Contingent Capital

Funds that would be available under a pre-negotiated agreement if a specific contingency (such as a natural disaster) occurs or a threshold (such as the maximum price of a raw material or the minimum price of product) is crossed. In this off balance-sheet arrangement, a party pays a capital commitment fee to a second party which undertakes (in advance) to extend a loan or purchase debt or equity security of a certain amount in case a stated situation occurs. Thus, the first party does not transfer its risk (as in insurance, which affects the income statement) and does not have to show a liability on its books (as for a loan, which affects the balance sheet), but receives a critical capital injection exactly when it is needed without having to negotiate from a position of weakness. Contingent capital arrangements take several forms, such as a catastrophe equity put option, contingent surplus note, or standby loan.

Balance of Payments (BOP)

Set of accounts that record a country's international transactions, and which (because double entry bookkeeping is used) always balance out with no surplus or deficit shown on the overall basis. A surplus or deficit, however, can be shown in any of its three component accounts: (1) Current account, covers export and import of goods and services, (2) Capital account, covers investment inflows and outflows, and (3) Gold account, covers gold inflows and outflows. BOP accounting serves to highlight a country's competitive strengths and weaknesses, and helps in achieving balanced economic-growth.

Inventory

An itemized catalog or list of tangible goods or property, or the intangible attributes or qualities. The value of materials and goods held by an organization (1) to support production (raw materials, subassemblies, work in process), (2) for support activities (repair, maintenance, consumables), or (3) for sale or customer service (merchandise, finished goods, spare parts). Inventory is often the largest item in the current assets category, and must be accurately counted and valued at the end of each accounting period to determine a company's profit or loss. Organizations whose inventory items have a large unit cost generally keep a day to day record of changes in inventory (called perpetual inventory method) to ensure accurate and on-going control. Organizations with inventory items of small unit cost generally update their inventory records at the end of an accounting period or when financial statements are prepared (called periodic inventory method). The value of an inventory depends on the valuation method used, such as first-in, first-out (FIFO) method or last-in, first-out (LIFO) method. GAAP require that inventory should be valued on the basis of either its cost price or its current market price whichever is lower of the two to prevent overstating of assets and earning due to sharp increase in the inventory's value in inflationary periods. The optimum level of inventory for an organization is determined by inventory analysis. Called also stock in trade, or just stock.

Contingent Capital

Funds that would be available under a pre-negotiated agreement if a specific contingency (such as a natural disaster) occurs or a threshold (such as the maximum price of a raw material or the minimum price of product) is crossed. In this off balance-sheet arrangement, a party pays a capital commitment fee to a second party which undertakes (in advance) to extend a loan or purchase debt or equity security of a certain amount in case a stated situation occurs. Thus, the first party does not transfer its risk (as in insurance, which affects the income statement) and does not have to show a liability on its books (as for a loan, which affects the balance sheet), but receives a critical capital injection exactly when it is needed without having to negotiate from a position of weakness. Contingent capital arrangements take several forms, such as a catastrophe equity put option, contingent surplus note, or standby loan.

Generation Y

The generation of people born during the 1980s and early 1990s. The name is based on Generation X, the generation that preceded them. Members of Generation Y are often referred to as echo boomers because they are the children of parents born during the baby boom (the baby boomers). Because children born during this time period have had constant access to technology (computers, cell phones) in their youth, they have required many employers to update their hiring strategy in order to incorporate updated forms of technology. Also called millennials, echo boomers, internet generation, iGen, net generation.

Visa

Certificate issued or a stamp marked (on the applicant's passport) by the immigration authorities of a country to indicate that the applicant's credentials have been verified and he or she has been granted permission to enter the country for a temporary stay within a specified period. This permission, however, is provisional and subject to the approval of the immigration officer at the entry point. The common types of visas include: (1) Single entry visa: valid only for one visit. (2) Multiple entry visa: allows any number of visits within its validity period. (3) Business visa: for a short visit to conduct discussions, negotiations, and/or presentations, but not to take up employment. (4) Tourist visa: allows freedom to move around the country and briefly cross its frontiers to another country and return. (5) Residence visa: allows an extended stay but does not grant permission to take up employment. (6) Work visa: gives the permission to stay and take up employment, for a specific job and only for a limited period. Called also work permit. (7) Electronic visa: permission recorded in a computer instead of being issued as a certificate or stamp.

