols, that are fed into the search engine of an electronic database to extract specific information. The care given to selecting keywords determines the relevance of the information retrieved.
Kickback:
A payment made to an individual who is responsible for awarding a contract (or for making a purchase) to persuade them to award it in favour of the payer of the kickback. In most circumstances kickbacks are illegal.
Know-How:
A special technique or skill which a company has developed and which has a value to that company, either because it gives it a competitive advantage over its rivals, or because it can sell the skill or technique to others.
Knowledge Management:
The process of managing the knowledge that a company owns, either collectively, through such things as its patents and know-how, or individually in the minds of its employees. More and more companies are appointing knowledge-management officers to be in charge of this function.
Kokusaika:
The Japanese word for internationalization, something that is interpreted as the rest of the world rather than the spread of the rest of the world’s corporations around Japan.
-L-
Labour:
Human effort: one of the three factors of production at the root of all studies of economics. The other two are land and capital.
Labour Intensive:
A description of products or services that require a high input of labour compared with the amount of land and capital. Postal services and catering are labour intensive; flying planes and making steel (these days) are not.
Labour Mobility:
The willingness of workers to move from one place to another in pursuit of new job.
Laissez Faire:
French for “let it happen”, an expression used to refer to a particular sort of free-market economics in which government interference with pure market forces is kept to a minimum.
LAN:
The acronym for local area network, a computer network that embraces a number of computers whose workers have a common interest: for example, they all work in one particular building, or they all work at one particular function (accounting, say).
Landed:
A term used to refer to a shipment of goods at the time and place when and where they are delivered.
Landlord:
A company or an individual who receives income from tenants making use of land and property over which the company or individual has the rights.
Launch:
The introduction of a new product or service into a market. This usually involves a co-ordinated advertising campaign and intensive distribution.
Launder:
To pass “dirty” money through “clean” places, such as reputable financial centres, so that the money appears to have been acquired legitimately, or to have had any tax due on it paid in full.
Law of Diminishing Returns:
The economic principle that, after a certain level of production, the same input produces a diminishing amount of output. This can be because of diseconomies of scale: as things get bigger they may require more management input to produce the same output.
Lawyer’s letter:
The initial shot in a potential legal battle. A letter, for instance, sent by a lawyer to an intransignent debtor demanding payment within a certain time.
Lay Off:
To end somebody’s employment, either temporarily or permanently, because of cuts by the employing organization. A temporary slowdown in demand for cars, for instance, might lead a car manufacturer to lay off some of its production workers for a few months, until demand picks up again.
LBO:
Short for leveraged buy-out, a takeover of a company in which most of the purchase price is paid with borrowed money, which (usually) then becomes a liability of the company that has been purchased.
Lead Time:
The amount of time between the placing of an order and the actual receipt of the goods that have been ordered. Lead times are an important variable in the planning of production processes.
Leadership:
A human quality that makes people prepared to follow one person but not another. Some maintain that people are born with leadership; others maintain that it can be learnt.
Lean Production:
A term used to refer to a particular method of production devised by Japanese manufacturer in their efforts in the 1960s and 1970s to catch up with their western counterparts. It involved minimizing production costs as much as possible, and wherever possible.
Learning Organization:
The type of organization that makes a systematic attempt to retain and redistribute in an optimum way the information and knowledge that it gathers in it day-to-day business.
Lease:
A contract granting the right to the use of property for a given period of time and for a given payment (or series of payments). If the property is land or buildings, the payment is called rent.
Lease Back:
An arrangement under which an organization which owns land or buildings sells them to a financial intermediary and immediately leases them back from the intermediary. This can have a dramatic effect on the organization’s balance sheet.
Leasing:
The hiring (by a manufacturer) or large capital assets (such as machinery) from a financial intermediary. Leasing enables the lessee to exchange what would have been a single large capital payment for a series of instalments that can be considered as an expense paid out of income. This can produce tax benefits for both the lessor and the lessee.
Ledger:
A book in which an organization’s accounts are formally recorded.
Legal Tender:
Any sort of money which is a legally acceptable form for paying a debt. Notes and coins are legal tender. Cheques and credit cards are not, since a vendor or a lender is not obliged to accept them as payment.
Less-Developed Country Corporation:
Dividend and interest income from qualified investments in less-developed countries and gains from sales or exchanges of such investments excluded from foreign base company income to the extent that these amounts are reinvested in qualified less-developed country investments. Less-developed countries are countries other than those within the Sino-Soviet bloc, Western Europe (other than Greece), Australia, Canada, Hong Kong, Japan, New Zealand, and South Africa. To qualify as a less-developed country a corporation must derive 80% of its income from less-developed countries and must have 80% of its assets and business property in such countries or in other associated properties. Under the Tax Reform Act of 1976, dividends arising form gains on sales or exchanges of stock in less-developed country corporations are no longer excluded from current taxation when the dividends are recieved from earnings accumulated after January 1, 1976.
Lessee:
An individual or organization to whom a lease is granted.
Lessor:
An individual or organization who grants a lease to another individual or organization.
Letter Box Company:
A corporation set up in a tax haven with nothing more than a mailing address to take advantage of tax provisions. Severely criticized in many quarters as an evasive measure, the company whose existence is little more than a nameplate has been outlawed in Monaco but is allowed to function in many other havens.
Letter of Credit:
An arrangement whereby a bank makes funds available to a customer in a foreign country. The bank debits the customer’s account at the same time as it sends a letter to a suitable bank abroad asking it to give the customer credit. A letter of credit is useful for the finance of trade as well as of foreign travel. The bank abroad will usually have a continuing agreement with the home bank to provide this service for its customers. Such a bank is called the home bank’s correspondent.
Letter of Intent:
A letter formally expressing an intention to take a particular course of action. A letter of intent is written in a way that makes it clear that it is intended not to be; it merely indicates that something is being contemplated.
Letter of Wishes:
Guidance and a request by the Settlor to the trustee having no binding powers over the trustee. There may be multiple letters. They must be carefully drafted to avoid creating problems with the settlor or true settlor. In the case of a grantor trust becoming a co-trustee, the trustee cannot be a “pawn” of the settlor or there is basis for the argument that there never was a complete enouncement of the assets. Sometimes referred to as a side letter.
Leverage:
The extent to which a purchase was paid for with borrowed money. Amplifies the potential gain or loss for the purchaser.
Leverage (Indirect) Programs:
Programs which use leased assets (such as US Government bonds) to increase the amount of instruments purchased and resold for a profit. The benefit of leased assets is that such programs generate substantially larger profits.
Liability:
There are at least three meanings:
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- An amount of money that is owed.
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- An obligation to do something in the future.
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- The legal responsibility for damages for breach of contract or some other civil wrong.
Licence:
A right granted by one organization to another to use a process, trademark, patent, and so on, belonging to the first organization in return for a fee, or for the payment of a royalty.
Licensee:
An individual or organization to whom a licence is granted.
Licensing:
Technology which can be the subject matter of licensing covers all forms of industrial enterprise. It embraces industrial property which may be protected by patents, trade marks, etc. As well as technology, which cannot be patented. Industrial enterprises frequently exploit their technology by transferring it to licensing companies in tax havens so that royalties and other sums may be received by the licensing company from related companies or third parties thus reducing the total tax burden. The anti-avoidance provisions of most developed countries have limited the use of tax havens for this purpose.
Licensor:
An individual or organization who grants a licence to somebody else.
Lifetime Employment:
The practice of working for the same employer from the moment that a person enters the workforce to the day that they retire. Lifetime employment is increasingly rare, but
immediately after the second world war it was commonplace.
LIFO:
The acronym for last in first out, an accounting principle whereby (for valuation purposes) the last stock-in-trade that was purchased is considered to be the first to be consumed in the production process.
Limit:
In relation to dealing instructions, a restriction set on an order to buy or sell, specifying the minimum selling or maximum buying price.
Limited Duration Company:
A hybrid entity with the characteristics of a general and limited partnership, the limited duration company exists in the States of Wyoming, Colorado, Florida and Kansas and certain tax havens outside the United States, including the Cayman Islands, Mauritius, and the Turks & Caicos Islands. In the latter, the entity is known as the limited life company. Although all members enjoy limited liability, no members have to be relegated to the status of “silent” partners as in a limited partnership, and the company is treated as a partnership for federal tax purposes in the United States under specific conditions. A limited duration company’s life span is limited to 30 years and the company must be dissolved if a member withdraws because of death or any other reason unless all remaining members agree to keep it alive. Share transfer is restricted.
Limited Liability:
The fundamental principle of incorporation whereby a so-called limited company is limited in its obligations to the amount of equity that is raised by its shareholders. A creditor of a limited liability company does not have legal recourse to the directors or the individual shareholders per se for payment of the company’s debts.
Limited Liability Company (LLC):
A hybrid between the partnership and the corporation (originates from the German GmbH created by law in 1892).
Limited Liability Company/Corporation:
A company established under common law. This type of company can be found in the UK, the Channel Islands, the Isle of Man and many Caribbean jurisdiction. The important characteristic is that the liability of the shareholder is limited up to the amount of their capital contribution.
Limited Liability Partnership LLP:
A form of the LLC favored and used for professional associations, such as accountants and attorneys. The benefits are that it protects the general partners, usually the one funding the operation, from liability. It is tax transparent and therefore used as a tax-planning tool for US tax resident persons or entities.
Limited Partnership:
A form of partnership in which one or more of the partners run the partnership (and have unlimited liability) and a number of other partners contribute only capital to the partnership (and have their liability limited to the amount of capital that they invest). The partners with unlimited liability are called general partners; those with limited liability are called limited partners. The limited partners have no right to participate in the running of the business.
Limited Power of Attorney:
A legal document that empowers the trade manager to deal with the various parties of the transaction on behalf of the owner of the funds (the Principal). Transactions will not happen without this instrument.
Line Extension:
A marketing term for the increase in a product line brought about by adding variations of an existing brand; for example, by adding to a brand of chocolate bars like Mars a brand of Mars icecream.
Line Management:
The managers responsible for the actual production of an organization’s goods and services. The expression comes from the military where line duties are those involved directly in the line of fighting, wheras staff duties are associated with the headquarters and support functions.
Liquidation:
The process of redistributing a company’s assets after it has ceased trading. The company may have ceased trading of its own volition, in which case the process is called voluntary liquidation, or it may have ceased trading on the instructions of a court because it has failed to meet its obligations on time.
Liquidity:
A measure of how quickly a company (or a market) can turn its assets into cash. A bank is highly liquid compared with a hotel company, for instance. Financial institutions like banks have to maintain a certain level of liquidity (imposed by their regulators) so that they can pay out their depositors’ money easily should there be a (temporary) loss of confidence in the institution.
Listed Company:
A company that has obtained permission for its shares to be admitted to the London Stock Exchange’s Official List.
List Price:
The formal price of goods and services as recorded on a list produced by the manufacturer or service provider. This may not be the price that customers are actually asked to pay.
Listing:
The adding of a company’s securities to the list of those that are traded on a recognised stock eschange.
Listing Requirements:
The things that a company is obliged to do before its securities can obtain a listing on a stock exchange. These usually include:
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- being in business for a minimum length of time;
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- making a profit for a certain period; and
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- producing accounts prepared according to the stock exchange’s own reuirements, which may demand disclosure well beyond what is required by the law of the land.
Lloyd’s:
A unique London-based insurance market that began in the 18th century in the coffee shop of a man named Edward Lloyd. The market is known particularly for insuring marine risks, but it suffered a series of heavy losses in the 1980s when it went into business with which It was less familiar.
Load:
To put a software program or a quantity of data into a computer.
Load Factor:
|The percentage of a carrier’s capacity that is occupied. For example, an airline may need, on average, a load factor of 75% – ie to sell more than 75% of its seats in order to be profitable.
Loan:
A transaction in which the owner of property (the lender) allows another person (the borrower) to have use of that property, usually for an agreed time and for an agreed price. The property in question, of course, is (more often than not) money.
Loan Stock:
That part of a company’s capital which is in the form of long-term loans or bonds.
Lock-out:
The exclusion from a place of work (an office or a factory) of one group of workers by another. Lock-outs usually occur as part of an industrial dispute between trade unions and managers.
Log File:
A file created by a web or proxy server which contains all of the access information regarding the activity on that server.
Log on:
To go through the stages required to gain access to the programs and information contained within a computer.
Logistics:
A term taken from the military where it referred to the science of supplying and moving troops; hence the science of moving goods, services and people in and out of corporations.
Logo:
The design or symbol that uniquely identifies a particular organization or brand.
Long:
An investor is said to be long in a stock when his supply of it and his commitments to buy it in the future are in excess of his commitments to sell it.
Long-Term:
In corporate life, generally a period in excess of ten years. Long-term planning is planning for the business world of ten years hence. Longs, as the British government’s long-term bonds used to be called, were securities with an original maturity of 15 years or more.
Loss:
The condition in which a company’s expenses over a given period are greater than its revenue over the same period; or where its income from a particular transaction is less than the cost of the transaction.
Loss Leader:
A product that is sold at a loss by a manufacturer or a retailer to entice (that is, to lead) a customer to buy other things from the same manufacturer or retailer.
Loyalty:
The extent to which customers buy the same goods and services again and again. On the whole, a customer’s loyalty decreases as his or her choice gets wider.
Loyalty Card:
The plastic card issued to customers as part of a loyalty programme.
Loyalty Program:
A marketing initiative designed to increase customers’ loyalty to a particular product or a particular distribution channel. A typical loyalty program might include givng customers plastic cards which electronically credit them with points (which can be redeemed for goods) in line with the volume of their purchases.
LTD:
A short version of limited liability, an expression added to the end of a company’s name to indicate that the company has the protection that limited liability affords. All languages have a similar way of indicating that an organization enjoys the privileges of limited liability.
Luxury Goods:
Expensive goods which no reasonable person would consider to be essential to everyday life, such as precious jewellery, high fashion or specially matured alcoholic drinks. Because of their nature, luxury goods are bought in a different way from consumer goods and need to be marketed differently. They are sometimes taxed differently, too.
-M-
M&A:
Short for mergers and acquisition, the business of arranging and financing takeovers (of one corporation by another) and mergers (between corporations).
Machine Tool:
A piece of equipment used for cutting and shaping metal in a manufacturing process.
Maildrop Company:
A fully-legal commercial enterprise using a stable physical address as a delivery destination for letters or parcels on behalf of fee-paying clients who don’t live on the premises. Mail can be held or forwarded at the clinet’s request. Some maildrops provide similar services for faxes as well. Very useful for receiving confidential information which you don’t want delivered to your home address without prior notification.
Maildrops and Serviced Offices:
What is a maildrop? A mail forwarding service – maildrop – allows a person to use their (the maildrop’s) address to receive mail and then have it forwarded to the address where the person actually wishes to receive mail. Sometimes it’s in the same city, othertimes in another continent. Mail is sent to the maildrop and is then placed unopened into another envelope and mailed to its final destination. As long as your intentions are legal there is never any problems with authorities. A good, reliable service does not condone fraudulent business activity. You can still use your regular address to receive most of your mail but your confidential mailgoes to the mail forwarding service and then to you.
Financial privacy is almost a thing of the past nowadays. With computers, it’s eroding rapidly, much quicker than in the past. You might say, “Who needs Privacy? I have nothing to hide!” It seems that whenever you make a simple purchase, they ask for your name and address. Then about a month later you start receiving weekly catalogs, sales literature, promotions, etc. Try giving them a name other than your own with your address. I tried John Doe (!) and sure enough that person started receiving catalogs. Many companies sell our names to others and sooner or later you are getting bombarded with Investment Schemes, Get Rich Quick Letters, Chain Letters, Miracle Health Cures, and other distracting material.
People who use mail forwarding services are a mixed bag of individuals and organizations. Some people have made enemies in life, ex-spouses, business acquiantances and while they may be living in Paris, France, they would like the other party to think they are in London, England, so they use a mail forwarding service.
If you are going to sell a product by mail and have the best product in the world but are located in San Salvador, El Salvador a potential buyer for your product may be hesitant about sending money for your product. If you have a US address, most buyers are not too worried about sending money through the mail.
Many people, maybe they have accumulated great wealth or are celebrities, have to worry about the press, fans and admirers,enemies, kidnappers, robbers, and so on. With a maildrop you can keep distance bewteen you and these people. Companies use mail forwarding services to do things their competition might find out about if they used their regular address. It’s also a good way to check out your competition. You can find out what they are charging the people you are selling to. Another company ran Help Wanted Ads just to see how loyal his employees were to him. Mailing list companies also use mail forwarding services to salt their mailing lists to the people they are renting to, and check to see that the lists are being used on a one time basis.
In using a maildrop try to find out beforehand how much privacy they give you, some will give information out to anyone calling over the phone – a good one will not as it could be just anyone calling. Try to find out how long they have been in business and if they plan to be in business for awhile. Make sure they don’t sell your name to other people’s mail order businesses as this can defeat their purpose.
Mail forwarding service combined with serviced business offices: Business centers particularly suit companies setting-up branch office(s) overseas. They prefer to establish themselves before signing a lease, though some companies that arrive intending to use a business center for a few months end up staying with them for years – for the sake of convenience, the comfort of clean modern offices with a prestigious address, without the hassle of maintenance and other problems associated with a lease,becomes too difficult to give up.
Telephone services range from a basic message-taking service to the most up-to-date call diversion system. One business center offers a diversion service called “The London Office”. This was designed with the telecommunications company so that your own 171-telephone number is instantly diverted to a chosen number anywhere in the world, and a programmed announcement saying “This is a call from your London office” pre-warns whoever answers the telephone. Of course you pay for the second leg of the call. The telephone services available from “The London Office” link with another service called “The VirtualOffice”. This is a package offering clients the flexibility to work from anywhere they choose; local telephone numbers are logged onto acomputer system for call diversion. The package includes use of the business center’s address, use of meeting rooms and secretarial services.
In most serviced office centers clients can buy services à la carte in order to suit their particular needs. For example, you can rent conference rooms by the hour so as to have an office for, for example in London, when the need arises. The main attraction of the serviced office facility is that the client has the option to walk away when his licence expires. Business centers take the operational headaches out of renting office space and of clients having to employ their own staff, which leaves them free to focus their efforts entirely on the success of their business.
Mail Order:
The use of the postal services as a distribution channel for goods. Customers receive a catalogue (a mail-order catalogue) from which they choose goods that they want to buy. They order and pay for them (by telephone or by post) and are sent the goods within a stated time period.
Mailshot:
A widespread distribution of printed material by post aimed at persuading the recipients to purchase particular goods or services, to join an organizations, to give money to charity, and so on.
Maintenance:
The cost of keeping plant and machinery in good working order.
Manage:
An age-old word derived from the Italian manneggiare, to handle (originally horses, now corporations). People who manage (managers) are generally expected to carry out certain functions; for example, employ staff, motivate and organize them, plan for the future and innovate (both products and processes).
Managed Bank:
An offshore bank also known as a Class “B” or Cubicle Bank. The Managed Bank is not required to maintain a physical presence in the licensing jurisdiction. Its presence in the licensing jurisdiction is passive with nominee directors and officers provided by a managing trust company with a physical presence. The Managed Bank is not permitted to transact business within the licensing jurisdiction but may maintain its books, records, etc., to assure secrecy of operations.
Management:
There are two meanings:
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- The business of managing an organization.
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- The people who do the managing.
Management Accounts:
A set of accounts prepared solely for the benefit of the managers of an organization. Such accounts need to be non-technical, prepared regularly (every month or every week, for example) and in a consistent format. They often contain forecasts and estimates that break away from the normal constraints of financial facts.
Management and Control:
In certain legal systems (e.g. Ireland) which follow the former United Kingdom law in this regard, a company is treated as being resident in the country in which its management and control is exercised, and not in the country of its place of registration or incorporation. The criterion of residence may be of relevance in international arrangements in involving tax havens, and can be material from both the fiscal and the exchange control points of view.
Management Company:
See Administrative Offices.
Management Consultant:
A person or organization who advises managers in a number of business areas, including strategy, information technology, marketing and human resources. Management consultants analyse business situations and offer advice on how to improve them. Many go on to get involved in implementing their own advice.
Managing Director:
A person who directs the management of an organization; the most senior manager in a business, division or function.
Mandate:
An instruction to carry out a particular course of action. The instruction may be given by a court, a customer, or a manager.
Man of Straw:
Effectively a nominee settlor or grantor who creates an offshore trust but often has no further connection with the trust once it is created.
Manufacture:
Originally the making of things by hand – “manu”…”facturing” – but now the making or things by hand or by machine.
Margin:
In general, the edge. But the word has come to have a number of specialist meanings in business:
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- The difference between the cost of something and the price at which it is sold, that is, the profit margin.
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- In economic theory, the margin is that level of production at which the cost of producing one more unit is exactly equal to the revenue to be gained from it.
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- A method of trading in securities which involves initially putting up only a small percentage of the cost of the securities, known as margin trading.
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- Margin lending is a form of lending by a bank which enables a customer to buy shares and then use the value of the shares as security for the lending.
Margin Account:
A brokerage account that allows a person to trade securities on credit.
Margin Call:
A margin call is a demand for more collateral on a margin account.
Marginal Cost:
The extra cost of producing one more unit of a product over and above an agreed output. The marginal cost assumes that all the overheads have been absorbed by the previous production.
Marginal Producer:
A manufacturing unit that is only just able to remain profitable at the current price levels of the industry in which it is operating, and at its own current production levels. When the economic environment becomes less favourable for the industry, the marginal producer is the first to go out of business.
Marginal Propensity:
The proportion of any additional unit of income that will be used in a particular way. Thus if a consumer’s marginal propensity to save is 0.3, he or she will save 30 cents out of every extra dollar that they gain.
Mark Down:
To reduce the original selling price of a product, perhaps because it has not been selling well. In particular, to lower the quoted price of a company’s shares sharply after the announcement of unfavourable news.
