Word A Day

fiduciary duty
A legal obligation of one party to act in the best interest of another. The obligated party is typically a fiduciary, that is, someone entrusted with the care of money or property. Also called fiduciary obligation.

fiduciary duty is in the Corporate, Commercial, & General Law subject.

fiduciary duty appears in the definitions of the following terms: fiduciary obligation, breach of trust, independent contractor, corporate opportunity doctrine, and business judgment rule.
 
acid test ratio
Key measure of a firm's liquidity, it answers the question "Can this firm meet its current obligations from its liquid assets if suddenly all sales stop?" More stringent than 'current ratio,' it excludes inventories (typically the least liquid of current assets) to concentrate on the more liquid assets of the firm. Usually an acid test ratio of 1.0 or higher is considered satisfactory by lenders and investors. Also called acid ratio or quick ratio. Formula: (Current assets - inventory value) %u00F7 current liabilities. See also current ratio.

acid test ratio is in the Accounting & Auditing, Banking, Commerce, Credit, & Finance and Investing subjects.

acid test ratio appears in the definition of the following term: current ratio.
 
creative accounting

Definition
Use of unorthodox 'massage parlor' techniques which, while following provisions of GAAP, paint a desired (negative or positive, as the case may be) picture of a firm's finances. For example, selling an asset (whose market value is high but book value is low) to create non-operating profit that offsets operating loss. Unlike cooking the books, creative accounting is generally legal. Euphemistically also called financial engineering or earnings management. See also creative financing.
 
Crash of 1987
Definition
October 19, 1987, the day on which the Dow Jones Industrial Average dropped 22.6%. Also known as Black Monday, the Crash of 1987 was the largest one day drop in stock prices in U.S. history. See Black Friday; Crash of 1929; Stock Market Crash.
 
crawling peg system

Definition
Procedure in which a currency's exchange rate is periodically adjusted, usually to counter the effects of inflation. The exchange rate remains fixed between one change (crawl) to the next.
 
creaming

Definition
Selling a unique or new product in the top price range before substitutes appear and bring down the price. By the time this occurs, the firm has already 'creamed' the market.
 
create

Definition
To build, assemble, or produce an object or idea. The act of creating is usually tied to being innovative with existing materials. For example, a person may create a new product by combining existing products that a company sells
 
creative brief
Definition
A document produced by a requesting party to be used by professionals operating within an inventive field to produce various useful deliverables. For example, a business might generate a creative brief to instruct an advertising agency to produce a visual design, a promotional video, advertising copy or a web site for promotion via the Internet.
 
creative financing

Definition
Creating an innovative capital structure, and arranging extended loan and trade credit repayment terms, to achieve a level of financial leverage not ordinarily possible.
 
creative strategy
Definition
The outline prepared by the creative team of an advertising agency for the launching of an advertising campaign or message. A creative strategy is generally the result of a team composed of one or more copywriters, an art director and a creative director. The creative strategy generally explains how the advertising campaign will meet the advertising objectives of the business.
 
Term of the Day
market
An actual or nominal place where forces of demand and supply operate, and where buyers and sellers interact (directly or through intermediaries) to trade goods, services, or contracts or instruments, for money or barter. Markets include mechanisms or means for (1) determining price of the traded item, (2) communicating the price information, (3) facilitating deals and transactions, and (4) effecting distribution. The market for a particular item is made up of existing and potential customers who need it and have the ability and willingness to pay for it.
 
:SugarwareZ-098::SugarwareZ-098:dividend discount model
Mathematical formula used generally by stockbrokers to determine the selling price of a firm's stock (shares). Based on the discounted value of the expected future dividend amounts, it is used usually to spot firms that are undervalued by the stockmarket but have potential for high returns. See also dividend valuation model.
 
equity method
Method of accounting used by a parent firm for monies invested in the subsidiaries. The parent firm records the investment in its balance sheet at a valuation that takes into account the profits and losses of the subsidiaries since their acquisition. Also called equity accounting. See also cost method.
 
equity method
Method of accounting used by a parent firm for monies invested in the subsidiaries. The parent firm records the investment in its balance sheet at a valuation that takes into account the profits and losses of the subsidiaries since their acquisition. Also called equity accounting. See also cost method.
 
horizontal integration
The merger of companies at the same stage of production in the same or different industries. When the products of both companies are similar, it is a merger of competitors. When all producers of a good or service in a market merge, it is the creation of a monopoly. If only a few competitors remain, it is termed an oligopoly. Also called lateral integration. See also vertical integration.
 
inventory to cost of sales ratio
Percentage of cost of sales attributable to average inventory. A decreasing number indicates higher efficiency in use of resources; an increasing number suggests potential cash flow problems due to greater sums tied up in inventory. Formula: (Average inventory during a period %u00F7 cost of sales during that period) x 100.
 
revenue
The income generated from sale of goods or services, or any other use of capital or assets, associated with the main operations of an organization before any costs or expenses are deducted. Revenue is shown usually as the top item in an income (profit and loss) statement from which all charges, costs, and expenses are subtracted to arrive at net income. Also called sales, or (in the UK) turnover.
 
Keynesian economics
A school of economic thought founded by the UK economist John Maynard Keynes (1883-1946) and developed by his followers. In 1936, at the height of the great depression, Keynes' landmark book The General Theory Of Employment, Interest And Money caused a paradigm shift for economics: it suddenly replaced their emphasis on study of the economic behavior of individuals and companies (microeconomics) to the study of the behavior of the economy as a whole (macroeconomics).
The main plank of his revolutionary theory is the assertion that the aggregate demand created by households, businesses and the government and not the dynamics of free markets is the most important driving force in an economy. This theory further asserts that free markets have no self-balancing mechanisms that lead to full employment. Keynesian economists urge and justify a government's intervention in the economy through public policies that aim to achieve full employment and price stability. Their ideas have greatly influenced governments the world-over in accepting their responsibility to provide full or near-full employment through measures (such as deficit spending) that stimulate aggregate demand. See also classical economics, neo-classical Economics, new classical economics and supply side economics.
 
creative accounting
Use of unorthodox 'massage parlor' techniques which, while following provisions of GAAP, paint a desired (negative or positive, as the case may be) picture of a firm's finances. For example, selling an asset (whose market value is high but book value is low) to create non-operating profit that offsets operating loss. Unlike cooking the books, creative accounting is generally legal. Euphemistically also called financial engineering or earnings management. See also creative financing.
 
balance sheet ratios
Comparisons of balance sheet items to gain insight into the (1) changes in the financial position, (2) strength/weakness of the financial position, and (3) relationship between different items. Two basic balance sheet ratios are the debt ratio (total debt ÷ total assets) and debt to equity ratio (total debt ÷ total equity).
 
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