Definition of Leakage

Leakage

Release of information to some persons before official public announcement.

shrinkage

a decrease in units arising from an inherent characteristic
of the production process; it includes decreases
caused by evaporation, leakage, and oxidation

inventory shrinkage

A term describing the loss of products from inventory
due to shoplifting by customers, employee theft, damaged and
spoiled products that are thrown away, and errors in recording the purchase
and sale of products. A business should make a physical count and
inspection of its inventory to determine this loss.

Inventory Shrinkage

A shortfall between inventory based on actual physical counts and inventory
based on book records. This shortfall may be due to such factors as theft, breakage, loss, or
poor recordkeeping.

Shrinkage factor

The expected loss of some proportion of an item during the
production process, expressed as a percentage.

Announcement date

Date on which particular news concerning a given company is announced to the public.
Used in event studies, which researchers use to evaluate the economic impact of events of interest.

Asian currency units (ACUs)

Dollar deposits held in Singapore or other Asian centers.

Asymmetric information

information that is known to some people but not to other people.

Before-tax profit margin

The ratio of net income before taxes to net sales.

Characteristic line

The market model applied to a single security. The slope of the line is a security's beta.

Corporate processing float

The time that elapses between receipt of payment from a customer and the
depositing of the customer's check in the firm's bank account; the time required to process customer
payments.

Devaluation A decrease in the spot price of the currency

Diffusion process

A conception of the way a stock's price changes that assumes that the price takes on all
intermediate values. dirty price. Related: full price

Earnings before interest and taxes (EBIT)

A financial measure defined as revenues less cost of goods sold
and selling, general, and administrative expenses. In other words, operating and non-operating profit before
the deduction of interest and income taxes.

Expected value of perfect information

The expected value if the future uncertain outcomes could be known
minus the expected value with no additional information.

Information asymmetry

A situation involving information that is known to some, but not all, participants.

Information Coefficient (IC)

The correlation between predicted and actual stock returns, sometimes used to
measure the value of a financial analyst. An IC of 1.0 indicates a perfect linear relationship between predicted
and actual returns, while an IC of 0.0 indicates no linear relationship.

Information costs

Transaction costs that include the assessment of the investment merits of a financial asset.
Related: search costs.

Information services

Organizations that furnish investment and other types of information, such as
information that helps a firm monitor its cash position.

Information-content effect

The rise in the stock price following the dividend signal.

Informational efficiency

The speed and accuracy with which prices reflect new information.

Informationless trades

Trades that are the result of either a reallocation of wealth or an implementation of an
investment strategy that only utilizes existing information.

Information-motivated trades

Trades in which an investor believes he or she possesses pertinent
information not currently reflected in the stock's price.

Initial public offering (IPO)

A company's first sale of stock to the public. Securities offered in an IPO are
often, but not always, those of young, small companies seeking outside equity capital and a public market for
their stock. Investors purchasing stock in IPOs generally must be prepared to accept very large risks for the
possibility of large gains. IPO's by investment companies (closed-end funds) usually contain underwriting
fees which represent a load to buyers.

Insider information

Relevant information about a company that has not yet been made public. It is illegal for
holders of this information to make trades based on it, however received.

In-house processing float

Refers to the time it takes the receiver of a check to process the payment and
deposit it in a bank for collection.

Official reserves

Holdings of gold and foreign currencies by official monetary institutions.

Official statement

A statement published by an issuer of a new municipal security describing itself and the issue

Official unrequited transfers

Include a variety of subsidies, military aid, voluntary cancellation of debt,
contributions to international organizations, indemnities imposed under peace treaties, technical assistance,
taxes, fines, etc.

Price discovery process

The process of determining the prices of the assets in the marketplace through the
interactions of buyers and sellers.

Production payment financing

A method of nonrecourse asset-based financing in which a specified
percentage of revenue realized from the sale of the project's output is used to pay debt service.

Production-flow commitment

An agreement by the loan purchaser to allow the monthly loan quota to be
delivered in batches.

Public offering

The sale of registered securities by the issuer (or the underwriters acting in the interests of the
issuer) in the public market. Also called public issue.

Public Securities Administration (PSA)

The trade association for primary dealers in U.S. government
securities, including MBSs.

