The CEO’s Glossary to Business Acronyms

AAR – average annual return ACH – automated clearing house—a collection of 32 regional electronic interbank networks used to process [...]

October 5 2011 by ChiefExecutive.net


AAR – average annual return

ACH – automated clearing house—a collection of 32 regional electronic interbank networks used to process transactions electronically with a guaranteed one-day bank collection float

ADP – automatic data processing

ADR – alternative dispute resolution

AICPA – American Institute of Certified Public Accountants

ALM – asset liability management

AM – asset managementAP – accounts payable

APR – annual percentage rate – the periodic rate times the number of periods in a year; for example, a 5% quarterly return has an APR of 20%

APV – adjusted present value – the net present value analysis of an asset if financed solely by equity (present value of un-levered cash flows), plus the present value of any financing decisions (levered cash flows); the analysis is often used for highly leveraged transactions such as a leverage buy out.

APY – annual percentage yield – the effective, or true, annual rate of return; the APY is the rate actually earned or paid in one year, taking into account the affect of compounding; the APY is calculated by taking one plus the periodic rate and raising it to the number of periods in a year

AR – accounts receivable

ARMs – adjustable rate mortgage – a mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index

ARPS – adjustable rate preferred stock – publicly traded issues that may be collateralized by mortgages and MBSs

ARPS – auction rate preferred stock – floating rate preferred stock, the dividend on which is adjusted every seven weeks through a Dutch auction

ARR – average rate of return – the ratio of the average cash inflow to the amount invested

ASB – Accounting Standards Board

ATC – average total cost

ATOI – after tax operating income

AWL – actual wage lossB2B – Business to business

B2C – Business to consumer

BAN – bank anticipation notes – notes issued by states and municipalities to obtain interim financing for projects that will eventually be funded long term through the sale of a bond issue

BCR – benefit/cost ratio

BEP – break-even point

BLS – Bureau of Labor Statistics

CapEx – capital expenditures

CAPM – capital asset pricing model – an economic theory that describes the relationship between risk and expected return, and serves as a model for the pricing of risky securities; the CAPM asserts that the only risk that is priced by rational investors is systematic risk, because that risk cannot be eliminated by diversification

CAR – cumulative abnormal return – sum of the differences between the expected return on a stock and the actual return that comes from the release of news to the market

CASB – Cost Accounting Standards Board

CCI – consumer confidence index

CD – certificate of deposit – also called a time deposit, this is a certificate issued by a bank or thrift that indicates a specified sum of money has been depositedCEO – Chief Executive Officer

CEPS – cash earnings per share

CFAT – cash flow after taxes

CFC – controllers foreign corporation – a foreign corporation whose voting stock is more than 50% owned by US stockholders, each of whom owns at least 10% of the voting power

CFO – chief financial officer, the individual in an organization with overall responsibility for accounting, treasury, financial management, financial reporting, finance and related functions; reports direction to the CEO

CFR – Code of Federal Regulations

CGT – capital gains tax

CHRO – Chief Human Resource Officer

CIO – Chief Investment Officer/Chief Information Officer

CISO – Chief Information Security Officer

CMA – Certified Management AccountantCMO – Chief Marketing Officer

CO – Compliance Officer

COBRA – Consolidated Omnibus Budget Reconciliation Act

COO – Chief Operating/Operations Officer

CPA – certified public accountant, a credential conferred by a state or similar governmental jurisdiction that authorized the holder to practice as a certified public accountant in that jurisdiction

CPC – cost per click

CPG – consumer packaged goods

CPI – consumer price index

CRM – customer relationship management

CROGI – cash return on gross investment

CSO – Chief Security Officer

D & O – Directors and Officers

DCF – discounted cash flow – future cash flows multiplied by discount factors to obtain present values

DDM – discounted dividend model – a formula to estimate the intrinsic value of a firm by figuring the present value of all expected future dividends

DISC – Domestic International Sales Corporation – a US corporation that receives a tax incentive for export activities

DRP – disaster recovery plan

DRP – dividend reinvestment plan – automatic reinvestment of shareholder dividends in more shares of a company’s stock, often without commissions; dividend reinvestment plans allow shareholders to accumulate stock over the long term using dollar cost averaging; the DRP is usually administered by the company without charges to the holder

DSI – discretionary salary increase

DTC – depository transfer check – check made out directly by a local bank to a particular firm or person

EBIT – earnings before interest and taxes – a financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses; in other words, operating and non-operating profit before the deduction of interest and income taxes

