Investment Terms

Unappropriated retained earnings consist of any portion of a company's retained earnings that are not classified as appropriated retained earnings. Appropriated retained earnings are set aside by the board and are assigned to a specific purpose, such as factory construction, hiring new labour, buying new equipment, or marketing. They will not be distributed to shareholders as dividend payment...

A kangaroo bond is a type of foreign bond issued in the Australian market by non-Australian firms and is denominated in Australian currency. The bond is subject to the securities regulations of Australia. A kangaroo bond is also known as a matilda bond. Bond issuers that want access to investors and lenders in the Australian debt market would issue a bond referred to as a kangaroo bond, named in r...

Zombies are companies that earn just enough money to continue operating and service debt but are unable to pay off their debt. Such companies, given that they just scrape by meeting overheads (wages, rent, interest payments on debt, for example), have no excess capital to invest to spur growth. Zombie companies are typically subject to higher borrowing costs and maybe one just event away from inso...

White-collar crime is a nonviolent crime committed for financial gain. According to the FBI, a key agency that investigates these offenses, these crimes are characterized by deceit, concealment, or violation of trust. The motivation for these crimes is "to obtain or avoid losing money, property, or services or to secure a personal or business advantage. Examples of white-collar crimes include secu...

Quadruple witching refers to a date on which stock index futures, stock index options, stock options, and single stock futures expire simultaneously. While stock options contracts and index options expire on the third Friday of every month, all four asset classes expire simultaneously on the third Friday of March, June, September, and December. Quadruple witching is similar to the triple witching...

A 51% attack refers to an attack on a blockchain—most commonly bitcoins, for which such an attack is still hypothetical—by a group of miners controlling more than 50% of the network's mining hash rate or computing power. The attackers would be able to prevent new transactions from gaining confirmations, allowing them to halt payments between some or all users. They would also be able to rever...

Zakat is an Islamic finance term referring to the obligation that an individual has to donate a certain proportion of wealth each year to charitable causes. Zakat is a mandatory process for Muslims and is regarded as a form of worship. Giving away money to the poor is said to purify yearly earnings that are over and above what is required to provide the essential needs of a person or family. Zakat...

A zero-day attack also referred to as Day Zero is an attack that exploits a potentially serious software security weakness that the vendor or developer may be unaware of. The software developer must rush to resolve the weakness as soon as it is discovered in order to limit the threat to software users. The solution is called a software patch. Zero-day attacks can also be used to attack the interne...

A zero basis risk swap (ZEBRA) is an interest rate swap agreement between a municipality and a financial intermediary. A swap is an agreement with two counterparties, where one party pays the other party a fixed interest rate and receives a floating rate. This particular swap is considered zero-risk because the municipality receives a floating rate that is equal to the floating rate on its debt ob...

The Zig Zag indicator lowers the impact of random price fluctuations and is used to help identify price trends and changes in price trends. The Zig Zag indicator lowers the impact of random price fluctuations and is used to identify price trends and changes in price trends. The indicator lowers noise levels, highlighting underlying trends higher and lower. The Zig Zag indicator works best in stron...

A Godfather offer is an irrefutable takeover bid made to a target company by an acquirer. Typically, the offer is priced at an extremely generous premium compared with the target's prevailing share price, making it difficult for management to reject the bid without angering shareholders and being accused of breaching their fiduciary duty. A Godfather offer is named after the Francis Ford Coppola m...

In business, a bear hug is an offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth in the market. It's an acquisition strategy that companies sometimes use when there's doubt that the target company's management or shareholders are willing to sell. The bear hug offer, though usually financially favorable, is generally unsolicited...

Big uglies is a slang term for large, old companies operating in hard, so-called dirty, industries such as manufacturing, oil, steel, and mining. These types of stocks tend to be unpopular with investors, with their generally dogged, steady returns and resistance to volatility often being overlooked in favor of more exciting, higher growth companies on the cutting edge of an industry. Over the yea...

Ankle biter is a slang term for a stock with low market capitalization. Ankle biter is also used to describe very young children or possibly a small, aggressive dog. The idea is that both small children and dogs are so small that they can only reach one's ankles. This slang term emerged around the 1950s. As an investment, ankle-biters tend to be quite volatile and are often thinly traded. On the p...

Cookie jar reserves are savings from previous quarters that a company records as earnings in subsequent quarters to make it appear that its earnings were higher than they really were. When a company fails to meet its earnings target, a company accountant can dip into the cookie jar to inflate the numbers. Needless to say, the practice of cookie jar accounting is frowned on by government regulators...

A big bath is an accounting term that is defined by a company's management team knowingly manipulating its income statement to make poor results look even worse in order to make future results appear better. It is often implemented in a relatively bad year so that a company can enhance the next year's earnings in an artificial manner. A big bath is so named because it is like wiping the slate clea...

A grey wave describes an investment or company thought to be profitable in the long term or extended long term. Speculators of grey waves will buy an investment vehicle that they believe will show a return in the very long term, and not before. The term grey wave can be explained by the understanding that when buying into a grey wave company, the investor should not plan for an immediate or even s...

Killer bees are companies or individuals—such as investment bankers, accountants, attorneys, and tax specialists—that help target firms avoid being taken over by an unwanted suitor. Their job is to devise and implement anti-takeover defence strategies, which generally consist of making the target less attractive or more difficult or costly to acquire. When a company targets another one for acquisi...

The cockroach theory refers to a market theory that states when a company reveals bad news to the public, many more related, negative events may be revealed in the future. Bad news may come in the form of an earnings miss, a lawsuit, or some other unexpected, negative event. The term cockroach theory comes from the common belief that seeing one cockroach is usually evidence there are many more. Th...

The colloquial term sushi bond is used to describe a bond issued by a Japanese company in a market outside of Japan and denominated in a currency other than the yen. The most common issuing currency is the U.S. dollar. A sushi bond is essentially a type of Eurobond. That is, it is an international bond issued in a currency that is not native to its issuer. In this case, the issuer is Japanese and...

Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value. Value investors actively ferret out stocks they think the stock market is underestimating. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond to a company's long-term fundamentals. The overreact...

Capital investment is the procurement of money by a company in order to further its business goals and objectives. The term can also refer to a company's acquisition of long-term assets such as real estate, manufacturing plants and machinery. In either case, the money for capital investment must come from somewhere. A new company might seek capital investment from any number of sources, including...

The barbell is an investment strategy applicable primarily to a fixed income portfolio. Following a barbell method, half the portfolio contains long-term bonds and the other half holds short-term bonds. The barbell gets its name because the investment strategy looks like a barbell with bonds heavily weighted at both ends of the maturity timeline. The graph will show a large number of short-term ho...

The risk-free rate of return is the theoretical rate of return of an investment with zero risks. The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. The real risk-free rate can be calculated by subtracting the current inflation rate from the yield of the Treasury bond matching your investment duration. In theo...

Preferred stocks are shares of a company’s stock with dividends that are paid out to shareholders before common stock dividends are issued. If the company enters bankruptcy, preferred stockholders are entitled to be paid from company assets before common stockholders. Most preference shares have a fixed dividend, while common stocks generally do not. Preferred stock shareholders also typically do...