Mark Up:
The difference between the cost price of a product (or service) and its selling price.
Market:
The place where buyers and sellers come together to exchange goods and services and to determine prices. It is a fundamental concept in economics, where buyers represent demand and sellers represent supply. In marketing terms, a market refers to a group of consumers with identifiable characteristics in common, such as the teenage market.
Market can also refer to the total sales of a particular product or industry. For example: “It’s a $4 billion market.
Market Capitalisation:
The market value of a company’s issued shares; that is, the quoted price of each individual share multiplied by the number of shares in issue.
Market Leader:
The organization which has the largest share of any particular market, and whose tactics are watched most closely by the other participants. A market leader’s actions set the trend for the rest of the market.
Market Penetration:
The percentage of a target market that has bought a particular product at least once. Also the extent (usually expressed as a percentage) to which a potential market is reached by an advertising message or a distribution channel.
Market Research:
A process of systematically analysing the market for a potential new product or service, and/or examining how the market for an existing product or service has changed. Much market research is based on surveys of consumers in which they are asked a series of questions about their purchasing habits. It is sometimes called marketing research.
Market Share:
The proportion of a market served by one participant. For example: “BMW has an x.y% share of the European car market.”
Marketing:
The process of identifying, anticipating and satisfying consumers’ needs (profitably) by means of the standard tools of marketing, such as market research, advertising and general promotion.
Marketing Mix:
The weight given to various elements involved in marketing a product or service. The elements are sometimes classified as the four Ps: product, price, place and promotion. In the marketing mix for luxury goods, for instance, price is less important than product.
Mass Market:
A market consisting of almost everybody in the population. The opposite of niche market.
Materials Handling:
The business of moving the materials involved in a process (raw materials, semi-finished goods, or the final product) so that they are in the right place at the right time. The cost of materials handling can be as high as 40% of the total cost of manufacturing.
Maternity Leave:
The (usually unpaid) time off work given to a pregnant employee by an employer. The employee’s job is kept available for her to return to once her baby’s dependence has diminshed.
Matrix Organization:
A company whose organizational structure is designed along two axes, giving each employee two lines of authority. The two axes are most frequently geographic and functional. Hence the head of an American multinational company’s German accounting operation will report to both his functional head (the finance director in the United States) and his regional head (the managing director of the business’s German subsidiary).
Mature Industry:
An industry in which innovative products and processes are rare and in which the market share of individual firms does not change much over time. Such industries include steelmaking, carmaking and innkeeping.
Maturity:
The length of time left until the principal repayment on a bond becomes due. The original maturity of the bond is its maturity on the date when it was issued; the residual maturity is its maturity now – that is, the length of time from this moment until the repayment becomes due.
Mavery Injunction:
A court injuction preventing the trustee for a trust from transferring trust assets pending the outcome of a lawsuit.
MBA:
Short for Master’s Degree in Business Administration, the main qualification (rapidly becoming indispensable) for managers and people who want to run their own business. The MBA is a postgraduate, post-experience one- or two-year course in which students study strategy, marketing, finance and organizational behaviour. MBA courses are particularly popular in the United States; less so in Europe.
MBI:
Short for management buy-in.
MBO:
Short for management buy-out, the purchasing of an organization by a group of managers. They may already work for the organization, or they may be outsiders who intend to work for it once they have purchased it (in which case the deal is sometimes called a management buy-in). An MBO is often also a leveraged buy-out.
Media:
The vehicles that carry advertising (and other things such as entertainment and news) to an audience.
Media Buyer:
A person in an advertising agency or independent firm who buys space in the media in bulk: time during television programmes or pages in newspapers and magazines. Media buyers, sometimes referred to as “gorillas with calculators”, then resell the space in smaller quantities to advertisers and advertising agencies.
Mediation:
A process of using a third party to resolve a difference of opinion between two other parties. Unlike arbitration, mediation does not involve the conflicting parties agreeing in advance to accept the third party’s decision. The mediator has no legal power to enforce an agreement.
Memorandum of Association:
A company’s charter to organize that must include such pertinent information as the nature of the business, the nationality of the organizers, the amount of capital to be issued or to be subscribed, par value of the shares, etc. This document must be designed to govern the company’s worldwide commercial activites. (Also see Articles of Association).
Mentor:
A person assigned to work with a senior manager for the specific purpose of offering independent advice on the manager’s performance in the workplace. Mentors must be in a position where they can express contrary views without damaging their career prospects.
Mentoring:
The work of a mentor. Mentoring is partly designed to overcome the oft-repeated claim that it is lonely at the top.
Merchandise:
Goods and services in a finished state, ready to go to the retailer or already in the hands of the retailer.
Merchant Bank:
The traditional British term for investment bank. Many merchant banks (most of them based in the City of London) grew out of the families (the Rothschilds, Hambros and Barings, for instance) who financed the trade of Britain’s merchants during the years of the British empire. Hence the name.
Merger:
The amicable coming together of two companies into one.
Merger Accounting:
A particular method of taking mergers into account – that is, of putting together the separate accounts of two merged companies. Merger accounting avoids creating goodwill. It includes assets in the combined accounts at their existing book values rather than at the price that was actually paid for them.
Merger/Consolidation:
A merger or consolidation occurs when two corporations combine their assets and operations into one corporation. In meger situations, one of the corporations will survive the merger, and it is referred to as the survivor. The other corporation is referred to as the disappearing corporation. The survivor assumes all of the assets and liabilities of the disappearing corporation.
Mezzanine Finance:
Any type of finance that falls somewhere between equity and debt in the priority of its claim in the case of a liquidation. If equity is the first floor and debt the ground floor, the mezzanine stands somewherein between.
MFN:
Short for most favoured nation, a status granted by one country to another whereby the first country agrees to apply its lowest tariffs to the second country’s exports will get better treatment.
Middle Manager:
A manager who sits somewhere in the middle of an organization’s hierarchy; a general term for the great bulk of managers who are neither managing directors nor new graduate recruits. Many middle managers have been dispensed with as a result of delayering.
Mineral Rights:
The right to dig for the minerals that lie under a particular piece of ground.
Minimum Wage:
The lowest amount that can legally be paid to an employee, often expressed as an hourly sum.
Mini-Trust:
A short (usually preprinted) form of a trust, often used as a confidentiality enhancer, to bridge the ownership and management of an International Business Company. The Mini-Trust is intended only to pass assets on the death of the settlor, i.e. a will substitute.
Minority:
The written record of meeting. Companies retain the minutes of important meetings, such as board meetings, as a formal acknowledgement and reminder of decisions that have been reached.
Minute Book:
Used for writing minutes in.
Minutes:
The corporate minutes reflect the written record of actions taken or authorized by the board of directors or shareholders. These written records are customarily stored in the corporate minute book.
Mission:
A company’s overriding business purpose; something that it aims to do above and beyond mking a profit.
Mission Statement:
A written version of a company’s mission, which aims to inspire its workforce and, by giving them the feeling that they are working for a higher purpose than wages, to make them more productive and more loyal.
M.L.A.T.:
Mutual Legal Assistance Treaty created by the U.S. in the hope of accessing foreign records.
Mobile Phone Networks:
Often lost in the screaming headlines about third-generation mobile phone networks is what the heck the first and second generations were. The first generation – 1G – was analog networks, 2G is digital networks like today’s decade-old GSM, and 3G is high-speed digital networks that let your mobile phone do lots of things that your personal computer can do today – getting e-mail, sending photos, reading Web pages, seeing maps, watching video clips and more. In many – especially urban – places of the world, we are now entering the 2.5G stage of mobile phones. Unfortunately, 2.5G is full of its own jargon. But if you’re cell-phone shopping, you’ll need to know it. If you want to use your mobile for PC-like features on the move, you’ll want to make sure the handset can do WAP and GPRS. This will get you the ability to receive data (Wireless Application Protocol) over faster, upgraded GSM networks (General Packet Radio Service), where available. If GPRS isn’t yet available from your carrier, your data could get a boost over GSM via a slightly faster technology called HSCSD, or High-Speed Circuit-Switched Data. For a GPRS speed boost, you’ll need a phone (and network) that can do EDGE – Enhanced Data rates for GSM Evolution. EDGE networks are just being explored by European cell phone carriers, and are expected to be used particularly by companies that didn’t get a government license to offer 3G. Speaking of GSM, most people think it stands for Global System for Mobile communications. Well, it does today, but that wasn’t its original derivation. It first came from Groupe Spéciale Mobile – the name of the division of the European Telecommunications Standards Institute responsible for the original GSM development.
Modem:
An abbreviation of modulator-demodulator, the instrument which sits between a computer and a telephone line and allows electronic messages to be passed in and out of the former via the latter. Without modems there should be no public access to the internet.
Money:
Anything that is recognized as a store of value and a medium of exchange by the participants in a market. This could be (and has been) cowrie shells, black beads and dollar bills.
Money Laundering:
Traditionally, money-laundering has been said to occur when criminals seek to make illegally obtained funds look legitimate by funneling them through “clean” banks and businesses until the money’s origin is obscured. Click here for FATF’s lastest report on money laundering and the annual review of Non-Cooperative Countries and Territories.
In practise, governments use the term “money laundering” to define any funds they consider less than transparent to their surveillance oversight. In other words, money without a readily identifiable source must be criminal until the user can prove otherwise by eliminated his/her financial privacy.
Money Market:
A market in which financial institutions (such as banks) buy and sell short-term financial instruments among themselves.
Money Supply:
The amount of money circulating in an economy. The definition of money varies. In the M0 version it consists of notes and coins only. The M1, M2 and M3 verions include a varying range of short-term financial assets (such as bank deposits) as well as notes and coins.
Money Trail:
The ‘fingerprint’ most money transactions leave.
Monopoly:
The situation where a single producer has a sufficiently large share of a market to be able to control prices in that market. A monopoly implies the absence of competition. Governments and consumer watchdogs aim to prevent companies with a monopoly from abusing their dominant position at the expense of the consumer.
Monopsony:
The situation where a single customer has the whole of a market to itself; the mirror image of a monopoly. Monopsonies occur most frequently when a government is virtually the only customer for a particular product, for example, in the defence industry or in certain areas of medical care.
Moody’s:
One of the world’s three main credit-rating agencies. Moody’s judgment on the quality of a company or a country’s debt can materially affect the price that the company or country has to pay to borrow money.
Moonlighting:
The earning of a second income; for example, night-time taxi driving by someone who is a builder or a civil servant by day. Moonlighting is so called because it frequently (but not necessarily) takes place at night. It also implies that the work is not 100% legal, in particular that it is kept out of sight of the taxman.
Moratorium:
A period of time in which a borrower is allowed (with the approval of the lender) to forgo payments of principal on a loan. Financial institutions are rarely prepared to grant borrowers a moratorium on interest payments.
Mortgage:
A long-term loan for the purpose of buying real estate which uses the real estate as security for the loan.
Motion:
A formal proposition made in a meeting which seeks to gain the support of those at the meeting for a particular course of action. Properly formulated motions are automatically recorded in the minutes of the meeting.
Mouse:
The small attachment to a computer that allows the user to go in and out of different software programs. The mouse controls the movements of a cursor on the screen. By clicking the mouse when the cursor points to a particular icon, the user can switch from one program to another.
MTC Number:
The Money Transfer Control Number given in connection with a Western Union money transfer.
MTN:
Medium Term Note. A guarantee issued by a bank with a maturity between 1 and 10 years and paying interest (often 10 years with a 7½% coupon).
Multimedia:
The use of a number of different media simultaneously. For example, a multimedia presentation might include a video film (using a television), some sound effects on a CD, a slide show, and a number of graphic posters.
Multinational:
A company which has production and sales operations in a number of countries, and which coordinates these operations from a single headqarters. The operations are run separately from each other, unlike those of a transnational.
Mutual:
A mutual organization is one that is run for the benefit of a group of people (its members) who have set it up to provide goods or services for themselves. Savings banks and insurance companies were freqently set up in this way in the 19th century. In general, the members of a mutual organization also own it.
Mutual Assistance Agreement:
A contract agreement between two or more nations in which the fiscal Governments are empowered to take preference over the civil rights of each others’ citizens in ascertaining and collecting crime-related proceeds or tax liability.
Mutual Fund:
Investment company usually formed in a tax haven and issuing shares to the public.
Mutual Fund Management Company:
A mutual fund, frequently established in a tax haven country, formed as a trust rather than as a company in order to serve as the settlor of the trust. The mutual funds’ management and distribution operations generally are handled by exempted companies. In certain tax havens it is not possible to offer stock issues that permit redemption of ordinary shares. In this case a mutual fund cannot function as an open-end investment company as is popular in the United States and must operate as a Unit Trust as practiced in the United Kingdom.
Mutual Legal Assistance Treaty (MLAT):
An agreement among the U.S. and many Caribbean countries for the exchange of information for the enforcement of criminal laws. U.S. tax evasion is excluded as not being a crime to the offshore countries. The British Virgin Islands have not executed this treaty.
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Naamlose Vennootschap (NV):
Limited company in the Netherlands used as a Substantial Holding Company, required to publish its accounts.
NAFTA:
The acronym for North American Free Trade Agreement, an agreement between Canada, the United States and Mexico that aims to remove tariffs and other barriers to trade between the three countries.
Nasdaq:
National Association of Securities Dealers Automated Quotations System.
Nationalize:
A privately owned corporation is nationalized when it is purchased (often compulsorily) by the state. Companies are usually nationalized for a principle (for example, a belief that the defence industry should be controlled by the state for reasons of security) rather than for profit. Nationalized companies are rarely as profitable as privately owned ones.
NATO:
North Atlantic Treaty Organization.
NCCT:
Non-Cooperative Countries and Territories – as of February 27 2004: Cook Islands, Guatemala, Indonesia, Myanmar, Nauru, Nigeria and Philippines. See also FATF.
Negotiable Instrument:
A financial instrument, such as a bearer bond or a share, which can be transferred from one owner to another without informing the original issuer of the instrument.
Negotiation:
The process of reaching agreement between two parties, one of which has something that the other party wants, and for which the other party is prepared to give something in return.
Nepotism:
The granting of favours to members of the same family, an issue central to the running of a family firm. How can it remain a family firm without undermining the morale of non-family employees by its nepotism.
Net:
A value that is left after certain deductions have been made from a gross amount.
Net Asset Backing:
The net worth of a company divided by the number of its shares; a rough approximation of the value behind each share.
Net Present Value:
The value today of an amount that is to be paid in the future. This value is calculated by taking into account future interest rates and the risk that the payment will not eventually be made. Net present value is frequently used to judge the viability of an investment project. If the net present value of its expected revenue exceeds the net present value of its future costs then it is worth going ahead.
Net Profit:
An organization’s gross income less all its costs, including tax, depreciation and interest payments.
Net Worth:
An organization’s assets less its liability. The amount that would be left to shareholders were all the organization’s assets to be sold and all its liabilitites to be met at the values that the accountants have ascribed to them.
Network:
The links that exist between computers enabling users of them to share certain centralized date and/or services, and to communicate among themselves.
Networking:
Making contact with other people in the hope that they might subsequently be useful in business or elsewhere. The expression has grown out of the computer industry’s use of the word network.
New Entrant:
A company that enters a market for the first time. New entrants inevitably provoke a strategic response from existing companies withing the market.
Newsletter:
A publication that specialises in breaking news in a narrow area; for example, a country, an industry or a market.
Newspeak:
The purpose of Newspeak was to drastically reduce the number of words in the English language in order to eliminate ideas that were deemed dangerous and, most importantly, seditious to the totalitarian dictator, Big Brother and the Party. Thoughtcrime would be made literally impossible because there will be no words in which to express it.
Niche Market:
A small, narrowly defined market, such as the market for Rolls-Royce motor cars, or the market for newsletters about biotechnology. Small, innovative companies are particularly good at identifying and satisfying niche markets.
Nikkei-Dow Jones Average:
A leading share index of the Tokyo stock exchange. It is an average of 225 major stocks of the Tokyo market.
No-frills:
Basic service on an airplane with no extras.
Nominal:
A nominal amount may be one that is too small to mention (as in nominal damages) or one that exists only in name (as in the nominal price of potatoes in 1945, a price that is not adjusted for the ravages of inflation, which the so-called real price is). The nominal value of a share is the value on the share certificate, which may not be a price that anybody has ever actually paid for it.
Nominee:
A person whose name is used in place of somebody else’s. A nominee may open a Swiss bank account, for instance, to disguise the identity of the real beneficiary of the account.
Nominee Company:
A company formed for the express purpose of holding securities and other assets in its name or to provide nominee directors and/or officers on behalf of clients of its parent bank or trust company.
Nominee Director:
Someone who acts on your behalf as a ‘front’ director of the company. In some jurisdictions the nominee director can also be another offshore company.
Nominee Name:
Name in which security is registered and held in trust on behalf of the beneficial owner.
Non-Active Company:
A company either in voluntary liquidation or one wishing to protect a name that includes the word “bank” or “trust company” despite the fact that the company does not carry on banking or trust business.
Non-executive Director:
Any director on the board of a company who is not also an executive working for the company. A non-executive director’s role is to ensure that there is a healthy balance between the interest of shareholders and the interest of the company’s management.
Non-performing:
A loan on which interest has not been paid for a considerable period of time (usually three months) is said to be non-performing. Financial institutions have to treat such loans in a special way in their accounts, setting aside reserves against the possibility that they will never get their money back.
Non-refundable:
Money cannot be refunded. Any advance payment for a product or service that will not be repaid if the product or service is ultimately not wanted by the payer. For instance, a deposit to secure a house which is not yet built may be non-refundable should the purchase not be completed.
Non-Resident Company:
Enterprises incorporated outside a specific tax haven, i.e., Cayman Islands, or outside any other country, whose shareholders are resident outside that particular tax haven or country and whose business activities primarily are conducted outside the specific tax haven or country. Non-resident persons may hold shares in non-resident companies and the latter may hold United States dollars or other hard currencies without requiring official permission both from within or outside that particular tax haven or country.
Non-tariff barrier:
A barrier to trade other than a tariff imposed directly on an import at its point of entry. Non-tariff barriers include things like safety regulations which only domestic firms satisfy; distribution systems that discriminate against imports; and government regulations that demand services (like finance) be supplied by known individuals.
Non-transferable:
Item is not to be used by any other person than the one named on the item.
Non-voting Share:
A share in a company that does not give the holder the right to vote at company meetings. Holders of non-voting shares benefit financially in the same way as other shareholders, but they have no say in the running of the company whose shares they own. In some markets the issuing of such shares is frowned upon.
No-Tax Haven:
Term used by certain financial writers to refer to tax havens where there are no relevant taxes.
Note:
A written acknowledgement of a debt, as in pound note or promissory.
Notebook Computer:
A miniature laptop computer with a more limited range of software.
Not-for-Profit Corporation:
A not-for-profit corporation, sometimes referred to as a nonprofit corporation, generally exists for the purpose of carrying out some socially useful objective. Formed under the nonprofit corporation laws of a state, not all of these corporations are tax exempt. And, unlike the name implies, many not-for-profit corporations make money. The money, however, does not get distributed to members, officers, or directors. The money is used to further the socially useful purpose.
Notice:
Advice given in advance. The advice may be of a forthcoming meeting, or of a person’s wish to end a period of employment. For example: “Today he handed in his notice.”
Numbered Account:
A bank account that is known to most of the bank’s staff only by its number. No name appears on the account’s checks or on the statements. The main purpose of the numbered account is to disguise the identity of the account holder. Most countries (include Switzerland) insist nowadays that the true beneficiary of all accounts be known to at least one senior manager in the bank.
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
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O&M:
Short for Organization and Methods, a once-popular field of management study dedicated to improving the methods and procedures used in office environments.
OAS:
Organization of American States.
OAU:
Organization of African Unity.
Objective:
The ultimate goal of an organization’s strategy.
Obsolescence:
The capacity of something to become out-of-date. For example, all fashion garments have a built-in obsolescence, that is, by their very nature they need to be replaced next season.
Occupancy:
A measure of the extent to which a property is occupied. For example, an apartment that is rented for only half the year has a 50% occupancy; a hotel room that is occupied for nine nights out of every ten has a 90% occupancy.
Occupation:
The paid employment that occupies most of an individual’s working life.
Occupational Hazard:
A danger that arises as a result of a person’s occupation. Hence falling off ladders is an occupational hazard for window-cleaners; backache is an occupational hazard of computer programs.
Occupational Pension:
A pension that is paid by a person’s employer by dint of the years of employment and the contributions that were made to the employer’s pension fund during that period.
O.E.C.D.:
Organization for Economic Co-operation and Development. Short for Organization for Economic Co-operation and Development, a Paris-based organization of 29 (richish) nations. Among other things, the OECD aims to harmonize international trading practices and to promote free trade.
Off Balance Sheet:
Any transaction by a company that does not appear on its balance sheet. Off-balance-sheet items include things like leasing deals and fiduciary deposits.
Off-balance Sheet Financing:
The process whereby a contingent (depending on certain events) liability is not recorded as a liability on the balance sheet but typically appears in the notes to the financial statement. Off-balance sheet financing is therefore not reflected in the balance sheet total, although possible related reserves will.
Offer:
An indication of willingness to enter into an agreement, and of the terms of such an agreement. An offer and an acceptance constitute a legally binding contract.
Office:
There are two meanings:
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- A room containing a desk and a chair in which people work on paper or on computers.
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- A clearly defined role within an organization. For example, something that has to be done by the chairman’s office is done by whoever happens to be carrying out the function of chairman.
Office Politics:
The art of organizing a group of people who work in offices. More specifically, the expression refers to the psychological games that people play with each other in and out of the office.
Officers:
Officers are appointed by the board of directors and serve at the pleasure of the board. The bylaws usually prescribe the titles and duties of each office. Common officers are the president, secretary, and the treasurer. Officers direct the daily operations of the corporation.
