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Glossary of Terms


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Accounts Payable (AP)

 
A business department or division that is responsible for making payments owed by the company to suppliers and other creditors.

Accounts Receivable (AR)   

Money owed by customers (individuals or corporations) to another entity in exchange for goods or services that have been delivered or used, but not yet paid  for; they usually come in the form of operating lines of credit and are usually due within a relatively short time period, ranging from a few days to a year.

Accounts Receivable Management  (ARM)

Processes and systems used to manage money that is owed to a company for goods and services it has provided to customers on credit.

Accounts Receivable Outsourcing  (ARO)

Day-to-day execution, by a third party service provider, of various tasks required to manage money owed by customers buying on credit.

Aging


A method used by accountants and investors to evaluate and identify any irregularities within a company's account receivables.

Air Way Bill (AW)

A document issued on behalf of the carrier describing the kind and quantity of goods being shipped, the shipper, the consignee, the ports of loading and discharge and the carrying vessel.

AKA

Also Known As

Antitrust

The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade.

Arbitration

An informal hearing regarding a dispute.  The dispute is judged by a group of people (generally three) who have been selected by an impartial panel. Once a decision has been reached, there is no further appeal process.

Automatic Stay

A legal provision that temporarily prevents creditors from pursuing debtors for amounts owed; an automatic stay goes into effect immediately when a debtor files for bankruptcy.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time.

Bankruptcy

A legal proceeding involving a person or business that is unable to repay outstanding debts.

BBB

Better Business Bureau

Business Process Re-engineering (BPR)

The complete overhaul of a key business process with the objective of achieving a quantum jump in performance measures such as return on investment, cost reduction and quality of service.

Business-to-Business (B2B) 

Relating to commercial transactions.

Business-to-Consumer (B2C)

Relating to retail (consumer) transactions.

Cash Against Documents (CAD)

A method of payment for goods of which documents transferring title are given to the buyer upon payment of cash to an intermediary acting for the seller.

Cash Flow

A revenue or expense stream that changes a cash account over a given period.

Cash in Advance (CIA or CID)

The most secure option for an exporter as full payment is due before the merchandise is shipped; it eliminates all risk of non-payment and bolsters working capital.

Cash on Delivery (COD)

The payment of products and/or services received is done at the time of actual delivery rather than paid for in advance.

CCAA

Commercial Collection Agency Association

Chapter 7

A bankruptcy proceeding in which a company stops all operations and goes completely out of business.

Chapter 11

A form of bankruptcy that involves a reorganization of a debtor's business affairs and assets.

Chapter 13

A U.S. bankruptcy proceeding in which the debtor undertakes a reorganization of his or her finances under the supervision and approval of the courts.

CLLA

Commercial Law League of America

Co-Debtor

One of two or more debtors who are primarily liable to the same debt.

Collection Effectiveness Index (CEI)

A metric used by organizations to evaluate the effectiveness of their receivable collection process.

Confirmed Letter of Credit (CLC)

A letter of credit, issued by a foreign bank, with validity confirmed by a bank in the seller’s country.

Contingency

A potential negative economic event which may occur in the future.  In finance, managers often attempt to identify and plan for any contingencies that they feel  may occur with any significant likelihood.

Cost and Freight (C&F)

A pricing basis in which the buyer pays the cost of the cargo and the freight costs.

Credit Insurance

An insurance policy and a risk management product offered by private insurance companies and governmental export credit agencies to business entities wishing to protect their accounts receivable from loss due to credit risks such as protracted default, insolvency or bankruptcy.

Credit Limit

The amount of credit that a financial institution extends to a client.

CRF

Credit Research Foundation

Customer Relationship Management (CRM)

An enterprise-wide strategy that focuses on the needs and wants of customers; also the name for software systems used to manage customer relationships.

Days Sales Outstanding (DSO)

A measure of the average number of days that a company takes to collect revenue after a sale has been made.

DBA

Doing Business As

Default

The failure to promptly pay interest or principal when due.

Delinquent

The failure to accomplish what is required by law or duty, such as the failure to make a required payment or to perform a certain action.

