• Provision

    Funds set aside for contingencies of an uncertain probability.

  • 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).

  • Replacement Value

    The value that corresponds to the estimated replacement cost of a fixed asset, resource, or inventory item.

  • 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 the dividends paid out to owners

  • Return on Assets (ROA)

    Usually expressed as Operating Income + Financial Revenues as a percentage of total assets.

  • Return on Capital Employed (ROCE)

    Operating income + Financial Revenues as a percentage of capital employed.

  • Return on Equity (ROE)

    Income after finacial items as a precentage of Equity.

  • Return on Investment (ROI)

    Is the ratio of money gained or lost on an investment.

  • Revenue

    Revenue arises when a company posts a sale to a customer, regardless of whether the customer has already paid or not.

  • Share

    A unit of ownership in a joint stock company. Shares of listed joint stock companies are bought and sold via stock exchanges.

  • Share Issue

    In a share issue, the share capital (capital stock) of a joint stock company increases. It is normal to distinguish between a stock dividend and a new share issue. In the case of a stock dividend, the share capital is increased through an act of internal accounting. Normally, the accumulated retained earnings are converted into share capital. A stock dividend does not affect the financial position of the company. In a new share issue, the share capital is increased via an injection of capital by existing or new shareholders. A new share issue improves the financial position of the company and is often done when the aim is to expand the business.

  • Shareholders' Equity

    The accumulated value of the owner's investments in the company + accumulated profits (and losses) from previous years + this years net income - the dividends paid to owners.

  • Short-term Liabilities

    Liabilities that must be paid back within one year.

  • Stock Dividend

    A way for a company to increase its share capital (capital stock) using an act of internal accounting. This can take place by for example transferring unrestricted shareholders' equity to share capital. A stock dividend does not affect the financial position of the company, but does however bind the equity closer to the company. (See also New Share Issue.)

  • Subsidiary

    A company that is at least half-owned (50 % of the share capital) by another company (the parent company).

  • Tangible assets

    Tangible assets are assets like office furniture, cars, machinery and equipment.

  • Tied-up Capital

    Capital that is bound up in a business in the form of for example raw materials, work in process, and accounts receivable.

  • Turnover Rate of Capital

    The turnover rate of capital is obtained by dividing the combined sales revenues for the accounting year by the capital. Also used is the abbreviation CTO, Capital Turn Over.

  • Variable Cost

    A cost that varies with the volume of manufacturing and sales.