Certificate issued or a stamp marked (on the applicant’s passport) by the immigration authorities of a country to indicate that the applicant‘s credentials have been verified and he or she has been granted permission to enter the country for a temporary stay within a specified period. This permission, however, is provisional and subject to theapproval of the immigration officer at the entry point. The common types of visas include: (1) Single entry visa: valid only for one visit. (2) Multiple entry visa: allows any number of visits within its validity period. (3) Business visa: for a short visit to conduct discussions, negotiations, and/or presentations, but not to take up employment. (4) Tourist visa: allowsfreedom to move around the country and briefly cross its frontiers to another country and return. (5) Residence visa: allows an extended stay but does not grant permission to take up employment. (6) Work visa: gives the permission to stay and take up employment, for a specific job and only for a limited period. Called also work permit. (7) Electronicvisa: permission recorded in a computer instead of being issued as a certificate or stamp.
General: Measure of prudence, responsibility, and diligence that is expected from, and ordinarily exercised by, areasonable and prudent person under the circumstances. Business: Duty of a firm’s directors and officers to actprudently in evaluating associated risks in all transactions. Investing: Duty of the investor to gather necessaryinformation on actual or potential risks involved in an investment. Negotiating: Duty of each party to confirm each other’sexpectations and understandings, and to independently verify the abilities of the other to fulfill the conditions andrequirements of the agreement. Also called reasonable diligence.
Keeping book inventory continuously in agreement with stock on hand within specified timeperiods. In some cases, book inventory and stock on hand may be reconciled as often as after each transaction, while in some systems these two numbers may be reconciled less often. This process is useful in keeping track of actual availability of goods and determining what the correct time to reorder from suppliers might be. Sometimes also called perpetual inventory.
A fund with a fixed number of shares outstanding, and one which does not redeem shares the way a typical mutual fund does. Closed-end funds behave more like stock than open-end funds: closed-end funds issue a fixed number of shares to the public in an initial public offering, after which time shares in the fund are bought and sold on a stock exchange, and they are not obligated to issue new shares or redeem outstanding shares as open-end funds are. The priceof a share in a closed-end fund is determined entirely by market demand, so shares can eithertrade below their net asset value (“at a discount”) or above it (“at a premium”). also calledclosed-end investment company or publicly-traded fund.
A basic principle in accounting that assumes a company will continue to operate in the foreseeable future. The significance of this principle becomes apparent when the value of a running business is compared with the value of one being liquidated. The moment a business is declared liquidated, all debts become immediately due in full,tangible assets are worth only what they will be sold for in an auction or fire-sale, and the intangible assets (such asgoodwill) become worthless. A going concern is the only type of business banks lend money to, and suppliers extendcredit to. Directors of publicly traded companies must explicitly state in their financial statements (verified through anindependent audit) that they have taken all reasonable steps to ensure the continuing viability of the company as a going concern. Also called continuity of business unit principle.
Popular name for International Organization For Standardization (IOS), a voluntary, non-treaty federation of standards setting bodies of some 130 countries. Founded in 1946-47 in Geneva as a UN agency, it promotes development ofstandardization and related activities to facilitate international trade in goods and services, and cooperation on economic, intellectual, scientific, and technological aspects. ISO covers standardization in all fields includingcomputers and data communications, but excluding electrical and electronic engineering (governed by the International Electrotechnical Commission or IEC) and telecommunications (governed by International Telecommunications Union’sTelecommunications Standards Sector or ITU-TSS). See also ISO 9000 Series and ISO 14000 Series.
An economic indicator that changes before the economy has changed. Examples of leadingindicators include production workweek, building permits, unemployment insurance claims,money supply, inventory changes, and stock prices. The Fed watches many of these indicators as it decides what to do about interest rates. There are also coincident indicators, whichchange about the same time as the overall economy, and lagging indicators, which change after the overall economy, but these are of minimal use as predictive tools.
Economic, procedural, regulatory, or technological factors that obstruct or restrict entry of new firms into an industry ormarket. Such barriers may take the form of (1) clear product differentiation, necessitating heavy advertising expenditureto introduce new products, (2) economies of scale, necessitating heavy investment in large plants to achievecompetitive pricing, (3) restricted access to distribution channels, (4) collusion on pricing and other restrictive trade practices (such as full-line forcing) by the producers or suppliers, (5) well established brands, or (6) fierce competition.Barriers to exit, paradoxically, also serve as barriers to entry because they make it difficult to cut one’s losses and run. Also called barriers to competition, entry barriers, or market entry barriers.
Associations, charities, cooperatives, and other voluntary organizations formed to further cultural, educational, religious,professional, or public service objectives. Their startup funding is provided by their members, trustees, or others who do not expect repayment, and who do not share in the organization’s profits or losses which are retained or absorbed. Approved, incorporated, or registered NPOs are usually granted tax exemptions, and contributions to them are often tax deductible. Most non governmental organizations (NGOs) are NPOs. Also called not for profit organization.
The purchase or sale of an equal number of puts and calls, with the same strike price andexpiration dates. A straddle provides the opportunity to profit from a prediction about the future volatility of the market. Long straddles are used to profit from high volatility. Long straddles can be effective when an investor is confident that a stock price will change dramatically, but cannot predict the direction of the move. Short straddles represent the opposite prediction, that astock price will not change.
