Glossary

Amounts owing on an open account to creditors for goods and services.

Money owed to a business for merchandise or services sold on an open account.

Price at which a security or commodity is offered for sale on an exchange.

Anything having commercial or exchange value that is owned by a business, institution or individual.

Professional examination and verification of a company's accounting documents and supporting data for the purpose of rendering an opinion as to their fairness, consistency and conformity with Generally Accepted Accounting Principles.

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Financial report showing the status of a company's assets, liabilities and owners' equity on a given date, usually the close of a month.

Price a prospective buyer is ready to pay.

Any interest-bearing or discounted government or corporate security that obligates the issuer to pay the bondholder a specified sum of money, usually at specific intervals, and to repay the principal amount of the loan at maturity. Bondholders have no corporate ownership privileges, as stockholders do.

Value at which an asset is carried on a balance sheet.Net asset value of a company's securities.

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Asset account on a balance sheet representing paper currency and coins, negotiable money orders and cheques and bank balances.

Highly liquid security with a known market value and a maturity, when acquired, of less than three months.

Total changes that affect the cash account during an accounting period.

The price of the final trade of a security at the end of a trading day.

Units of ownership of a public corporation. Owners are typically entitled to vote on the selection of directors and other important matters, as well as to receive dividends on their holdings. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock.

Financial statement that brings together all assets, liabilities, and operating accounts of a parent company and its subsidiaries.

Original price of an asset, used in determining capital gains.

Figure representing the cost of buying raw materials and producing finished goods.

Cash, accounts receivable, inventory and other assets that are likely to be converted into cash, sold, exchanged or expensed in the normal course of business, usually within a year.

Debts or other obligations coming due within a year.

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Money, goods or services that one party is obligated to pay to another in accordance with an expressed or implied agreement. Debt may or may not be secured.General name for bonds, notes, mortgages and other forms of paper evidencing amounts owed and payable on specified dates or on demand.

Usually, long-term debt divided by shareholder's equity.

The estimated future tax obligations that usually arise when different depreciation methods are used for financial statements and tax purposes. It is also an add-back to the statement of cash flows. Deferred income taxes include accumulated tax deferrals due to accelerated depreciation and investment credit.

Amortization of fixed assets, such as plant and equipment, so as to allocate the cost over their depreciable life. Depreciation reduces taxable income but does not reduce cash.

Distribution of earnings to shareholders, prorated by class of security and paid in the form of money, stock or, rarely, company products or property. The amount is decided by the Board of Directors and is paid when declared by the Board. Dividends must be declared as income in the year they are received.

Annual percentage of return earned by an investor on a common or preferred stock. The yield is determined by dividing the amount of the dividends per share by the current market price per share of the stock. The dividend yields of stocks are listed in the stock tables of most daily newspapers.

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Portion of a company's profit allocated to each outstanding share of common stock. The figure is calculated after paying taxes and after paying preferred shareholders.

Also known as operating profit before interest, depreciation and amortization, EBITDA is the operating revenue less cost of sales, operating expenses and SG&A expenses, plus interest expenses, depreciation and amortization.

Total assets minus total liabilities.

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Tangible property used in the operations of a business, but not expected to be consumed or converted into cash in the ordinary course of events. Fixed assets are normally represented on the balance sheet at their net depreciated value.

Figure showing the earnings per common share after assuming the exercise of warrants and stock options, and the conversion of convertible bonds and preferred stock (all potentially dilutive securities). Actually, it is more analytically correct to define the term as the smallest earnings per common share figure that can be obtained by computing earnings per share for all possible combinations of assumed exercise or conversion.

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The excess of acquisition cost over net asset value. Usually represents the value given to a well-respected business name, to the quality of its client portfolio and other such intangible factors.

Net sales less the cost of goods sold.

Percentage rate at which stocks or earnings are growing. Individual companies try to establish a rate at which their earnings grow over time. Firms with long-term earnings growth rates of over 15% are considered fast-growing companies. Analysts also apply the term growth rate to specific financial aspects of a company's operations, such as dividends, sales, assets and market share. Analysts use growth rates to compare one company to another within the same industry.

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Summary of the revenues, costs and expenses of a company during an accounting period.

Right or nonphysical resource that is presumed to represent an advantage to the firm's position in the marketplace. Such assets include copyrights, patents, trademarks, goodwill, computer programs, capitalized advertising costs, organization costs, licences, leases, franchises, exploration permits and import and export permits.

Value of a firm's raw materials, work in process, supplies used in operations and finished goods. Since inventory value changes with price fluctuations, it is important to know the method of valuation. There are a number of valuation methods; the most widely used are first in, first out (FIFO) and last in, first out (LIFO). Financial statements normally indicate the basis of inventory valuation, generally the lower figure of either cost price or current market price, which precludes potentially overstated earnings and assets as the results of sharp increases in the price of raw materials.

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Claim on the assets of a company - excluding ownership equity. Characteristics: (1) it represents a transfer of assets or services at a specified or determinable date; (2) the firm has little or no discretion to avoid the transfer; (3) the event causing the obligation has already occurred.

