Vijay Shankar Sharma
Textbook finance, M&A, governance, strategy, and organisation terms. Not UNITE and not Layer 4. 147 terms. Textbook meanings only.
147 terms. Page 1 of 3.
ma · intermediate
Terms describing an acquisition's effect on the acquirer's earnings per share: a deal is accretive if it increases the acquirer's earnings per share, and dilutive if it decreases it. The distinction is a commonly cited, though incomplete, shorthand for evaluating whether a deal is likely to create value, since it does not on its own capture the deal's strategic merit or risk.
accounting · intermediate
An accounting method that records revenues and expenses when they are earned or incurred, regardless of when the associated cash is actually received or paid, as distinguished from cash accounting, which records transactions only when cash changes hands. It is the method required under both GAAP and IFRS for most companies.
ma · intro
A transaction in which one company purchases and takes control of another, which then typically ceases to exist as an independent entity or continues as a subsidiary of the acquirer. Acquisitions can be friendly, negotiated cooperatively with the target's management and board, or hostile, pursued directly against the target board's wishes.
accounting · intro
The accounting method of gradually expensing the cost of an intangible asset, such as a patent or acquired goodwill, over its estimated useful life, functioning similarly to depreciation but applied to intangible rather than physical assets.
ma · intermediate
An acquisition structure in which the buyer purchases specific assets and liabilities of a target company, rather than acquiring the target company's shares directly, often used to allow the buyer to select which assets and liabilities to take on and to leave certain risks behind with the seller.
governance · intro
A committee of a company's board of directors, typically composed of independent directors, responsible for overseeing financial reporting, the internal control environment, and the work of external auditors. It serves as a key mechanism for ensuring the integrity of a company's published financial statements.
accounting · intro
A financial statement that presents a company's assets, liabilities, and shareholders' equity at a specific point in time, structured around the fundamental accounting identity that assets equal liabilities plus equity. It provides a snapshot of what a company owns and owes, in contrast to the income statement, which covers performance over a period.
strategy · intermediate
A strategic framework, developed by researchers W. Chan Kim and Renée Mauborgne, advocating that companies pursue uncontested market space by creating new demand, rather than competing head-to-head against established rivals in existing, saturated markets, described metaphorically as a 'red ocean' of intense competition.
governance · intermediate
The range of backgrounds, skills, and perspectives represented among a company's board of directors, including but not limited to gender, ethnicity, professional background, and tenure. Research on the relationship between board diversity and financial performance has produced mixed results, though diversity is also often defended on governance grounds independent of any performance link.
governance · intro
The group of individuals elected by a company's shareholders to oversee management, set overall strategic direction, and represent shareholder interests. Boards typically include a mix of executive directors, who also hold management roles, and independent directors, who have no other material relationship with the company.
finance · intro
The value of a company's assets as recorded on its balance sheet, minus its liabilities, representing the accounting net worth of the company rather than its market value. Book value can diverge substantially from a company's actual market capitalisation, particularly for businesses whose value depends heavily on intangible assets not fully reflected on the balance sheet.
ma · intermediate
Also called: termination fee
A fee that a target company agrees to pay an acquirer if a signed acquisition agreement is terminated under specified circumstances, such as the target's board accepting a competing offer, intended to compensate the original acquirer for the time and cost invested and to discourage the target from opportunistically abandoning the deal.
finance · intermediate
Also called: bridge loan
Short-term financing used to provide immediate cash flow until a company can arrange more permanent, typically larger, financing, such as a bridge loan used to fund a company between venture capital rounds or during an acquisition process.
risk · intro
Also called: business continuity plan
The process of creating systems and procedures to ensure a company can continue operating, or quickly resume operating, during and after a significant disruptive event, such as a natural disaster, cyberattack, or major supplier failure.
strategy · intro
The overall plan by which a company creates, delivers, and captures value, encompassing how it identifies customers, what it offers them, how it generates revenue, and what its underlying cost structure looks like. Fundamentally changing a company's business model, rather than merely its products, is often the most difficult form of strategic change to execute.
finance · intro
Also called: capitalization table
A capitalisation table: a record of a company's ownership structure, listing all shareholders, the type and number of shares or options each holds, and the resulting ownership percentages. It is used especially by startups to track how ownership changes across successive rounds of investment and option grants.
finance · intro
Also called: capex
Funds a company spends to acquire, upgrade, or maintain physical assets such as property, equipment, or technology infrastructure, as distinguished from operating expenses incurred in day-to-day business activity. Capital expenditure is recorded on the balance sheet and depreciated over time, rather than expensed immediately on the income statement.
finance · intro
The specific mix of debt and equity a company uses to finance its overall operations and growth. A company's chosen capital structure affects its cost of capital, financial risk, and flexibility, and is a central decision in corporate finance, balancing the tax advantages of debt against the increased financial risk it creates.
