FINANCIAL TERMS

Actuary
A professional statistician working for an insurance company. They
evaluate your application and medical records to project how long
you will live.
Slang used to refer to an "unofficial rule" under
which the banking industry once operated,
which alludes to it being noncompetitive and
simplistic.

3-6-3 Rule
 Refers to the condition of a company’s asset
when its actual value is higher than the book
value used in its financials.

Above Water
An account that can be found in the assets
portion of a company's balance sheet. Goodwill
can often arise when one company is purchased
by another company. In an acquisition, the
amount paid for the company over book value
usually accounts for the target
firm's intangible assets.

Goodwill
A market theory that suggests that when
a company reveals bad news to the public, there
may be many more related negative events that
have yet to be revealed. The term comes from
the common belief that seeing one cockroach is
usually evidence that there are many more that
remain hidden.
 

Cockroach Theory
Investment-grade bonds that pay a lower
interest rate because of the issuing
company's high credit rating. Angel bonds are
the opposite of fallen angels, which are bonds
that have been given a "junk" rating, and are
therefore much more risky.

Angel Bond
Taxes that have been unpaid in the year that
they were due. Taxpayers can have unpaid back
taxes at the federal, state and/or local levels.
Back taxes accumulate interest and penalties on
a regular basis.

Back Taxes
A French term referring to the selling of
insurance through a bank's established
distribution channels, known as a Bancassurer.

Bancassurance
A real estate investing term that refers to someone
who spends their time trying to locate properties
with substantial investment potential. Usually, the
intent is to find properties that are distressed and
selling at a discount that can be repaired or
remodeled and sold for a sizable profit.
Sometimes, however, the term is also used to refer
to people who find underpriced properties that
would make good income (rental) properties.

Bird Dog
The equity that is created in a company or some
other asset as a direct result of hard work by the
owner(s).

Sweat Equity
A type of real estate investment strategy in
which an investor purchases properties with the
goal of reselling them for a profit. Profit is
generated either through the price
appreciation that occurs as a result of a hot
housing market and/or from renovations and
capital improvements. Investors who employ
these strategies face the risk of price
depreciation in bad housing markets.

Flipping
The purchase of a company's shares in
which the acquiring party gains controlling
interest of the targeted firm. Incorporating a
buyout strategy is a common technique used to
gain access to new markets and is one of the
most common methods for inorganically
growing a business.

Buyout
A corporate action in which a company buys most,
if not all, of the target company's ownership stakes
in order to assume control of the target
firm. Acquisitions are often made as part of a
company's growth strategy whereby it is
more beneficial to take over an existing firm's
operations and niche compared to expanding on
its own. Acquisitions are often paid in cash, the
acquiring company's stock or a combination of
both.

Acquisition
A false signal indicating that a declining trend
in a stock or index has reversed and is heading
upwards when, in fact, the security will
continue to decline.

Bull Trap
An order to fill a transaction immediately and
completely or not at all.

Fill Or Kill - FOK

A buzzword describing fraudulent
activities performed by corporations in order to
falsify their financial statements. Typically,
cooking the books involves augmenting
financial data to yield previously non-existent
earnings. 

Cook The Books

A data sheet containing historical listings of
trades for a security. The fitch sheet shows a
variety of transaction details, including the
price, volume, time of trade and on which
exchange the deal was executed.

Fitch Sheet
A market economy based on supply and demand
with little or no government control. A completely
free market is an idealized form of a market
economy where buyers and sells are allowed to
transact freely (i.e. buy/sell/trade) based on
a mutual agreement on price without state
intervention in the form of taxes, subsidies or
regulation.

Free Market
A zero balance account is used by corporations
to eliminate excess balances in separate accounts
and maintain greater control over
disbursements.

Zero Balance Account - ZBA

A method of debt financing that enables
individuals to borrow and lend money - without
the use of an official financial institution as an
intermediary. Peer-to-peer lending removes the
middleman from the process, but it also
involves more time, effort and risk than the
general brick-and-mortar lending scenarios.

Peer-To-Peer Lending (P2P)