Category: Dictionary

Secondary Market:​ EXCHANGES and OVER-THE-COUNTER markets where securities are bought and sold subsequent to original issuance, which took place in the primary MARKET.

SEC Registration Statement:​ DISCLOSURE document that must be filed with the SEC in connection with a public offering of SECURITIES, unless the offering is exempt.

SEC Filings:​ Financial and informational DISCLOSURES required by the SEC in order to comply with certain sections of the Securities Act of 1933 and the Securities and Exchange Act of 1934. Some of the more common filings that publicly owned companies must submit are the FORM 10-K, FORM 10-Q and FORM 8-K.

Seasonality:​ Variations in business or economic activity that recur with regularity as the result of changes in climate, holidays, and vacations.

Savings Bond:​ U.S. government BOND issued in face value denominations ranging from $50 to $10,000.

Sale-Leaseback Transaction:​ Sale of property by a seller who simultaneously leases the property back from the purchaser.

Safe Harbor Rule:​ Concept in statutes and regulations whereby a person who meets listed requirements will be preserved from adverse legal action. Frequently, safe harbors are used where a legal requirement is somewhat ambiguous and carries a risk of punishment for an unintended violation.

Routine Transactions:​ Recurring financial activities reflected in the accounting records in the normal course of business.

Risk-Adjusted Discount Rate:​ In portfolio theory and capital budget analysis, the rate necessary to determine the PRESENT VALUE of an uncertain or risky stream of INCOME; it is the RISK-free rate plus a risk premium that is based on an analysis of the risk characteristics of the particular INVESTMENT or project.

Risk Management:​ Process of identifying and monitoring business risks in a manner that offers a RISK / RETURN relationship that is acceptable to an entity’s operating philosophy.

Risk Averse:​ Term referring to the assumption that, given the same RETURN and different RISK alternatives, a rational investor will seek the SECURITY offering the least risk.

<span style="color: #ff0000"Risk:​ Measurable possibility of losing or not gaining value.

Right to Setoff:​ DEBTOR’S legal right, to discharge all or a portion of the DEBT owed to another party by applying against the debt an amount that the other party owes to the debtor.

Right of Rescission:​ Right granted by the Federal Consumer Credit Protection Act of 1968 to void a CONTRACT within three business days with full refund of any down payment and without penalty.

Review Report:​ See Accountants’ Report

Review Engagement:​ Agreement between a CERTIFIED PUBLIC ACCOUNTANT (CPA) and his or her client to perform a review.

Review:​ Accounting service that provides some assurance as to the reliability of financial information. In a review, a CERTIFIED PUBLIC ACCOUNTANT (CPA) does not conduct an examination under GENERALLY ACCEPTED AUDITING STANDARDS (GAAS).

Revenues:​ Sales of products, merchandise, and services; and earnings from INTEREST, DIVIDEND, rents.

Revenue Recognition:​ Method of determining whether or not income has met the conditions of being earned and realized or is realizable.

Return on Investment (ROI):​ Ratio measure of the profits achieved by a firm through its basic operations. An indicator of management’s general effectiveness and efficiency. The simplest version is the ratio of NET INCOME to total ASSETS.

Return on Assets:​ A measurement of a company’s PROFITABILITY or overall earning power, that is, how efficiently a company uses its assets to produce INCOME. It is found by dividing INCOME by average total assets.

Return:​ PROFIT on a securities or capital INVESTMENT, usually expressed as an annual percentage rate.

Retire:​ To take something, such as a BOND, out of circulation.

Retained Earnings Account:​ The ACCOUNT that reflects the stockholders’ claim to the assets earned from operations and reinvested in corporate operations.

Retained Earnings:​ Accumulated undistributed earnings of a company retained for future needs or for future distribution to its owners.

Retail Method:​ A way of estimating INVENTORY, used in retail business.

Restructuring:​ Reorganization within an entity. Restructuring may occur in the form of changing the components of CAPITAL, renegotiating the terms of DEBT agreements, etc.

Restricted Assets:​ Cash or other ASSETS whose use in whole or in part is restricted for specific purposes bound by virtue of contracted agreements.

Residual Value:​ The estimated NET scrap, salvage, or trade-in value of a TANGIBLE ASSET at the estimated date of disposal.

Resident Alien:​ This is an individual that is not a citizen, but who has a residence in the United States. They are taxed on all of their INCOME worldwide in the same manner a citizen of the United States is.

Reserve :​ ACCOUNT used to earmark a portion of EQUITY or fund balance to indicate that it is not available for expenditure. An obsolete term in the United States. More commonly used in Europe.

Research and Development Costs:​ The EXPENSE of FUNDING RESEARCH AND DEVELOPMENT (R&D).

