M – S
Management Accounting - Reporting designed to assist management in decision-making, planning, and control. Also known as Managerial Accounting.
Management’s Report – Management is required to include in its annual report its assessment of the effectiveness of the company’s internal control over financial reporting in addition to its audited FINANCIAL STATEMENTS as of the end of the most recent FISCAL YEAR.
Margin - Excess of selling price over the unit cost.
Mark-to-Market - Method of valuing ASSETS that results in adjustment of an ASSET’s carrying amount to its market value.
Marketable Securities - STOCKS and other negotiable instruments which can be easily bought and sold on either listed exchanges or over-the-counter markets.
Material Weakness – A significant deficiency or combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim FINANCIAL STATEMENTS will not be prevented or detected.
Materiality - Magnitude of an omission or misstatements of ACCOUNTING information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would change or be influenced.
Merger - BUSINESS COMBINATION that occurs when one entity directly acquires the ASSETS and LIABILITIES of one or more entities and no new company or entity is created.
Mortgage - Legal instrument evidencing a security INTEREST in ASSETS, usually real estate. Mortgages serve as COLLATERAL for PROMISSORY NOTES.
Municipal Bond - Bond issued by a government or public body, the INTEREST on which is typically exempt from government taxation.
Matching Principle - A fundamental rule of basic ACCOUNTING. In any one given ACCOUNTING period, you should try to match the REVENUE you are reporting with the EXPENSES it took.
Mutual Fund - Investment company which generally offers its shares to the general public and invests the proceeds in a diversified portfolio of SECURITIES.
Negative Assurance - Report issued by an ACCOUNTANT based on limited procedures that states that nothing has come to the ACCOUNTANT’S attention to indicate that the financial information is not fairly presented.
Negligence - The omission to do something which a reasonable man, guided by those ordinary considerations which ordinarily regulate human affairs, would do, or the doing of something which a reasonable and prudent man would not do. Negligence is the failure to use such care as a reasonably prudent and careful person would use under similar circumstances.
Net Assets - Excess of the value of SECURITIES owned, cash, RECEIVABLES, and other ASSETS over the LIABILITIES of the company.
Net Income - Excess or DEFICIT of total REVENUES and GAINS compared with total EXPENSES and losses for an ACCOUNTING period.
Net Lease - In addition to the rental payment, the LESSEE assumes all property charges such as taxes, insurance, and maintenance.
Net Sales - Sales at gross invoice amounts less any adjustments for returns, allowances, or DISCOUNTS taken.
Non Routine Transactions – Activities that occur only periodically, the data involved are generally not part of the routine flow of transactions.
Notional - Value assigned to ASSETS or LIABILITIES that is not based on cost or market (e.g., the value of a service not yet rendered).
Objectivity - Emphasising or expressing the nature of reality as it is apart from personal reflection or feelings; independence of mind.
Obligations - Any amount which may require payment by an entity at a future time.
Open-End Mutual Fund - MUTUAL FUND that does not have a fixed number of shares outstanding, offers new shares to the public, and buys back outstanding shares at market value.
Operating Agreement - Agreement, usually a written document, that sets out the rules by which a LIMITED LIABILITY COMPANY (LLC) is to be operated.
Operating Cycle - Period of time between the acquisition of goods and services involved in the manufacturing process and the final cash realisation resulting from sales and subsequent collections.
Option - Right to buy or sell something at a specified price during a specified time period.
Paid in Capital - Portion of the stockholders’ EQUITY which was paid in by the stockholders, as opposed to CAPITAL arising from profitable operations.
Parent Company - Company that has a controlling interest in the COMMON STOCK of another.
Partnership - Relationship between two or more persons based on a written, oral, or implied agreement whereby they agree to carry on a trade or business for profit and share the resulting profits. Unlike a company’s shareholders, the partnership’s general partners are liable for the DEBTS of the partnership.
Pension - Retirement plan offered by an employer for the benefit of an employee, usually at retirement, through a TRUSTEE who controls the plan ASSETS.
Personal Financial Planning - Process for arriving at a comprehensive plan to solve an individual’s personal, business, and financial problems and concerns.
Personal Financial Statements - FINANCIAL STATEMENTS prepared for an individual or family to show financial status.
Personal Property - Movable property that is not affixed to the land (REAL PROPERTY). Personal property includes tangible items such as cash, cars and computers, as well as intangible items, such as royalties, patents and copyrights.
Preferred Stock - Type of CAPITAL STOCK that carries certain preferences over COMMON STOCK, such as a prior claim on DIVIDENDS and ASSETS.
Premium - (1) Excess amount paid for a bond over its face amount. (2) In insurance, the cost of specified coverage for a designated period of time.
Prepaid Expense - Cost incurred to acquire economically useful goods or services that are expected to be consumed in the revenue-earning process within the operating cycle.
Present Value - CURRENT VALUE of a given future cash flow stream, discounted at a given rate.
Principal - Face amount of a SECURITY, exclusive of any PREMIUM or INTEREST. The basis for INTEREST computations.
Projection - Prospective FINANCIAL STATEMENTS that include one or more hypothetical assumptions.
Proprietorship - Business owned by an individual without the limited liability protection of a firm or a LIMITED LIABILITY COMPANY (LLC). Also known as sole proprietorship.
Public Offering - Offering shares to the public.
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.
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.
Ratio Analysis - Comparison of actual or projected data for a particular company to other data for that company or industry in order to analyse trends or relationships.
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.
Recapitalisation – An internal reorganisation of a company 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 reorganisation because it involves only one company and is usually accomplished by the surrender by shareholders of their SECURITIES for other STOCK or SECURITIES of a different type.
Receivables - Amounts of money due from customers or other DEBTORS.
Reconciliation - Comparison of two numbers to demonstrate the basis for the difference between them.
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 and the effective date of the statement. A red herring is not an offer to sell or the solicitation of an offer to buy.
Refinancing Agreement - Arrangement to provide funding to replace existing financing, the most common being a refinance of a home MORTGAGE.
Reinsurance - Process by which an insurance company obtains insurance on its insurance claims with other insurers in order to spread the risk.
Reorganisation – This is a change in the businesses capital arrangements. If for a firm there are seven statutory options for reorganisation that would cause the company and shareholders to not recognise any GAIN or LOSS on the exchange of STOCK.
Replacements – EXPENDITURES for making good or whole the portions of property that have deteriorated through use or have been destroyed through accident.
Reserve - ACCOUNT used to earmark a portion of EQUITY or fund balance to indicate that it is not available for EXPENDITURE.
Restricted Assets - Cash or other ASSETS whose use in whole or in part is restricted for specific purposes bound by virtue of contracted agreements.
Restructuring - REORGANISATION within an entity. Restructuring may occur in the form of changing the components of CAPITAL, renegotiating the terms of DEBT agreements, etc.
Retained Earnings - Accumulated undistributed earnings of a company retained for future needs or for future distribution to its owners.
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.
Revenues - Sales of products, merchandise, and services; and earnings from INTEREST, DIVIDEND, rents.
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.
