Glossary
Filing terms in plain words. In quoted text these terms have a dotted underline: hover over one, or tap it on a phone.
10-K
The annual report filed with the SEC, with audited financial statements.
10-Q
The quarterly report. Unaudited, shorter than the 10-K.
10b5-1 plan
A trading plan an insider sets up in advance, so later trades happen automatically. Purchases under a plan say less about the insider's current view.
8-K
A report companies file within four business days of an important event, such as results, a deal, or an executive leaving.
accounts receivable
Money customers owe the company for things already sold. If it grows much faster than sales, customers may be paying later.
allowance for credit losses
A bank's estimate of loans and receivables that will not be repaid, set aside in advance.
amortization
Spreading the cost of intangible assets, such as patents or acquired customer lists, over their useful life.
asset turnover
Revenue divided by total assets: how much the company sells for each dollar of assets.
backlog
Orders received but not yet delivered.
CAGR
Compound annual growth rate: the steady yearly growth that would give the same total change.
capital expenditures
Spending on long-term assets such as factories, equipment and data centers.
cash flows from operating activities
Cash the business itself brought in during the year, before investing and financing. Profit can differ from it because of non-cash items and timing.
Common Equity Tier 1
A bank's highest-quality capital (mostly shareholders' equity), measured against its risk-weighted assets. Regulators set minimum levels.
contingencies
Possible gains or losses that depend on future events, often lawsuits or investigations.
covenant
A condition in a loan agreement, for example a maximum level of debt. Breaking one can let the lenders demand early repayment.
credit facility
A pre-arranged loan the company can draw on when it needs cash.
critical audit matter
An area the auditor found especially difficult or judgment-heavy, described in the auditor's report.
days sales outstanding
Receivables divided by revenue, times 365: about how many days customers take to pay.
days to cover
Short interest divided by average daily volume: how many days of normal trading it would take short sellers to buy back.
deferred revenue
Money received for products or services not yet delivered. It becomes revenue later.
depreciation
Spreading the cost of equipment and buildings over the years they are used.
derivative
A contract whose value depends on something else, such as an interest rate or currency, often used to reduce (hedge) a risk.
EBITDA
Earnings before interest, taxes, depreciation and amortization. A non-GAAP measure of operating profit.
effective tax rate
Income tax expense divided by pre-tax profit. It can differ from the legal rate because of credits, foreign income and one-time items.
enterprise value
Market value of the shares plus net debt: roughly what buying the whole company would cost.
foreign currency
Money in other currencies. When the dollar rises, sales made abroad are worth fewer dollars.
Form 4
The form an insider (director, officer or 10% owner) files within two business days of buying or selling the company's shares.
forward-looking statements
Statements about the future (plans, expectations). The company warns that actual results may differ.
free cash flow
Operating cash flow minus spending on equipment and buildings. Not a GAAP measure, so companies define it in slightly different ways.
GAAP
Generally Accepted Accounting Principles: the official US accounting rules.
going concern
Accountants assume a company will keep operating for at least the next year. If there is "substantial doubt" about that, the filing has to say so. It is one of the most serious warnings a filing can carry.
goodwill
The part of an acquisition price above the value of the assets bought, such as brand or expected synergies. It is tested every year and written down if it is no longer worth that much.
hedging
Using contracts to reduce the effect of changes in currencies, interest rates or prices.
impairment
Writing down an asset because it is now worth less than the value on the books. It reduces profit but usually not cash.
independent registered public accounting firm
The outside auditor that checks the financial statements.
interest cover
Operating profit divided by interest expense: how many times over the company earns its interest bill.
internal control over financial reporting
The checks a company uses to make sure its financial statements are right. Management and the auditor report on them every year.
inventory
Goods the company has made or bought and not yet sold.
inventory turnover
Cost of revenue divided by inventory: how many times a year the stock of goods is sold.
liquidity
The company's ability to pay its bills as they come due, from cash and available credit.
loss contingency
A possible loss that depends on a future event, such as losing a lawsuit. It is booked only when the loss is probable and can be estimated; otherwise it is only described.
Management's Discussion and Analysis
Item 7 of the 10-K: management explains the year's results, cash and outlook in words.
material weakness
A serious gap in the company's controls over its own accounting, big enough that a significant error in the financial statements might not be caught in time.
net debt
Total debt minus cash. Negative means the company has more cash than debt.
net interest income
For a bank: interest earned on loans and securities minus interest paid on deposits and debt.
non-GAAP
A measure the company defines itself, outside the official accounting rules (GAAP). The filing must show how it connects to the closest GAAP number.
off-balance sheet arrangements
Commitments, such as guarantees, that do not appear as liabilities on the balance sheet but could cost money.
payout ratio
The share of earnings paid out as dividends (dividend per share divided by EPS).
quick ratio
Current assets without inventory, divided by current liabilities. Like the current ratio, but it does not count goods that still have to be sold.
remaining performance obligations
Revenue from signed contracts that the company has not yet delivered and so not yet recognized.
restatement
Correcting financial statements that were already published because they contained an error.
revenue recognition
The rules for when a sale counts as revenue, usually when the product or service is delivered rather than when cash comes in.
risk factors
Item 1A of the 10-K: the company's own list of things that could hurt its business.
ROIC
Return on invested capital: operating profit after tax divided by the money invested in the business (debt plus equity). Shows how much profit each dollar of capital earns.
short interest
Shares sold short and not yet bought back, reported by brokers to FINRA twice a month.
tariff
A tax on imported goods, paid by the importer.