Balance Sheet

A condensed statement that shows the financial position of an entity on a specified date (usually the last day of an accounting period). Among other items of information, a balance sheet states (1) what assets the entity owns, (2) how it paid for them, (3) what it owes (its liabilities), and (4) what is the amount left after satisfying the liabilities. Balance sheet data is based on a fundamental accounting equation (assets = liabilities + owners' equity), and is classified under subheadings such as current assets, fixed assets, current liabilities, Long-term Liabilities. With income statement and cash flow statement, it comprises the set of documents indispensable in running a business. An audited balance sheet is often demanded by investors, lenders, suppliers, and taxation authorities; and is usually required by law. To be considered valid, a balance sheet must give a true and fair view of an organization's state of affairs, and must follow the provisions of GAAP in its preparation.

Due Diligence

General: Measure of prudence, responsibility, and diligence that is expected from, and ordinarily exercised by, a reasonable and prudent person under the circumstances. Business: Duty of a firm's directors and officers to act prudently in evaluating associated risks in all transactions.

Investing: Duty of the investor to gather necessary information on actual or potential risks involved in an investment.

Negotiating: Duty of each party to confirm each other's expectations and understandings, and to independently verify the abilities of the other to fulfill the conditions and requirements of the agreement.

Trustee

Person or organization (such as a trust company) named in trust agreement by the trustor or a court (the first party) as a trusted third party to nominally own, and protect and handle, trust-property for the benefit of one or more beneficiaries (the second party) in accordance with the terms of the trust agreement. He or she is usually charged with investing trust property prudently and productively, and (unless specifically prohibited) can lease, mortgage, or sell it if deemed necessary in fulfillment of the trust's objectives. A trustee can be removed and replaced on court orders but, after accepting trusteeship, he or she may not delegate, renounce, or resign his or her responsibility unless an acceptable successor consents as being the replacement. The capacity to be a trustee exists only where there is a capacity to hold or take property, therefore a minor or a person of unsound mind is not acceptable as a trustee. The maker of a trust (trustor) may also be its trustee and/or its beneficiary, but a sole trustee cannot be a sole beneficiary. Although a trustee is legally barred from benefiting from the trusteeship, usually a compensation is allowed in the trust agreement. But he or she cannot commingle personal funds that of the trust and cannot enter into any transaction with the trust. Otherwise the statute of frauds is applied and the fairness or the good-faith nature of the transaction is generally not accepted as a defense. A trustee may also have reporting requirements on the activities and status of the trust and all correspondence regarding the assets is directed to the trustee. He or she is discharged of the duties of the trusteeship only when the intention or the purpose of the trust is fulfilled. 

Nonprofit Organization (NPO)

Associations, charities, cooperatives, and other voluntary organizations formed to further cultural, educational, religious, professional, or public service objectives. Their startup funding is provided by their members, trustees, or others who do not expect repayment, and who do not share in the organization's profits or losses which are retained or absorbed. Approved, incorporated, or registered NPOs are usually granted tax exemptions, and contributions to them are often tax deductible. Most non governmental organizations (NGOs) are NPOs.

Pegging

Commodities trading: Control by commodity exchanges of price fluctuations by tying the daily trading limits to the previous trading day's settlement (close) price.
Currency trading: Control of exchange rate fluctuations by a government through
(1) tying a currency's value to the value of a stronger currency,
(2) buying and selling own currency to increase or decrease its demand.
Securities trading: Manipulation of a new issue's market price by its underwriter through large purchases on the stockmarket. Similar manipulation of already issued securities is illegal.

Bull Market

Securities or commodities market in which prices are rising, bulls are trading in high volumes, investment interest is high, and the public views the economy as strong and getting stronger.

Bear Market

Period in which prices of securities or commodities fall by 20 percent or more. During such periods
(1) investment interest is generally limited,
(2) concerns about the state of the economy abound, and
(3) dealers or speculators are more inclined in selling their investment portfolios than to increase their risk by holding.

Prezados amigos blogueiros,

estamos aqui tentando criar um espaço com o objetivo de difundir conhecimento, pois entendo que a única maneira de ampliar nossos horizontes é através do compartilhamento do saber.