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Accounts Payable

Obligations owed by a company that are due within one year. These obligations are shown as a current liability on the balance sheet.

Accounts Receivable

Payments that are owed a company by its customers. These payments are shown as a current asset on the balance sheet.

Accrued Wages

Wages owed to a firm's employees which have not yet been paid. Accrued wages appear as a current liability on the balance sheet.

Acid Test Ratio

Another name for the quick ratio. See quick ratio.

Activity Ratios

A series of ratios that measure how actively a firm is using its resources.

Adjustment Bond

See Income Bond.

ADR

An "American Depository Receipt," which is sold on U.S. stock exchanges, represents a specific number of shares in a foreign company. It is used in the United States to facilitate the trading of foreign stocks.

American Stock Exchange

One of the largest of several U.S. based organized securities trading markets.

Amortization

Similar to depreciation, except amortization relates to intangible assets (patents, trademarks, or goodwill) owned by the firm while depreciation relates to tangible assets.

Annual Report to Shareholders

The principal document used by public corporations to disclose information to shareholders. It is produced each year by every publicly-traded company in the U.S. and includes certain basic financial tables as well as valuable corporate information such as a business discussion and outlook, market segment data, product line data, and business expansion plans.

Arbitrage

A trading technique that attempts to exploit discrepancies in the price of a particular asset that trades in different markets. For example, an individual would purchase stock in one market and sell it in another market where the price is higher.

Arrears

Typically used when referring to dividends on preferred stock that are "overdue." These "overdue" dividends, or "dividends in arrears," must be paid to shareholders before any common stock dividends may be paid.

Asked Price

See Offer.

Assets

Resources owned by a firm. Assets are further classified as current assets, fixed assets, or intangible assets. Current assets are those assets that can be turned into cash within a year, such as cash, marketable securities, receivables, and inventories. Intangible assets are items of value such as patents and goodwill. Fixed assets are items such as buildings and equipment.

Asset Turnover

A measure of the sales generating ability of a firm's overall assets. A low asset turnover ratio may indicate that a firm is not generating enough sales to justify its investments.

Asset Turnover = Sales
Total Assets

Auditor's Report

Also known as the "Report of Independent Accountants," the Auditor's Report is one of the basic financial documents included in a firm's annual report to shareholders. It is prepared by an outside accounting firm and expresses the accountant's opinion regarding the fairness of a particular company's financial statements.

Average Shares Outstanding

The average number of common stock shares that are owned by investors during a particular time period such as a quarter or year.

Averages

A variety of stock market activity measures that attempt to summarize price movements. Among the best known of these averages (or indexes) is the Dow Jones Industrial Average, which is an average of 30 industrial stocks that are listed for trading on the New York Stock Exchange.

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