The role of this glossary is to present brief definitions of most of the key concepts in corporate finance and management (in total 900 names-definitions) with aim the reader to be able to understand and become familiar with the terminology in the analyses that will present in the category Corporate & Business.
Additionally, we hope that the reader by acquiring intimacy with the specific terminology, he will also love the science of finance and management, giving to it a significant part of his personal time.
In the following glossary we tried to include the most well-known definitions and terms in the field of Corporate Finance & Management. If you still find that a term or definition is missing and you know that it can be included in this glossary, please do not hesitate to contact us via the contact form of our web-site (Contact Us) and the Liberal Globe will edit it and will include it.
Glossary Corporate Finance & Management
There are currently 78 names in this directory beginning with the letter P.
Parity of authority and responsibility
the principle that responsibility for action should not be greater than authority delegates, nor should it be less. Authority is the discretionary power to carry out assignments and responsibility is the obligation owed a delegate to accomplish these activities.
Parking
a securities low violation in which traders attempt to hide the extent of their share ownership (to avoid the 5% trigger requiring disclosure of takeover intentions and keep down the price of target stock) by depositing or parking shares with an accomplice broker until a later date, i.e. when the takeover attempt is out in the open.
Partial controls
are controls designed to measure performance in a specific activity, such as quality, cash, production, or sales.
Partial tender offers
a tender offer for less than all target shares; specifies a maximum number of shares to be accepted but does announce bidder’s plans with respect to the remaining shares.
Pass-through securities
notes or bonds backed by a package of assets (i.e. mortgage pass-throughs, CARs, CARDs).
Path-goal approach to leadership effectiveness
an approach that sees as the main function of the leader clarifying and setting goals with subordinates, helping them to find the best path for achieving the goals, and removing obstacles.
Payment-in-kind provision (PIK)
a clause which provides for issuance of more of the same type of securities to bondholders in lieu of cash interest payments.
Payroll-based ESOP (PAYSOP)
a type of employee stock ownership plan in which employers could take a tax credit of 0,5% of ESOP-covered payroll. Repealed by the Tax Reform Act of 1986.
Pension plan
a fund established by an organization to provide for benefits to plan participants (i.e. employees) after their retirement.
Perfect competition
set of assumptions for an idealized economic model.
1) large numbers of buyers and sellers so none can influence market prices or output,
2) economies of scale exhausted at relatively small size and cost efficiencies are the same for all companies,
3) No significant barriers to entry,
4) Constant innovation, new product development,
5) Complete knowledge of all aspects of input/output markets is costless available.
PERT (Program Evaluation and Review Technique)
a time-event network analysis system in which the various events in a program or project are identified, with the planned time for each, and are placed in a network showing the relationships of each event to other events; from the sequence of interrelated events, the path of those events in which there is zero (or the least) slack time in terms of planned completion is the critical path.
Planning
selecting missions and objectives-and the strategies, policies, programs, and procedures for achieving them; decision making; the selection of a course of action from among alternatives.
Planning premises (the planning assumptions)
the expected environment in which plans will operate; they may be forecasts of the planning environment or basic policies and existing plans which will influence any given plan.
Planning premises-type of
premises may be internal or external to an enterprise, quantitative or qualitative, controllable, uncontrollable, semi-controllable.
Planning process
a rational approach to setting and accomplishing an objective and evaluating alternatives considering goals sought and against the environment of planning premises.
Plans, type of
purpose or missions, objectives, strategies, policies, procedures, rules, programs, and budgets.
Plasticity
resources are considered plastic when a wide range of discretionary uses can be employed by the user. If monitoring costs are high, moral hazard problems are likely to develop.
Plural executive
a committee or group which has the authority to execute, as a group, managerial functions.
Pluralistic society
a society in which many organized groups present various interests. Each group has an impact on other groups, but no one group has an inordinate amount of power.
Poison pill
any antitakeover defense which creates securities that provide their holders with special rights (i.e. to buy target or acquiring firm shares) exercisable only after a triggering event (i.e. a tender offer for or the accumulation of a specified percentage of target shares). Exercise of the rights would make it more difficult and/or costly for an acquirer to take over the target against the will of its board of directors.
Poison put
a provision in some new bond issues designed to protect bondholders against takeover-related credit deterioration of the issuer. Following a triggering event, bondholders may put their bonds to the corporation at an exercise price of 100-101 % of the bond’s face amount.
Policies
general statements or understandings which guide thinking in decision making; the essence of policies is the existence of discretion, within certain limits, in guiding decision making.