EBO – employee buyout

EBR – enhanced business reporting – comprised of voluntary, globally recognized guidelines for providing richer disclosure of business information, allowing companies to better communicate current and expected performance while giving the investment community and other stakeholders the information they need to make better decisions; this includes financial statements, key performance indicators based on industry-specific definitions and company-specific information about strategy, plans, opportunities, and risks

EBT – earnings before tax

ECI – employment cost index

EDI – electronic data interchange – the exchange of information electronically, directly from one firm’s computer to another firm’s computer, in a structured format

EEO – equal employment opportunity

EFT – electronic funds transfer

EIC – earned income tax credit

EIN – employer identification number

EM – effective margin – the amount equaling the net earned spread, or margin, of income on the assets in excess of financing costs for a given interest rate and prepayment rate scenario

EOQ – economic order quantity – the order quantity that minimizes total inventory costs

EPOS – electronic point of sale

EPS – earnings per share – a company’s profit divided by its number of outstanding shares; if a company earned $2 million in one year had 2 million shares of stock outstanding, its EPS would be $1 per share

ERP – enterprise resource planning – a business management system that integrates all facets of the business to the related financial reporting functionality; help managers in business activities such as planning, manufacturing, sales, marketing, inventory control, order tracking and finance; ERP attempts to integrate all departments and functions across a company to create a single software program that runs off of one database

ESO – employee stock option

ESOP – employee stock ownership plan – a company contributes to a trust fund that buys stock on behalf of employees

EV – enterprise value

FASB – Financial Accounting Standards Board, independent, private, non-government group which is authorized by the accounting profession to establish generally accepted accounting principles (GAAP) in the United States

FCIA – Foreign Credit Insurance Association – a private US consortium of insurance companies that offers trade credit insurance to U.S. exporters in conjunction with the U.S. Export-Import Bank.

FDI – foreign direct investment – the acquisition abroad of physical assets such as plant and equipment, with operating control residing in the parent corporation

FDIC – Federal Deposit Insurance Corporation – a federal institution that insures bank deposits

FFO – funds from operations – used by real estate and other investment trusts to define the cash flow from trust operations; it is earnings with depreciation and amortization added back

FFY – federal fiscal year

FIFO – first in first out – a method of valuing the cost of goods sold that uses the cost of the oldest item in inventory first

FMV – fair market value

FOIA – Freedom of Information Act

FRA – forward rate agreement – agreement to borrow or lend at a specified future date at an interest rate that is fixed today

FSC – Foreign Sales Corporation – a special type of corporation created by the Tax Reform Act of 1984 that is designed to provide a tax incentive for exporting US-produced goods

FTC – Federal Trade Commission

FTP – file transfer protocol

GAAP – Generally Accepted Accounting Principles – a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time

GAAS – Generally Accepted Auditing Standards – standards governing the conduct of external audits by CPAs as determined by the Auditing Standards Board (ASB) of the AICPA

GDP – gross domestic product – the market value of goods and services produced over time including the income of foreign corporations and foreign residents working in the US, but excluding the income of US residents and corporations overseas

GIF – graphics interchange format

GNP – gross national product – measures economy’s total income; it is equal to GDP plus the income abroad accruing to domestic residents minus income generated in domestic market accruing to non-residentsGR – general revenue

HCM – human capital management

HTML – hypertext mark-up language

HTTP – hypertext transfer protocol

IASB – International Accounting Standards Board, an organization whose members represent 153 accounting bodies in 112 countries; this group is dedicated to bringing about the harmonization of international accounting standards

IMF – International Monetary Fund – an organization founded in 1944 to oversee exchange arrangements of member countries and to lend foreign currency reserves to members with short-term balance of payment problems

IPO – initial public offering – a company’s first sale of stock to the public; securities offered in an IPO are often, but not always, those of young, small companies seeking outside equity capital and a public market for their stock; investors purchasing stock in IPOs generally must be prepared to accept very large risks for the possibility of large gains; IPOs by investment companies (closed-end funds) usually contain underwriting fees which represent a load to buyers

IRB – industrial revenue bond – bond issued by local government agencies on behalf of corporations

IRC – internal revenue code

IRR – internal rate of return

ISP – internet service provider

JOA – joint operating agreement

JPEG – joint photographic experts group

KPI – key performance indicators

LBO – leveraged buyout – a transaction used for taking a public corporation private financed through the use of debt funds: bank loans and bonds; because of the large amount of debt relative to equity in the new corporation, the bonds are typically rated below investment grade, properly referred to as high-yield bonds or junk bonds; investors can participate in an LBO through either the purchase of the debt (i.e. purchase of the bonds or participation in the bank loan) or the purchase of equity through an LBO fund that specializes in such investments