Research and Development (R&D):​ Research is a planned activity aimed at discovery of new knowledge with the hope of developing new or improved products and services. Development is the translation of research findings into a plan or design of new or improved products and services.

Rescind:​ Cancel a CONTRACT agreement.

Required Rate of Return:​ RETURN required by investors before they will commit money to an INVESTMENT at a given level of risk.

Repurchase Agreement (Repos):​ Agreement whereby an institution purchases SECURITIES under a stipulation that the seller will repurchase the securities within a certain time period at a certain price.

Report Release Date:​ The date the company’s financial statements are issued.

Report:​ An oral or written description of something, such as a book, event, or situation.

Replacements:​ EXPENDITURES for making good or whole the portions of property that have deteriorated through use or have been destroyed through accident.

Repairs:​ EXPENDITURES made in order to keep property in good condition but that do not appreciably prolong the life or increase the value of the property.

Reorganization:​ This is a change in the businesses capital arrangements. If for a CORPORATION there are seven statutory options for reorganization that would cause the corporation and shareholders to not recognize any GAIN or LOSS on the exchange of stock.

Relevant Assertions:​ Assertions that have a meaningful bearing on whether the account is fairly stated.

Reinvestment Rate:​ RATE OF RETURN resulting from the reinvestment of the INTEREST from a BOND or other fixed-income SECURITY.

Reinsurance:​ Process by which an insurance company obtains insurance on its insurance claims with other insurers in order to spread the risk.

Regulated Investment Company (RIC):​ Commonly called a MUTUAL FUND, this is a domestic corporation that acts as an investment agent for its shareholders by typically investing in government and corporate securities and distributing the DIVIDENDS andINTEREST income earned from such investments. In order to be considered a RIC a CORPORATION must make an irrevocable election tax election in order to be treated as one.

Regressive Rate:​ Rate that decreases as the calculation base increases. Often used to describe taxes where the TAX rate paid decreases as the TAXABLE INCOME increases.

Registrar:​ Agency responsible for keeping track of the owners of bonds and the issuance of stock.

Refunding:​ Replacing an old DEBT with a new one, often in order to lower the INTEREST costs of the issuer.

Refinancing Agreement:​ Arrangement to provide funding to replace existing financing, the most common being a refinance of a home MORTGAGE.

Redemption Value:​ Price to be paid by an ENTITY to retire its BONDS or PREFERRED STOCK.

Red Herring:​ “Pre-release” PROSPECTUS offering. An announcement of a future issuance of SECURITIES, given restricted circulation during the waiting period of 20 days or other specified period between the filing of a registration statement with the SEC and the effective date of the statement. A red herring is not an offer to sell or the solicitation of an offer to buy.

Recovery:​ Period in a business cycle when economic activity picks up and the gross national product grows, leading into the expansion phase of the cycle.

Reconciliation:​ Comparison of two numbers to demonstrate the basis for the difference between them.

Reconcile:​ To resolve.

Recession:​ Downturn in economic activity, defined by many economists as at least two consecutive quarters of decline in a country’s gross national product.

Receivables:​ Amounts of money due from customers or other DEBTORS.

Receivable Turnover:​ A ratio for measuring the relative size of a company’s accounts receivable and the success of its CREDIT and collection policies during an accounting period.

Recapitalization:​ An internal reorganization of a corporation including a rearrangement of the capital structure by changing the kind of stock or the number of shares outstanding or issuing stock instead of bonds. It is distinguished from most other types of reorganization because it involves only one corporation and is usually accomplished by the surrender by shareholders of their securities for other stock or securities of a different type.

Rebate:​ In lending, UNEARNED INTEREST refunded to a borrower if the LOAN is paid off before MATURITY.

Reasonable Assurance:​ Management’s assessment of the effectiveness of internal control over financial reporting is expressed at the level of reasonable assurance. It includes the understanding that there is a remote likelihood that material misstatements will not be prevented or detected on a timely basis. It is a high level of assurance.

Realized Profit (or Loss):​ PROFIT or LOSS resulting from the sale or other disposal of a SECURITY.

Realization:​ Conversion into CASH, as happens in the sale of asset.

Real Rate of Return:​ RETURN on an INVESTMENT adjusted for INFLATION.

Real Interest Rate:​ Current INTEREST RATE minus INFLATION RATE.

Real Income:​ Income of an individual, group, or country adjusted for changes in purchasing power caused by INFLATION.

Real Estate Mortgage Investment Conduit (REMIC):​ An entity that holds a fixed pool of mortgages and issues multiple classes of interests in itself to investors. A qualified REMIC is generally taxed like a partnership, unless it takes contributions after its start up day or engages in a prohibited transaction.