Offshore:
Any country other than your own. In general, any business that is transacted in foreign currencies between parties that is also foreign to the place. A Dutch bank based in London lending dollars to a Brazilian company is transacting offshore business. Such business is often done in order to minimize tax liabilities.
Offshore Banking:
By popular usage, the establishment and operation of US or foreign banks in such offshore tax havens as the Bahamas and the Cayman Islands.
Offshore Banking Unit (OBU):
A bank in an offshore financial center, not allowed to conduct business in the domestic market but only with other OBU’s or with foreign persons.
Offshore Booking Centers:
An offshore financial center used by international banks as a location for “shell branches” to book certain deposits and loans. Such offshore bookings are often utilized to avoid regulatory restrictions and taxes.
Offshore Center:
A financial center used as a foreign base for overseas operations where the investor may move in and out of his investment freely and which fits the needs of the user.
Offshore Centres:
Countries and jurisdictions, most commonly small islands with little to no resources for revenue, specializing in the provision of financial services. These centres specialize and focus on offering to non-residents more favorable tax environments than that enjoyed in their home territory on international trading activities and/or investments via that country. Other beneficial features of offshore centres may include banking secrecy, privacy, various types of discretionary services and other favorable aspects of the legal environment.
Offshore Dollars:
Also known as euro dollars, offshore dollars consist of dollar deposits in any location outside the United States, including Europe.
Offshore Finance Company:
A company organized in a foreign country, almost always in a tax haven country, which handles such financing services as arranging foreign loans in Eurocurrency markets and floating bonds or other forms of indebtedness abroad in United States dollars or other hard currencies. Generally the offshore finance company is created to handle the financing requirements of its parent or related companies but is used occassionally to handle the financing needs of the parent company’s distributors or agent overseas.
Offshore Financial Centers:
A country or jurisdiction where an intentional attempt has been made to attract foreign business by deliberate government policy such as the enactment of secrecy laws and tax incentives.
Offshore Fund:
A mutual fund offering its shares to persons resident outside the country in which it is incorporated.
Offshore Group of banking Supervisors (OGBS):
Established in October 1980 at the instigation of the Basle Committee on Banking Supervision with which the Group maintains close contact. The primary objective of OGBS is to promote the effective supervision of banks in their jurisdictions and to further international cooperation in the supervision between the Offshore Banking Supervisors and between them and basle Committee member nations and other banking supervisors. Current OGBS members are: Aruba, Bahamas, Bahrain, Barbados, Bermuda, Cayman Islands, Cyprus, Gibraltar, Guernsey, Hong Kong, Isle of Man, Jersey, Lebanon, Malta, Mauritius, Netherlands antilles, Panama, Singapore and Vanuatu.
Offshore Holding Company:
A company organized in a foreign country which controls one or more affiliate companies and which manages, administers or services its affiliate companies usually located outside the country in which the parent company is incorporated.
Offshore Investment Center (Or Jurisdiction):
A financial center used as a foreign base for overseas operations where the investor may move in and out of his investment freely and which fits the needs of the user. Large amounts of financial assets or foreign currencies may be sold without delay at low cost as compared with other types of financial centers. An offshore investment center is also used as a base for such international acitvities as export-import trading, commodity transactions, mutual and other investment funds, exchange and securities hedging, futures trading for options, calls and puts, and patent and trademark licensing. Once referred to exclusively as the traditional “tax haven,” the title given to this type of offshore operation (offshore investment center or jurisdiction) is now also universally accepted in order to strengthen its image in the worldwide business community.
Offshore Investor:
An investor who is a user of a foreign base company in an offshore center and who may move in and out of his investment freely.
Offshore Limited Partnership:
A partnership, the general partner of which is an offshore company. The limited partners may be onshore entities.
Offshore Profit Centers:
Branches of major international banks and multinational corporations, which are established in low tax financial jurisdictions to lower taxes for the business entity as a whole. The resulting high- and low- (or non-) taxed profits are blended to enhance the overall return to the shareholders.
Offshore Trading Company:
A company organized in a foreign country to buy goods from an exporter in one or more other foreign countries and to sell these same goods to importers in other foreign countries. The documents are processed by the offshore trading company and all managerial, administrative and day-to-day financial transactions are handled by it. The goods are shipped from the seller in one country to the buyer in the other country without ever being shipped or landed in the country where the offshore trading company is located.
Offshore Trust:
The quality that differentiates an offshore trust from an onshore trust is portability. The offshore trust can be transferred to additional jurisdictions to maintain confidentiality and to advantage desirable facets of the new jurisdictions laws.
A trust, similar to a corporation or foundation, is a legal entity with its own property distinctly separate from the assets of the individuals positioned behind it. However, unlike a corporation, trusts have no share capital. Trusts are normally created to fulfill
a specific purpose such as:
To avoid ownership of the shares of a company. The trustee who declares that the shares are held on behalf of the trust normally holds shares.
-
- To collect dividends from companies anywhere in the world as income. If correctly worded, a trust may add all income to the corpus, thus making any distribution from the trust a capital distribution, which, in some countries, may not be taxable in the hands of the beneficiary.
-
- To provide an extra step in the line of anonymity of the beneficial owner or owners of a company.
-
- To ensure that, if any arrangement utilizing a company are exposed, these investigations necessarily end at the point where the trustee is interposed. Strict secrecy provisions bind trustees.
Off-the-Shelf:
Something that is purchased straight off a shop’s shelf, a product produced in advance in the expectation that it will find a consumer who is prepared to buy it. The opposite of tailor-made or customized.
An off-the-shelf company is one that is bought with its legal status already established, that is, a company that has never carried out business but which has a name, articles of association and a registered address.
Oligopoly:
The control of a market by a few producers. The danger of an oligopoly is that the few producers get together and agree among themselves to fix prices as if they were a monopoly.
Ombudsman:
An independent person appointed to hear and act upon consumers’ complaints about manufacturers or service providers. The idea originated in Sweden, where the first ombudsman was set up to hear complaints about government services.
On Approval:
When goods are supplied on the understanding that the purchaser may return them if they prove not to be what the purchaser wanted. Goods bought by mail order are usually, in effect, sold on approval.
On-line:
A computer that is linked directly to a database or to a central processing unit.
Onshore:
Onshore is defined as the country in which a private person, a company or any other legal entity is resident for tax purposes.
On Spec:
Work done for a client without a contract or order on the understanding that the client will only pay for the work if and when it is used.
Open-Ended Investment Company:
The corporate equivalent of a unit trust in which investors’ interests are represented by redeemable shares.
Open-market Operations:
Dealings by a central bank in the money market designed to adjust a country’s money supply.
Open Outcry:
A method of trading on an exchange in which dealers shout out their offers to buy or sell. A contract is made hwen a buyer’s shouts are matched with those of a seller.
Open Plan:
A way of designing the interior of an office in which the walls dividing the space into individual rooms are removed. All that may stand between employees’ desks are potted plants and soundproof screening.
Open Position:
A situation in which an investor has an obligation to buy more securities of a certain type in the future than his future obligation to sell securities of that type. (Or the other way round, he has an obligation to sell more than he has to buy.)
Open System:
An expression used to describe information technology that is accessible to all. In other words, any hardware and software that are in the public domain so that manufacturers can make products that are compatible with them.
Operating System:
The fundamental software program that enables a computer to run all the other programs that it contains.
Operations Research:
A mathematically based study of repetitive activity designed to improve the productivity of manufacturing processes. Or, as it is known, makes considerable use of computerised simulation.
Opportunity Cost:
In general, the amount that could have been gained if factors of production (land, labour or capital.) had been put to an alternative (and more rewarding) use. Hence investing in a bank account earning 3% a year when the stockmarket index rises by 10% has an opportunity cost of 7%.
Option:
The right to buy or sell a specified amount of a commodity (or of securities) at a specified price within a specified time (usually less than six months). Such a right can be bought and sold during the specified time. If it is not exercised within that time, however, it expires.
Order:
An instruction to buy or sell goods or services which is legally binding.
Order Form:
The document on which an order is formally recorded.
Ordinary Companies:
Companies incorporated in a specific country which generally follow the British pattern calling for a Memorandum of Association that requires a specified minimum number of subscribers, a registered office and authorized share capital. Ordinary companies are permitted to trade within or without the country in which incorporated upon approval by the Government.
Ordinary Share:
The most straightforward form of share. It gives the holder the right to vote at formal shareholders’ meetings, and the right to a portion of any dividends that are declared, but nothing more.
Organic Growth:
The growth of an organization that comes from its own internal efforts rather than from external factors, such as a takeover or a joint venture.
Organization:
There are two business-related meanings:
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- A collection of people who come together for a defined purpose.
-
- The way in which those people structure their relationships to best achive their purpose.
Organizational Behaviour:
The academic study of the behaviour of people within organizations. It embraces subjects like motivation and leadership.
Organogram:
A diagrammatic representation of an organization’s structure, including lines representing the relationships between different functions and different businesses.
Outplacement:
Assistance given to dismissed employees by their former employer to help them to find a new job or career. The function is increasingly carried out by specialist outplacement agencies.
Outplacement:
Assistance given to dismissed employees by their former employer to help them to find a new job or career. The function is increasingly carried out by specialist outplacement agencies.
Outsource:
To hand over to an outside organization the responsibility for running and developing a discrete function or process within business. For example, an organization might outsource the running of its computers or its fleet of company cars.
Outstanding:
An obligation that is due and that has not yet been settled.
Outworker:
Someone who works for an organization somewhere outside the organization’s own premises outworkers are used, for example, in the textiles industry, where they assemble garments in their own homes. They are usually paid a piece rate which relates their rewards to the quantity of goods that they produce.
Overcharge:
To demand a price for something that is in excess of the price that can be obtained elsewhere, all other things being equal.
Overdraft:
A credit facility granted by a bank which allows the borrower to draw funds from the bank up to a prescribed limit, as and when the borrower wishes. This flexible form of borrowing is common in Europe but not widespread in North America or East Asia.
Overhead:
A company’s overhead is the sum of its direct costs.
Oversubscribe:
When the demand for new issue of securities exceeds the supply of securities available, the issue is said to be oversubscribed. If there is a demand for 700,000 securities and there are only 100,000 for sale, the issue is said to be six times oversubscribed.
Over-the-Counter:
There are two meanings:
-
- An informal stockmarket for trading in shares that are not quoted on a major exchange, known as an OTC market.
-
- Pharmaceuticals that can be sold freely over a shop’s counter without the need for a doctor’s prescription.
Overtime:
Hours worked by n employee beyond those contractually agreed with the employer; for example, work done in the evenings or at weekends. Overtime is usually paid at a higher rate than work done in normal hours.
Overtrading:
Increasing a business’s turnover to such an extent and at such a speed that the increase is not supported by other areas of the business. If the accounts department is swamped with new orders, for example, and cannot get invoices out and payments in within a reasonable time, the business might suffer from a liquidity crisis.
Own Label:
Products that are branded with the name of the retailer, such as a supermarket which sells its own-label cornflakes and soap powder in competition with established manufacturers’ products. The retailer itself does not actually manufacture cornflakes or soap powder. It does not even manufacture the packaging. It just adds its name to products that have been made by someone else, sometimes someone who produces a well-known competing brand.
Owner-Operator:
Someone who owns and runs their own small business – a taxi-driver or someone who runs a corner shop.
-P-
Pacific Rim:
Any grouping of countries which have coastlines on the Pacific Ocean.
Packing List:
A formal list of the contents of a container which is sent with the container. The person who receives the container checks that its contents accord with the packing list to see if anything has gone missing in transit.
Page Views:
Also called Page Impressions. Hits to HTML pages only (access to non-HTML documents are not counted).
Paid-up Capital:
That part of a company’s authorised capital which has been fully paid for by the company’s shareholders.
Pallet:
A wooden frame on which goods are placed when in transit. A pallet is designed to reduce damage to the goods and to make them easier to handle.
Paper Offer:
An offer by one company to buy another in exchange not for cash but for shares in the purchasing company (that is, its paper). The vendor thus merely exchanges the shares of one company fro those of another.
Paper Profit:
An unrealized profit which only appears on paper, that is, as a calculation. For instance, if shares bought for $300 are now worth $500, but their owner has no intention of selling them, the owner can be said to have made a paper profit of $200.
Paper Trail:
The inevitable trail that most transactions leave tracing back to its originator.
Par:
The nominal (or face) value of a security. The price written on the certificate that provides proof of ownership.
Parallel Account:
A seperate account established at the trading bank.
Parallel Market:
A market that operates outside the standard market for a product or service; for example, European shares that are sold as ADRS in the United States; or the street vendor who sells goods ourside a store which also sells the same goods, but at a different price.
Parameter:
A constant that helps to set a framework for considering issues that are variable. For example, a company’s parameters for determining its strategy for the next year could be that the rate of growth of the economy will be 3% and that it wants to increase its market share by 10%.
Parent Company:
A company which owns one or more subsidiaries.
Parkinson’s Law:
First expounded in 1958 in a book written by a history professor, Cyril Northcote Parkinson, the law says that “work expands to fill the time available for its completion”. Another allied law says that expenditure rises to meet income.
Partly Paid:
Shares for which a shareholder has paid only part of the amount that is due. The rest of the payment can usually be called for at the issuer’s discretion.
Partnership:
Two or more people who get together to undertake a business for profit, but without becoming incorporated as a company. This is a common form of organization among professional people such as lawyers and accountants. In some countries partnerships have a separate legal existence; in others there is no legal existence separate from that of the individual partners themselves.
A partnership often offers useful features for the purposes of an overall tax plan. In certain jurisdictions, a partnership may have corporate attributes and resemble a company. However, even where a partnership does not have corporate attributes, requirements relating to formations and registration the nationality and/or residence of partners, limited liability, restrictions on activities, should be examined in the context of the general law governing local partnerships.
Part Shipment:
The shipping of one part of a larger order or consignment of goods. Part shipments can create problems if the documentation is not handled properly.
Part-time Work:
Any work that takes up less than a normal full working day. Part-time workers are rarely entitled to the same pension and health benefits as full-time workers.
Par Value:
Par value, an accounting term which is rapidly being discarded, is the face value assigned to shares of stock. For exemple, if shares have a par value of $1 per share, the shares must be sold for at least $1. They may be sold for more, and if so, the first $1 per share is allocated to be paid in capital account of the corporation. If the stock is no par, the board of directors retains the discretion to set a price for the shares and to allocate whatever portion of that price it chooses to the paid in capital account.
Passenger Mile:
One airline passenger carried one mile; this is calculated by multiplying the number of miles traveled times the number of passengers.
Passive Investor:
An investor in a start-up company who is looking only for financial gain. A passive investor has no interest in being involved in the running and building of the business.
Passport:
Official document proclaiming the citizenship of an individual.
Password:
A closely guarded sequence of alphanumeric characters which have to be entered into a computer before gaining access to it and its software programs. The password acts as a security device.
Patent:
A document given to an inventor by a registered authority granting the inventor the exclusive rights to manufacture and sell his invention in a specified market for a specified period of time. When that time is over, the product is said to come off patent.
Patent Pending:
Notification, often written on the side of a product, to say that a patent for the product has been applied for, but has not yet been granted.
Paternity Leave:
Time that a male employee is allowed off work to help his partner with a new-born child. During paternity leave the father’s job remains open to him, awaiting his return.
Payback Period:
The amount of time that it takes for an investment to pay for itself; that is, the time untilthe discounted income from the investment exactly equals the capital put into the investment.
Payday:
The day on which employees receive their pay.
PAYE:
The acronym for pay as you earn, a way of collecting income tax at source, that is, from full-time employees as and when they are paid.
Payment Date:
The date on which an acknowledged payment is due; for example, dividends that have been declared but not yet paid, or an invoice for work done that is due to be paid a fixed number of days after the work has been completed.
Payment Method:
The means by which a due payment is made, that is, by cash, check, credit card, bank draft, or whatever.
Pay Order:
A document which instructs a bank to pay a certain sum to a third party. Such orders are normally acknowledged by the bank which provides a guarantee that the payment will be made.
Payroll:
The list of all the employees within an organization that are paid on a regular basis. Also the aggregate total of all that is paid to those employees on a regular basis.
PBG:
Guarantees issued by prime banks. In this context the word prime is an adjective and not a noun, meaning that the bank issuing the bank guarantee is of prime status, one of the top international banks.
PC:
Short for personal computer, a stand-alone computer customized for each individual user. The PC-marked a revolution from earlier generations of computers which had been large centralized marchines operated by specialists.
P/E Ratio:
Short for price/earnings ratio, the ratio of a share’s stockmarket price to its earnings per share. The ratio is seen as a key indicator of whether a company is over-valued or not. Each industry has a P/E ratio that is considered more or less average for that industry.
Pension:
An income that is paid after someone’s retirement from work because of contributions that were made to a fund during their working life. Pension contributions are a standard perk offered by companies to attract and retain good employees.
Pension Fund:
A fund set up to meet the pension obligations of an organization. In many countries pension funds are among the largest investors in the stockmarket.
Peppercorn:
An extremely low nominal rent paid for business premises, often because the premises are due to be redeveloped at some uncertain future date and may have to be vacated at short notice.
Per Diem:
A daily allowance given to an employee to cover expenses, for things like travel and entertainment, incurred in the course of their work.
Performance Bond:
A written commitment to perfom a piece of work to a specified standard and within a specified period of time. Failure to meet the criteria of the bond can lead to the payment of heavy penalties. Performance bonds are common in the construction business.
Performance-related Pay:
Relating a significant proportion of an employee’s pay to their performance. The concept is hard to put into practice because of the difficulty in finding a quantifiable measure that is genuinely related to an individual’s performance. The most obvious candidates, share price and profit, have obvious shortcomings.
Perishable Goods:
Goods which perish fairly quickly, such as fresh fish, fruit or dairy products.
Perk:
Short for perquisite, an incidental benefit that accrues to an employee because of his or her employment. For example, someone who works in a restaurant might expect free meals to be one of the perks of the job.
Permanent Establishment:
Cited in virtually all basic income and fortune tax treaties, it is described in the Model Convention of the Organization for Economic Cooperation and Development as “a fixed place of business in which the business of the enterprise is wholly or partly carried on. “It includes a place of management, branch, office, factory, workshop, mine or quarry, and building site or construction or assembly project existing for more than 12 months. It does not include storage, display and delivery facilities. An enterprise in one signatory to a treaty is not deemed to have a permanent establishment in the other signatory merely because of carrying on business through a broker, general commission agent, or other independent agent. Advantageous treaty provisions for taxation of dividends, interest and royalties are in many cases negated if an enterprise located in one signatory has a permanent establishment in the other territory. A permanent establishment may also be regarded by tax authorities as creating domestic source income liable to income taxes. Practically all industrial and above even before adoption of the O.E.C.D. Model Convention.
Perpetual Notes:
Financing instruments used by United States companies investing in the United Kingdom, that are treated in the United Kingdom as loans with interest deductible and as equity in the United Kingdom as loans with interest deductible and as equity in the United States, and as dividends received by United States shareholders considered as a tax-free return of capital to the extent of the investor’s cost basis in its investment.
Personnel:
Traditionally, the department in an organization which looks after the day-to-day requirements of its employees. Nowadays it is likely to have been rebranded as human resources.
Personen- und Gesellschaftsrecht:
Law applicable to individuals and corporate bodies in Liechtenstein.
Peter Principle, The:
A rule first enunciated in a 1969 book by Laurence J. Peter. The Peter Principle says that every employee eventually rises to their level of incompetence. Also expressed as “cream rises until it sours”.
Petrodollar:
Dollars earned by petroleum-producing countries from the exports of oil to all countries but labeled “Petrodollars” because payments for the petroleum almost always are required to be in United States dollars. This practice stems from the traditional preference of the petroleum-producing countries, including Venequela, Canada, Iran and the Arab countries, to invoice their sales in United States dollars. Payments for oil exports historically have been for cash so that the oil producers have accumulated substantial funds at an unprecedented rate. Because the oil producers are principally developing countreis, their economies cannot absorb the great inflow of dollars in an orderly fashion. Thus, they are constantly seeking profitable investments in foreign lands. Simultaneously, all of the world’s leading industrial nations and many developing countries which do not produce oil are bidding for a portion of these huge sums. In an effort to avoid upsetting the economies of the world and to allot the petrodollars abroad in an orderly manner, the leading international financing organizations, including the World Bank, European Economic Community, Bank for International Settlements, and the Organization for Economic Corporation and Development, are assisting the oil producers, particularly the Arab countries, in investing the billions of dollars from petroleum sales.
Petty Cash:
Small amounts of cash retained in the workplace for making occasional small payments in cash – for milk, stamps, and so on.
Picket:
An employee who stands at the entrance to his or her place of work during an industrial dispute in order to persuade other employees (and/or suppliers and/or customers) not to enter. In many countries where picketing is legal, secondary picketing (the picketing of somebody else’s place of work) is not.
Pie Chart:
A widely used diagrammatic way of presenting business statistics. A pie is drawn to represent the whole of, say, a market or business, and the pie is then divided into slices whose size is proportional to the shares of the whole that each one represents.
Piece Rate:
A method of payment for work based on the quantity produced, in contrast to the more common method of payment which is based on the number of hours worked.
Piece Work:
Work that is performed by outsiders who are paid on a piece rate basis; common in the garment industry.
Pilot:
A trial run on a modest scale to test the feasibility of something much bigger. For example, the manufacture of a small number of items of a product to see whether it is worth gearing up for their mass production.
PIN:
The acronym for personal identification number, the number required by individuals to gain access to electronic information that is personal and private to them. PINs are most commonly used in association with plastic credit cards.
Pitch:
There are two business-related meanings:
-
- To make a prepared presentation with the aim of securing a contract or sale.
-
- The physical space where a street trader (or a stockbroker who operates on the floor of an exchange) has their stall.
