Finance - Investment
Investment jargon - 'A'
Accountant - An individual who has passed the accountancy examinations of one of several recognised accountancy
bodies in the UK and abroad and has completed the required work experience to offer financial advice. For the
purposes of doing a deal or raising finance most entrepreneurs would probably approach a member of the Chartered
Institute of Management Accountants, the Institute of Charted Accountants for England and Wales, the Institute of
Charted Accountants in Ireland and the Institute of Charted Accountants of Scotland.
Accounting - The method of communicating, labelling, measuring and recording economic transactions. Transactions
are usually measured in monetary terms, and records are prepared in the form of financial statements. The
discipline is divided into financial and management accounting. The former is concerned with legal issues and
reporting to people outside an organisation. Management accounting is concerned mainly with providing support to
business managers. Accounting activities include book-keeping, calculating taxation, conducting audits and playing
Accounting manual - A document that details the accounting policies and procedures of a business. It normally
contains a list of account codes or chart of accounts. A company's treatment of depreciation is an example of an
Accounting period - The period for which a company prepares its accounts. Management accounts may be produced
internally on a monthly or quarterly basis, whilst financial accounts will be made for a period of one year. An
accounting period starts when a company begins trading and ends either: a) One year after starting to trade b) At
the end of the period of account c) Start of a winding-up of operations or d) When the company leaves the
Accounting policies - The accounting bases deemed appropriate in the fair representation of a company's
financial results. These bases will be consistently adhered to in the preparation of financial statements.
Companies are required to reveal their accounting policies in the annual accounts; policies will deal with areas
such as R&D costs, foreign exchange, goodwill and pension schemes.
Accounting standard - A definitive standard for reporting and financial accounting in the form of an SSAP
(Statement of Standard Accounting Practice) issued by the Accounting Standards Committee. The standard may, since
1990, also take the form of the FRS (Financial Reporting Standard) issued by the UK Accounting Standards Board.
Acquisition accounting - The accounting codes of practice followed in the event of one company being taken over
by another. For the purpose of financial statements, the fair value of the consideration should be placed between
the underlying net tangible and intangible assets, apart from goodwill. Goodwill is calculated as being the
difference between the fair value of the consideration and the aggregate of the fair values of the separate net
assets. These assets include intangibles that can be identified such as patents and trademarks. The results of the
acquired company are brought into the profit and loss account from the date of acquisition.
Acquisition - A term used to describe a company that has been, or is in the process of being taken over*.
Acquisition finance - Bank debt raised to fund an acquisition alongside equity for a buy-out.
Administration - Occurs when things are going horribly wrong! An 'administrator' is brought in to keep the
company trading in an attempt to protect the interests of the shareholders. An administrator is unlikely to close
down the firm and may instead choose to sell-off certain assets. If the administrator is unable to save the company
then a receiver may be brought in, who then may choose to liquidate all company assets.
Agreed bid - A bid for the takeover of a company that is given the support of the directors. This is in contrast
to a hostile bid, which is not given the directors' blessing.
Alternative Investment Market - Wisely considered to be the baby brother of the London Stock Exchange. Companies
are able to float on the AIM without the need for a three year trading record. Companies can trade shares without
the burden or expense of a full market listing.
Annual General Meeting - A meeting of the shareholders of a company that must be held every year not be more
than 15 months apart. An AGM would normally include the presentation of audited accounts, recommendations for the
payment of dividends, fixing of remuneration and the appointment of directors and auditors. Notice of the AGM must
be given to the shareholders at least 21 days prior to the meeting.
Annual report & accounts - Annual financial statements of a company, required by law to be published and
filed at Companies House. Some SME's will only be required to submit abbreviated accounts that may not have been
audited. An annual account will consist of the following; profit and loss account, balance sheet, cash-flow
statement, statement of recognised gains and losses, directors' and auditors' report. Partnerships and
Non-incorporated bodies are not legally required to produce accounts.
Articles of association - A company's Bible, this document details and dictates the running of a company. The
voting rights of shareholders and managements' power is detailed along with the conduct of shareholders' and
directors' meetings. The articles contained in the Companies Regulations are a contract between the company and its
members, and as such are only applicable to shareholders and not company directors or solicitors in the enforcement
of their rights. The articles will be submitted when application is made for incorporation, with the memorandum of
Asset - Put simply, any object that is of value to its owner which can be turned into cash. Most accounting
organisations refer to an asset as something of future economic benefit obtained as a result of previous
transactions. Assets may be divided into tangible and intangible. A tangible asset could be land and buildings,
fixtures and fittings, whereas an intangible asset could include goodwill, patents and copyrights. An asset for the
purposes of capital gains tax is defined as property in the UK or abroad for which a value can be established. Some
assets, however, are exempt from capital gains tax.
Asset-backed fund - A fund, where the money is invested in tangible or corporate assets, such as property or
shares. An asset-backed fund has an advantage over savings loaned to a bank in that the money can be expected to
increase at the rate of inflation.
Asset value - This figure represents the total value of the assets of an organisation (not including
liabilities) divided by the number of shares in issue.
Asset valuation - Represents the value of company assets that is recorded on the balance sheet. The assets
included in the valuation will normally be fixed assets, and professional advice may be required to re-evaluate
land and buildings.
Audit - An examination of the financial statements of an organisation. The auditor will express an opinion of
the statements based on compliance and substantive tests (control and detail tests) that are performed. It is a
legal requirement for companies to undergo audits by an external auditor (i.e. someone outside the organisation).
Internal audits may also be performed by company audit departments to make sure that internal controls are
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