Pooling of interest
method of accounting for mergers. The consolidated balance sheet of the merged firm is obtained by combining the balance sheets of the separate firms.
Portfolio balance strategy
a balance in business segments based on market-growth/market-share criteria. Combine high-growth/high-market-share (stars), low-growth/high-market-share (cash cows), low-growth/low-market-share (dogs) segments to achieve favorable overall growth, profitability and enough internal cash flows to finance positive NPV investment opportunities.
Positive reinforcement
a theory which states that people are best motivated by properly designing their work environment, giving them prompt feedback on performance, and finding ways to help them and praise them for the good things they do.
Power
the ability of individuals or groups to induce or influence the beliefs or actions of other persons or groups. Several kinds of power may be identified such as legitimate power, expertness, referent power, reward power and coercive power.
Predatory behavior
a theory which holds that a dominant firm may price below cost or build excess capacity to inflict economic harm on existing firms and to deter potential entrants.
Preference (utility theory)
the theory that individual attitudes toward risk will vary from statistical probabilities, with some individuals being willing only to take lower risks than indicated by probabilities (risk averters) and others taking greater risks (gamblers).
Preferred stock
is a stock that takes priority over common stock regarding dividends. Dividends may not be paid on common stock unless the dividend is paid on all preferred stock. The dividend rate on preferred is usually fixed at time of issue.
Premium buy-back
refers to repurchasing the stock of a large block holder (an unwanted acquirer) at a premium over market price (greenmail).
Price pressure
a theory that the demand curve for the securities of an individual company is downward sloping and that this causes negative stock price effects of large supply increases such as large block offerings.
Price trader
outside investors who trade in response to price changes in securities regardless of whether they understand the cause of the price change.
Price-cost margin (PCM)
defined as (price-marginal cost) divided by price. That is operating profit as a percentage of price. A zero PCM reflects perfect competition i.e. Price=Marginal cost.
Principles
fundamental truths or what are believed to be truths at a given time, explaining relationships between two or more sets of variables, usually an independent variable and a dependent variable; may be descriptive, explaining what will happen, or prescriptive (normative) indicating what a person should do: in the latter case, principles reflect some scale of values, such as efficiency and therefore imply value judgements.
Prisoner’s dilemma
a situation in which the inability of individuals to communicate/cooperate leads them to willingly accept an outcome which leaves them worse off and would not have been chosen had collective action been possible.
Procedures
plans that establish a required method of handling future activities. They are guides to action; they derail the exact way certain activities must be accomplished.
Product life cycle
a conceptual model of the stages through which products or lines of business pass. Includes development, growth, maturity and decline. Each stage presents its own threats and opportunities.
Product-extension merger
a type of conglomerate merger; a combination between firms in related business activities that broadens the product lines of the firms; also called concentric mergers.
Production knowledge
a form of organization learning; entrepreneurial or management ability to organize and maintain complex production processes economically.
Production management
those activities necessary to manufacture products or create services. It includes activities such as purchasing, warehousing, transportation, and other operations to procure raw materials until the product or service is bought by the customer.
Profit and loss control
a control technique designed to measure a division or other part of a business enterprise by calculating the total profits (or loss) performance of that entity.
Profit sharing plan
a defined contribution pension plan in which the firm’s annual contributions to the plan are based on the firm’s profitability.
Profitability index (benefit-cost ratio)
ratio of a project’s present value to the initial investment.
Program budgeting
a budgeting approach used primarily by government agencies, emphasizing goals, the programs to achieve them and budgetary allocations designed to support such programs.
Programs
a complex of goals, policies, procedures, rules, task assignments, steps to be taken, resources to be employed, and other elements necessary to carry out a given course of action and normally supported by capital and operating budgets.
Project finance
debt that is largely a claim against the cash flows from a project rather than against the firm.
Promotion
a change within the organization to a higher position with greater responsibilities and usually requiring more advanced skills and knowledge than the previous position. Promotion normally brings greater status and an increase in pay.
Promotion based on open competition
the policy of filling positions or making promotions from the most qualified people available whether from inside or outside a given enterprise.
Promotion from within
the practice of making all promotions in an enterprise from people within it if it is possible to do so.
Proxy contest
an attempt by a dissident group of shareholders to gain representation on a firm’s board of directors.
Public warehouse (terminal warehouse)
warehouse operated by an independent warehouse company on its own premises.
Pure conglomerate merger
a combination of firms in nonrelated business activities that is neither a product-extension nor a geographic-extension merger.
