Business / Finance Glossary

Accounts Receivable Financing: A short-term financing method in which accounts receivable are collateral for cash advances. See: Factoring.

Accounts Receivable Turnover: The ratio of net credit sales to average accounts receivable, which is a measure of how quickly customers pay their bills.

Accredited Investor: Refers to a wealthy investor (net worth $7 million or annual income >200,000) who does not count to the maximum of 35 people allowed to invest in a private limited partnership.

Accretion (Of A Discount): In portfolio accounting, a straight-line accumulation of capital gains on a discount bond in anticipation of receipt of par at maturity.

Accrual Basis: In the context of accounting, practice in which expenses and income are accounted for as if they are earned or incurred, whether or not they have been received or paid. Antithesis of cash ba . . . View Full Definition

Accrual Bond: A bond on which interest accrues but is not paid to the investor during the time of accrual. The amount of accrued interest is added to the remaining principal of the bond and is paid at maturity.

Accrued Benefits: The pension benefits earned by an employee accourding to the years of the employee's service.

Accrued Expenses: Expenses that the business has incurred for which it has not received, or will not receive, an invoice, and that have not yet been paid.

Accrued Interest: Applies mainly to convertible securities. Interest that has accumulated between the most recent payment and the sale of a bond or other fixed-income security. At the time of sale, the buyer . . . View Full Definition

Accrued Market Discount: The rise in the market value of a discount bond as it approaches maturity (when it is redeemable at par) and not because of falling market interest rates.

Accumulate: Broker/analyst recommendation that could mean slightly different things depending on the broker/analyst. In general, it means to increase the number of shares of a particular security over t . . . View Full Definition

Accumulated Benefit Obligation (ABO): An approximate measure of the liability of a pension plan in the event of a termination at the date the calculation is performed. Related: Projected benefit obligation.

Accumulated Depreciation: The total amount of depreciation expense recorded to date for the company's fixed assets. On the balance sheet, this value is subtracted from the gross value of Property, Plant and Equipment . . . View Full Definition

Accumulated Dividend: A dividend that has reached its due date, but is not paid out. See: Cumulative preferred stock.

Accumulated Profits Tax: A tax on earnings kept in a firm to prevent the higher personal income tax rate that would obtain if profits were paid out as dividends to the owners.

Accumulation: In the context of corporate finance, refers to profits that are added to the capital base of the company rather than paid out as dividends. See: Accumulated profits tax. In the context of in . . . View Full Definition

Accumulation Area: A price range within which a buyer accumulates shares of a stock. See: On-balance volume and distribution area.

Acid Test Ratio: Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid items to current liabilities.

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