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 115 names in this directory beginning with the letter S.
Sale and lease-back
is the sale of an existing asset to a financial institution that then leases it back to the user.
Sales forecast
a prediction of expected sales, by product or service and price, for a period in the future; sales forecasts are both derived from plans and are major planning premises.
Satisficing
a term that denotes the tendencies of managers, normally in instances of bounded rationality, in making decisions to pick a course of action that is deemed “good enough” under the circumstances.
Scalar relationships
authority relationships are said to be scalar when subordinates report to their immediate superiors and when their superiors report directly, as subordinates, to their superiors (i.e. in sales). In other words, the chain of command that runs from the top of an organization to its lowest ranks.
Scale economies
the reduction in per-unit costs achievable by spreading fixed costs over a higher level of production.
Scientific management
a term originally used as denoting in analyzing management. It implies that the methods of scientific inquiry, analysis, and summary can be applied to the activities of managers. It later implied time study and similar methods used by Taylor and his followers to analyze activities of people in organizations. Basically, it sought to develop
(1) ways of increasing productivity by making work easier to perform and
(2) methods for motivating people to take advantage of labor-saving techniques it developed.
It may be summarized as
(1) replacing rules of thumb with rules of science,
(2) obtaining harmony rather than discord,
(3) achieving cooperation rather than restricted output,
(4) developing workers to the fullest extent possible.
(approach by F.W. Taylor)
Scorched earth defenses
actions to make the target less attractive to the acquiring firm and which may also leave the target in weekend condition. Examples are sale of best segments (crown jewels) and incurring high levels of debt to pay a large dividend or to engage in substantial share repurchase.
Seasoned issue
procedure for selling blocks of seasonal issues of stock. More generally, sale of already issued stock.
Second-step transaction
typically the merger of an acquired firm into the acquirer after control has been obtained.
Secondary initial public offering (SIPO)
the reoffering to the public of common stock in a company which had initially been public but had then taken private (i.e. in an LBO).
Security market line (SML)
a line representing the relationship between expected return and market risk.
Self-liquidating loan
is a loan to finance current assets. The sale of the current assets provides the cash to repay the loan.
Self-selection
consequence of a contract that induces only one group (i.e. the low-risk individuals) to participate.
Sell-off
general term for divestiture of part or all a firm by any one of several means i.e. sale, liquidation, spin-off, and so on.
Semi-strong from efficiency market
is a market in which security prices reflect all publicly available information.
Senior debt
is a debt which, in the event of bankruptcy, must be repaid before subordinated debt receives any payment.
Sensitivity analysis
is an analysis of the effect on project profitability of possible changes in sales, costs and so on.
Sensitivity training
a form of training based on behavior of persons in groups and through undirected group interchange, designed to make these persons more aware of their feelings and the feelings of others toward them.
Share repurchases
a public corporation buys its own shares, by tender offer, on the open market, or in a negotiated buy-back from a large block holder.
Shareholder interest hypothesis
the theory that shareholder benefits of antitakeover defenses outweigh management entrenchment motives and effects.
Shark registration
a procedure that allows firms to file one registration statement covering several issues of the same security.
Shark repellent
any of several takeover defenses designed to make a firm less attractive and less vulnerable to unwanted acquirers.
Shark watcher
a firm (usually a proxy solicitation firm) which monitors trading activity in its clients’ stock to detect early accumulations by an unwanted acquirer before the 5% disclosure threshold.
Shelf registration
the federal securities law provision in Rule 415 which allows firms to register at one time the total amount of debt or equity they plan to sell over a two-year period. Securities can then be sold with no further delays whenever market conditions are most favorable.
Short-swing trading rule
federal regulation under Section 16 of the Securities Exchange Act which prohibits designated corporate insiders from retaining the profits on any purchase and sale of their own firms’ securities within a six-month period.
Signal
action that demonstrates an individual’s unobservable characteristics (because it would be unduly costly for someone without those characteristics to take the action).
Sitting-on-a-gold-mine hypothesis
attributes the increase in a takeover target’s stock price to information disclosed during the takeover process that the target’s assets are undervalued by the market.
Situational approach to leadership
the approach that studies leadership on the premise that it is strongly influenced by the situation from which the leader emerges and in which he or she operates.
Skewed distribution
probability distribution in which an unequal number of observations lie below and above the mean.
Small number problems
when the number of bidders is large, rivalry among bidders renders opportunistic behavior ineffectual. When the number of bidders is small, each party seeks terms most favorable to it through opportunistic representations and haggling.
Social audit
an audit of the performance of an enterprise in those areas which have a significant social impact and importance.
Social responsibility of managers
the responsibility of managers in carrying out their socially approved missions, to be responsive to, to be congruent with, and to interact and live with the forces and elements of their social environment.
Social responsiveness
the ability of an enterprise to relate policies and operations to the environment that are beneficial to both the organization and the society.
Sociotechnical system
a system viewed as an interconnection of physical (technical) and social elements in an organization.
Span of management
the phenomenon that there is a limit to the number of persons a manager can supervise, even though this limit varies depending on situations and the competence of a manager.
Specialized asset
an asset whose use is complementary to other assets. For example, a pipeline from producing fields to a cluster of refineries near large consumption markets.