Real Estate Investment Trust (REIT):​ Investor-owned TRUST which invests in real estate and, instead of paying income tax on its income, reports to each of its owners his or her pro rata share of its income for inclusion on their income tax returns. This unique trust arrangement is specifically provided for in the INTERNAL REVENUE CODE.

Raw Materials Inventory Account:​ Another term for MATERIALS INVENTORY ACCOUNT.

Raw Material:​ Something in its natural state that will be used in a manufacturing process.

Quick Ratio​ The relationship of a company’s QUICK ASSETS to its current liabilities.

Quick Assets:​ Assets that are or are expected to be converted into CASH in the near term: cash, accounts receivable, SHORT-TERM INVESTMENTS.

Quasi-Reorganization:​ Type of reorganization in which, with shareholder approval, the management revalues ASSETS and eliminates the DEFICIT (increased by asset devaluations if any) by charging it to other EQUITY accounts without the creation of a new corporate entity or without court intervention.

Quarterly Reports:​ Another term for INTERIM FINANCIAL STATEMENTS.

Quarter:​ Three-month intervals of the year.

Quantity:​ An amount or number.

Quantitative Analysis:​ Analysis dealing with measurable factors as distinguished from such QUALITATIVE considerations as the character of management or the state of employee morale.

Quality:​ An operating environment in which a company’s product or service meets a customer’s specifications the first time it is produced or delivered.

Qualitative Analysis:​ Analysis that evaluates important factors that cannot be precisely measured.

Qualitative:​ Relating to quality, especially as distinguished from quantity or amount.

Puts:​ A put is an option to sell a certain number of shares of stock at a stated price within a certain period. The gain or loss on a put is short or long term depending on the holding period of the stock involved.

Push-Down Accounting:​ Method of ACCOUNTING in which the values that arise from an acquisition are transferred or “pushed down” to the accounts of an acquired company.

Purchases Returns and Allowances:​ A CONTRA ACCOUNT used under the PERIODIC INVENTORY SYSTEM to accumulate CASH refunds, credits on ACCOUNT, and other allowances made by suppliers for unsatisfactory or incorrect MERCHANDISE that was originally purchased for resale.

Purchases Discounts:​ Discounts taken by merchants in return for prompt payment for MERCHANDISE purchased for resale.

Purchases:​ A temporary ACCOUNT used under the PERIODIC INVENTORY SYSTEM to record the TOTAL COST of all MERCHANDISE purchased for resale during an accounting period.

Purchase Order:​ Written authorization to a vendor to deliver specified goods or services at a stipulated price.

Purchase Method of Accounting:​ ACCOUNTING for a MERGER by adding the acquired company’s ASSETS at the price paid for them to the acquiring company’s assets.

Public Oversight Board (POB):​ The POB is an independent oversight board, composed of public members, which monitors and evaluates peer reviews conducted by the SEC Practice Section (SECPS) of the AICPA’s Division for CPA Firms as well as other activities of the SECPS.

Public Offering:​ Offering shares to the public. Generally done through SEC filings.

Public Company Accounting Oversight Board (PCAOB):​ A private-sector, non-profit corporation, created by the Sarbanes-Oxley Act of 2002, to oversee the AUDITORs of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports.

Proxy:​ Document authorizing someone other than the shareholder to exercise the right to vote the stock owned by the shareholder.

Prospective Financial Information (Forecast and Projection):​Forecast: Prospective financial statements that present, to the best of the responsible party’s knowledge and belief, an entity’s expected financial position, results of operations, and changes in financial position. A financial forecast is based on the responsible party’s assumptions reflecting conditions it expects to exist and the course of action it expects to take. Projection: Prospective financial statements that present, to the best of the responsible party’s knowledge and belief, given one or more hypothetical assumptions, an entity’s expected financial position, results of operations, and changes in financial position.

Projection:​ Prospective FINANCIAL STATEMENTS that include one or more hypothetical assumptions.

Profit Sharing Plan:​ DEFINED CONTRIBUTION PLAN characterized by the setting aside of a portion of an entity’s profits in participant’s accounts.

Profit Margin Pricing:​ An approach to cost-based pricing in which price is computed using a percentage of a product’s total costs and expenses.

Profit Margin:​ Used to measure the percentage of each sales dollar that results in NET INCOME.

Production:​ The act or process of creating something.

Product Line:​ In ACCOUNTING, all costs associated with the acquisition of an ASSET.

Pro Rata:​ Distribution of an expense, fund, or DIVIDEND proportionate with ownership.

Pro Forma:​ Presentation of financial information that gives effect to an assumed event (e.g., MERGER).

Privity:​ An interest in a transaction, contract or legal action to which one is not a party, arising out of a relationship to one of the parties.