Term of the Day

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

Term of the Day

declining balance depreciation

Method of computing depreciation in which the written down or book value (purchase price accumulated depreciation) of a capital asset is reduced by a fixed percentage rate. This method results in larger depreciation amounts in the earlier years of an asset's useful life and progressively lower amounts in later years, and is employed where the usage of an asset remains generally uniform despite the asset's age. Formula: 1- (Residual value Cost)^1/N where N is the number of years in the asset's estimated useful life. Also called diminishing balance depreciation, and reducing balance depreciation. See also straight line depreciation.

Term of the Weekend

underwriting agreement
Securities-purchase contract between an underwriter or underwriting syndicate and an issuer of bonds or shares. Among other terms, it specifies the price at which the security will be offered to the public (public offering price), underwriter's profit margin (underwriting spread), and the date by which the payments must be settled (settlement date).

Term of the Day

insurance company dividend

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

Term of the Day

financial accounting standards (FAS)

Definitive benchmarks prescribed by a country's Accounting Standards Board (as in the UK), or Financial Accounting Standards Board (as in the US) for reporting of accounting data in financial statements. These rules must be applied to all financial statements in order to provide a true and fair view of the firm's financial position, and a standardized method of comparison with financial statements of the other firms.

Term of the Day

consolidated financial statement

Financial information presentation in which the assets, equity, liabilities, and operating accounts of a firm and its subsidiaries are combined (after eliminating all inter-firm transactions) and shown as belonging to a single reporting entity. Also called combined financial statement or consolidated accounts.

Term of the Weekend

management prerogative
Employer's or management's unqualified-authority to exercise its discretion in certain areas without discussions with or the agreement of a union. Also called management rights, they are not subject to negotiations and may be expressly stated as such in a collective bargaining agreement. They include the rights to (1) assign and direct workforce, (2) determine the method to discipline employees for just cause, (3) increase and reduce the workforce according to the demand for firm's outputs or availability of money, (4) decide what products are offered for sale, at what price, and by which method.

business owner policy (BOP)

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

What Makes a Successful Manager?

by Warren Buffett Passion is the number one thing that I look for in a manager. IQ is not really that important. They need to be able to work well with others and the ability to get people to do what you want them to do. If you could put 10% of your future

earnings on one of your classmates, you would pick the one that's most effective at working with people. These are qualities that are elective. If you could pick one to sell short, it would be the person that no one wants to work with. When I took over Solomon I had to pick the best person to run it. I interviewed 12 people for 15 minutes each and I asked myself, "Who would I go into a foxhole with?" I never look at grades or where you went to school.

Term of the Day

adjusted basis value

Original cost or base price of a fixed asset from which depreciation is deducted, and to which capital expenditure is added. It is a taxpayer's equivalent of book value, and is used to arrive at capital gain or capital loss (resulting from the sale of an asset) for computing applicable tax. Also called adjustable basis value.

Term of the Day

investment club
A group of retail investors who pool some of their money and make joint investments. Investment clubs attempt to enable individuals to become individual investors by pooling their funds in small groups and collectively deciding how to invest the money. Like-minded investors come together to make investments based upon the input and research of the entire group, often providing a more complete foundation for subsequent decisions. Of course, members of investment clubs do not need to invest only through the club, so the club can make an excellent addition to a portfolio or it can serve as an excellent introduction to investing as an individual. Clubs can be a benefit to investors of all skill and experience levels. It can be difficult to gain a spot in an existing club without connections or the opportunity to replace a departing member. Fortunately, starting a new club is as simple as finding a dozen or so people in one geographic area who want to participate. Members should plan to, and may be required to, contribute at least a certain amount to the club's investment budget at certain intervals. Some clubs allow members to exceed the minimum and others do not. All investments should be researched as carefully as an individual would research them, but, because more people are involved, research can be more thorough and cover more investment opportunities.

hard selling
Applying psychological pressure (by appealing to someone's fears, greed, or vanity) to persuade the prospect to make a quick purchase decision. This approach is justified on the ground that most people are lazy and will postpone making a decision even if it were in their best interest to make the commitment. This practice is, however, reviled when its sole purpose is the salesperson's gain at the customer's detriment. Also called high pressure selling.

Average Directional Index

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

Term of the Day

accounting policies
Principles, rules and procedures selected, and consistently followed, by the management of an organization (the accounting entity) in preparing and reporting the financial statements. Accounting policies deal specifically with matters such as consolidation of accounts, depreciation methods, goodwill, inventory pricing, and research and development costs. Accounting policies must be disclosed in the annual financial statements. See also summary of significant accounting policies.

net unrealized appreciation

NUA. The change (positive or negative) in value that shares held in a tax-deferred account will experience once they are sold. Net unrealized appreciation does not undergo income tax when it is distributed, so this should be carefully considered by investors who are distributing stock from their retirement plan to another account, which might be subject to income tax.