Placement:
A method of selling securities in which the securities are placed with a small number of investors. A placements is usually done privately, in contrast to the other main way of selling shares (which is through a public offering). A placement is cheaper than a public offering, but the price obtained for the securties may be less.
Planning:
The formal process of planning for the future of a business. Traditionally, this occurs at regular intervals and involves managers outlining a series of actions for the business over, say, the next ten years.
Plant and Equipment:
A collective term for the tools and machines required to carry on a business; everything apart from the buildings and the workforce.
Platform:
The operating system (i.e. Windows 98, Windows NT, etc.) used by a visitor to a Web site.
PLC – Public Limited Company:
A UK public limited company (also exists in the Channel Islands).
PMB:
Private Mail Box. When you lease a private mailbox (PMB) from a private business, rather than a PO box from the United States Postal Service, you receive a PMB number.
Point of Sale:
The place where a sale is made. This is usually a shop, but it can be a telephone or an order form in a mail-order catalogue.
Point to Point:
A term for using individual airline fares from city to city.
Poison Pill:
A tactic followed by a company to make itself less attractive to a potential buyer. It might include an agreement to distribute large sums of money to shareholders and employees, a distribution that is triggered only by the appearance of a takeover bid.
Population:
A marketing expression for the whole of a potential market for a particular product or service.
Portal:
Internet general-purpose starting point.
Portfolio:
A mixture of assets (usually financial) that belong to a single owner, either an individual or an institution. A portfolio might typically contain shares, bonds, gold and cash.
Portfolio Manager:
The person who looks after an investor’s portfolio, buying and selling financial assets (on behalf of the investor) in search of a chosen investment target.
Portfolio Work:
A form of work in which an individual has a number of regular jobs which he or she performs at various times throughout the working week.
Portable Pension:
A pension that is a perk of one particular job and which the beneficiary can take with them (and continue to fund) as and when they change jobs.
Position:
There are several business-related meanings:
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- A particular job in an organization (as in, she has a senior position at The Economist).
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- An investor’s stake in a particular financial market (including what it owns and what it is contractually obliged to buy and sell in the future).
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- The strategic location in a market taken (or aimed for) by a company.
Post-date:
To put a future date on a financial instrument (such as a check) so that the payee cannot obtain payment untill that date.
Predatory Pricing:
The practice of cutting drastically and deliberately the price of a product or service in order to steal a competitor’s market share. By implication, predatory pricing involves cutting prices so that the profit margin is zero or negative. Hence it can only be done as a short-term measure.
Pre-emption:
The right to purchase something before others can. It refers, in particular, to the right of existing shareholders in a company to purchase any new issue of shares in the company before the shares are offered to others.
Preemptive Rights (U.S.):
Preemptive rights, another device intended to protect shareholders, enable shareholders to retain their proportional share ownership. If John owns 10% of the issued and outstanding stock of John Doe, Inc., and if the corporation proposes to issue an additional 100 shares of its stock, John would have the preemptive right to acquire 10 shares of the new issue on the same terms and conditions as the corporation proposed to offer the shares to outsiders. Like cumulative voting, preemptive rights exist in some state unless the articles reject them. In other states, preemptive rights don’t exist unless the articles permit them.
Preference:
Special treatment given by one country to another in respect of trade between them.
Preference Share:
A special sort of share whose dividend payment has preference over the dividend payments to the holders of ordinary shares. In the event of a liquidation, owners of preference shares receive payment efore ordinary shareholders.
Preferential Creditor:
A creditor of an organization who gets priority in certain circumstances, such as a liquidation. Preferential creditors include tax authorities, anyone with a charge on the organization’s assets, and lowly paid employees whose wages are overdue.
Preferred Supplier:
A supplier who has a special relationship with a customer. This relationship usually means that the customer will, other things being equal, give the supplier a certain amount of (almost guaranteed) business during the course of a year. In return, the supplier is expected to match certain standards of quality and timeliness.
Pre-filing Notice, US Only:
Mailed by the IRS to parties (tax payers) who are believed to be participating in fraudulent trust programs. The notice requests that the receiver seek professional counsel before filing their next tax return.
Premises:
The land and building where a business is carried on.
Premium:
There are two business-related meanings:
-
- A regular payment to an insurer for providing cover against a stated risk.
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- An amount paid over and above some specified value. In the takeover of a public company, for instance, the premium is the amount paid over and above the price of the company’s shares on the stockmarket before the bid appeared.
Prepayment:
The settlement of a debt before it becomes due. Some loan contracts impose a penalty fee if a borrower makes a prepayment.
Presentation:
The formal delivery of a business message.
Price:
The cost in money terms of a product or service.
Price Sensitive:
A product or service whose sales fluctuate dramatically with any change in its price. Commodity products in markets where there is plenty of competition are particularly price sensitive. A retailer cannot change the price of a basic loaf of bread, for example, without sharply affecting sales.
Price Support:
A minimum price set by a government for a product in order to guarantee that its producers will obtain a certain income for their output. It is usually applied to agricultural products.
Price War:
A fierce form of competition in which vendors successively undercut each others’ prices to steal market share.
Primary Market:
The market in which financial instruments are sold when they are first issued, that is, when they pass from the issuer to their first purchaser. Thereafter they are bought and sold in a secondary market.
Prime Bank:
An older term for a well known (top-25, top-100) international bank. The term should be avoided and replaced by “money center bank” or “international bank”.
Prime Market:
The market in which financial instruments are sold when they are first issued, that is, when they pass from the issuer to their first purchaser. Thereafter they are bought and sold in a secondary market.
Principal:
The amount borrowed in a loan or issue of securities. The principal is the capital sum that has ultimately to be repaid, and on which the interest that has to be paid in the meantime is calculated.
Private Company:
A company whose shares are not available to be bought by the general public. A private company is owned by a small number of shareholders who have no obligations (outside the general laws of the land) to reveal information about their business to the public.
Private Placement:
An issue that is offered to a single or a few investors as opposed to being publicly offered.
Private Trustee Company:
A company incorporated in certain offshore jurisdictions, such as Bermuda, to act as a trustee for a limited class or group of trust. Private trustee companies are not permitted to offer trustee services to the public generally.
Privatisation:
The sale of a state-owned company to the general public.
Probate:
The legal process for the distribution of the estate of a decedent.
Process:
A number of activities which, taken together, add value to a business. This can be as wide as something like marketing (the marketing process) or as narrow as a small part of manufacturing (the paint-handling process).
Procurement:
The purchasing of all the inputs that are required to keep a business running, including raw materials, spare parts and machines.
Product:
The final output of a manufacturing process.
Product Liability:
The liability of a manufacturer for any product which it puts on to the market and that subsequently causes damage to a consumer. In developed countries this liability is becoming embedded in law and not dependent on the consumer proving that the manufacturer was negligent.
Productivity:
An economist’s term for the output produced in a given time by a unit of any of the three factors of production (land, labour or capital). For example, the return produced by an investment of $1,000 in a year, or the yield in a year from planting wheat on a hectare of land. Its numerical precision makes productivity a useful way of measuring differences in efficiency over time, or the difference between alternative uses of the factors of production.
Profit:
What is left over in a business after all its bills have been paid. The difference between the revenue of the busines (from selling its output) and the cost of the inputs that were required to produce the output.
Profit and Loss Account:
The accountant’s record of a business’s revenue and expenditure during a period. Designed to show the profit (or loss) that the business made in that period, it is known in the United States as the income statement.
Profit Centre:
A business unit that prepares its own profit and loss account, recording the theoretical prices at which it buys inputs from other parts of the business, and the theoretical prices at which it sells its output to other parts of the business.
Profit Sharing:
A way of allowing employees to share in the profit of the organization for which they work. Devising profit-sharing schemes in such a way that everyone feels they are fair has proved to be extremely difficult.
Profitability:
The ability of a particular business, product or process to make a profit. There is no single satisfactory measure of a company’s profitability. Proxies include the gross profit margin, the earnings per share and the return on total assets.
Pro Forma:
A presentation of financial or accounting figures based on a theoretical future occurrence. For instance, a pro-forma set of accounts might be produced to show what would happen to their accounts if two companies were to merge. A pro-forma invoices indicates the liability that will arise if an order is made or if certain goods are shipped. In practice, pro-forma invoices are often issued simply because customs and excise require little relation to what the customer is actually going to pay for the goods.
Professional Corporation (U.S.):
Professional corporationsare formed under the professional corporation laws of the state and are limited to professionals, such as doctors, dentists, lawyers, architects, engineers, and accountants. Professional corporation statutes designate which professionals may incorporate under these statutes. Professional corporation shareholders remain personally liable to their clients for professional malpractice.
Program:
A set of instructions which enable a computer to carry out particular actions. A word-processing program, for example, enables its user to type letters and data.
Project Finance:
A way of financing big capital projects, such as hydroelectric schemes or toll roads, that depends primarily on the future cash flow of the project for its return.
Promissory Note:
A legally binding promise by one party to another that a certain payment will be made on a prescribed date in the future. Often referred to simply as a note.
Promoter:
A promoter, in a corporation context, is one who generates interest and activity in and on behalf of a corporation before its formation. A promoter is usually personally liable for all preincorporation activities.
Promotion:
There are two business-related meanings:
-
- The elevation of an an employee to a more senior position.
-
- The concentration of exceptional marketing effort on a particular product or service.
Proof of Funds (POF):
A document by which the principal’s bank states that the principal owns the funds required for the transaction. Usually, proof of funds can also be delivered in the form of a recent bank-, security- or custody statement.
Proper Law:
The body of law which governs the validity and interpretation of a contract or trust deed.
Proprietary:
A right that endures for some time for a special reason; for example, a right to manufacture a new invention which is protected for a while by a patent. Proprietary medicines are pharmaceuticals which are manufactured by only one company and protected from competition by patent.
Prospectus:
A document outlining a company’s plans for issuing new securities, including what it intends to do with the money that it raises from the issue. In many countries the contents of prospectuses are laid down by law and are designed to protect investors from misleading information.
Protectionism:
The erecting of trade barriers to shelter a domestic market from overseas competition.
Protector:
An individual appointed by the settler of a trust to ensure that the trustee(s) administers and manages the trust assets in accordance with the trust deed and he is often vested with the power to appoint and remove trustees.
Protocol:
An established method of exchanging data over the Internet.
Provider:
A wealthy private party buying guarantees from theissuing banks, reselling them thorugh banks/brokers. Other designation: commitment holder.
Provision:
Money put aside by a business out of current profit to meet future liabilities. Specific provisions are set aside against liabilities that can be forecast with a degree of certainty. General provisions are set aside against unexpected liabilities.
Proxy:
A proxy is a written authorization to vote on behalf of another. Shareholders often vote by proxy, permitting others to vite their shares. Except for close corporations (U.S.), directors may never vote by proxy. Proxies are usually revocable, but they can be made irrevocable under certain circumstances.
Proxy Fight:
A struggle between two sets of opposing shareholders to collect the proxies of other shareholders in order to pass a resolution at a company meeting, for example, a resolution that their candidate be elected to the board.
Psychometric Testing:
The use of tests which claim to measure characteristics of an individual’s personality in order to ascertain whether that individual is suitable for a particular job. It includes the use of graphology.
PT ‑ The Perpetual Traveler
A PT by definition, is a non‑conformist in a highly regulated, highly taxed, first world society. In a nutshell, a PT merely arranges his or her paperwork in such a way that all governments consider him a tourist. A person who is just “Passing Through”. The advantage is that being thought of by government officials as a person who is merely “Parked Temporarily”, a PT is not subjected to taxes, military service, lawsuits, or persecution for partaking in innocent but forbidden pursuits or pleasures. Unlike most citizens or subjects, the PT will not be persecuted for his beliefs or lack of them. PT stands for many things: a PT can be a “Prior Taxpayer”, “Perpetual Tourist”, “Practically Transparent”, “Privacy Trained”, or “Permanent Traveler” if he or she wants to be. The individual who is a PT can stay in one place most of the time. Or all of the time. PT is a concept, a way of life, a way of perceiving the universe and your place in it. One can be a full‑time PT or a part‑time PT. Some may not want to break out all at once, or become a PT at all. They just want to be aware of the possibilities, and be prepared to modify their lifestyle in the event of a crisis. Knowledge will make you sort of a PT. A “Possibility Thinker” who is “Prepared Thoroughly” for the future.
Public Bank:
A commercial or savings bank licensed to carry on the business of banking and in some instances other activities related to financial or funding services.
Public Company:
A company whose shares can be bought and sold by the public (usually on a recognized stock exchange). The opposite of a private company. Also known as a publicly held company, but not to be confused with a publicly owned company, which is a company that is owned by a government. To confuse matters further, when a publicly owned company is privatised it becomes a public company.
Public File:
A file held at the Company Register of the jurisdiction concerned, usually maintained at a Government agency and available to the public for review.
Public Offer:
A new issue of securities that is offered to the general public.
Public Relations:
The job of communicating an organizations’s point of view to a number of different audiences; for example, the press, customers and the government. The more specific job of communicating with investors is called investor relations.
Publicity:
In general, the attention of the public. Something that companies seek to gain for their new products or for their good behaviour (vis-à-vis the environment, for example). In French, publicité means advertising.
Pump Priming:
A one-off course of action designed to act as a catalyst for a broader economic consequence. Once a pump has been primed it should run by itself thereafter.
Purchase Order:
A detailed written request to a supplier for the delivery of goods or services at a specific price. Once the supplier accepts the terms, the order becomes a legally binding document.
Purchasing Power:
The capacity of consumers to purchase goods and services, itself a function of the taxes that they pay, their propensity to save, and thir morale.
Purchasing Power Parity:
The exchange rate between two currencies based on a comparison of how much it takes in each currency to buy an identical basket of consumer goods. Commonly abbreviated to PPP.
Purpose Trust:
A trust created for a specific purpose without any individually ascertained or ascertainable beneficiaries. A purpose trust is often used where it is intended to be philanthropic in nature. For example, perhaps the grantor might want the trust to benefit genetic research that seeks a cure for Parkinson’s disease.
Put Option:
An option to sell a fixed number of securities at a specified price within a specified period of time.
Pyramid Selling:
A method of selling products through layers and layers of agents who are structured like a pyramid. The top layer of agents sells to the next layer and so on. The last layer gets to sell to the general public. In practice, the last layer more frequently gets left with a load of unsellable stuff.
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
-Q-
Qualified Accounts:
A set of accounts to which auditors have added a qualification saying that for one reason or another they are unable to verify all the figures. The reason may be that the company is involved in a longrunning and still unresolved lawsuit, or that it is unable to verify the existence of inventory in a faraway place.
Qualitative Research:
Market research designed to gain unquantifiable insights into consumer’s attitudes and perceptions. It relies heavily on group discussions and in-depth interviews.
Quality Management:
A system developed in Japan after the second world war in which companies aim to improve the quality of everything they do, marginally but coninuously. Well expressed in a saying from the Middle East: “Drop by drop we make a lake.”
Quality Circle:
A group of employees who get together to consider the quality of their work and how they can improve it. Quality circles rely heavily on charting measurable elements of performance and then rewarding any improvement in those elements.
Quality Control:
The systematic checking of samples of mass-produced goods at various stages in the production process, but particularly just before the goods are dispatched to the shops. Sometimes abbreviated to QC.
Quantitative Research:
Market research that attempts to obtain quantitative findings about a sample of consumers, usually expressed as a percentage: for example, 75% of the sample said that they ate Gozo for breakfast.
Quarter Day:
The traditional days on which quarterly payments (of rent, and so on) are paid. These vary from country to country.
Quarter Ratio:
The ratio of a company’s current assets (cash, bank accounts, accounts payable) to its current liabilities. The quick ratio gives a rough idea of how well a company could cope with a liquidity crisis.
Quorum:
A quorum is usually at least half of the directors or the holders of at least half of a coporation’s issued and outstanding stock. Before directors or shareholders can authorize any action, a quorum must be present. The bylaws prescribe quorum requirements.
Quota:
A predetermined amount, particularly of goods that are allowed to cross trade barriers. For example, a country may set a quota for the number of foreign cars that it is prepared to allow across its borders in any one year.
Quotation:
There are two business-related meanings:
-
- A price that a supplier “quotes” for the (future) delivery of goods or services.
-
- What a company gets when it becomes quoted on a stock exchange – the price at which buyers and sellers are prepared to deal in its shares.
Quoted Company:
A company whose share price is quoted on a recognized stock exchange.
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
-R-
R&D:
Short for research and development, the work that a company does (and the department that does it) to come up with new products and with new ways of developing existing products.
Racial Discrimination:
Discrimination between people on the basis of their race. In most countries racial discrimination in the workplace is illegal.
Rally:
A resurgence of prices (particular of share prices) after a period in which they have been depressed.
Random Sample:
A sample of a population chosen so that (in mathematical theory, at least) every member of that population has an equal chance of being chosen. It is important that samples are random when companies are test-marketing new products or doing quantitative research.
Rate of Interest:
The price paid for the use of money over time. This takes into account the rate of inflation in an economy, the demand for money in the economy, and the degree of risk to the lender.
Rate of Return:
The rate at which factors of production (land, labour or capital) produce a return. In analyzing a company’s performance (and comparing it with others) various rates of return on total assets, the rate of return on equity and the rate of return on capital employed.
Rating:
The classifying of the characteristics of something according to a scale. It might be a film’s suitability for children, a company’s respect for the environment, or the chances of a debt being repaid.
Rationing:
The allocation of scarce goods or services by a method other than price. Rationing can be done on a first-come, first-served basis, as when people queue for tickets to an immensely popular concert. Or, as in wartime, it can be done with coupons entitling the holder to a certain amount of goods, and no more. One of the most problematic areas of rationing today is in the provision of health services. How do you decided who is to have their hip replaced next?
Raw Materials:
The most basic inputs of a manufacturing process. In many cases these are materials taken from the ground, through mining or agriculture. For steelmaking for example, the raw material include iron; for carmaking the raw materials include steel.
Ready-Made Company:
See Shelf Company.
Real:
Corrected for inflation. The real price is rarely the same as the nominal price.
Real Estate:
A North American expression for land and everything that is attached to it.
Withholding and other taxes are frequently imposed on rental income deriving from the holding of real estate in a foreign country; similarly, capital gains taxes may be imposed on the profits flowing from the sale of property. However, in exceptional cases, the provisions of a tax treaty may be of considerable value in minimizing the total tax burden, e.g. the treaty between the Netherlands Antilles and the United States.
Ownership of real estate by individuals may also result in liability to death duties and similar taxes in the country in which the real estate is situated, irrespective of the residence or domicile of the individual owner. For this reason it is common to hold foreign real estate through a tax haven or other company.
Real Time:
Occuring in the present, with special reference to computer systems that take little or no time to perform computations; that is, they carry out instructions almost instantaneously. Really useful in fighter planes.
Recall:
There are two meanings:
– A call by a manufacturer for all the products purchased at a particular time to be returned (and a refund to be paid). Most frequently used when a product is discovered to be faulty.
Recapitalization:
A major reorganization of the structure of a company’s capital, involving, for example, the exchange of shares for loans (or vice versa).
Receipt:
A written acknowledgement of payment received for goods or services.
Receivable:
Money that has not yet been received by a business for bills that it has delivered to its customers.
Receiver:
Somebody appointed by a court to “receive” a shaky company’s assets on behalf of the company’s creditors. Receivers either attempt to help the company to trade itself back into good health, or they liquidate it.
Recession:
An economy is technically said to be in recession when its GDP has fallen for at least two three month periods in succession. More generally, a recession is a prolonged period of exceptionally slow economic growth.
Reciprocity:
The granting of favours to A by B in return for the same favours being granted to B by A. A common principle underlying countries’ negotiations over trade and tax issues.
Recommended retail price:
A price which manufacturers recommend that retailers should charge consumers for their products. When recommended retail prices become compulsory they can constitute a restrictive practice. As such, they are illegal in many countries.
Recruitment:
The process of identifying and choosing new employees. Sepcialist recruitment agencies are often called upon to assist in the process.
Recycle:
There are two meanings:
-
- To reuse industrial and commercial waste as the raw material for a new industrial process; for example, to use waste paper in manufacturing pulp.
-
- The process whereby banks take in surplus savings in one part of the world and invest them in other places where there is a shortage.
Red Clause:
A clause typed in red on a letter of credit to indicate that an exporter can receive all the amount due on the letter of credit in advance of shipping the goods. Red clause originated in the Australian wool trade.
Red Ink:
A loss. Red ink used to be used by accountants to indicate that a figure was negative.
Redemption:
Relating to the time when a financial asset matures, as in redemption date or redemption yield.
Re-domiciliation Corporations:
Some offshore jurisdictions allow corporations incorporated in other jurisdictions to reincorporate in their own at will.
Redundancy:
The loss of a job through no fault of the employer. The job is redundant, (that is, no longer needed) not the employee. Employees who are made redundant are often legally entitled to extra payment as compensation for losing their jobs.
Re-engineering:
A radical redesign of a manufacturing process.
Reference:
A written statement testifying to the character of someone known to the writer. References are often requested by potential employers from job candidates.
Refinance:
To refund an existing debt; borrowing elsewhere to meet a current financial obligation.
Refund:
To repay to a consumer the price of goods that have been purchased upon the return of the goods and/or the presentation of evidence that they were faulty.
Registered Agent:
A registered agent is the person or entity designated in the articles of incorporation to receive service of process and other important notices from the state. A corporation must maintain a registered agent at all times or risk forfeiture of the corporate charter.
Registered Company:
A company that is registered with the authorities of the country in which it is established. In most countries it is illegal to operate as a company without being registered.
Registered Office:
The registered office is the place where the registered agent can be found. It may be the corporate office, or it may be the office of the corporation’s attorney.
Registered Share:
Share, which is transferred by an instrument of transfer. The name of the holder is registered in the books of the company.
Regulation:
The administering of the laws and government rules imposed upon business.