LEI – leading economic indicators

LIFO – last in first out – a method of valuing inventory that uses the cost of the most recent item in inventory first

LLC – limited liability company

LLP – limited liability partnership

LOC – letter of credit – a form of guarantee of payment issued by a bank used to guarantee the payment of interest and repayment of principal on bond issues

MBO – management buyout – leveraged buyout whereby the acquiring group is led by the firm’s management

MNC – multinational corporation

MPEG – motion picture exports group

MTL – multi-level marketing

MTM – market to market

NAV – net asset value – the value of a fund’s investments; for a mutual fund, the net asset value per share usually represents the fund’s market price, subject to a possible sales or redemption charge

NAVPS – net asset value per share

NOI – net operating income

NOL – net operating loss

NPV – net present value – the present value of expected future cash flows minus the cost

OA – operating assets

OCF – operating cash flow

OCR – optical text recognition

OE – operating expenseOI – operating income

OL – operating liabilitiesOR – operating revenue

P & L – profit and loss

P/E — Price/Earnings ratio – shows the “multiple” of earnings at which a stock sells; determined by dividing current stock price by current earnings per share (adjusted for stock splits); earnings per share for the P/E ratio is determined by dividing earnings for past 12 months by the number of common shares outstanding

PBT – profit before tax

PDF – portable document format

PEG – price to earnings growth

PERC – preferred equity redemption stock – preferred stock that converts automatically into equity at a stated date; a limit is placed on the value of the shares the investor receives

PLC – product life cycle

POA – power of attorney

PoP – point of purchase

PR – public relations

QC – quality control

R & D – research and development

RE – residual earnings

REIT – real estate investment trust – is similar to a closed end mutual fund; REITs invest in real estate or loans secured by real estate and issue shares in such investments

REMIC – real estate mortgage investment conduit – a pass-through tax entity that can hold mortgages secured by any type of real property and issue multiple classes of ownership interests to investors in the form of pass-through certificates, bonds or other legal forms; a financing vehicle created under the Tax Reform Act of 1986RFP – request for proposal

RFQ – request for quote

ROA – return on assets – indicator of profitability – determined by dividing net income for the past 12 months by the total average assets; result is shown as percentage; ROA can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets)

ROC – return on capital

ROE – return on equity – indicator of profitability – determined by dividing net income for the past 12 months by common stockholder equity (adjusted for stock splits); result is shown as a percentage; investors use ROE as a measure of how a company is using its money; ROE may be decomposed into return on assets (ROA) multiplied by financial leverage (total assets/total equity)

ROI – return on investment – generally book income as a proportion of net book value

ROR – return on revenue

ROS—return on sales

RPPP – relative purchasing power parity – idea that the rate of change in the price level of commodities in one country relative to the price level in another determines the rate of change of the exchange rate between the two countries’ currencies

RR – retention rate

SBIC – small business investment company

SEC – Securities and Exchange Commission, agency of the federal government that regulates the public trading of securities; the SEC has the authority to establish accounting and auditing regulations but defers to the Financial Accounting Standards Board (FASB) and the Public Company Accounting Oversight Board

SIC – abbreviation for Standard Industrial Classification; each 4-digit code represents a unique business activity

SOL – statute of limitations

TABs – tax anticipation bills – special bills that the treasury occasionally issues that mature on corporate quarterly income tax dates and can be used at face value by corporations to pay their tax liabilities

TANs – tax anticipation notes – notes issued by states or municipalities to finance current operations in anticipation of future tax receipts

UPC – universal product code

VPN – virtual private network

VWAP – value weighted average price

WACC – weighted average cost of capital – expected return on a portfolio of all of the firm’s securities; used as a hurdle rate for capital investment

WAL – weighted average life or (average life) – the average number of years that each dollar of unpaid principal due on the mortgage remains outstanding; average life is computed as the weighted average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal paydowns

WC – workers’ compensation

Sources and additional resources

http://www.aicpa.org/Press/DownloadableDocuments/Acronyms_and_Abbreviations.pdf

http://www.nytimes.com/library/financial/glossary/bfglosa.htm

http://www.rogers-international.com/downloads/publicspeaking/Acronyms%20and%20abbreviations.pdfhttp://www.shrm.org/TemplatesTools/Glossaries/Documents/Acronyms.pdf

http://www.abbreviations.com/bmc.asp?c=BUSINESS