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Tag Archives: Finance terms

Term of the Day: CASH FLOW LOAN

 

Definition of ‘Cash Flow Loan’

Borrowing cash typically to meet day-to-day operations or acquisitions. It is a type of debt financing, in which a bank lends funds, generally for working capital, using the expected cash flows that a borrowing company generates as collateral for the loan.

Reasons for needing a cash flow loan could be seasonal-demand changes, business expansion or changes in the business cycle.

Cash-flow loans can help in temporary situations, but if cash flow problems persist then companies need to improve their cash conversion cycle and get customers to pay faster.

 

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Term of the Day: Trust

Legal entity created by a party (the trustor) through which a second party (the trustee) holds the right to manage the trustor’s assets or property for the benefit of a third party (the beneficiary).

The four main types of trusts are:

(1) Living: trust created by the trustor while he or she is alive.

(2) Testamentary: trust established through a will and which comes into effect (is created) when the trustor dies.

(3) Revocable: trust that can be modified or terminated by the trustor after its creation.

(4) Irrevocable: trust that cannot be modified or terminated by the trustor after its creation.

 
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Posted by on March 14, 2013 in Uncategorized

 

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Cash Per Share: definition

Also known as ‘Cash Flow Per Share’ is a measure of a firm’s financial strength, calculated as:

Cash Flow Per Share = (Operating Cash Flow – Preferred Dividends) / Common Shares Outstanding.

Cash flow per share shows the after-tax earnings plus depreciation, on a per share basis.

As a financial analyst i prefer to place more emphasis on the cash flow per share value than on earnings per share values. While an earnings per share value can be easily manipulated to appear more positive than it really is, therefore putting its reliability in question, cash is more difficult to alter, resulting in what some analysts believe is a more accurate value of the strength and sustainability of a particular business model.

A company’s earnings per share is the portion of a company’s profit that is allocated to each outstanding share of common stock, and, like cash flow per share, serves as an indicator of a company’s profitability. Because the cash flow per share takes into consideration a company’s ability to generate cash, it is regarded by some analysts as a more accurate measure of a company’s financial situation than the earnings per share metric. Cash flow per share represents the net cash a firm produces, on a per share basis.

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Business Term: Total Quality Management (TQM)

TQM Model

TQM Model

Total quality managent is A holistic approach to long-term success that views continuous improvement in all aspects of an organization as a process and not as a short-term goal.

It aims to radically transform the organization through progressive changes in the attitudes, practices, structures, and systems.

Total quality management transcends the product quality approach, involves everyone in the organization, and encompasses its every function: administration, communications, distribution, manufacturing, marketing, planning, training, etc.
Coined by the US Naval Air Systems Command in early 1980s, this term has now taken on several meanings and includes:

(1) commitment and direct involvement of highest-level executives in setting quality goals and policies, allocation of resources, and monitoring of results;

(2) realization that transforming an organization means fundamental changes in basic beliefs and practices and that this transformation is everyone’s job;

(3) building quality into products and practices right from the beginning;

(4) understanding of the changing needs of the internal and external customers, and stakeholders, and satisfying them in a cost effective manner;

(5) instituting leadership in place of mere supervision so that every individual performs in the best possible manner to improve quality and productivity, thereby continually reducing total cost;

(6) eliminating barriers between people and departments so that they work as teams to achieve common objectives; and

(7) instituting flexible programs for training and education, and providing meaningful measures of performance that guide the self-improvement efforts of everyone involved.

Source. Business Directory.
 

 
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Posted by on September 22, 2012 in Finance, Economic terms and Buzz Words

 

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Finance Term: TANSTAAFL – ”There Ain’t No Such Thing As A Free Lunch”

Definition of ‘There Ain’t No Such Thing As A Free Lunch – TANSTAAFL’

An acronym that attempts to describe the cost of decision making and  consumption. “There ain’t no such thing as a free lunch” (TANSTAAFL) expresses  the idea that even if something seems like it is free, there is always a cost,  no matter how indirect or hidden.
In finance, TANSTAAFL refers to the  opportunity cost paid to make a decision. The decision to consume one product  usually comes with the trade-off of giving up the consumption of something  else.
Also known as “there is no such thing as a free lunch”  (TINSTAAFL).

According to Investopedia,  The phrase ‘TANSTAAFL’  is thought to have originated because many saloons  in the U.S. used to provide free lunches to their patrons, but required them to  purchase drinks in order to get them.
Although the phrase is a double  negative, it is not intended to be interpreted as such. Therefore, the alternate  acronym TINSTAAFL is often used.

