• Net Present Value (NPV) Method

    The net present value method is used for investment calculations. Using a discount rate, future inflows and outflows of cash are recalculated to a present value. In this way, the net flows can be comparable even if they take place at different points in time. If a discount rate of 12% is used, then receiving SEK 567 today is just the same as receiving SEK 1000 in five years. If we lend out SEK 567 at a 12% interest rate, then we will get back SEK 1000 in five years.

  • New Share Issue

    Share capital is increased when new shares are issued. New capital is usually acquired by offering existing shareholders the opportunity to buy new shares. The exception to this is the directed new share issue, in which the board can turn to a specific person (a legal entity or physical person) with an offer to buy shares regardless of their existing holdings.

  • Nominal Value

    The original cash value of shares, etc.

  • Non-Allocated Expenses

    This includes expenses that cannot be assigned to a sale or to production, such as expenses for financial management, administration, the chief executive officer, sales, marketing, information, environmental management, human resource management, etc.

  • Operating Assets

    That part of the company’s assets that is used on an ongoing basis in business operations.

  • Operating Result

    The net income from operations.

  • Opportunity Costs

    Opportunity costs refer to the revenues that are foregone when a certain course of action is chosen. If it is possible to earn SEK 300 on one alternative and SEK 100 on another, one naturally chooses the first. If the second alternative were chosen, the opportunity cost would be SEK 200.

  • Opportunity Rate of Interest

    The average interest that one receives from invested capital.

  • Pay-off Method

    A simple but not especially reliable method for investment calculations. It involves calculating how long it will take to recoup an invested amount and choosing the alternative that restores the money as quickly as possible.

  • Periodization

    Income and outlays are assigned to the period for which the net income will be reported, without reference to the point in time when it is actually booked.

  • Prepaid Income and Expenses

    These terms are used in the annual financial statements. An example of prepaid income is when a customer pays in advance but the company has not yet delivered the goods or services by the end of the financial period. Rent that is paid quarterly in advance by a company pays is an example of a prepaid expense.

  • Profit

    If revenues at the end of an accounting period are greater than costs, then the company has generated a profit. (See also Loss).

  • Profit Mark-up

    The profit mark-up is used in calculations in order to cover general business risk, warranties, and profits that represent a favorable yield on operating capital. The profit mark-up is added to the full cost.

  • Profitability

    The surplus (revenues minus costs) from an alternative’s course of action, often expressed in relation to invested capital.

  • Provision for Claims

    A financial reserve to account for exercised guarantees.

  • Quick Ratio

    A measurement of the company's ability to pay its ongoing costs. Is calculated by taking the current assets minus the value of inventories and dividing this by short-term liabilities. A rule of thumb is that the quick ratio should never fall below 100%. (This can however vary by industry).

  • Residual Value

    The value of a fixed asset at the end of its economic life.

  • Retained earnings

    Accumulated profits and losses from previous years (minus dividends paid to owners)

  • Return on Assets, ROA

    Net income as a percentage of total capital.

  • Return on Capital Employed ROCE

    This is the operating income after depreciation as a percentage of operating capital.