Regulator:
The person in charge of an agency (or government department) that has been set up for the purpose of regulating a particular industry or market.
Regulator:
The person in charge of an agency (or government department) that has been set up for the purpose of regulating a particular industry or market.
Reinsurance:
The practice among insurance companies of redistributing risk between them. An insurance company that agrees to insure, say, an oil rig may then buy some reinsurance from anoher insurer in order to share the risk of the rig sinking.
Reinvoicing:
Reinvoicing is the establishment of an offshore corporation to act as an intermediary between a supplier of goods or services and customers or clients. The intermediary, for example, pays the supplier US$1,000.00 for the product and sells it to the ultimate buyer for US$1,500.00. The profit that is retained offshore, which is the result of the reinvoicing transaction, is US$500.00.
Related Person:
Any person who controls a foreign corporation and any corporation which is controlled by, or under common “control” with, that entity. “Control” is defined as the ownership of a majority of the voting power.
Relocation:
The business of moving elsewhere. This can be the moving elsewhere of a whole company, or the moving elsewhere of a whole company, or the moving elsewhere of the individuals who work for it.
Remittance:
The sending of money from one person to another, particularly associated with the cross-border payments made by immigrant communities in Europe and North America to the families that they left behind.
Remuneration:
The subcommittee of a company’s board which negotiates and decides on the remuneration of the most senior executives of the company, in particular of the managing director and the other executive directors on the board.
Remuneration Committee:
The subcommitee of a company’s board which negotiates and decides on the remuneration of the most neior executives of the company, in particular of the managing director and the other executive directors on the board.
Rent:
Money paid for the use of real estate over time.
Rent Control:
Government-imposed rules on the amount of rent that can be charged, designed either to control ruthless landlords or to influence the movement of tenants (for example, out of inner-city areas).
Rent-free Period:
A period of time in which a tenant is allowed to occupy premises without paying rent. Often granted as part of a package to entice a particularly desirable tenant into a new development.
Replacement Cost:
The cost today of replacing a waiting asset. Replacement cost accounting attempts to inject these costs into a company’s book.
Replacement Demand:
The demand for a product which arises from consumers wanting to replace old models with new ones. The replacement demand for detergent is high, for cars it is low (and becoming even lower) and for mink coats it is virtually non-existent.
Repositioning:
Changing consumers’ perception of a product or service by altering its packaging or the way in which it is sold.
Reschedule:
To alter the maturity of a borrower’s debts (with the agreement of both the borrower and the lender) in order to facilitate the borrower’s chances of repaying on time. Formally putting off until tomorrow what cannot be paid today.
Reserves:
Surplus funds that an organization retains for itself and does not distribute to shareholder. Countries also hold reserves. The foreign currency, gold and facilities with international organizations such as the IMF that they can use if and when they need to intervene in the foreign-exchange markets to stabilize their currencies.
Residence:
The place where an individual or a company is said (by a national tax authority) to reside for the purposes of taxation.
Resident Company:
A bank, trust company, or holding company permitted to deal only in local currency. Any transactions in foreign currency must be approved by the local regulatory authorities. If your business (or proposed business) is international in scope, this kind of restriction could be a major impediment to corporate efficiency. The company is treated by the jurisdiction in which it is incorporated or in which it conducts commercial activities as resident for tax purposes or exchange control purposes or both.
Resignation:
The formal ending by an employee of a contract of employment.
Resolutions:
A resolution is a formal statement of any decision which has been voted upon. When the board of directors or shareholders authorize a particular action, the authorization most often comes in the form of a corporate resolution. For example, a corporate resolution could read: “Resolved, that this corporation establish a depositary account with the XXX Bank.”
Resources:
The input available to a business; in particular, the factors of production (land, labour and capital), but also more abstract things such as information and advice.
Restraint of Trade:
Any contract that places a restriction on the way a party to the contract trade. For example, an agreement between an ice-cream manufacturer and a retailer to provide the retailer with refrigerators as long as they are stocked only with the manufacturer’s own products.
Restrictive Practice:
A business activity that restricts free competition. In free-market economies governments keep an eye out for restrictive practices, and clamp down whenever they find them.
Retail:
The selling of goods and services to the final consumer.
Retail Outlet:
Any distribution channel that sells goods and services retail: a shop, a mail-order catalogue, or a web site.
Retained Earnings:
That part of a company’s net profit which is not distributed as a dividend.
Retire:
There are two business-related meanings:
-
- To end full-time employment, that is, to retire from work.
-
- To remove the obligation attached to a debt, either by early pament or through some other arrangement.
Retirement Age:
The standard age within a society at which people retire from work. In most developed countries this is between 60 and 65. Someone who retires before the retirement age is said to take early retirement.
Return:
What comes back to someone who makes use on land, labour and/or capital. The return may be in the form of interest (on a loan) or a harvest (from agricultural land). A company’s health can be judged by looking at its return on equity (roe), its return on assets (roa) and its return on sales (ros).
Returns:
Products which are returned to their supplier by the purchaser to whom the purchase price is refunded. The term is also used to refer to the responses to a direct mail advertising campaign.
Revenue:
The income from any commercial activity. Originally, it was the income of the state from taxes (as in Inland Revenue).
Reverse Takeover:
A takeover in which the company being taken over fights back by taking over the company that is trying to buy it.
Revolving Credit:
A loan which permits the borrower to borrow up to a set limit, again and again. The borrower with a revolving credit can borrow up to its limit, repay some of it, and then borrow up to the limit again.
Revolving Underwriting Facility (RUF):
A note issuance facility of a medium-term commitment which may be used either as a standby facility or as a source of variable rate dollar funding. A RUF usually is structured so that the medium-term committed banks do not expect to fund their commitments during the course of the facility.
Rights Issue:
An issue of shares which gives existing shareholders the right to buy the issue at a favourable price and within a specified period of time. Rights that are not taken up can usually be sold on the open market before they expire. In most markets a public company has to make all new share issues in this way in order to prevent existing shareholders from involuntarily having their holdings diluted.
Risk:
The chances of losing money. Investors who buy financial instruments such as US government bonds, where the risks of not being repaid are minimal, are said to be risk averse. Some risks can be reduced by hedging, others by taking out insurance cover.
Risk Analysis:
The systematic analysis and measurement of the risk of different investments. There are other types of risk associated with an investment besides the simple one of an inability of the investment to make a return. They include political risk (that a government may compel the borrower to renege on the debt) and foreign-exchange risk (that a debt denominated in another currency may, through turbulence in the foreign-exchange markets, come to e worth much less by the time it is repaid).
Risk Management:
The task of managing the risks that an organization takes in the course of its business. Ways of reducing risk include insurance, hedging and disinvestment.
Robotics:
The development and use of robots to undertake activity formerly done by humans. In the car industry, in particular, robots have taken over many of the manufacturing processes.
Roll Over:
To extend the maturity of a loan beyond its original repayment date. In some cases this may involve replacing an old loan with a new one.
Roll-Up Funds:
Funds which create interest that is not distributed but left in a fund so as to increase its capital value and thus become subject to the usually lower capital gains taxation than to the higher personal income or capital transfer tax rates. Roll-up funds, also known as accumulation funds, have administrative advantages. They eliminate the need to track the reinvestment of dividends while the fund’s statements provide the investor with an immediate indication of return on the initial investment by a comparison of present price with starting price. Some roll-up funds are structured as unit trusts.
Ro-ro:
A ship where vehicles roll on and then roll off; that is, the vehicles are driven down ramps and straight into the hold of the boat, and likewise in reverse when disembarking.
Round:
A set of negotiations under the terms of the gatt, such as the Tokyo Round or the Uruguay Round. The purpose of these rounds is to get the member countries to agree to reduce even further the barriers to trade between them.
Royalty:
All amounts received for the privilege of using intangibles such as patents, copyrights, secret processes and formulae, as well as amounts received for the privilege of exploiting mineral, oil and gas deposits.
Run:
An unusually intense demand by customers for the same thing at the same time. For example, a run on a bank is a simultaneous demand by the bank’s depositors to withdraw their money. Other runs, such as the run on turkeys just before Christmas, are less worrying (and more predictable).
-S-
Sabbatical:
An extended period of leave taken by an employee, often as a right under the terms of their contract of employment. University teachers, for instance, are often allowed to take a one-term sabbatical every seven years.
Safekeeping Receipt:
A document issued by a bank which requires the bank to hold specific funds (or securities, gold, etc.) unconditionally separate from other assets and return them when requested by the depositor. In this way, the funds (or securites, gold, etc.) are not an asset of the bank nor are they, directly or indirectly, subject to any of the bank’s other obligations or debts.
Salary:
Regular payment to an employee for his or her work. A salary is usually paid monthly. A weekly payment is generally called a wage.
Sale:
There are two meanings:
-
- Any exchange of goods or services for money, commonly used in the plural. For example: “Last week’s sales were extremely poor.”
-
- A special reduction in prices designed to stimulate sales of the other kind. Retailers hold these sales in what are for them the quiet periods of the year.
Sale of Return:
A type of contract under which goods are supplied to retailer on the basis that if they are not sold within a given time they can be returned to the supplier without payment.
Sales Promotion:
A special short-term effort used to promote or launch a product or service. To be effective, a sales promotion needs to be conspicious and noticed, and it needs to bring in more revenue than it costs.
Sales Quota:
A target given by a company to its sales staff setting the volume or value of sales that they are expected to achieve within a given period.
Sales Tax:
Any tax based on the volume or value of sales.
Salesman:
A person whose main job it to sell goods or services. The word has come to symbolize the slick entrepreneur trying to pass on low products for high prices.
Sample:
There are three business-related meanings:
-
- A number of items chosen from all those that exist. Samples are used to test the characteristics of the group as a whole.
-
- A product that is taken as a model for the subsequent mass production of that product; particularly common in the rag trade.
-
- A small example of a product that is given away to donsumers to persuade them to buy it in larger quantities.
Sanction:
An obstruction placed on a country’s ability to trade freely. Sanctions are usually imposed as a penalty for behaviour disapproved of by the international community; for example, the sanctions imposed on South Africa for its policy of apartheid. Confusingly, the word sanction (as a verb) means to authorize. Hence South Africa sanctioned the plicy (of apartheid) that brought about sanctions.
Saturate:
To have such a generous supply of products in a market that it is difficult for a new entrant to gain a foothold.
Scan:
To read electronically the bar code on the packaging of products in a retail outlet.
Scenario Planning:
A method of planning for the future that involves getting an organization’s executives to focus on the changes that they think will be the most significant for their business in the future. They are then asked to imagine what such changes might lead to.
S Corporation (U.S.):
An S corporation is created under the Internal Revenue Code. A corporation may elect to be treated as an S corporation. Stringent rules exist with respect to how and when the election is made; the number and type of shareholders; and the means by which the election may be terminated. S corporations pay no income tax; all items of income, gain, credit, and losss pass through to the shareholders in proportion to their shareholdings.
Scheduled Territories:
Since June 1972, the United Kingdom, the Channel Islands, the Isle of Man, the Republic of Ireland and Gibraltar.
Schengen Treaty:
The name “Schengen” originates from a small town in Luxembourg. In March 1995, seven European Union countries signed a treaty to end internal border checkpoints and controls. More countries have joined the treaty over the past years. At present, there are 15 Schengen countries, all in Europe.
The 15 Schengen coutries are: Austria, Belgium, Denmark, Finland, France, Germany, Iceland, Italy, Greece, Luxembourg, Netherlands, Norway, Portugal, Spain and Sweden. All these countries except Norway and Iceland are European Union members.
Scrap:
An asset that is no longer of economic value to an organization. But this does not mean that it is of no value to anyone. Scrap can be sold and its value is called the scrap (or salvage value).
Scrip Issue:
A free distribution of shares to a company’s existing shareholders in proportion to their shareholding. A scrip issue is little more than an accounting device; it does nothing to increase the value of the company or of any shareholder’s stake in it. Also known as as bonus issue.
Screen Company:
A company incorporated in a country which charges a nil or low rate of tax on receipts or distributions of interest, dividends or royalties received from another country, taking advantage of a favorable double taxation agreement between two countries which reduces the tax withheld at source in the country in which the income arises.
Sealed Bid:
A bid for a contract that is presented in a sealed envelope. Nobody knows the details until the envelopes of all bidders for the contract have been handed in. They are then all opned at the same (prearranged) time, and the winning bid is announced.
Search Engine:
A software program that enables a computer to search its database and retrieve all references to a specified keyword.
Seasonally Adjusted:
The adjustment of statistics to take account of the fact that business activity varies with the seasons; for example, sales figures are distorted during the Christmas and summer holiday periods. Sesaonally adjusted data remove the exceptional influence and show the underlying trend.
S.E.C.:
Securities and Exchange Commission, United States federal organization which supervises information provided by companies whose shares are offered to or dealt in by the public.
Section 482 “Arms Lenght”:
A section in the United States Internal Revenue Code that gives the Government authority to reallocate income to a domestic corporation where it is not dealing on an “arms lenght” with a controlled affiliate as if the affiliate were an independent enterprise.
Section 367 Ruling:
Tax-free treatment as approved by the United States Internal Revenue Service for certain ordinary transactions, such as transfers of a wholly owned subsidiary into the parent corporation, and certain transactions qualifying as tax-free reorganizations, whereby a foreign corporation is part of the transaction. The ruling no longer need to be obtained in advance from the United States Internal Revenue Service stating that the transaction is not regarded as being in pursuance of a plan having as one of its principal purposes the avoidance of Federal income tax.
Section 936 Funds:
Dollar balances accumulated in Puerto Rico by United States mainland companies generated from operations under the Commonwealth of Puerto Rico’s generous tax holidays (known as “Operation Bootstrap”) adopted in 1947 and amended through subsequent Industrial Incentive Acts 1963, 1969, 1971, 1973. Under Section 936 of the United States Internal Revenue Code, these accumulated funds were not taxable to the mainland United States companies if they were used to finance development of the members of the Caribbean Basin Initiative. To qualify for any part of the $10 billion of accumulated funds, a recipient Central American nation was required to be a party with the United States to a Mutual Legal Assistance Treaty. However, under the 1996 United States tax amendment to the Internal Revenue Code, the tax credit granted to possessions corporations in Section 936, where tax-free accumulated funds in Puerto Rico are invested in qualifying Caribbean Initiative Countries thorugh tax exemption, is being phased out.
Secondary Market:
A market in goods or services which have already been sold to a consumer at least once (especially markets in financial instruments such as bonds and shares).
Secondment:
A temporary job taken by an employee with an organization other than the one with which they have a contract of employment. For example: “He normally works for Rolls-Royce, but he is on secondment this year to the Ministry of Defence.”
Secretary:
A person who does the formal correspondence required by either an individual or an organization. Hence a company secretary is responsible for all the official correspondence between the company and the government or regulator. Company secretaires may also have personal secretaries who type their letters for them. From the French word secrétaire, meaning a writing table with drawers in which to keep paper and pens.
Sector:
A group of companies with some sort of commercial activity in common. The transport sector, for instance, comprises companies involved in transport (airlines, train operators, and so on). The airline companies alone constitute the airline sector.
Secured Credit Card:
A credit card that is linked to a corresponding savings account or other form of collateral. Typically a sum of money equal to or larger than the line of credit is deposited in an interest-bearing savings account. This is used as security against a potential future loss against the card-holders liabilities. Here, there are two accounts: A frozen bank account – the funds in which act as a guarantee for the card – and the actual credit card account.
The advantages of a secured credit card are no-questions-asked privacy and the ease of approval of credit. Statements are mailed only in the months when something is charged to the account, unless the balance for the preceding month has yet to be paid off in full. But you are still obliged to make a minimum monthly payment of 10 percent of the outstanding balance within a couple of weeks from receiving your statement.
Secured Loan:
Any loan which gives the lender the right to take possession of assets belonging to the borrower should the loan not be repaid on schedule.
Securities:
Securities can include notes, stock, treasury stock, preorganization subscriptions, voting trust certificates, partnership interests, investment contracts, and certificates of interest in oil, gas, or mineral rights. Both the offer and sale of securities are regulated by state and federal governments, and care must be taken to comply with applicable laws and regulations.
Security:
There are two business-related meanings:
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- Something which is pledged by a borrower to a lender as collateral for a loan. Should the loan not be repaid, the lender has the right to take the security in place of the repayment. The security for a mortgage is the property that has been purchased with the mortgage loan.
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- A document which demonstrates its holder’s right to a share in a company’s equity or to the ownership of one of its bonds. In this sense the word is generally used in the plural (that is, securites).
Seed Money:
The first (small) investment in a project. Seed money is usually designed to enable the project’s backers to prepare a business plan and to do enough market research to persuade a sizeable financial institution to back the project more fully.
Segmentation:
The breaking up of a market according to the characteristics of its consumers. This enables a product to be sold in different ways to different ways to different segments of its market. Selling pensions to university students requires a dramatically different approach from the way in which they are sold to middle-aged managers.
Self-employed:
Someone who works for themselves and is not employed by an organization. Self-employed people have to handle their own tax affairs and have no perks.
Self-regulation:
The regulation of an industry done by the industry itself, as opposed to the regulation that is done by government. Industries have an interest in regulating themselves to ensure that no rogue in their midst blackens the reputation of all of them. Most of them prefer to set the rules by which they are judged themselves rather than have the government do it.
Seller’s Market:
A market in which demand oustrips supply and in which sellers can get rid of as much product as they can lay their hands on.
Sem Fabrica:
Spanish for “without a factory”, an expression used widely in Latin America to desribe elderly entrepreneurs who have sold their businesses and are now living comfortably on the proceeds.
Semiconductor:
A semi-efficient conductor of electricity, something that conducts less well than metal but better than an insulator (such as rubber). Semiconductors such as silicon are the bedrock of the computer industry.
Senior Debt:
A loan which has first call on a company’s assets in the event of a liquidation of the company. A secured loan is senior debt; an unsecured loan is known as junior debt.
Sensitivity Analysis:
Calculation of the extent to which one business variable is affected by changes in another. For instance, calculating the percentage increase in sales for each 1% reduction in the price of a product.
Server:
A computer that hosts information available to anyone accessing the Internet.
Service Company:
A company located in an offshore financial center to provide management, invoicing and other services for client companies located in other countries. Initially used to advantage double taxation treaties. Service Companies are now frequently used to facilitate flight capital outflow and are often involved in money laundering schemes.
Service Economy:
An economy in which service industries (those which supply services rather than finished goods or raw materials) predominate. Most rich countries are service economies today.
Services:
Non-tangible benefits supplied by businesses to consumers. Airplanes are products; flights on airplanes are services.
Set-Off:
The attempt by one party to a contract to reduce its obligations under the contract by the amount of a counter-obligation arising elsewhere. Thus if A owes B $1m for one deal and B owes A $100,00 for a completely different deal, A might pay B $900,000 and call it quits. But what if B does not acknowledge the debt to A?
Settle:
To create or establish an offshore trust. Done by the settlor (UK and Channel Island term) or the grantor (U.S. and IRS term).
Settlement:
Exchanging money or securities for securities.
Settlement Deed (/Declaration of Trust):
It specifies the property which is to be placed in trust, the way in which the trust funds are to be invested and administered, to whom the income is to be paid or whether it is to be accumulated, how long the trust is to continue and to whom the trust property will be ultimately contributed.
Settlor:
The person who creates a trust.
Several Liability:
The liability of group of people for which they can only be sued individually, and then only for that part of the overall liability incurred by each of them. Several liability thus creates several liabilities.
Severance Pay:
An amount of money to which employees are contractually entitled if their employment is brought to a premature end through no fault of their own. Severance pay is often related to the individual employee’s length of service with the employer.
Shadow Director:
A person who is not a director of a company but under whose shadow the official directors operate. Shadow directors are often the founders of companies which have gone public. They have been removed from the board, but they will manage to exert considerable influence over it.
Share:
A portion of something, in particular of the equity of a company.
Share Certificate:
Documentary evidence of the holder’s ownership of a share in the equity of a company.
Share Index:
An index, such as the FTSE 100, of the prices of leading shares quoted on a particular stockmarket. Their price movements act as a proxy for the market as a whole.
Share of Stock:
Represents ownership in a corporation. There exist several different types (common and preferred) and classes of shares with different privileges and rights, such as registered shares (with or without par value), preference shares, (non-)redeemable shares, shares with or without voting rights and bearer shares etc.
Share Option:
An option to purchase shares at a given price and within a specified period of time. Share options are frequently offered to senior managers as part of their remuneration packages. The prices at which the options can be exercised ensure that the managers make a sizeable capital gain if the company performs well while they are running it.
Share Premium:
The amount of money that a company raises from a share issue that is in excess of the nominal value of the shares.
Shareholders/Stockholders:
Shareholders, who own the issued stock of a corporation and are thus its owners, elect directors and vote on fundamental matters, e.g., merger, sale, dissolution. Shareholders do not own specific corporate property; they merely own an interest in the corporation. Some state statutes use the term “shareholder”; others refer to “stockholders.”
Shareholders’ Funds:
The total value of the shareholders’ stake in their company. Shareholders’ funds are equivalent to the company’s capital and reserves. Virtually the same as net worth.
Shelf Company:
A company that previously has been organized with designated capital and registration cost paid and is placed on an inactive basis, with annual registration, capital and stamp duty fees currently paid but shares held in bearer form and the directors and officers substituted at the time the company is taken off the shelf and becomes active.
Shelf Life:
The amount of time that a product can be left on the shelf in a retail outlet and still be in a fit condition for consumption. The expression is used particularly with respect to foodstuffs.
Shell Company:
A company that has no significant assets. Its purpose is to act either as a vehicle for legitimate borrowing, or as a way to launder money and/or keep it out of the eyes of the taxman. Shell companies also provide a way for businesses to get a listing on a stock exchange without having to go through the listing procedure.