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Finance Term: DINKS: ‘Dual Income, No Kids.

Definition:
A household in which there are two incomes and no children (either both partners are working or one has two incomes). DINKS are often the target of marketing efforts for luxury items such as expensive cars and vacations.

Couples living in a DINK household are thought to have more disposable income because they don’t have the added expenses that come with children. Contrast this with “DEWKS”.-

Dewks is A household in which there are children and both partners earn an income.

DEWKS families are marketing targets for toys, children’s clothes and other goods and services that pertain to children. Contrast this with “DINKS”.  

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Taxation Terms: Double Irish With A Dutch Sandwich

Definition of ‘Double Irish With A Dutch Sandwich’

A tax avoidance  technique employed by certain large corporations, involving the use of a  combination of Irish and Dutch subsidiary companies to shift profits to low or  no tax jurisdictions. The double Irish with a Dutch sandwich technique involves  sending profits first through one Irish company, then to a Dutch company and  finally to a second Irish company headquartered in a tax haven. This technique  has allowed certain corporations to dramatically reduce their overall corporate  tax rates.

The double  Irish with a Dutch sandwich technique is just one of a class of similar  international tax avoidance schemes. Each involves arranging transactions  between subsidiary companies to take advantage of the idiosyncrasies of varied  national tax codes. These techniques are most prominently used by tech companies  because these firms can easily shift large portions of profits to other  countries by assigning intellectual property rights to subsidiaries abroad.

 

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Buzz word: ‘Eating Someone’s Lunch’

The act of an aggressive competition that results in one company taking portions of another company’s market share. Market share is the percentage of an industry or market’s total sales that is achieved by one company during a specified time period. A more aggressive company “eats the lunch” of another company when it take some of its competitor’s market share. This can be achieved through the release of a better or newer product, aggressive pricing or marketing strategies or other competitive advantages. When these strategies result in one company having a bigger market share for a particular product or service, the company enjoying the larger market share is said to be eating someone’s lunch.

Eating someone’s lunch generally refers to defeating or outwitting an opponent. In the business world, it describes situations where one company outperforms another and earns a larger market share. Eating someone’s lunch is considered a necessary component of a competitive market, and may help bring better pricing and services to consumers as companies compete for larger market shares. A company may eat someone’s lunch at one point in time, only to have their own lunch eaten during a subsequent time as competitors fight back for market share.

 

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Buzz Word: ‘Stop Trading On Congressional Knowledge Act – STOCK Act’

Definition of ‘Stop Trading On Congressional Knowledge Act – STOCK Act’

A bipartisan bill signed into law Apr. 4, 2012 by President Barack Obama that  prevents members of congress from trading stocks based on nonpublic information  gathered on Capitol Hill.

The Stop Trading on Congressional Knowledge (STOCK)  Act elucidates that congressional members and staff owe a duty to United States  citizens not to misappropriate nonpublic information to make a profit.

In  addition to banning insider trading for members and Congressional staff, the  STOCK Act provides for increases transparency in financial disclosure reporting,  and requires members of Congress and government employees to report certain  investment transactions within 45 days.

According to Investopedia The STOCK Act amended the Ethics in Government Act of 1978 to require  electronic reporting and online availability of public financial disclosure  information. This information must be made available on agency web sites and  through databases that can be searched and sorted.
According to the Act,  a member of Congress who commits one of several corruption offenses while  serving as an elected official will be required to forfeit his or her federal  pension.

The STOCK Act expands forfeiture to apply to misconduct by members  committed in other federal, state and local elected offices and adds insider  trading as a crime for which forfeiture will be required.

fThe STOCK Act  also requires disclosure of personal mortgage terms, bans special access to  initial public offerings and bans bonuses for Fannie Mae and Freddie Mac senior  executives.

 

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Buzz Words: Death by a Thousand Cuts

Death by a thousand cuts is A failure that occurs as a result of many smaller problems. Death by a thousand cuts could refer to the termination of a proposed deal as a result of several small issues rather than one major cause. This term can also apply to a product or idea that is destroyed by too many minor changes or the failure of a plan as a result of a cumulative chain of events.

This word is derived from the idea that a small cut will not kill you but, if you get enough of them, you could bleed to death. The term is derived from an ancient form of torture, in which the condemned person was subjected to a number of less devastating wounds over time until the accumulation of damage eventually became fatal.

 

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