Cash or easily convertible into cash. In a corporation's financial statements, liquid assets are cash, marketable securities and accounts receivable.

Liability due in a year or more. Normally, interest is paid periodically over the term of the loan, and the principal amount is payable as notes or bonds mature.

Lowest trading price for a security that day.

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Securities that are easily sold. On a corporation's balance sheet, they are assets that can be readily converted into cash - for example, government securities, banker's acceptances and commercial paper. In keeping with conservative accounting practice, these are carried at cost or market value, whichever is lower.

The latest stock price of a share multiplied by the number of shares outstanding.

The price at which buyers and sellers trade similar items in an open marketplace. In the absence of a market price, it is the estimated highest price a buyer would be warranted in paying and a seller justified in accepting, provided both parties were fully informed and acted intelligently and voluntarily.

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Difference between total sales and total costs and expenses after income taxes. Total costs comprise cost of goods sold including depreciation; total expenses comprise selling, general and administrative expenses. Net income after taxes is the bottom line referred to in popular terms. It is out of this figure that dividends are normally paid.

Gross sales less returns and allowances, freight out and cash discounts allowed. Cash discounts allowed is seen less frequently than in past years, since it has become conventional to report as net sales the amount finally received from the customer. Returns are merchandise returned for credit; allowances are deductions allowed by the seller for merchandise not received or received in damaged condition; freight out is shipping expense passed on to the customer.

Amount by which assets exceed liabilities. For a corporation, net worth is also known as stockholder's equity or net assets.

Asset not expected to be converted into cash, sold or exchanged within the normal operating cycle of the firm, usually one year. Examples of noncurrent assets include fixed assets, leasehold improvements and intangible assets.

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The difference between the revenues of a business and the related costs and expenses, excluding income derived from sources other than its regular activities and before income deductions.

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Class of capital stock that pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock does not ordinarily carry voting rights.

Price of a stock divided by its earnings share. The P/E ratio may either use the reported earnings from the latest year (called a trailing P/E) or employ an analyst's forecast of next year's earnings (called a forward P/E).

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Net profits kept to accumulate in a business after dividends are paid. Retained earnings plus the total of all the capital accounts represent the net worth of a firm.

The latest 12 months' net income divided by the total assets from the most recent quarter.

Latest twelve months' net income divided by the most recent quarter invested capital (long-term debt plus common stock equity plus preferred equity).

Amount, expressed as a percentage, earned on a company's common stock investment for a given period. It is calculated by dividing common stock equity (net worth) at the beginning of the accounting period into net income for the period after preferred stock dividends but before common stock dividends. Return on equity tells common shareholders how their money is being employed. Comparing percentages for current and prior periods reveals trends, and comparison with industry composites reveals how well a company is holding its own against its competitors.

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American federal agency created by the Securities Exchange Act of 1934 to administer the securities business on a national scale. In Canada, there is no national regulating body; however, securities laws are enforced by the provinces.

Instrument that signifies an ownership position in a corporation (a stock), a creditor relationship with a corporation or a government body (a bond) or rights to ownership such as those represented by an option, subscription right and subscription warrant.

The System for Electronic Document Analysis and Retrieval (SEDAR) was developed in Canada for the Canadian Securities Administrators (CSA) to facilitate the electronic filing of securities information as required by the securities regulatory agencies in Canada; allow for the public dissemination of Canadian securities information collected in the securities filing process; and provide electronic communication between electronic filers, agents and the Canadian securities regulatory agencies.This Web site provides a listing of filings that have become publicly accessible in the SEDAR database as of the most recently completed business day.

Unit of equity ownership in a corporation. This ownership is represented by a stock certificate, which names the company and the shareowner. The number of shares a corporation is authorized to issue is detailed in its corporate charter. Corporations usually do not issue the full number of authorized shares.

Stock held by shareholders, shown on corporate balance sheets under the heading of "Capital stock issued and outstanding".

All debt obligations coming due within one year; shown on a balance sheet as current liabilities.

Gain or loss resulting from circumstances that are, by their nature, uncharacteristic of the corporation's normal evolution. Nonrecurring occurrence that must be explained to shareholders in an annual or quarterly report. Earnings are usually reported before and after taking into account the effects of special items.

Analysis of cash flow included as part of the financial statements in annual reports of publicly held companies. The statement shows how changes in balance sheet and income accounts affected cash and cash equivalents and breaks the analysis down according to operating, investing and financing activities. As an analytical tool, the statement of cash flow reveals healthy or unhealthy trends and makes it possible to predict future cash requirements. It also shows how actual cash flow measured up to estimates and permits comparisons with other companies.

Ownership of a corporation represented by shares.

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Stock reacquired by the issuing company and available for retirement or resale. It is issued but not outstanding. It cannot be voted and it pays or accrues no dividends. It is not included in any of the ratios measuring values per common shares.

Long-term price or trading volume movements either up, down or sideways, which characterize a particular market, commodity or security. Also applies to interest rates and yields.

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Funds invested in a company's cash, accounts receivable, inventory and other current assets. This figure enables one to evaluate a company's ability to repay its short-term debt.

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Return on an investor's capital investment.

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