Shift:
A number of employees who work together for a fixed period of time. For example: “Today she’s working on the night shift.” Shift work occurs in manufacturing industries where equipment needs to be kept running for 24 hours a day, either because demand is exceptionally high or because it is expensive to shut the equipment down and restart it.
Shipping:
Owing to the innate mobility of the shipping industry it is common for ship owners and operators to have recourse to tax havens. Frequently the ownership, operation, administration and registration are situated in carefully chosen (and often different) jurisdictions in order to keep global tax burdens at a low level.
Shipping Agent:
An agent who handles the shipping of goods and raw materials for a manufacturer. In this context, the word shipping covers all forms of transport, not just ships.
Ship’s Manifest:
A list, kept by a ship’s captain, of all the different cargo carried on his ship.
Shop Floor:
The physical location of a company’s manufacturing processes; also the complete set of all such places. For example: “He was a shop-floor worker until he got promoted to head office.”
Shop Front:
The most visible evidence of an organization’s existence. For example: “The company’s office in Manhattan is just a shop front. The real business goes on in Milwaukee.”
Shop Steward:
The appointed representative of a trade union. Each significant business unit where a union is represented has its own shop steward. He or she acts as an intermediary between the union and the workers on the shop floor.
Short:
An investor is said to be short in a stock when his supply of it plus his commitments to buy it in the future amount to less than his commitments to sell it in the future.
Shortfall:
The amount by which an actual figure falls short of a targeted figure. For example: “The shortfall on the six-months profit figure was greater than expected.”
Short-term:
A period of time of 12 months or less. In accounting, a liability is short-term if it is going to arise within the current accounting period, that is, in less than 12 months. A short-term loan is one with a maturity of 12 months or less.
Shrinkage:
Any stock in a retail outlet that is not exchanged for cash. Shrinkage may occur through theft, damage, or shoddy workmanship.
Shutdown:
The closing down of a sizeable manufacturing operation because:
-
- There is a shortage or orders;
-
- The equipment needs retooling; or
-
- The workers have gone on strike.
SIC:
Short for Standard Industrial Classification, a widely used system for classifying industrial products. It is based on a six-digit number in which the first two digits identify a broad industry sector, the second two define the sector more narrowly, and the third two define the individual product.
Sight:
If something is payable on sight it means that it is payable on demand. A sight deposit, for example, is a deposit at a bank that the depositor can withdraw immediately and at any time.
Silicon Valley:
Popular name for the valley running between San Jose and San Francisco in California where many pioneering computer companies grew up. The computer industry relies heavily on silicon as a semiconductor.
SIM card:
The SIM (Subscriber Information Module) card – a.k.a. “smart card” – holds all of a subscriber’s personal information and phone settings. In essence, it is the subscriber’s authorization to use the network. It also holds the phone number, personal security key and other data necessary for the handset to function. The card can be switched from phone to phone, letting the new phone receive all calls to the subscriber’s number.
Simulation:
An attempt to represent aspects of the real world (economic aspects in particular) by means of mathematical models. Simulation is heavily dependent on the use of advanced computer programs.
Sinking fund:
A fund into which money is transferred at regular intervals to meet an expected future liability.
SITA:
Societe Internationale Telecommunications Aeronautiques Societe Cooperative. An international company owned by airlines that provides communication services.
Skill:
Proficiency at a particular task. A skilled workforce is one whose members have special expertise at something or other. An unskilled workforce consists of people who have had no training or relevant experience since leaving school.
SLC:
Stand-by Letter of Credit. A financial guarantee or performance bond issued by a bank on behalf of a customer and regulated by the ICC-500 rules.
Sleeping Partner:
A partner in a business who is not involved in the day-to-day running of the business. Although the expression originally applied only to individuals who worked in a partnership, now it applies to all forms of business, with the word partner being used loosely.
Slogan:
A memorable phrase or sentence about a product that helps to keep the product in consumers’ minds.
Slump:
A severe economic recession that falls short of a depression. A slump in sales is a short sharp drop in turnover.
Smart:
Any product with some sort of embedded electronic intelligence is described as smart. A smart card is a credit card with an embedded microchip that enables it to manage a credit facility. Smart refrigerators would tell the milkman when you were running out of milk.
SME:
Short for small and medium-sized enterprises. In Europe it has become a general term for all small businesses. The SME sector is universally recognized as having special needs. Although it is innovative and nimble, it is hampered by not having access to economies of scale.
Smurfing:
Breaking large sums of money into small deposits through anonymous bank accounts and offshore “shell” companies into order to dodge banks to report these transactions.
Soap:
A serialized television drama that (originally) was sponsered by a single company for advertising purposes. The first soaps were sponsered by soap manufacturers.
Société Anonyme:
The French equivalent of a limited company, an indication to the general public that a company enjoys the benefit of limited liability. Usuallly abbreviated to SA.
Social Engeering:
Posing as someone else to obtain the information you need.
Sociedad Anonima:
A company established under Spanish Law. The important characteristic is that the liability of the shareholder is limited up to the amount of their capital contribution.
Societe Anonyme:
A company established under French Law. The important characteristic is that the liability of the shareholder is limited up to the amount of their capital contribution.
Sociedades Gestoras de Participatoes Sociais (SGPS):
Madeaira holding company specifically designed to take advantage of European Union Directive 90/435.
Soft Currency:
A currency that is expected to depreciate in value against other currencies. The opposite of hard currency.
Soft Loan:
A loan that is granted on terms that are more generous to the borrower than those that could be obtained in the open market.
Soft Market:
A market in which supply exceeds demand; one that favours buyers (who hold off in expectation of the price falling) rather than sellers.
Soft Sell:
A gentle attempt to sell something to a consumer, making no effort to hurry the consumer into making a decision. The opposite of a hard sell.
Software:
The electronic programs inside a computer’s hardware that enable it to carry out different tasks.
Sogo Shosha:
The unique trading companies that sit at the heart of all Japanese zaibatsu. Their role is to act as the group’s agent in all its trading activities. They also serve as an intelligence-gathering operation for the group.
Soho:
The acronym for small office, home office, a recently identified industrial sector consisting of home workers and of people who work in organizations with one or two others. Soho is a dynamic, fast-growing sector.
Sold as Seen:
When something being sold comes with no assurances at all from the seller. The buyer must beware – or caveat emptor.
Sole Trader:
A business that is not incorporated and that is run by its owner. The wole owner of the business has sole unlimited liability.
Solvent:
Having the ability to pay debts as and when they become due. The opposite of insolvent.
SOPARFI – The Luxembourg Societe de Participation Financiere:
Luxembourg has recently extended its participation exemption regime and SOPARFIs are now subject to the normal rate of national and municipal Luxembourg tax except that, subject to the fulfillment of certain conditions, dividends and capital gains are not taxed. Such companies are therefore able to take advantage of the EU parent/subsidiary directive 90/435. A SOPARFI is not excluded from the scope of the tax treaties concluded by Luxembourg, and this may make this type of company extremely attractive for certain tax planning exercises. Luxembourg has signed tax treaties with most EU countries, Canada, Czech Republic, Hungary, Japan, Korea, Morocco, Norway, Slovak Republic, Switzerland and the US.
Sources and Uses of Funds:
An accounting statement that shows all the cash that came in and out of a business during a fixed period (usually a year). In some countries such statements are required by law to be submitted as an integral part of the company’s annual accounts.
Sovereign Risk:
The risk that a country will not pay its obligations as and when they fall due for polical, military or economic reasons.
Spam:
The e-mail equivalent of junk (snail) mail.
Span of Control:
The extent of an individual manager’s responsibility, as a measured (usually) by the number of people reporting to him. Some argue that this should be no more than six; others think that 20 is not too many.
Sparbuch:
An Austrian and German type of bank/building society account. Ownership is certified by a book and stamp – not by identification. They do still exist.
Special Resolution:
A resolution proposed at a company meeting that falls outside the company’s normal business. For instance, a resolution that a director charged with fraud should stand down from the board would be a special resolution.
Specialization:
The process of focusing on a narrow range of things. Specialization by a company involves it in manufacturing a smaller and smaller product range, or in focusing on one narrow aspect of the manufacturing process. In the case of an individual, specialization means concentrating on a narrower range of skills, and mastering them to a greater degree.
Specification:
The detailed description of what a customer wants done (and, sometimes, of the way in which it is to be done) that is given to a supplier; for example, to the printer of this book. The supplier then quotes a price on the basis of the “spec”.
Speculator:
Someone who buys something with the aim of making a quick (and substantial) profit from selling it soon after. In particular, investors in the stockmarket whose interest is in making a quick turn, not in owning corporate assets.
Spiders:
An automated program which searches the Internet.
Spin-off:
A corporate division or subsidiary that is established as a separate corporate entity. Traditionally, the shares in a spin-off are allocated pro-rata to the shareholders of the parent company out of the which it has been spun.
Split Commission:
The sharing of a commission between an agent who carries out a particular piece of business (a broker who handles a stock transaction, for instance) and the person who introduced the business to the agent.
Split Shift:
A shift that is broken up into two spells of work separated by a period of time for which the worker is unpaid. Split shifts are suitable for school bus drivers, for example. They need to work in the morning when children go to school and in the afternoon when they come back, but not in between.
Spokesman:
A person who speaks on behalf of a company, or on behalf of its products. Usually someone is employed specially for the task, a person skilled in making muck smell of musk. Occasionally, well-known personalities are adopted to act as spokesmen, such as fashion models and athletes.
Sponsor:
There are two business-related meanings:
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- A big investor whose declared support for a particular issue of securities encourages others to buy the securities.
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- The subsidising of an event by a company for the purposes of advertising. The event may be sporting (as in the Whitbread round-the-world yacht race) or it may be a television program.
Spoofing:
The practice of faking the return address of a spam e-mail, so you won’t be able to trace who sent it, or the subject line, so you will open it.
Spot Check:
An unannounced random check to see if work is being done correctly. Spot checks can be used as part of a program of quality control.
Spot Market:
A market in which the prices quoted for goods and services are for immediate payment and for immediate delivery. The original commodity and currency markets are examples of spot markets.
Spot Price:
The price of something if it is bought on the spot, and for cash.
Spread:
The difference between one item and another, most frequently the difference between a buying price and a selling price. A bid-offer spread, for example, is the difference between the price that a buyer is prepared to bid for a security and the price for which a seller is prepared to offer the same security.
Spreadsheet:
A computer program consisting of the relationships between a number of mathematical variables (like prices and costs). A change in one of the variables can be fed into the program and its effect on all the others calculated immediately.
Squeeze:
A time when the supply of something is scarce. In particular, the supply of money, which leads to a credit squeeze.
Staff:
In general, the employees of an organization. The origins of the word lie in military history when staff carried out the centralized administrative functions and the line consisted of the troops who actually engaged in battle.
Stag:
An investor who speculates that a new issue of securities will be oversubscribed. Stags buy more securities than they really want in the belief that the heavy demand will cause the issue’s share price to rise sharply as soon as it starts trading.
Stake:
Any substantial holding of shares in a company. The term comes from pioneering farmers who would put stakes in the ground around land that they laid claim to.
Stakeholder:
Anyone who has a “stake” in a company, including employees, suppliers and customers as well as shareholders. Some spread the stakeholder net even wider to include the local community.
Stamp Duty:
A tax whose payment is acknowledged by the affixing of stamps to an official document.
Stand-alone:
A business process, or a computer workstation, that is independent of any other. In other words, a computer that is not networked to others, or a production process that is not dependent on inputs from elsewhere within the organization of which it is a part.
Stand-by Facility:
A loan that is available to a borrower for a certain period of time if certain conditions are met. In particular, a loan from the IMF to a member country which is made available, usually for up to three years, for as long as the country meets certain economic and financial criteria.
Standard:
A measure of something that acts as the basis for judging other things of the same type. For example, the time that it takes a car to accelerate from stationary to 60mph is a standard measure of acceleration.
Standard Deviation:
A statistical measure of the extent to which a sample of data spread out from a central core figure (usually the average of the sample). The extent, for example, to which daily sales figures for cornflakes deviate from the average daily figure.
Standard & Poor’s:
One of the world’s most influential credit-rating agencies.
Standardisation:
The process of reducing variety in manufacturing or services to gain economic benefit. The term refers in particular to the process of introducing common specifications for the production of equipment, especially electronic equipment, so that consumers can use any type of software on any type of hardware.
Standing Order:
An instruction to a financial institution to make a fixed payment to a named creditor at regular intervals, usually monthly.
Start-up:
A business that is just beginning. Its start-up cost is the money that it needed for it to open its doors: to install telephones, to buy equipment and to hire staff.
Statement:
A written summary of financial transactions. They may be transactions that take place in and out of a bank account over a given period, or they may be the transactions carried out by a corporation during a given period.
Statute of Elizabeth:
The statute under English Common Law governing fraudulent conveyances to avoid creditors. The Statute was incorporated into the English Law of Property Act 1925 and has been replaced by the Insolvency Act 1986 in the United Kingdom. Under the Statute, a transfer of property to a trust can be voided by creditors based on the subjective intent of the grantor. The Statute has been adopted in all common law countries, but has been replaced by specific legislation with more objective criteria in countries implementing asset protection trust legislation. More recently, the Statute has been replaced in the Cook Islands by the International Trusts Acts 1984, in the Cayman Islands by the Fraudulent Dispositions Law 1989, in Gibraltar by way of amendments to the Bankruptcy Ordinance 1934 and in the Bahamas by the Fraudulent Dispositions Act 1991. Originally the penalty for a violation under the Statute of Elizabeth was the forfeiture of one half of the property or assets to the Government and one-half to the injured creditor, along with six months’ imprisonment “without bail or mainprise.” While most common law jurisdictions practice the Statute of Elizabeth concepts with modifications, each State of the United States has adopted either (1) a variation of the Statute or the Statute as part of the common law, or (2) the Uniform Fraudulent Conveyance Act or the Uniform Fraudulent Transfer Act, with adjustments as seen fit.
Statutes:
Statutes are laws passed by the state legislature or U.S. Congress. Business corporation laws are statutes. Statutes often authorize an administrative agency to declare regulations which are used to supplement the statute. In the event of a conflict, statutes control over regulations.
Statutory Audit:
The audit of a business that is required by the laws of the country in which the business is registered.
Statutory Notice:
The amount of time decreed by law that must be allowed to pass between the announcement of an intention to end a contract and the actual ending of the contract.
Stepping-Stone Country:
A country in which a screen company is incorporated.
Sterling Area:
The area in which the pound sterling is legal tender, namely the Scheduled Territories. In general, the United Kingdom does not impose restrictions on exchange transactions or payments and receipts between residents of the United Kingdom and residents of the Scheduled Territories. Exchange control applies mainly to transactions with residents of countries outside the Scheduled Territories.
Steward:
Originally, a person who managed the domestic affairs of a family, looking after their estates and so on. Hence a person who manages a business on behalf of its owners, or one who manages the affairs of passengers on trains, boats or planes. A company’s directors can be said to be stewards of the company on behalf of its shareholders.
Stiftung:
Foundation, a legal entity established in Liechtenstein with corporate personality and founded in order to receive a permanent transfer of assets by way of settlement. Do not have shares.
Stock:
Stock represents ownership in the corporation and is often evidenced by a stock certificate. Stock can be common or preferred, voting or nonvoting, convertible, redeemable, and so on. The articles of incorporation will determine the designations and classifications of stock.
Stock Exchange:
A place where securities are traded.
Stockholders:
See Shareholders/Stockholders.
Stockholders’ Annual Meeting:
“The parliament”/”ultimate authority”: 1) approves annual accounts of both profit and loss and the company’s assets and liabilities; 2) makes policy decisions on future business actions; 3) personnel decisions (president, secretary and treasurer – to be retained or replaced – the same goes for whether to retain or replace the auditors and directors; 4) constitutional issues: should the Articles of Association be modified or changed? should quorum requirements be changed? – etc.
Stock Option:
Another term for share option.
Stock Purchase Agreement:
A stock purchase agreement is an agreement between the shareholders and the corporation. It provides a mechanism to regulate the transfer and sale of corporate stock. Often, a stock purchase agreement will provide a right of first refusal in favor of the corporation or remaining shareholders in the event of a proposed sale of stock by a shareholders. A stock purchase agreement can also provide for a purchase upon the death, disability, retirement, discharge, resignation, or bankruptcy of a shareholder.
Stock Split:
The dividing up of a company’s shares into a larger number. Each shareholder in, for example, a three-for-one split gets three shares for each one that they hold. Each of the new shares is worth one-third of the old one. No new value is created. A stock split makes shares with a high denomination more marketable. It is easier to sell three $35 shares than one $105 share.
Stockbroker:
A person or firm that acts as an agent for investors in buying and selling securities on a stock exchange.
Stockmarket:
An organized market in financial instruments which signify the ownership of capital – that is, in bonds, stocks and shares.
Stockpile:
To hold on to unnecessarily large quantities of something in order to benefit later from price changes or from shortages supply.
Stockroom:
The place where an organization stores its inventory.
Straight Line:
The depreciation of an asset by an equal amount each year over the full economic life of the asset.
Strategic Alliance:An alliance formed between two or more organizations with a specific strategic goal in mind.
Strategic Planning:
The process of drawing up a strategy.
Strategy:
A policy designed to achieve a number of specific objectives. The term originates from a Greek work meaning generalship, the art of mastering the battlefield.
Stress:
The pressure on individuals to perform. Stress in the right amount is essential to good performance, on the sports field as much as in the boardroom. Too much stress, however, causes physical illness and absenteeism.
Strike:
The deliberate withholding of their wages or an improvement in their working conditions.
Strike:
The deliberate withholding of their labour by a group of workers as a means of persuading an organization to take a particular course of action. The action usually involves an increase in their wages or an improvement in their working conditions.
Strike Price:
The price at which an option states that a security can be bought or sold in the future.
Strip:
The process of separating (for trading purposes) the interest payments due on a bond from the capital payments. Bonds that have been so separated are called strips, an acronym for Separate Trading of the Registered Interest and Principal of Securities.
Structure:
Any building, and hence the way in which an organization builds its lines of command and communication among its various employees.
Style:
The intangible qualities of an organization which uniquely differentiate the way in which it does things. The style of an organization remains the same even when all its employees change.
Sub-Account (Segregated Account):
When a bank acts on behalf of an intermediary, a sub-account is opened for each of the intermediary’s clients, to hold funds in their name. The account can only be operated, and the funds can only be used, by the terms of a written agreement (Power of Attorney) that is given to, and approved by, the bank. The deposited funds are not considered intermediary assets nor bank assets if a safekeeping receipt is issued by the bank.
Subcontractor:
Any individual or firm to whom a person who has a contract to do a piece of work passes on some of that work. A subcontractor remains legally responsible for the work being done according to the original contract.
Sublease:
A contract to lease something from someone who is already leasing it from someone else.
Subliminal Advertising:
The presentation of advertising in such a way that the recipient is not aware that it has been presented, as, for instance, on a single frame of a film. Subliminal advertising was once considered to be dangerously subversive and was made illegal in the US. Nowadays most people are sceptical about its effects.
Subordinate Debt:
Any debt that can be settled only after other debts have been paid. Such a debt is subordinate (or junior) to the other (senior) debt.
Subpart F Income (U.S.):
The section of the American tax law of 1962 containing anti-tax haven measures in relation to specified companies known as “controlled foreign corporations”.
Subscription Price:
There are two business-related meanings:
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- The cost of buying products or services that are to be supplied at regular intervals in the future, commonly newspapers or magazines. Subscriptions are usually sold at a large discount to the face value of the products.
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- The price at which a new issue of securities is offered to existing shareholders in a rights issue.
Subsidiary:
A company that is more than 50% owned and controlled by another company.
Subsidiary Company:
A subsidiary company is a company under the control of another company through stock ownership.
Subsidy:
An economic benefit bestowed on a group of individuals or corporations by a government to encourage a particular form of economic behaviour. Governments often give subsidies to their country’s exporters and to companies that invest in under-developed regions.
Substantial Holding Company:
A particular type of holding company established in the Netherlands exempted from tax on income from investments under specified conditions.
Substantial Transformation of Property:
Purchases of personal property by a foreign subsidiary of a United States parent corporation in which the goods are substantially transformed prior to sale and thus are treated as having been manufactured, produced or constructed by the selling corporation. Generally when the conversion costs representing direct labor and factor burden are 20% or more of the cost of goods sold, these will constitute the manufacture, production, or construction of property needed in order to qualify for non-Subpart F income (that is not taxed currently inthe United States) and the sale of the product is treated as manufacturing income since it passes the “substantial manufacture” test.
Succession Planning:
The process of preparing for another person to succeed the incumbent in a senior position. It has been suggested, rather extremely, that succession planning is the most important task of any CEO. Succession planning has traditionally proved to be particularly difficult in a family firm.
Suffix:
The name/abbreviation of letters after the company name to denote limited liability, for example: Limited, Corporation, Incorporated, Société Anonyme (France), Société par actions (France), Sociedad Anonima, Sociedade Anonima, Stiftung (Liechtenstein), Limitada, Aktiengesellschaft (Germany), Naamloze Vennootschap (The Netherlands), Aktieselskab (Denmark), Sociedad Berhad Anonima (Western Samoa), Berhad (Labuan), Sociedad Anónima de Inversión (Uruguay), AG (Germany), ApS, A/S (Denmark), BV (The Netherlands), Corp., Est. (Liechtenstein), GmbH (Germany), Inc., KFT (Hungary), LDA, LLC, Ltd., PLC (United Kingdom), RT (Hungary), S.A., S.A.R.L. (France), S.A.F.I. (Uruguay).
Suffix (Internet Domain Name):
The three digit suffix of a domain can be used to identity the type of organization. Possible “Suffixes” are: .com=Commercial, .edu=Educational, .int=International, .gov=Government, .mil=Military, .net=Network, .org=Organization.
Suggestions Box:
A sealed place where the employees of an organization can put suggestions (anonymously if they wish) about ways in which the organization can be improved.