Disclosure Statement

A document outlining the specific terms and conditions of a loan, including the interest rate of the loan, any loan fees, the amount borrowed, insurance, prepayment rights and the responsibilities of the borrower.

Documents Against Acceptance (D/A or DOA)

A bank releases the documents to the buyer/importer only if the importer accepts the accompanying bill of exchange or draft by signing it.

Documents Against Payment(D/P or DOP)

A bank releases the documents to the buyer/importer only if the importer fully pays the accompanying bill of exchange or draft.

Dormancy Period

The period of time during which the owner of the property does not take action on his property.

DuPont Analysis (DuPont Identity)

A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are measured at their gross book value rather than at net book value in order to produce a higher return on equity (ROE).

End of Month (EOM)

Used in payment terms. Ex. Terms “2% 15 EOM” means that a 2% discount is earned if the invoice is paid in 15 days; the full amount is due at the end of the month.

Endorser

A person who is authorized to sign a negotiable security in order to transfer ownership from one party to another, or to approve the terms and conditions of a contract.

Enterprise Resource Planning (ERP)

A management information system that integrates and automates many of the business practices associated with the operations or production and distribution aspects of a company engaged in manufacturing products or services.

Escheatment

The process of turning over unclaimed or abandoned property to a state authority.

Executory Contract

A contract under execution, or where one or more parties have not yet performed their duties as stipulated in the contract document.

Flash Notice

A real-time posting of urgent credit-related information, like NSF/RTM checks, bankruptcies, placements for collections, changes in  ownership, etc.

GAIN

Gift Associates Interchange Network, Inc.

Goods and Services Tax (GST)

Similar to a sales tax in that it is levied at the time of the sale of goods and services.

Gross Domestic Product (GDP)

One of several measures of the size of an economy; defined as the market value of all final goods and services produced within a country in a given period of time.

Harmonized System (HS)

An international six-digit commodity classification developed under the auspices of the Customs Cooperation Council. Individual countries  have extended it to ten digits for customs purposes, and to 8 digits for export purposes.

IACC

International Association of Commercial Collectors, Inc.

Income Statement

A financial statement showing how Net Revenue is transformed into Net Income; also called a Profit & Loss statement.

Industry Credit Group

Groups that provide industry-specific information that credit managers need in order develop more complete credit histories on customers. Membership provides a faster, more accurate, cost effective solution for managing risks associated with extending credit.

Informal Reorganization

A mutual agreement between a lender and borrower to renegotiate terms on a loan that is technically in default, so as to avoid foreclosure or liquidation.

International Chamber of Commerce (ICC)

The largest, and arguably most diverse, business organization in the world with thousands of member companies representing over 130 countries and a vast array of business interests.

International Commercial Terms (INCOTERMS)

Trade terms published by the International Chamber of Commerce (ICC) that are commonly used in both international and domestic trade contracts.

International Financial Reporting Standards (IFRS)

A set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements.

International Standard Industrial Classification of All Economic Activities (ISIC)

This classification is the international standard for the classification of productive economic activities.

Involuntary Bankruptcy

A legal proceeding in which a person or business is requested to go into bankruptcy by creditors, rather than on the person or business' own accord.

Letter of Credit (L/C)

An undertaking by an issuing bank to the beneficiary to make payment within a specified time, against the presentation of documents which comply strictly with the terms of the credit.

Middle of Month (MOM)

Used in payment terms. Ex. “1% 10 MOM” means that a 1% discount is earned if the invoice is paid in 10 days; the full amount is due the middle of the month.

Monopoly

A situation in which a single company or group owns all or nearly all of the market for a given type of product or service. By definition, monopoly is characterized by an absence of competition, which often results in high prices and inferior products.

Multinational Corporation (MNC)

An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management.

NCCA

National Chemical Credit Association

Net Income

The result after all revenues and expenses have been accounted for.

Net Revenue

Money received from the sale of products and services before expenses are taken out.

North American Industry Classification System (NAICS)

Business classification system developed through a partnership between the United States, Canada and Mexico.

North American Product Classification System (NAPCS)

A demand oriented product classification system designed by the statistical agencies of the United States, Mexico, and Canada. The initiative was launched in February, 1999 to complement the supply-oriented North American Classification System (NAICS).