A military-type organizational structure, commonly employed in large, centralized corporations. Line and staffmanagement has two separate hierarchies: (1) the line hierarchy in which the departments are revenue generators(manufacturing, selling), and their managers are responsible for achieving the organization’s main objectives byexecuting the key functions (such as policy making, target setting, decision making); (2) the staff hierarchy, in which the departments are revenue consumers, and their managers are responsible for activities that support line functions(such as accounting, maintenance, personnel management). While both hierarchies have their own chains of command, a line manager may have direct control over staff employees but a staff manager may have no such powerover the line employees. In modern practice, however, the difference in the two hierarchies is not so clear-cut and jobsoften have elements of the both types of functions.
OIBDA. A financial measure similar to EBITDA, except that it uses Net Operating Income as opposed to net income. It is calculated by adding interest, taxes, depreciation and amortization(also known as ITDA) to the company’s operating income. OIBDA is used by companies more frequently, although it is still a non-GAAP measure. Some companies prefer to use OIBDA because it doesn’t consider non-operating income, and therefore tends to give a better indication of income from regular operations.
An individual or institution which acts as an underwriter or agent for corporations and municipalities issuing securities. Most also maintain broker/dealer operations, maintain marketsfor previously issued securities, and offer advisory services to investors. investment banks also have a large role in facilitating mergers and acquisitions, private equity placements andcorporate restructuring. Unlike traditional banks, investment banks do not accept deposits from and provide loans to individuals. also called investment banker.
Indicates how successful a firm is in utilizing its assets in generation of sales revenue. A high ratio is considered desirable, but what is considered high in one industry may be low for another. Asset turnover ratios are computed for specific assets, such as ‘cash to sales‘ (cash / sales revenue), ‘inventory to sales’ (value of inventory / sales revenue), ‘fixed assets to sales’ (fixed assets / sales revenue). When computed as total ‘assets-to-sales’ ratio (total assets / sales revenue), it is called capital intensity.
Probability that the government of a country (or an agency backed by the government) will refuse to comply with theterms of a loan agreement during economically difficult or politically volatile times. Although sovereign nations don’t “go broke,” they can assert their independence in any manner they choose, and cannot be sued without their assent. Sovereign risk was a significant factor during 1970s after the oil shock when Argentina and Mexico almost defaulted on their loans which had to be rescheduled.
A commodity, currency or other type of capital that is tradable and can be stored for future use. It is a fundamental component of the economic system because it allows trade to occur with items that have inherent value. An example of a store of value is currency, which can be exchanged for goods and services. If the value of currency becomes unpredictable, such as in times of hyperinflation, investors and consumers will shift to alternative stores of value, such asgold, silver, precious stones and real estate.
Observation that the very act of becoming a player changes the game being played. It is reflected in interviewingprocess where the interviewees tend to give answers they think interviewer wants to hear. Named after German Noble-laureate physicist Werner Karl Heisenberg (1901-76) whose uncertainty principle states that (in particle physicsexperiments) the very act of observing alters the position of the particle being observed, and makes it impossible (even in theory) to accurately predict its behavior. See also observer inseparability.
Frequent or ongoing audit conducted by a firm’s own (as opposed to independent) accountants to (1) monitor operatingresults, (2) verify financial records, (3) evaluate internal controls, (4) assist with increasing efficiency and effectivenessof operations and, (5) to detect fraud. Internal audit can identify control problems, and aims at correcting lapses before they are discovered during an external audit. Although the internal auditors are the firm’s employees, they normally do not audit themselves or their own departments, but entrust it usually to independent auditors.
Fairness and impartiality towards all concerned, based on the principles of evenhanded dealing. Equity implies giving as much advantage, consideration, or latitude to one party as it is given to another. Along with economy, effectiveness, and efficiency, Equity is essential for ensuring that extent and costs of funds, goods and services are fairly divided among their recipients. See also equitable. Accounting: (1) Ownership interest or claim of a holder of common stock(ordinary shares) and some types of preferred stock (preference shares) of a company. On a balance sheet, equityrepresents funds contributed by the owners (stockholders) plus retained earnings or minus the accumulated losses. (2) Net worth of a person or company computed by subtracting total liabilities from the total assets. In case ofcooperatives, equity represents members‘ investment plus retained earnings or minus losses. Law: (1) The Englishsystem of justice that developed during 17th to 19th centuries, separate and distinct from the system of common law. Not bound by the precedents, it tempered the harshness and inflexibility of common law, especially in cases involvingfamilies and children. Although both systems of law merged by 1875, the rules of equity prevail in case of a conflict with the rules of common law. (2) Any right to an asset or property, held by a creditor, proprietor, or stockholder(shareholder).
A written guaranty from a third party guarantor (usually a bank or an insurance company) submitted to a principal (clientor customer) by a contractor (bidder) with a bid. A bid bond ensures that on acceptance of a bid by the customer the contractor will proceed with the contract and will replace the bid bond with a performance bond. Otherwise, the guarantor will pay the customer the difference between the contractor’s bid and the next highest bidder. This difference is called liquidated damages, which cannot exceed the amount of the bid bond. Unlike a fidelity bond, a bid bond is not an insurance policy, and (if cashed by the principal) the payment amount is recovered by the guarantor from the contractor. Also called bid guaranty or bid surety.