Public warehouse

Warehouse operated by an independent warehouse company on its own premises.

Publicly traded assets

Assets that can be traded in a public market, such as the stock market.

Security characteristic line

A plot of the excess return on a security over the risk-free rate as a function of
the excess return on the market.

UNITS OF PRODUCTION

A depreciation method that relates a machine’s depreciation to the number of units it makes each
accounting period. The method requires that someone record the machine’s output each year.

Earnings before interest and taxes (EBIT)

The operating profit before deducting interest and tax.

Earnings before interest, taxes, depreciation and amortization (EBITDA)

The operating profit before deducting interest, tax, depreciation and amortization.

Non-production overhead

A general term referring to period costs, such as selling, administration and financial expenses.

Process costing

A method of costing for continuous manufacture in which costs for an accounting compared are compared with production for the same period to determine a cost per unit produced.

Production overhead

A general term referring to indirect costs.

Profit before interest and taxes (PBIT)

See EBIT.

earnings before interest and income tax (EBIT)

A measure of profit that
equals sales revenue for the period minus cost-of-goods-sold expense
and all operating expenses—but before deducting interest and income
tax expenses. It is a measure of the operating profit of a business before
considering the cost of its debt capital and income tax.

business process reengineering (BPR)

the process of combining information technology to create new and more effective
business processes to lower costs, eliminate unnecessary
work, upgrade customer service, and increase
speed to market

cost-benefit analysis the analytical process of comparing the

relative costs and benefits that result from a specific course
of action (such as providing information or investing in a
project)

cost of production report

a process costing document that
details all operating and cost information, shows the computation
of cost per equivalent unit, and indicates cost assignment
to goods produced during the period

economic production run (EPR)

an estimate of the number
of units to produce at one time that minimizes the total
costs of setting up production runs and carrying inventory

equivalent units of production (EUP)

an approximation of the number of whole units of output that could have been
produced during a period from the actual effort expended
during that period; used in process costing systems to assign
costs to production

FIFO method (of process costing)

the method of cost assignment that computes an average cost per equivalent
unit of production for the current period; keeps beginning
inventory units and costs separate from current period production
and costs

information

bits of knowledge or fact that have been carefully
chosen from a body of data and arranged in a meaningful way

joint process

a manufacturing process that simultaneously
produces more than one product line
joint product one of the primary outputs of a joint process;
each joint product individually has substantial revenuegenerating
ability

management information system (MIS)

a structure of interrelated elements that collects, organizes, and communicates
data to managers so they may plan, control, evaluate
performance, and make decisions; the emphasis of the
MIS is on internal demands for information rather than external
demands; some or all of the MIS may be computerized
for ease of access to information, reliability of input
and processing, and ability to simulate outcomes of
alternative situations

modified FIFO method (of process costing)

the method of cost assignment that uses FIFO to compute a cost per
equivalent unit but, in transferring units from a department,
the costs of the beginning inventory units and the
units started and completed are combined and averaged

multiprocess handling

the ability of a worker to monitor
and operate several (or all) machines in a manufacturing
cell or perform all steps of a specific task

process benchmarking

benchmarking that focuses on practices and how the best-in-class companies achieved their results

process complexity

an assessment about the number of processes through which a product flows

process costing system

a method of accumulating and assigning costs to units of production in companies producing large quantities of homogeneous products;
it accumulates costs by cost component in each production department and assigns costs to units using equivalent units of production

processing time

the actual time consumed performing the
functions necessary to manufacture a product

process map

a flowchart or diagram indicating every step
that goes into making a product or providing a service

process productivity

the total units produced during a period
using value-added processing time

process quality yield

the proportion of good units that resulted from the activities expended

product- (or process-) level cost

a cost that is caused by the development, production, or acquisition of specific products or services

statistical process control (SPC)

the use of control techniques that are based on the theory that a process has natural variations in it over time, but uncommon variations
are typically the points at which the process produces "errors", which can be defective goods or poor service

strict FIFO method (of process costing)

the method of cost assignment that uses FIFO to compute a cost per equivalent unit and, in transferring units from a department, keeps the
cost of the beginning units separate from the cost of the
units started and completed during the current period

total units to account for

the sum of the beginning inventory
units and units started during the current period

units started and completed

the difference between the number of units completed for the period and the units in beginning inventory; it can also be computed as the number of units started during the period minus the units in ending inventory

weighted average method (of process costing)

the method of cost assignment that computes an average cost per
equivalent unit of production for all units completed during
the current period; it combines beginning inventory units
and costs with current production and costs, respectively,
to compute the average

Ito process

Statistical assumptions about the behavior of security prices. For
details, see the book by Hull listed in the “Bibliography”.