Sunrise Industry:
An industry that is at the beginning of its economic life and is growing fast. Such industries today would include biotechnology and electronic commerce.
Sunset Industry:
An industry that is near the end of its economic life, such as the car-phone industry, which is being made extinct by the spread of mobile phone.
Super Captives:
These are offshore excess captive insurance companies formed by United States corporations banding together, usually in associations but sometimes in product or manufacturing groups, to cover their larger liability claims in response to the increasing shortage of available risk liability insurance. Because of the worsening world reinsurance capacity, in recent years there has been a change in composition from single parent captive companies to group or association-type domestic and offshore insurance companies, with one out of two new captive formations of the association structure.
Supervisory Board:
A second board required in certain countries, such as Germany. The supervisory board consists of a number of non-executive directors and is charged with keeping an eye on the management board (which consists of executive directors). In particular, it watches to see that the interests of shareholders and creditors are not compromised in management’s pursuit of its own interests.
Supplier:
Someone who supplies an organization with needed goods or services.
Supplier Credit:
A loan to an exporter enabling it to finance an order from a buyer in another country. The loan may be guaranteed by the export credit agency of the exporting company’s country.
Supply:
The other fundamental concept in economics. The extent to which producers are prepared to manufacture goods and services at different prices.
Supply Chain:
The flow of materials in and out of an organization, their movement through the organization during the production process, and their final delivery (as a product) to a point of sale.
Suspense Account:
A bank account that is set up to hold funds temporarily until they can be transferred to their rightful home. Their rightful ownership may be in question, or the funds may be arriving in small amounts that are being collected until they can be transferred more economically as a single item.
Suspension:
Disciplinary action taken against an employee that falls short of dismissal. Suspension involves the employee in not turning up to work for a while, usually without pay.
Sustainable Development:
Economic development that does not exhaust in the short term those resources that will enable the development to continue in the long term.
Swap:
A transaction in which assets change hands without the intermediation of money. The assets may be financial. For example, western central banks have an agreement to swap currencies among themselves should they need to support each other’s exchange rates.
Sweatshop:
A small manufacturing plant in which cheap labour is made to work long hours at exhausting task. Sweatshops are associated in particular with the garment industry.
S.W.I.F.T.:
Society for Worldwide Interbank Financial Telecommunications.
Swing Producer:
The most dominant member of a cartel, and the one which is expected to support the weaker members when they have difficulty in living within the cartel’s terms. The swing producer either boosts supply by adding extra production at short notice, or reduces it by withholding production. Within OPEC, the oil-producers’ cartel, Saudi Arabia plays the role of swing producer.
Syndicate:
A group of companies or individuals who get together to carry out an activity that each of them would not be prepared to carry out on their own. Financial institutions, for example, get together to give syndicated loans to borrowers whose financial requirements are far greater than any one of the institutions would be prepared to shoulder alone.
Syndicat:
The French word for trade union.
Synergy:
The idea that companies can make 2+2=5 by combining operations in imaginative and cost-saving ways. Hence if one computer manufacturer buys another and makes savings by combining overheads (while keeping the combined sales figure of the two firms constant) it is said to have created synergy.
System:
The orderly arrangement of parts into a single whole; generally, a single whole that has a single purpose. Hence the human central nervous system is an arrangement of body parts designed to gather and transmit messages to and from the nerves. Likewise, a computer system.
-T-
Tactic:
One of a series of short-term steps that must be taken to fulfil a longer-term strategy.
Take-home Pay:
The amount of pay that employees actually take home; that is, their gross pay net of tax, national insurance and other deductions that are made in advance of payment.
Takeover:
The formal process whereby one company buys another. In the case of a quoted company this involves following the often complex rules of the stock exchange on which the company is quoted.
Tangible Asset:
Literally, an asset that can be touched. Buildings, machines and cash are all tangible assets.
Tangible Net Worth:
The net worth of an organization minus its intangible assets, things like goodwill and the value of patents. Tangible net worth gives a more immediately realizable value of the organization.
Target Market:
The specific market at which a company aims its products; for example, teenagers, elderly widows, product does not have a target. It hopes that everybody wil buy its merchandise.
Tariff:
There are two meanings:
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- An ad valorem tax imposed on imported goods, often as a form of protectionism.
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- A schedule of prices.
Tax:
The due that are levied on individuals and corporations to pay for the running of governments.
Tax Assessment:
A formal agreement between a taxpayer and a government as to how much tax is due from the taxpayer for a particular period.
Tax Avoidance:
This term implies that a taxpayer has arranged his affairs in such a way either that his tax burden is less than it would otherwise have been or that no tax is payable as a result of such arrangement. The term is generally employed so as to indicate that the taxpayer has acted in a lawful manner and differs fundamentally in this regard from the concept of “tax evasion” which is illegal.
See also: Anti-Avoidance Measures; Tax Evasion; Tax Shelters.
Tax Clearance Certificates:
A certificate issued by an Income Tax Department confirming that an individual departing from a country has fulfilled all his income tax obligations and has no arrears. The certificate must be shown to customs and emigration authorities upon departure from the specific country.
Tax Deductible:
Any expense which can be paid for out of untaxed income without incurring a tax liability.
Tax Evasion:
Fraudulent or illegal arrangements made with the intention of evading tax, e.g. by failure to make full disclosure to the revenue authorities. The term denotes those activities deliberately undertaken by a taxpayer to attempt to free himself in an illegal manner from the tax to which he is subject. Tax evasion embraces such activities as sham transactions and the falsification of tax returns or of books and accounts. The element of illegality distinguishes tax evasion from tax avoidance.
See also: Tax Avoidance.
Tax Exempt Company (as found in the Channel Islands and the Isle of Man):
This is a company designed for companies and individuals who are foreign to the jurisdiction in which it is registered, providing a maximum of privacy, combined with comprehensive freedoms from local taxation. Tax Exempt companies (often referred to simply as Exempt Companies) pay a tax-exempt fee each year. This fee is a fixed annual fee exempting the company from further tax liabilities in the jurisdiction in which it is registered. It also has to pay annual filing fees (governmental fees) and domicillary fees (service provider’s fees) in order to remain registered. The relevant tax-exempt fee for the relevant jurisdiction is denoted in the e-offshore list for every jurisdiction.
Tax Haven:
The term Tax Haven is generally used to refer to a jurisdiction: 1) where there are no relevant taxes; 2) where taxes are levied only on internal taxable events, but not at all, or at low tax rates, on profits from foreign sources; or 3) where special tax privileges are granted to certain types of taxable persons or events. Such special tax privileges may be accorded by the domestic internal tax system or may derive from a combination of domestic and treaty provisions. (Where tax benefits are part of an economic development programme the term tax incentives is usually used).
Simply stated, a tax haven is any country whose laws, regulations, traditions, and, in some cases, treaty arrangements make it possible for one to reduce his over all burden.The tax havens of the world broadly may be classified into six separate categories: 1) no-tax havens (e.g., Anguilla, Bahamas, Bermuda, Cayman Islands, Nevis, Turks and Caicos, St. Vincent and Vanuatu); 2) countries taxing only local income (e.g., Costa Rica, Liberia, Panama, Gibraltar and Hong Kong); 3) low-tax havens with treaty benefits (e.g., the Netherlands, the Netherlands Antilles, British Virgin Islands, Luxembourg and Singapore); 4) countries offering special privileges (e.g., Channel Islands and the Isle of Man); 5) tax havens for individuals (e.g., Andorra, Sark, Campione d’Italia and Monaco; 6) tax havens for International Business Companies (e.g., Antigua, Barbados, Grenada, Jamaica and Montserrat).
See also: The Offshore Manual & Directory.
Tax Holiday:
A designated period of time, whose duration usually is five to ten years but in some instances is up to 30 years, in which the Government exempts or reduces from taxation income, sales, capital, property, customs or other taxes. Today the trend is for the tax holiday period to be limited in urban areas and longer in suburban and rural districts.
Tax Incentives:
The term Tax Incentives is used when tax benefits are part of an economic development programme. Most tax incentive measures fall into one or more of the following categories: tax exemption (tax holiday);
deduction from the taxable base; reduction in the rate of tax; tax deferment.
Tax Loophole:
An unintended benefit permitted under the tax laws of a country when previously the Government unknowingly approved legislation that encourages a taxpayer to take advantage of a tax reduction or exemption, which the legislators had foreseen.
Tax Loss:
Any loss made by a company which it is able to transfer to another accounting period and to set off (for tax purposes) agoinst profit arising during that period.
Tax-loss Company:
A company that has accumulated losses which are not allowed for income tax purposes but may be attractive to another company so that a takeover or merger of the company suffering a loss will place the latter on a profitable basis. In this way the losses are used to reduce or eliminate the tax liability of the resulting company when it seubsequently shows profits.
Tax Planning:
See International Tax Planning.
Tax Return:
The form on which the details of a taxpayer’s income, expenditure and capital gains are sent to the tax authorities.
Tax Shelter:
The term “tax shelter” is sometimes employed to refer to those jurisdictions where taxes are levied only on internal taxable events, but not at all, or at very low rates, on profits from foreign sources.
In domestic tax law the term applies to a variety of devices which allow taxpayers to deduct certain artificial losses, i.e. losses which are not really economic losses but represent losses which are available as deductions under the current tax laws. These artificial losses may be offset not only against income from the investment out of which they arise, but also against the taxpayer’s other income, usually from his regular business or professional activity.
Tax Sparing:
The sphere of application of a tax incentive may be extended by way of a tax-sparing clause in a treaty between a capital importing country and a capital exporting country. Such clauses allow residents of the capital exporting country a credit against domestic tax for profits or gains derived in the developing country in respect of which all or specified taxes are subject to exemption or reduction in the latter country.
Normally tax treaties are not concluded between high tax jurisdictions and tax havens. In line with this approach certain tax treaties specifically exclude from their scope entities, which benefit from specially favored tax treatment (e.g. the exclusion of Luxembourg holding companies from the provisions of tax treaties concluded with Luxembourg). However, certain colonies or former colonies of the United Kingdom and the Netherlands benefit from extensions (with or without modification) of treaties concluded respectively by the United Kingdom and the Netherlands. The existence of such treaty links may be of considerable value with regard to tax haven operations taking place in jurisdictions such as the British Virgin Islands and the Netherlands Antilles.
Tax Treaties:
Tax treaties are international agreements or conventions concluded with the object of eliminating double taxation by the contracting states. International double taxation may be loosely defined as the imposition of comparable taxes in two (or more) states on the same taxpayer in respect of the same subject matter and for identical or overlapping periods. The most harmful effects of double taxation are on the exchange of goods and services and on the movement of capital and persons.
Team-building:
Techniques for improving the ways in which individuals work together in teams. Team-building aims to make teams more than the sum of their parts.
Teamwork:
Work that is done in teams. An increasing amount of workplace activity consists of teamwork.
Teaser:
A short advertisement that does not name the product being advertised, but merely hints at more advertising to come. Teasers are often used to launch new products.
Technology:
The use of science and scientific methods to improve performance.
Technology transfer:
The transfer of a company’s technology in return for access to a market. Technology transfer is frequently promised by western companies as a way of gaining access to developing-country markets.
Teleconference:
A prolonged telephone conversation between more than two people situated in more than two places. Teleconferences are a substitute for meetings in cases where the participants cannot easily get together in the same room at the same time.
Telemarketing:
The use of the telephone as a channel for marketing goods and services.
Teleworker:
The practice of working at a distance from a head office or workstation via modem links and telecommunications.
Telex:
An out-of date method of transmitting typed messages via telephone lines. The telex was largely made redundant by the fax machine.
Temp:
Someone who is temporarily employed by an organization to do a set task, often secretarial, for a short time.
Tenant:
Somebody who holds a right to occupy land or buildings that are owned by somebody else.
Tenant:
Somebody who holds a right to occupy land or buildings that are owned by somebody else.
Tender:
To make an offer (in writing) to do a certain specified piece of work for a specified price.
Tender Offer:
An offer to buy a specified number of securities at a specified price. If fewer than the specified number of securities are offered, the person making the offer is not obliged to buy any of them.
Term:
There are two business-related meanings:
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- The period of time during which the conditions of a contract apply.
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- The conditions themselves, as in “terms and conditions”
Term loan:
Any loan which has to be repaid in full within a stated period of time.
Terminal:
The interface between a computer network and an individual computer user.
Terms of trade:
The ratio of a country’s export prices to its import prices. The prices are calculated as an index based on an arbitrary starting point. Terms of trade thus measure changes over time rather than absolute values.
Test Market:
To try out a new product or service by launching it initially in a limited area.
Testimonial:
A statement by a respected source vouching for the high quality of a product or a person.
The 10% Rule:
The portion of dividend income and other items of undistributed foreign base company income exempt from current taxation under the United States Internal Revenue Code if for the taxable year such income items amount to less than 10% of the total gross income of the controlled foreign corporation. In other words, the controlled foreign corporation is treated as having no foreign base company income. The 10% rule is also i known as The 10-70 Rule because, if foreign-base company income is more than 70%, then all the company’s income is treated as foreign base company income. Until the Tax Reduction Act of 1975, effective as of January 1, 1976, this was known as The 30% Rule or The 30-70 Rule, because 30% was the designated excluded amount instead of 10%. Under the 1986 Tax Reform Act, the interest level was reduced to 5% so that the so-called 10% rule became the 5% rule in name and practice and the 5-70% rule refers to a foreign base company having income amounting to more than 70%.
Third Party:
Someone invited to play a role in a contract or agreement who is not one of the two parties to the agreement; an outsider with an incependent view.
Thoughtcrime:
The mere act of thinking about ideas and concepts like Freedom or Revolution.
Time and a half:
The payment to an employee of 1.5 times their normal hourly rate for working at an anti-social time outside their normal working hours; in particular, the rate paid in the West for working in the early evening or on Saturdays.
Time and Motion:
An old-fashioned system of measuring the time taken and the motions required to carry out particular industrial tasks. Time and motion studies were designed as a way of measuring changes in individual employees’ productivity.
Time Management:
A systematic way of managing the use of time, particularly in the workplace, based on the idea that time is money. One popular time-management tool is called a diary.
Title:
The right to the ownership of property. If someone has “good title” to a property, it means that there is no dispute about their ownership of that property.
Toll-free number:
A telephone number where the receiver pays for the calls rather than the caller. Toll-free numbers are widely used in certain forms of marketing.
TQM:
Short for total quality management, the idea that quality management should infuse every single process in a company’s operations.
Trade:
There are two meanings:
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- To buy and sell goods and services, usually across national boundaries.
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- A profession or skill. For example: “He’s in the meat trade.”
Trade Barrier:
Something that hinders the free flow of trade, especially import duties and things which make imported goods less competitive vis-à-vis domestically produced goods.
Trade Discount:
A discount given by one member of a trade to another; for example, by a wholesaler of garments to the owner of a fashion boutique.
Trade Fair:
A large organized event at which producers of a defined range of goods and services (often from a number of different countries) show off their wares to potential customers and to each other.
Trademark:
The unique mark that a manufacturer puts on to its products to distinguish them from any other manufacturer’s products; for example, the label on a pair of Levi jeans. To help protect them from being copied, manufacturers can have their trademarks officially registered in most of the worldøs leading industrial countries. To enjoy the protection of registration, however, a manufacturer must demonstrate that its mark is both distinctive and in continuous use.
Trade Mission:
An organized trip abroad by a group of businessmen designed to introduce them to potential customers, representatives, politicians, and so on, in the foreign country.
Trade Off:
Yielding one asset to gain another. For example, selling a building to realize a tax loss that can then be set off against the year’s trading profit.
Trade Program:
A term for the participation in the buying and the selling of bank debentures.
Trade Secret:
Any proprietary way of conducting a trade (or profession) that enables its practitioner to be more competitive than its rivals. No firm wants its trade secrets to be discovered by anybody else.
Trade Union:
A group of workers who organize themselves to promote the rights of employees and to improve conditions in the workplace. In particular, a union is able to use the collective bargaining power of all its members when negotiating with employers on matters such as wage increases.
Trainee:
A person in the process of being trained how to do a particular job. If a trainee fails to pick up the necessary skills withing a certain time, he or she may not be taken on by the company as a full-time employee.
Tranche:
A specified part of a larger transaction. Each purchase and resale of a separate block of bank instruments within the total transaction is known as a tranche. For example, a contract may be signed to buy 100 million US dollars worth of bank paper with an initial tranche (or purchase) of 25 million US dollars.
Transaction Cost:
The cost of carrying out a transaction; for example, the cost of clearing a check, or of buying something at an auction.
Transfer:
The form signed by the seller of a security authorizing the company to remove his name from the register and substitute that of the buyer.
Transfer Payment:
A payment by a government to its citizens that is not made as a reward for the supply of goods or services – for example, unemployment benefit.
Transfer Pricing:
The shifting of profit from one part of a group to another by the charging of artificial (non-market) prices for the provision of goods and services between the parts. Transfer pricing is used to move taxable profits from a high-tax jurisdiction to a low-tax one.
Transformer Company:
A licensed insurer which “transforms” insurance risks of insurance companies into capital market transactions. In Bermuda, transformer companies are frequently used, generally by Class 4 insurance companies which segregate the risk of insurance and reinsurance obligations.
Transnational:
A company which straddle national boundaries. A transnational company is not a multinational. The latter’s business operations work independently of each other. The many different and far-flung operations of a transnational are inextricably linked with each other.
Transparency:
The principle of making company accounts as clear as possible so that their readers can see for themselves the transactions that underlie them.
Transparent or Conduit Entity:
A form of business organization in which the members or partners are subject to individual tax and/or legal liability for the obligations of the organization. A transparent entity also is known as a conduit. Transparent entities in the United States include S corporations, partnerships and grantor or simple trusts and other associations taxable as a partnership, such as a limited liability company. Members can include individuals or other unlimited liability investors as well as corporate or limited liability investors. The determination of whether an entity is subject to tax as a conduit entity must be made for the country in which the entity is organized and in the country of investor(s). The primary tax advantage of forming a transparent or conduit entity is to avoid an entity level tax and flow through profits and losses directly to investors. A transparent entity could be used for joint venture projects, real estate investment and leasing or mutual fund businesses.
Transshipment:
The practice of unloading a cargo at one place (a port or an airport, for example) so that it can be transferred to another mode of transport that will take it on to its final destination.
Traveller’s Check:
A means of enabling travellers to make payments when abroad. The traveller’s check, now over 100 years old, relies on the simple security device of the couble signature. Owners sign once when they buy the cheque, and agin when they sell it. If they lose the check in between signatures they can get it replaced by the issuer.
Treasurer:
The (senior) manager withing a company who is responsible for the safekeeping of all the money that comes into the business, and for the wise spending of the money that goes out of it.
Treuhänderschaft:
A Liechtenstein form of a trust.
Treuunternehmung:
Another Liechtenstein form of a registered trust, designed to undertake commercial activities.
Trial Offer:
A special promotion that allows a consumer to try a product for a period of time before deciding whether or not to buy it.
Triangular Hedge:
Use of a local currency commodity-dollar as payment for exchange of goods in the practice of counter trade or barter, with the commodity contracts frequently negotiated on futures exchange for the long term in such staples as sugar, copper and petroleum.
Trigger Price:
The price of imported goods below which predetermined restrictions on imports come into effect. The restrictions are aimed at preventing cheap imports from flooding the market and damaging domestic producers.
Troubleshooter:
A person who goes into trouble companies at a senior level in order to solve specific short-term problems.
True and Fair:
The accountants’ mantra: that the figures ina company’s accounts should represent a true and fair view of the company’s affairs. The idea is subject to individual interpretation.
Trust:
A trust is the relationship which arises whenever a person or corporate entity, called a trustee, is compelled in equity to hold property (whether real or personal, and whether by legal or equitable title) for the benefit of some other persons who are termed Beneficiaries, or for a lawful purpose in such a way that the real benefit of the property accrues to the Beneficiaries of the Trust. A trust must have a settlor or a person who establishes the trust to take over the ownership of assets. The trustee is an individual or corporation to which legal ownership of the assets is transferred. A trustee must supervise, manage, invest and distribute the assets in accordance with the trust deed. The trust deed states the terms and conditions under which the trustee operates. A benficiary is the intended owner of the assets placed in the trust. The protector is a guardian who ensures that trustees carry out the wishes of the settlor.
1. The Testamentary Trust: A trust created by the Grantor/Settlors at death by will. This is a type of trust which does not avoid probate, since the assets used to fund the trust are controlled by the will which is administered by the probate court. These types of trusts may sometimes be subject to ongoing jurisdiction of the probate court.
2. Inter Vivos Trust: Also known as living trust or loving trust, the Inter Vivos Trust is created during the Grantor’s life and is generally revocable during his or her lifetime. Living trusts have numerous advantages over testamentary trusts in that they can avoid the delay and expense of dealing with the probate court and lawyers; solve the disability or potential guardianship problems of the Grantor as he or she becomes elderly; maximize available tax planning; avoid forced heirship laws; and provide for flexible methods of distributing assets to beneficiaries as and when intended. Many estate and trust professionals recommend living trusts to hold all assets during life.
3. Life Insurance Trust: This is a form of living trust that holds the ownership of insurance policies and provides for the distribution of the insurance proceeds on the death of the insured/grantor. This type of planning is particularly popular in the United States, as insurance is one of the single most useful wealth transfer devices permitted under United States estate tax law.
4. Charitable Trust: Either a living trust or testamentary trust, the charitable trust has charities as its beneficiary. A charitable reminder trust which allows current income tax benefits to be obtained in the form of charitable deductions – with the property ultimately going to charity free of estate tax – benefits those with substantial wealth. A charitable lead trust (CLT) is a vehicle for passing wealth to subsequent generations while also satisfying the donors’ philanthropic interests and not only providing for immediate charitable income tax deduction but also requiring the grantor to report all income realized by the CLT on his or her annual personal income tax return. The grantor is not permitted an income tax deduction for the current value of the lead interest.
