Business Glossary: A

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A Fifth letter of a Nasdaq stock symbol specifying Class A shares.

AAII See: American Association of Individual Investors

ABO See: Accumulated Benefit Obligation

ABS See: Automated Bond System

ACAT See: Automated Customer Account Transfer

ACES See: Advance Computerized Execution System

ACH See: Automated Clearing House

ACRS See: Accelerated cost recovery system

ACU See: Asian currency units

AD The two-character ISO 3166 country code for ANDORRA.

ADB See: Adjusted Debit Balance

ADB See: Asian Development Bank

ADR See: American Depository Receipt

ADS See: American Depository Share

AE The two-character ISO 3166 country code for UNITED ARAB EMIRATES.

AED >The ISO 4217 currency code for United Arab Emirates Dirham.

AEX See: Amsterdam Exchange

AFA The ISO 4217 currency code for Afghan Afghani.

AF The two-character ISO 3166 country code for AFGHANISTAN.

AFM See: Amman Financial Market

AG The two-character ISO 3166 country code for ANTIGUA AND BARBUDAAG.

AI The two-character ISO 3166 country code for ANGUILLAAI.

AIBD Association of International Bond Dealers

AL The two-character ISO 3166 country code for ALBANIA.

ALL The ISO 4217 currency code for Albanian Lek.

ALT Alternative Trading System. This term is defined under section 301 of the U.S. Securities Act.

AM The two-character ISO 3166 country code for ARMENIA.

AMD The ISO 4217 currency code for Armenian Dram.

AMEX See: American Stock Exchange

AMPS See: Auction Market Preferred Stock

AN The two-character ISO 3166 country code for NETHERLANDS ANTILLES.

ANG The ISO 4217 currency code for Netherlands Antilles Guilder.

AO The two-character ISO 3166 country code for ANGOLA.

AON See: All or none order

AOR The ISO 4217 currency code for Angolan Reajustado Kwanza.

AOS See: Automated Order System

APR See: Annual Percentage Rate

APT See: Arbitrage Pricing Theory

APT See: Automated Pit Trading

APV See: Adjusted Present Value

APY See: Annual Percentage Yield

AR See: Auto-Regressive

ARCH See: Auto-Regressive Conditional Heteroskedasticity

AQ The two-character ISO 3166 country code for ANTARCTICA.

AR The two-character ISO 3166 country code for ARGENTINA.

ARS The ISO 4217 currency code for Argentinian Peso.

ARM See: Adjustable-rate mortgage

ARPS See: Adjustable-rate preferred stock

ARPS See: Auction rate preferred stock

ARR See: Average rate of return

AS The two-character ISO 3166 country code for AMERICAN SAMOA.

ASE See: Athens Stock Exchange.

ASX See: Australian Stock Exchange

AT The two-character ISO 3166 country code for AUSTRIA.

ATP See: Arbitrage Trading Program

ATS The ISO 4217 currency code for Austrian Schilling.

AU The two-character ISO 3166 country code for AUSTRALIA.

AUD The ISO 4217 currency code for Australian Dollar currency.

AW The two-character ISO 3166 country code for ARUBA.

AWG The ISO 4217 currency code for Aruban Guilder.

AZ The two-character ISO 3166 country code for AZERBAIJAN.

AZM The ISO 4217 currency code for Azerbaijani Manat.

AAA+ Bank Banks are rated according to their credit worthiness by IBCA, Moodys investor service and Standard & Poors. The only AAA bank in the US is JP Morgan.

Abandonment Controlling party giving up rights to property voluntarily.

Abandonment option The option of terminating an investment earlier than originally planned.

ABC agreement A contract between an employee and a brokerage firm outlining the rights of the firm purchasing an NYSE membership for that employee.

Ability to pay Refers to the borrower's ability to make interest and principal payments on debts. See: Fixed charge coverage ratio.
In context of municipal bonds, refers to the issuer's present and future ability to create sufficient tax revenue to fulfill its contractual obligations, accounting for municipal income and property values.
In context of taxation, notion that tax rates should be determined according to income or wealth.