Go public

The process of offering a company’s shares for sale to the public through an
initial public offering.

Process

A series of linked activities that result in a specific objective. For example, the
payroll process requires the calculation of hours worked, multiplication by hourly
rates, and the subtraction of taxes before the final objective is reached, which is the
printing of the paycheck.

Process costing

A costing methodology that arrives at an individual product cost through the calculation of average costs for large quantities of identical products.

Production yield variance

The difference between the actual and budgeted proportions
of product resulting from a production process, multiplied by the standard unit cost.

Public offering

The sale of new securities to the investing public.

Work-in-process inventory

Inventory that has been partially converted through the
production process, but for which additional work must be completed before it can
be recorded as finished goods inventory.

information content of dividends

Dividend increases send good news about cash flow and earnings. Dividend cuts send bad news.

initial public offering (IPO)

First offering of stock to the general public.

Aggregate Production Function

An equation determining aggregate output as a function of aggregate inputs such as labor and capital.

Factor of Production

A resource used to produce a good or service. The main macroeconomic factors of production are capital and labor.

Official Settlements Account

An account within the balance of payments accounts showing the change in a country's official foreign exchange reserves. It is used to measure a balance of payments deficit or surplus.

Public Debt

See national debt.

Publicly Held National Debt

See national debt.

Walsh-Healey Public Contracts Act of 1936

A federal Act that forces government contractors to comply with the government’s minimum wage and hour rules.

Accounting and Auditing Enforcement Release (AAER)

Administrative proceedings or litigation Releases that entail an accounting or auditing-related violation of the securities laws.

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working
capital provided by operations before interest and taxes.

EBBS - Earnings before the bad stuff

An acronym attributed to a member of the Securities and
Exchange Commission staff. The reference is to earnings that have been heavily adjusted to
remove a wide range of nonrecurring, nonoperating, and noncash items.

EBDDT - Earnings before depreciation and deferred taxes

This measure is used principally by
firms in the real estate industry, with the exception of real estate investment trusts, which typically
do not pay taxes.

Litigation Release

official SEC record of a settlement or a hearing scheduled before a civil
court judge of an alleged violation of one or more sections or rules of the securities laws. Typically,
a litigation Release entails a more serious violation of the securities laws than an administrative
proceeding.

Public Oversight Board

An independent private-sector body that oversees the audit practices
of certified public accountants who work with SEC-regulated companies.

Purchased In-Process Research and Development

Unfinished research and development that is acquired from another firm.

Lean production

The technique of stripping all non-value-added activities from
the production process, thereby using the minimum possible amount of resources
to accomplish manufacturing goals.

Process flow production

A production configuration in which products are continually
manufactured with minimal pauses or queuing.

Reprocessed material

Material that has been reworked and returned to stock.

Work-in-process

Any items being converted into finished goods or Released from
the warehouse in anticipation of beginning the conversion process.

Medical Information Bureau

This organization was established in 1902. The Medical information Bureau (M.I.B.) is a non-profit association of life insurance companies. Its purpose is to detect and deter fraud by providing warnings called, alerts, to member companies. For example, if an insurance applicant advised one insurance company of a heart attack and then applied to another insurance company omitting this history, codes, reported by the first insurance company, indicating a heart attack would alert the second insurance company to the undisclosed history. It is a rarity, however, that the alert is the only notice of a specific medical impairement as most applicants completely disclose their history.

Future-Oriented Financial Information

information about prospective results of operations, financial position and/or changes in financial position, based on assumptions about future economic conditions and courses of action. Future-oriented financial information is presented as either a forecast or a projection.

Initial Public Offering

A firms first offering of its shares to the investment public, after registration requirements of the various securities regulators have been met.

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