Specificity
the degree to which an asset or resource is specialized to and thus dependent on the rest of the firm or organization.
Spin-off
a transaction in which a company distributes on a pro data basis all of the shares it owns in a subsidiary in return for relinquishing their parent company shares.
Splintered authority
the situation where the total authority to accomplish a given result rests in more than one position and must be pooled, or combined, to make the required decision.
Split-up
a transaction in which a company distributes on a pro rata basis all the shares it owns in a subsidiary to its own shareholders. Creates a new public company with (initially) the same proportional equity ownership as the parent company.
Split-up (2)
a transaction in which a company some, but not all, parent company shareholders receive shares in a subsidiary in return for relinquishing their parent company shares.
Spread (underwriter’s spread)
difference between the price at which an underwriter buys an issue from a firm and the price at which the underwriter sells it to the public.
Staff
a relationship in an organizational position where an incumbent’s task is to give some other person advice or counsel.
Staffing
filling, and keeping filled, the positions in the organization structure with competent people. This is done through
1) defining work-force requirements,
2) inventorying the people available,
3) recruiting,
4) selecting candidates for positions,
5) placing candidates,
6) promoting,
7) appraising,
8) planning the career of,
9) compensating, and
10) training or developing people.
Staggered board (classified board)
an antitakeover measure which divides a firm’s board of directors into several classes only one of which is up for election in any given year, thus delaying effective transfer of control to a new owner in a takeover.
Stake-out investment
preliminary investment for a foothold in anticipation of the future possibility of a larger investment.
Stakeholder
any individual or group who has an interest in a firm; in addition to shareholders and bondholders, includes labor, consumers, suppliers, the local community, and so on.
Standard Industrial Classification (SIC)
the Census Bureau’s system of categorizing industry groups, mainly product or process oriented.
Standby agreement
in a rights issue, agreement that the underwriter will purchase any stock that is not purchased by investors.
Standstill agreement
a voluntary contact by a large block shareholder (or former large block holder bought out in a negotiated repurchase) not to make further investments in the target company for a specified period.
Start-up MLP
also called acquisition MLP; the assets of an existing entity are transferred to a master limited partnership, and the business is hence worth conducted as an MLP. The Boston Celtics’ conversion into an MLP is an example.
Stepped-up asset basis
the provision allowing asset purchasers to use the price paid for an asset as the starting point for future depreciation rather than the asset’s depreciated book value in the hands of the seller.
Stock appreciation right (SAR)
part of executive compensation programs to align managers’ interests with those of shareholders. SARs are issued to managers giving them the right to purchase stock on favorable terms; the exercise price can be as low as 50% of the stock price at issuance; maximum life is ten years.
Stock bonus plan
a defined contribution pension plan in which the firm contributes a specified number of shares to the plan annually. The benefits to plan beneficiaries depend on the stock performance.
Strategic business unit (SBUs)
a district form of organization, usually employed within a larger company, constructed around a product or service, so that it will receive the attention normally given a complete product or project organization structure. These units are expected to be handled as though they were independent businesses.
Strategies
general programs of action and deployment of resources to attain comprehensive objectives; the program of objectives of an organization and their changes, resources used to attain these objectives and policies governing the acquisition, use, and disposition of these resources; the determination of the basic long-term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals.
Strategy
the long-range planning process for an organization. A succession of plans (with provisions for implementation) for the future of a firm.
Strip financing
a type of financing, often used in leveraged buy-outs in which all claimants hold approximately the same proportion of each security (except for management incentive shares and the most senior bank debt).
Strong-form efficient market
is a market in which security prices reflect instantaneously all information available to investors.
Structural theory
an approach to industrial organization that argues that higher concentration in an industry causes less competition due to tacit coordination or overt collusion among the largest companies.
Subchapter S corporation
a firm if business organization which provides the limited liability feature of the corporate form while allowing business income to be taxed at the personal tax rates of the business owners.
Subordinated debt (junior debt)
debt over which senior debt takes priority. In the event of bankruptcy, subordinated debtholders receive payment only after senior debt is paid in full.
Super majority
a requirement in many antitakeover charter amendments that a change of control (for example) must be approved by more than a simple majority of shareholders; at least 67% to 90% approval may be limited.
Superior-vote stock
in dual-class stock firms, the class of stock which has more power to elect directors; usually concentrated in the hands of management.
Supervisors
same as manager, but ordinarily used to apply to managers at the lowest level, or first line of managing.
Supplemental liability
additional liability to a pension plan that results from an increase in promised benefits.
Swingline facility
bank borrowing facility to provide finance while the firm replaces US commercial paper with euro-commercial paper.
SWOT
acronym for strengths, weakness, opportunities, and threats; an approach to formulating firm strategy via assessments of firm capabilities in relation to the environment.
Synergy
the “2+2=5’ effect. The output of a combination of two entities is greater than the sum of their individual outputs.
System (definition)
a set of assemblage of things connected or interdependent and interacting to form a complex unity; a whole composed of parts in orderly arrangement according to some scheme or plan. For any system there must be boundaries that separate it from its environment.
Systems (boundaries)
the demarcation lines or area definition separating a given system from its environment.
