S Corporation
A small
corporation which, under Subchapter S of the Internal Revenue Code,
elects to be taxed as a proprietorship or a partnership yet retains
limited liability and other benefits of the corporate form of organization.
Sale
and Leaseback
An arrangement
whereby a firm sells land, buildings, or equipment and simultaneously
leases the property back for a specified period under specific terms.
Sales
Forecast
A forecast
of a firm's unit and dollar sales for some future period; it is generally
based on recent sales trends plus forecasts of the economic prospects
for the nation, region, industry, and so forth.
Scenario
Analysis
A risk
analysis technique in which "bad" and " good" sets of financial circumstances
are compared with a most likely, or base-case, situation.
Seasonal
Dating
Terms
used to induce customers to buy early by not requiring payment until
the purchaser's selling season, regardless of when the goods are shipped.
Secondary
Market
The market
in which "used" stocks are traded after they have been issued by corporations.
Secondary
Markets
Markets
in which securities and financial assets are traded among investors
after they have been issued by corporations.
Secured
Loan
A loan
backed by collateral, often inventories or receivables.
Security
Market Line (SML)
The line
on a graph that shows the relationship between risk as measured by beta
and the required rate of return for individual securities.
Semiannual
Compounding
The arithmetic
process of determining the final value of a cash flow or series of cash
flows when interest is added twice a year.
Sensitivity
Analysis
A risk
analysis technique in which key variables are changed one at a time
and the resulting changes in the NPV and IRR are observed.
Short
Hedges
Futures
contracts are sold to guard against price declines.
Signal
An action
taken by a firm's management which provides clues to investors about
how management views the firm's prospects.
Sinking
Fund Provision
A provision
in a bond contract that requires the issuer to retire a portion of the
bond issue each year.
Social
Responsibility
The concept
that businesses should be actively concerned with the welfare of society
at large.
Sole
Proprietorship
An unincorporated
business owned by one individual.
Speculation
With futures,
it involves betting future price movements.
Speculative
Balance
A cash
balance that is held to enable the firm to take advantage of any bargain
purchases that might arise.
Spin-Off
A divestiture
in which the stock of a subsidiary is given to the parent company's
stockholders.
Spontaneously
Generated Funds
Funds
that are obtained automatically from routine business transactions.
Spot
Rate
The effective
exchange rate for a foreign currency for delivery on (approximately)
the current day.
Stand
-Alone Risk
The risk
an investor would face if he or she held only one asset Stand-alone
risk is one part of "total risk," with the other part being risk which
can be eliminated through diversification.
Stand-Alone
Risk
The risk
an asset would have if it were a firm's only asset and if investors
owned only one stock. It is measured by the variability of the asset's
expected returns.
Standard
Deviation
A statistical
measure of the variability of a set of observations.
Statement
of Cash Flows
A statement
reporting the impact of a firm's operating, investing, and financing
activities on cash flows over an accounting period.
Statement
of Retained Earnings
A statement
reporting how much of the firm's earnings were retained in the business
rather than paid out in dividends. The figure for retained earnings
that appears here is the sum of the annual retained earnings for each
year of the firm's history.
Stepped-Up
Exercise Price
An exercise
price that is specified to rise if a warrant is exercised after a designated
date.
Stock
Dividend
A dividend
paid in the form of additional shares of stock rather than in cash.
Stock
Repurchase
A transaction
in which a firm buys back shares of its own stock, thereby decreasing
share outstanding, increasing EPS, and, often, increasing the stock
price.
Stock
Split
An action
taken by a firm to increase the number of share outstanding, such as
doubling the number of share outstanding by giving each stockholder
two new share for each one formerly held.
Stockholder
Wealth Maximization
The primary
goal for management decision; considers the risk and timing associated
with expected earnings per share in order to maximize the price of the
firm's common stock.
Strategic
Business Plan
A long-run
plan which outlines in broad terms the firm's basic strategy for the
next 5 to 10 years.
Stretching
Accounts Payable
The practice
of deliberately paying late.
Strike
(Exercise) Price
The price
that must be paid for a share of common stock when an option is exercised.
Structured
Note
A debt
obligation derived from another debt obligation.
Subordinated
Debentures
A bond
having a claim on assets only after the senior debt has been paid off
in the event of liquidation.
Sunk
Cost
A cash
outlay that has already been incurred and which cannot be recovered
regardless of whether the project is accepted or rejected.
Supernormal
(Nonconstant) Growth
The part
of the life cycle of a firm in which it grows much faster than the economy
as a whole.
Swap
Two parties
agree to exchange obligations to make specified payment streams.
Symmetric
Information
The situation
in which investors and managers have identical information about firms'
prospects.
Synchronized
Cash Flows
A situation
in which inflows coincide with outflows, thereby permitting a firm to
hold low transactions balances.
Synergy
The condition
wherein the whole is greater than the sum of its parts; in a synergistic
merger, the postmerger value exceeds the sum of the separate companies'
premerger values.
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