5. Protective Trust: The Protective Trust provides specific provisions, either inter vivos or testamentary, whereby the Settlor ensures protection of the property for beneficiaries who may be incompetent, improvident, or about to be divorced. It should be noted that a protector trust cannot benefit the grantor with immunity from his own creditors. However, a grantor can settle a trust to protect a beneficiary from claims of the beneficiary’s creditors and even from claims in a divorce.
6. Discretionary Trust: This popular type of trust provides powers to a trustee that allows the trustee to decide which beneficiary, or who among a class of beneficiaries, may be given distributions of the trust assets. The essence of a discretionary trust is that a beneficiary has no right to claim any part of the income or even principal. The trustee is given the flexibility to ay the beneficiary or apply trust assets for his benefit as the trustee thinks fit. Discretionary trusts are particularly useful in protective trusts. It should be noted that under the English Trustees Act of 1925, Section 33, a protective trust can be created expressly by creating a determinable life estate followed by a discretionary trust.
7. Accumulation Trust: This trust has provisions that require the trustee to accumulate income until some later date when it is distributed. This trust provision, in combination with protective trust provisions, enables the trust mechanism to be the most efficient and effective estate planning device for minor children, incompetent beneficiaries, or beneficiaries who may be exposed to financial risks or litigation.
8. Irrevocable Trust: A trust which may not be changed, amended, or revoked, is the Irrevocable Trust. The terms of this trust are permanent. This type of trust should be used only under special circumstances, such as with a life insurance trust (in the United States), and when dealing with situations where completed gifts are required. Generally, irrevocable trusts cannot be used for living or inter vivos trusts situations. Trusts which can be terminated by the Grantor are Revocable Trusts.
9. Grantor Trust: A trust where, because of the application of United States Income Tax Law, all the income earned by the trust is taxed to the Grantor wether or not distributed. This is a tax classification rather than a traditional trust classification by usage.
10. Express Trust: An Express Trust exists when the Trust Deed stipulates how the assets are to be managed and when and how capital and income are distributed, although it may be difficult for surpluses to avoid tax claims from the home country. Other tax classifications which have become part of the trust lexicon are Qualified Domestic Trusts (Q-Dot), Qualified Subchapter-S Trusts (QSST), and Qualified Terminable Interest Property (Q-Tip).
11. Purpose Trust: Designed for a specific, reasonable and plausible purpose, it does not name any individual as a predetermined beneficiary. Instead, by unertaking commercial activity or holding assets in a purpose trust, a company or individual avoids classification as the owner of the commercial activity or trust assets. A purpose trust can be used for: (i) permitting avoidance of regulatory restrictions; (ii) obtaining freedom from liability when undertaking hazardous activites; (iii) facilitating a loan by sequestering assets; and (iv) removing voting control of stock from a company or individual.
12. Revocable Trust: One that may be cancelled by the grantor under most circumstances. An revocable trust has many applications, including the authority for someone other than the grantor to pay taxes on the income of the trust or to be certain that the capital in trust is preserved for children and grandchildren.
13. Simple Trust: This is a trust that must distribute all its income; all other trusts are in the category of “complex trusts”.
14. Spendthrift Trust: A trust that prohibits the benficiary from disposing of or assigning an interest to another party. This type of trust may not be attached or otherwise reached by the beneficiaries’ creditors.
Trust Company:
A company that is in business to act as a trustee for individuals and other businesses.
Trust Deed (Settlement Deed, Declaration of Trust or Trust Instrument):
The document that lays down the foundations of how the trustees are to administer and manage the trust assets and how they are to distribute and dispose of trust assets during the lifetime of the trust.
Trustee:
Trustees have a fiduciary duty to act in accordance with a trust deed and for the benefit of the beneficiary(ies). See trust.
Trustee in Bankruptcy:
A person appointed as a trustee by a court in a case of bankruptcy. The trustee in bankruptcy takes title to the bankrupt company’s assets while they are being disposed of.
Trust Services:
A large number of banks located in tax havens offer trust services. In addition there are trust companies specifically offering trust services. Most tax haven jurisdictions have enacted legislative provisions and set up administrative authorities to control the activities of such banks and trust companies. Services offered by banks and trust companies normally include a fairly wide range of trusteeship, management and related services. The trusteeship services involve not merely acting as trustee of settlements, but many other services such as acting as trustee for debenture holders or as custodian trustee for pension funds, attending to statutory requirements and the maintenance of financial records. Often nominee shareholders, directors and other officers are furnished. Investment services are normally provided.
Turnkey Project:
A large-scale building project where the contractor agrees to see to every detail of the project. The purchaser has only to turn the key when the project is finished in order to take possession.
Turnover:
The total amount of money obtained by an organization for the goods and services that it has sold, less the money that it has paid back for returns.
Two-tier Board:
Any company board that is divided into two parts; as, for instance, in Germany where public companies have both a management board and a supervisory board.
Tycoon:
A successful entrepreneur. Someone with fast cars, pretty girls and big cigars as standard accountrements, typified by the hero of The Last Tycoon, F. Scott Fitzgerald’s novel about Hollywood in the 1930s.
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Ultra Vires:
An action that goes beyond the powers of the organization undertaking it.
UMTS:
Universal Mobile Telecommunications System.
UN:
United Nations.
Unbundling:
The disentangling of businesses within a conglomerate so that each is run separately as an individual unit.
UNCTAD:
The acronym for United Nations Conference on Trade and Development, an arm of the UN that aims, in particular, to increase trade between developing countries and the rest of the world.
Undercapitalized:
The provision of insufficient capital for a business to operate without financial strain.
Underground Economy:
Part of an economy that is unrecorded by the tax authorities. It may be unrecorded because it involves a barter transaction, for example, or because it is attempting to evade tax.
Underwrite:
There are two meanings:
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- To assume the risk involved in a new issue of securities. The people who do this (usually banks) are called underwriters.
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- To take on an insurance risk in return for a premium.
Underwriting:
An arrangement by which a company is guaranteed that an issue of shares will raise a given amount of cash because the underwriters, for a commission, agree to subscribe for any of the issue not taken up by the public.
UNDP:
United Nations Development Programme.
Unearned Income:
Any income that is not earned from employement, such as dividends, interest payments and lottery prizes. Some governments treat unearned income for tax purposes.
Unemployed:
People who are not employed but would like to be. The long-term unemployed are people who have been unemployed for a continuous period of more than a year.
UNESCO:
United Nations Educational Scientic and Cultural Organization.
Unfair Dismissal:
Terminating someone’s contract of employment without good cause. Employees thus dismissed have the right to sue their employers for damages.
Unfair Trade:
Trade in goods that have been subsidized in ways that break the rules of one of the international trading agreements.
UNFPA:
United Nations Fund for Population and Activities.
UNHCR:
United Nations High Commissioner for Refugees.
UNICE:
Union des Industries de la Communauté Européenne.
UNICEF:
United Nations Childrens Fund.
Unit Cost:
The cost of producing one unit of a product or service.
Unitary Tax:
A revolutionary form of tax system pioneered by the US state of California. Under a unitary tax system a company is taxed on a percentage of its worldwide profit rather than on the profit which the company claims arose within the fiscal authority’s jurisdiction. The percentage may be based on the share of the company’s sales that took place in the jurisdiction.
United States Property:
Tangible property located in the United States, stock of a domestic corporation, obligations of United States persons (including the guarantee of such obligations) and the right to use any patents, copyrights, etc. in the United States acquired or developed by a controlled foreign corporation. Assets acquired in normal commercial transactions without any intention of permitting them to remain in the United States, such as accounts recievable, are excluded from United States property.
United States Shareholder:
A United States person (citizen or resident) who owns 10% or more of the combined voting power of all classes of stock entitled to vote, either directly, indirectly or constructively, of a controlled foreign corporation.
Universal Bank:
A bank that is allowed to carry out a wide range of financial services, almost without limit. In most countries banks are restricted by law as to the sort of services they can offer.
Unlimited Company:
A company that does not have the protection of limited liability. The directors of the company are personally liable for all its obligations, without limit.
Unlisted Securities Market:
A market in securities that are not listed on a recognized stock exchange. Such securities are traded informally, and individual buyers generally have to be matched with sellers.
Unquoted Company:
A company whose shares are not quoted on a recognized stock exchange. When there is no quoted market price for a company’s shares, marketing them is not easy.
UNRWA:
United Nations Relief and Works Agency for Palestine Refugees in the Near East.
Upgrade:
To do something that improves the quality or performance of something that already exists; for example, buying more memory for a computer, or improving the credit rating of a company’s debt.
Up market:
A marketing term based on a theoretical division of markets into a top, a middle and a bottom. A product aimed to appeal to the top end of the market is said to be upmarket. The division of markets can be based on social class, wealth or lifestyle. Contrast with downmarket.
UPO:
Universal Postal Union.
Upstream:
An activity that is close to the original raw materials used in a process (particularly in oil refining). Drilling in the desert, for example, is more upstream than the manufacture of petrochemicals.
URL:
Universal Resource Locator is a means of identifying an exact location on the Internet. For example, http://www.webtrends.com/html/info/default.htm is the URL which defines the use of HTTP to access the Web page default.htm in the /html/info/ directory on the WebTrends Corporation web site). As the previous example shows, a URL is comprised of four parts: Protocol Type (HTTP), Machine Name (webtrends.com), Directory Path (/html/info/), and File Name (default.htm).
Useful Life:
The length of time during which an asset produces more than the cost of its upkeep. An indicator of the period over which the asset should be depreciated.
User Group:
A group of consumers who are brought together by a company’s marketing department to examine and discuss their attitudes to the company’s products and to those of its rivals. A sophisticated form of market research.
USP:
Short for unique selling proposition, something a product has which differentiates it from all its rivals. Its USP then becomes a central focus of the product’s advertising campaign.
Usury:
The charging of exorbitant rates of interest for loans. Most developed countries now have laws against usury, although credit-card companies manage to escape them. In Europe such laws can be traced back to the 15th century.
Utility:
Any company that provides services which are essential to the comfortable running of homes and offices, such as electricity, gas and water.
-V-
Value:
A subjective measure of worth. What something is worth to its owner. Something that is a valuable piece of information to one person may be worthless to the next.
Value Added:
The value that a process adds to the goods and services it is processing; the amount by which it increases their worth in a market. That is, the price fetched for the output from the process minus the cost of the inputs put into the process.
Value Chain:
The interlinking activities that take place within an organization in the process of converting its inputs into its outputs. Identifying these activities and finding ways to perform them more efficiently is a way for companies to gain competitive advantage over their rivals.
Variable Cost:
A cost that varies in line with the volume of production. For example, the cost of steel is a variable cost in the production of automobiles; the cost of heating the factory is not.
Variable Rate:
A rate of interest which changes in line with some benchmark figure. The extent and frequency with which the rate changes is laid down (for example, no more than once every six months, and then by less than two percentage points). Contrast with floating rate, which has no limits to its fluctuation.
VAT:
Short for Value Added Tax, an ad valorem tax based on the government imposed tax on goods and services.
Venture Capital:
Money that is put up by a financial institution or wealthy individual to back a risky project, either in its early stages or when it needs a new injection of capital. Because of the high risk involved, venture capital expects a higher rate of return than that obtained from normal equity.
Vergleich:
Germany’s version of chapter 11, a breathing space for companies in financial dificulty. Vergleich allows them to write off some of their debts if they meet payment terms agreed with their creditors.
Vertical Integration:
The integration of businesses whose activities follow each other sequentially. If a garment manufacturer were to buy a spinning mill or a garment shop, it would be an example of vertical integration. Likewise, a food manufacturer that buys a chain of grocers.
Vicious Circle:
A sequence of events, each of which leads on inevitably to a worse situation, and each of which triggers another such event. Late payment by a customer, for instance, might lead to the need for a new bank loan, which might lead to an unfavourable credit rating, which might lead to a vicious circle. Contrast with virtuous circle.
Videoconference:
A way of communicating between groups of people in remote places via the telphone and television. A videoconference has the added bonus, compared with a teleconference, of allowing the participants to see each other in real time as well as to hear each other.
Vintage Company:
See Shelf Company.
Virtual:
Creating the attributes of something without actually creating the thing itself. A virtual office, for example, does not exist in an office building. It exists in a travelling salesman’s hotel room when he links up his computer to his colleagues’ and starts working as if he were in an office. A virtual corporation is a company with a large turnover, virtually no premises and few staff.
Virtuous Circle:
A sequence of events which leads from good to better. Each of the events triggers another which improves things even more. Contrast with vicious circle.
Virtuous Circle:
A sequence of events which leads from good to better: Each of the events triggers another which improves things even more. Contrast with vicious circle.
Virus:
A computer program which destroys computer data and other programs. Viruses can be introduced into a computer via any link with the outside world: a floppy disk, a modem link, or a CD.
Visa:
A stamp or endorsement usually placed in a passport by a consulate allowing a person to enter a country for a certain period of time.
Visible Trade:
Trade between countries in manufactured goods; things that can be seen, such as cars and computers, rather than insurance policies and room service.
Vision:
A lofty and far-seeing aspiration that a company puts in writing in order to inspire its employees into working for something above and beyond their daily wages.
Visitor Visa:
Visa that allows a tourist to enter a country for the purpose of travel.
Voice Mail:
A telephone system which allows each individual within an organization to have a phone that can receive recorded messages from incoming callers when individuals are away from their desks. A sort of networked answerphone.
Voice-over:
The voice which is added to a filmed advertisement, in a recording studio, after the film has been made.
Voice Recognition:
The ability of an electronic device to distinguish the sound of an individual human voice. Voice-recognition technology has many potential uses, such as accessing bank accounts and computers.
Volatility:
The extent to which something is liable to fluctuate violently and frequently, especially the price of shares, currencies and loans.
Volume Discount:
A discount given to a buyer that is related to the volume of goods that the buyer purchases. For example, if a single item costs $100, but buying ten of the items costs only $900, there is a volume discount of 10%.
Voting or Pooling Agreement:
A voting or pooling agreement is an agreement, preferably in writing, of two or more shareholders to vote their shares in a certain manner. The most common use of this agreement would be to pool voting strength for the election of directors.
Voting Rights:
Rights enabling the holder of a share in a company to vote on issues raised at the company’s general meetings.
Voting Trust:
A voting trust is an agreement among the shareholders of the corporation. Under a voting trust, shareholders transfer their shares of stock to a trustee in exchange for voting trust certificates. The trustee votes the shares in the manner directed in the voting trust agreement. Voting trusts are often used to preserve control of the corporation.
-W-
Wage:
The monetary reward for labour.
Wage Freeze:
The halting (or limited) by a government of wage increases throughout an economy, once a popular way of attempting to control inflation.
Walkout:
An organized stoppage of work by a group of employees in an attempt to obtain improved working conditions and/or wages.
Wall Street:
The street on Manhattan Island where the New York Stock Exchange is situated, a name that has become a synonym for financial markets in general, and for American capitalism in particular.
WAP:
Wireless Application Protocol – gives your mobile phone access to the Internet.
Warehouse:
There are two meanings:
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- The physical place where a company stores its stock (inventory). Such places are usually on the outskirts of big towns, where property prices are low, but close to arterial transport routes.
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- To buy shares in a company in the names of nominees in order to disguise the fact that a connected group of investors is building up a alrge stake.
Warrant:
A certificate entitling its holder to buy shares in a company at a future date and at a prescribed price.
Warranty:
A guarantee given by a seller of goods that the goods will perform as promised. Warranties have a finite life and do not cover damage that is not the fault of the manufacturer.
Waste Management:
The systematic management of the waste products created by an industrial process; that is, products which are surplus to the process in question. Some waste products can be recycled into different manufacturing processes; others can be used directly as by-products; and others need to be broken down into biodegradable substances.
Wasting Asset:
A fixed asset with a finite useful life, such as a machine that eventually wears out, or a gold mine that is eventually exhausted.
Watchdog:
An officially appointed body (or person) that watches over the activity of an industry to see that it is not, for instance, anti-competitive or in some other way against the public interest.
Waybill:
A document accompanying a shipment of goods that sets out the route that is to be followed by the goods and the cost of the shipment.
Web Payment Services (WPS)
While the bulk of Internet e-commerce is still transacted using credit cards, there has been steady inroads being made by alternative methods of settling e-transactions. These Web Payment Services (WPS) have ingeniously utilized the most popular application on the Internet “e-mail”, to appeal to customers.
By using an existing platform to launch their services, WPS providers have enjoyed wide appeal with customers worldwide. The largest of these, http://www.PayPal.com, has approximately 11 million users, processes 150,000 payments per day, and attracts over 20,000 new users per day. The following also provide WPS services: http://www.c2it.com, http://www.WesternUnion.com, http://www.BillPoint.com.
Web Site:
An electronic site on the world wide web where a company, or an individual, lays out information about itself. Each web site has a unique address. Individuals with access to the internet can key in to that address and gain access to the information on the site.
Whistleblower:
An employee who alerts the authorities to the fact that his or her employer is engaged in illegal activity. Whistleblowers sometimes have special protection under the law.
White Collar:
A term used to refer to those workers in an organization who wear a white collar, that is, a smart shirt and tie rather than a set of overalls. It is a similar distinction to that between staff and line workers.
White Goods:
Electrical consumer goods that are traditionally encased in white enamel,such as refrigerators and washing machines.
White Knight:
An investor who comes to the rescue of a company that is subject to a hostile takeover.
Wholesale:
Ther purchasing of large volumes of goods direct form manufacturers in order to sell them in smaller volumes to retailers.
Wildcat Strike:
A sudden and unofficial strike by a group of employees that is not recognized by the employees’ trade union. A wildcat strike may beginwith a walkout.
Windfall Profit:
A sudden and unexpected profit that is not a result of the conscious effort of the beneficiary. For example, the compulsory purchase of waste land by a government for the purposes of roadbuilding might result in a windfall profit for the landowner.
Winding Up:
The process of closing down a company, selling off its assets and removing it from official records.
Window Dressing:
The deliberate tarting up of a company’s accounts to make them look as attractive as possible to investors, employees and others. Window dressing need not be illegal. For a number of items that appear in accounts there is no single correct method of valuation.
Window of Opportunity:
A short period of time in which the conditions for carrying out a particular task are highly favourable. There may, for example, be a window of opportunity for a company to issue new shares; a time when the stockmarket is briefly able to fetch a high price for the shares.
Wirtschaftlich Beguenstigter:
Person who is the ultimate beneficiary of a company or trust. This term is used in Switzerland and Liechtenstein.
Withholding Tax:
Tax required to be deducted at source by companies paying interest, dividends or royalties, but which may in certain circumstances be reclaimed by the recipient or be reduced under a double taxation agreement/tax treaties
Word Processor:
A simple sort of computer that carries out the functions of a typewriter, but more quickly.
World Wide Web:
The computer software that allows a person sitting in front of a PC to gain instantaneous access to electronic information provided by organizations thousands of miles away via the internet.
Work in Progress:
All the semi-finished goods that exist within a business and are on their way towards becoming finished goods. Also, the value of all those goods which is shown in the company’s accounts as an asset. Referred to in the United States as work in process.
Work Permit:
An official permit given by a government to people who are not citizens of that government’s country, allowing them to take up formal paid employment within the country.
Workstation:
A place within an office or a home that is equipped with the tools needed to do a particular job, espceially one that requires the use of a computer, modem and telephone. A workstation can also be the place where a carpenter does his work.
Work-to-Rule:
A refusal by employees to do work that falls outside the terms of their contract, strictly interpreted. This means, for instance, that they refuse to work overtime. The work-to-rule is a common tactic used in industrial disputes.
Workforce:
The total of all employees in either an industry or an individual company. The same as labour force.
Working Capital:
A firm’s current assets minus its current liabilities.
Workload:
A quantitative measure of the amount of work that an individual is expected to do in a particular job during a fixed period of time.
Write Down:
To reduce the value of an asset in the books of a company.
Write Off:
To reduce to zero the value of an asset in the books of a company.
WTO:
Short for World Trade Organization, a Geneva-based organization that acts as a kind of watchdog for the world’s trading system. It oversees the enforcement of the GATT.
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Year-End:
The last day of an accounting period, the day on which the books are brought to a close. Transactions before that day are taken into accounts; transactions after it are (by and large) not.
Yield:
The rate of output of any of the factors of production (that is, of land, labour or capital). Land yields, for example, are measured by the amount of crop produced per hectare; the yield on share capital is measured by the amount of dividend paid.
Yield Curve:
A graph showing the different yields that are obtained from financial instruments of the same quality but of different maturity. A yield curve plots the yield of the instruments against their maturity.
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-Z-
Zaibatsu:
Huge industrial conglomerates built up in Japan as the engine of the country’s industrial revolution, groups such as Mitsubishi and Sumitomo. Each zaibatsu invariably embraces a bank and a sogo shosha. Although disbanded after the second world war, many zaibatsu have been reformed since.
Zap:
The practice of using a remote-control device to switch from one television channel to another, particularly to avoid having to watch advertisements. Zapping has a powerful influence on the effectiveness of television advertising.
Zero-base Budgeting:
A method of drawing up a budget which starts from zero; that is, it assumes that there was not budget at all in previous years. This avoids the trap of slavishly following what was decreed to be a correct figure in a previous period, and then updating it by adding 10%.
Zero-Coupon Bond:
A bond which does not pay any interest. A zero-coupon bond is sold at a deep discount to its face value. The owner’s gain comes from the gradual appreciation of the bond. On maturity it will be redeemed at its face value.
Zero Defects:
To have no errors in a product or process – a common aim of TQM.
Zero-sum Game:
Any game in which the gains to the winner (or winners) are equal and opposite to the losses of the loser (or losers). Gambling is a zero-sum game; business is not. A new entrant to a market can have the effect of increasing the size of the market in such a way that all the participants in it benefit.
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