Abnormal returns The component of the return that is not due to systematic influences (market-wide influences). In other words, the abnormal returns is the difference between the actual return and that is expected to result from market movements (normal return). Related: excess returns.

Above par See: Par.

Absolute advantage A person, company or country has an absolute advantage if its output per unit of input of all goods and services produced is higher than that of another person, company or country.

Absolute form of purchasing power parity A theory that prices of products of two different countries should be equal when measured by a common currency. Also called the "law of one price."

Absolute Physical Life The period of use after which an asset has deteriorated to such an extent that it can no longer be used.

Absolute priority Rule in bankruptcy proceedings requiring senior creditors to be paid in full before junior creditors receive any payment.

Absorbed Used in context of general equities. Securities are "absorbed" as long as there are corresponding orders to buy and sell. The market has reached the absorption point when further assimilation is impossible without an adjustment in price. See: Sell the book.

Abusive tax shelter A limited partnership that the IRS judges to be claiming tax deductions illegally.

Accelerated cost recovery system (ACRS) Schedule of depreciation rates allowed for tax purposes.

Acceleration clause A contract stating that the unpaid balance becomes due and payable if specific actions transpire, such as failure to make interests payments on time.

Accelerated depreciation Any depreciation method that produces larger deductions for depreciation in the early years of an asset's life. Accelerated cost recovery system (ACRS), which is a depreciation schedule allowed for tax purposes, is one such example.

Acceptance Contractual agreement instigated when the drawee of a time draft "accepts" the draft by writing the word "accepted" thereon. The drawee assumes responsibility as the acceptor and for payment at maturity. See: Letter of credit and banker's acceptance.

Accommodative monetary policy Federal Reserve System policy to increase the amount of money available to banks for lending. See: Monetary policy.

Account In the context of bookkeeping, refers to the ledger pages upon which various assets, liabilities, income, and expenses are represented.

In the context of investment banking, refers to the status of securities sold and owned or the relationship between parties to an underwriting syndicate. In the context of securities, the relationship between a client and a broker/dealer firm allowing the firm's employee to be the client's buying and selling agent. See: Account executive; account statement.

Account Ad Valorem Duty An imported merchandise tax expressed as a percentage.

Account balance Credits minus debits at the end of a reporting period.

Account executive The brokerage firm employee who handles stock orders for clients. See: Broker.

Account Party Party who applies to open a bank for the issuance of a letter of credit.

Account reconciliation The reviewing and adjusting of the balance in a personal checkbook to match your bank statement.

Account statement In the context of banking, refers to a summary of all balances.

In the context of securities, a summary of all transactions and positions (long and short) between a broker/dealer and a client. See also: Option agreement.

Accountant's opinion A signed statement from an independent public accountant after examination of a firm's records and accounts. The opinion may be unqualified or qualified. See: Qualified opinion.

Accounting earnings Earnings of a firm as reported on its income statement.

Accounting exposure The change in the value of a firm's foreign currency-denominated accounts due to a change in exchange rates.

Accounting insolvency Total liabilities exceed total assets. A firm with a negative net worth is insolvent on the books.

Accounting liquidity The ease and quickness with which assets can be converted to cash.

Accounts payable Money owed to suppliers.

Accounts receivable Money owed by customers.

Accounts receivable financing A short-term financing method in which accounts receivable are collateral for cash advances. See: Factoring.

Accounts receivable turnover The ratio of net credit sales to average accounts receivable, which is a measure of how quickly customers pay their bills.

Accredited investor Refers to an individual whose net worth, or joint net worth with a spouse, exceeds $1,000,000; or whose individual income exceeded $200,000 or whose joint income with a spouse exceeded $300,000 in each of the 2 most recent years and can be expected to meet that income in the current year. More details of the definitions for investors other that individuals are found in Regulation D of the Securities and Exchange Commission.

Accreting Swap) An interest rate swap in which the notional principal amount increases over time, for example as with a construction loan provided in tranches as each stage of the project is completed.

Accretion (of a discount) In portfolio accounting, a straight-line accumulation of capital gains on a discount bond in anticipation of receipt of par at maturity.