NSF

Non-Sufficient Funds

NYMCG

New York Media Credit Group

OCA

Outside Collection Agency

Office of Foreign Asset Control (OFAC)

A department of the U.S. Treasury that enforces economic and trade sanctions against countries and groups of individuals involved in terrorism, narcotics and other disreputable activities.

Open Account (OA)

Credit extended by a business to a buyer; it is the most simple but most risky method of payment which should not be used until a good trading relationship has been established with the buyer.

Outsourcing

A practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally.

PACE

Paper Alliance Credit Exchange

Past Due

A loan payment that has not been made as of its due date.

PAT

Paper & Allied Trades

Per Annum (p.a)

Per Year

PICE

Printing Industry Credit Executives, Inc.

PIMS

Print Industry & Media Supply

Point of Purchase (PoP)

A place where a product or service may be bought or promoted.

Pro Forma Invoice (P/I or PI)

Basically an advance copy of the final invoice; the pro forma invoice is often used by the importer to apply for a letter of credit (L/C) and foreign exchange (import) allocation.

Profit and Loss (P&L)

A financial statement that indicates how Net Revenue is transformed into Net Income; also called an Income Statement in the U.S.

Promissory Note

A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.

Purchasing Power Parity (PPP)

An estimate of the exchange rate required to equalize the purchasing power of different currencies, given the prices of goods and services in the countries concerned.

Put Option

An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. This is the opposite of a call option, which gives the holder the right to buy shares.

Red Flag

An indicator of potential problems with a security.

Request for Proposal (RFP)

A type of bidding solicitation in which a company or organization announces that funding is available for a particular project or program, and companies can place bids for the project's completion.

Return on Equity (ROE)

The amount of net income returned as a percentage of shareholders equity.

Return on Investment (ROI)

A comparison of the money earned (or lost) on an investment to the amount of money invested.

Risk

The chance that an investment's actual return will be different than expected.

RTM

Refer To Maker

Sight Draft (SD)

A draft or bill that is payable on demand or upon presentation; also called a “demand draft”.

Society for Worldwide Interbank Financial Telecommunications (SWIFT)

Financial industry-owned co-operative supplying secure, standardized messaging services and interface software to 7,650 financial institutions in over 200 countries.

Standard Industrial Classification (SIC) Code

A standard series of four-digit codes created by the U.S. government in 1937 for categorizing business activities. In 1997, the use of SIC codes was replaced in most (but not all) capacities by a six-digit code called the North American Industry Classification System (NAICS).

Trust Company

A large business; often associated with abusive practices and often used their size to exclude competition.

Unclaimed Property

Assets such as cash, stocks, bonds, mutual funds, uncashed checks, land, life insurance policies and the contents of safe deposit boxes that have been turned over to the state after several years of inactivity.

Uncollectible Accounts

Loans, receivables or other debts that have virtually no chance of being paid. An account may become uncollectable for many reasons, including the debtor's bankruptcy, an inability to find the debtor, lack of proper documentation, etc. 

Unconfirmed Letter of Credit (ULC)

A letter of credit which has not been guaranteed or confirmed by any bank other than the bank that opened it; the advising bank merely informs the beneficiary of the letter of credit terms and conditions.

Uniform Commercial Code (UCC)

A standard set of business laws that regulate financial contracts. The Uniform Commercial Code has been adopted by most states in the U.S. The code itself has nine separate articles. Each article deals with separate aspects of banking and loans. The UCC better enabled lenders to loan money secured by the borrower's personal property.

Unsecured Creditor

An individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because it will have nothing to fall back on should the borrower default on the loan.

Value Added Tax (VAT)

Similar to a sales tax in that it is levied at the time of the sale of goods and services.

Webinar

A seminar or other presentation that takes place on the Internet, allowing participants in different locations to see and hear the presenter, ask questions, and sometimes answer polls.

World Trade Organization (WTO)

An international, multilateral organization, which sets the rules for the global trading system and resolves disputes between its member states, all of whom are signatories to its approximately 30 agreements; WTO headquarters are located in Geneva, Switzerland.