Bank reserves are the cash minimums that financial institutions must keep on hand. The Federal Reserve sets the requirements in order to ensure that banks have enough money on hand to cover withdrawals. Undisclosed reserves include unpublished or hidden reserves that may not appear on public documents—such as a balance sheet—but are nonetheless real assets and are considered as such by most banking institutions.
The European Monetary System (EMS) was an adjustable exchange rate arrangement set up in 1979 to foster closer monetary policy co-operation between members of the European Community (EC). The European Monetary System (EMS) was later succeeded by the European Economic and Monetary Union (EMU), which established a common currency called the euro.
The tertiary industry is the segment of the economy that provides services to its consumers, including a wide range of businesses such as financial institutions, schools and restaurants. It is also known as the tertiary sector or service industry/sector. The tertiary industry is one of three industry types in a developed economy, the other two being the primary, or raw materials, and secondary, or goods production, industries. As an economy becomes more developed, it shifts its focus from primary to secondary and tertiary industries.
A pitchbook is a sales document created by an investment bank or firm that details the main attributes of the firm, which is then used by the firm’s sales force to help sell products and services and generate new clients. Pitchbooks are helpful guides for the sales force to remember important benefits and to provide visual aids when presenting to clients.
To capitalize is to record a cost/expense on the balance sheet for the purposes of delaying full recognition of the expense. In general, capitalizing expenses is beneficial as companies acquiring new assets with long-term lifespans can amortize the costs. This is known as the process of capitalization.
Levered free cash flow (LFCF) is the amount of money a company has left remaining after paying all of its financial obligations. Levered free cash flow is important to both investors and company management, because it is the amount of cash that a company can use to pay dividends to shareholders and/or to make further investments in growing the company’s business. The amount of levered cash flow a company has can be negative even though operating cash flow is positive. This occurs when the amount of operating cash flow a company generates is insufficient to cover all of the financial obligations.
The term business-to-consumer (B2C) refers to the process of selling products and services directly between a business and consumers who are the end-users of its products or services. Most companies that sell directly to consumers can be referred to as B2C companies.
The Walmart Effect is a term used to refer to the economic impact felt by local businesses when a large company like Walmart (WMT) opens a location in the area. The Walmart Effect usually manifests itself by forcing smaller retail firms out of business and reducing wages for competitors’ employees. Many local businesses oppose the introduction of Walmart stores into their territories for these reasons.
Current liabilities are a company’s short-term financial obligations that are due within one year or within a normal operating cycle. An operating cycle, also referred to as the cash conversion cycle, is the time it takes a company to purchase inventory and convert it to cash from sales. An example of a current liability is money owed to suppliers in the form of accounts payable.
A value fund is a fund that follows a value investing strategy and seeks to invest in stocks that are deemed to be undervalued in price based on fundamental characteristics. Value investing is often compared with growth investing, which focuses on emerging companies with high growth prospects.