Accrual Accounting Convention An accounting system that tries to match the recognition of revenues earned with the expenses incurred in generating those revenues. It ignores the timing of the cash flows associated with revenues and expenses.

Accrual basis In the context of accounting, practice in which expenses and income are accounted for as they are earned or incurred, whether or not they have been received or paid. Antithesis of cash basis accounting.

Accrual bond A bond on which interest accrues but is not paid to the investor during the time of accrual. The amount of accrued interest is added to the remaining principal of the bond and is paid at maturity.

Accrued benefits The pension benefits earned by an employee according to the years of the employee's service.

Accrued discount Interest that accumulates on savings bonds from the date of purchase until the date of redemption or final maturity, whichever comes first. Series A, B, C, D, E, EE, F, I, and J are discount or accrual bonds, meaning principal and interest are paid when the bonds are redeemed. Series G, H, HH, and K are income bonds, and the semiannual interest paid to their holders is not included in accrued discount.

Accrued interest Applies mainly to convertible securities. Interest that has accumulated between the most recent payment and the sale of a bond or other fixed-income security. At the time of sale, the buyer pays the seller the bond's price plus "accrued interest," calculated by multiplying the coupon rate by the fraction of the coupon period that has elapsed since the last payment. (If a bondholder receives $40 in coupon payments per bond semiannually and sells the bond one-quarter of the way into the coupon period, the buyer pays the seller $10 as the latter's proportion of interest earned.)

Accrued market discount The rise in the market value of a discount bond as it approaches maturity (when it is redeemable at par) and not because of falling market interest rates.

Accumulate Broker/analyst recommendation that could mean slightly different things depending on the broker/analyst. In general, it means to increase the number of shares of a particular security over the near term, but not to liquidate other parts of the portfolio to buy a security that might skyrocket. A buy recommendation, but not an urgent buy.

Accumulated Benefit Obligation (ABO) An approximate measure of the liability of a pension plan in the event of a termination at the date the calculation is performed. Related: Projected benefit obligation.

Accumulated dividend A dividend that has reached its due date, but is not paid out. See: Cumulative preferred stock.

Accumulated profits tax A tax on earnings retained in a firm as a way for the principals to defer personal income taxes.

Accumulation In the context of corporate finance, refers to profits that are added to the capital base of the company rather than paid out as dividends. See: Accumulated profits tax.
In the context of investments, refers to the purchase by an institutional broker of a large number of shares over a period of time in order to avoid pushing the price of that share up.
In the context of mutual funds, refers to the regular investing of a fixed amount while reinvesting dividends and capital gains.

Accumulation area A range within which a buyer accumulates shares of a stock. See: On-balance volume and distribution area.

Acid test ratio Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid items to current liabilities.

Acquired surplus The surplus acquired when a company is purchased in a pooling of interests combination, i.e. the net worth not considered to be capital stock.

Acquiree A firm that is being acquired.

Acquirer A firm or individual that is purchasing another firm or asset.

Acquisition When a firm buys another firm.

Acquisition cost Refers to the price (including the closing costs) to purchase another company or property.

In the context of investments, refers to price plus brokerage commissions, of a security, or the sales charge applied to load funds. See: Tax basis.

Acquisition of assets A merger or consolidation in which an acquirer purchases the selling firm's assets.

Acquisition of stock A merger or consolidation in which an acquirer purchases the acquiree's stock.

Across the board Movement or trend in the stock market that causes all stocks in all sectors to move in the same direction.

Acting in concert Investors working together and performing identical actions to attain the same investment goal.

Act of state doctrine This doctrine says that a nation is sovereign within its own borders, and its domestic actions may not be questioned in the courts of another nation.

Active A market in which there is frequent trading.

Active account Refers to a brokerage account in which many transactions occur. Brokerage firms may levy a fee if an account generates an inadequate level of activity.

Active bond crowd Refers to members of the bond department of the NYSE who trade the most bonds. Antithesis of cabinet crowd.

Active box Securities that are held in safekeeping and are available as collateral for securing brokers' loans or customers' margin positions.

Active fund management An investment approach that