accounting · intro
A financial statement showing the cash generated and used by a company across operating, investing, and financing activities during a reporting period, providing a picture of actual cash movement that can differ significantly from the accrual-based profit reported on the income statement.
organizational · intermediate
The concentration of decision-making authority at a central point within an organisation, such as senior leadership or corporate headquarters, rather than distributing it to lower levels or local units. It can improve consistency and control at the cost of responsiveness to local conditions.
governance · intermediate
An arrangement in which the same individual holds both the role of chief executive officer and chairman of the board, combining the top management role with leadership of the body responsible for overseeing management. Governance advocates frequently argue that separating the two roles improves board independence and oversight.
organizational · intro
A structured approach to preparing, supporting, and helping individuals and an organisation as a whole move through significant organisational change, such as a merger, restructuring, or new technology rollout, aimed at reducing resistance and ensuring the change is actually adopted rather than merely announced.
finance · intermediate
Also called: comps, trading comparables
A valuation method that estimates a company's worth by examining the valuation multiples, such as price-to-earnings or enterprise-value-to-EBITDA, of similar publicly traded companies, then applying those multiples to the company being valued. Its reliability depends heavily on how genuinely comparable the selected peer companies actually are.
strategy · intro
A durable competitive advantage that protects a company's market position and profitability from competitors over time, commonly arising from factors such as brand strength, network effects, high switching costs, patents, or economies of scale. The term draws an analogy to the water-filled trench that historically protected a castle from attack.
governance · intro
A situation in which a person's personal interests, or their obligations to another party, could improperly influence their judgement or actions in a role where they owe a duty of loyalty to someone else, such as a company or its shareholders. Governance structures such as disclosure requirements and recusal from related decisions are designed to manage and limit the effects of unavoidable conflicts.
accounting · intermediate
A potential financial obligation that depends on the outcome of a future, uncertain event, such as a pending lawsuit or a product warranty claim, which may or may not ultimately become an actual liability. Depending on how likely and how estimable the potential obligation is, it may be recorded on the balance sheet or merely disclosed in the notes to the financial statements.
ma · intermediate
The additional amount, above a target company's current trading price, that an acquirer typically pays to gain a controlling ownership stake, reflecting the value of being able to direct the company's strategy and operations rather than holding a passive minority position.
finance · intermediate
A short-term debt instrument that converts into equity, typically at a discount or valuation cap, upon a future triggering event such as a subsequent financing round, commonly used in early-stage startup financing when it is difficult to agree on a precise company valuation.
strategy · intro
A specific capability, skill, or resource that a company possesses and does particularly well, that is difficult for competitors to replicate, and that provides genuine access to a range of markets or contributes significantly to the value customers perceive in its end products. It is a central concept in strategic planning focused on building competitive advantage from internal strengths.
governance · intro
The overall system of rules, practices, and processes by which a company is directed and controlled, encompassing the relationships and balance of power between shareholders, the board of directors, and management. Strong corporate governance is widely associated with lower risk of fraud, better long-term decision-making, and greater investor confidence.
finance · intermediate
The effective interest rate a company pays on its borrowed funds, typically lower than its cost of equity because lenders are repaid before shareholders in the event of financial difficulty and their returns are contractually fixed rather than residual. Because interest payments are often tax-deductible, the after-tax cost of debt is generally used in valuation calculations.
finance · intermediate
The return a company's shareholders require to compensate them for the risk of holding its stock, often estimated using models such as the capital asset pricing model, which relates the required return to a stock's volatility relative to the broader market. It is typically higher than a company's cost of debt, since equity holders bear more risk and are paid after creditors in the event of financial distress.
risk · intermediate
The risk that the other party in a financial transaction, such as a loan, derivative contract, or trade, will fail to fulfil its contractual obligations, resulting in a loss to the other party.
risk · intro
The risk that a borrower or counterparty will fail to meet its contractual debt obligations, resulting in a financial loss to the lender. It is a central consideration in lending decisions, bond pricing, and the credit ratings assigned to companies and governments by rating agencies.
strategy · intro
Also called: CAC
The average cost a company incurs to acquire a single new customer, typically calculated by dividing total sales and marketing spend over a period by the number of new customers gained in that period. It is commonly analysed alongside customer lifetime value to assess whether a company's growth is being achieved economically.
strategy · intro
Also called: LTV, CLV
An estimate of the total net profit a company expects to generate from a single customer over the entire duration of their relationship with the business. Comparing customer lifetime value to customer acquisition cost is a common way of assessing whether a company's growth strategy is fundamentally sound.
accounting · intermediate
Also called: DSO
A measure of how quickly a company collects payment after a sale, calculated as the average number of days it takes to convert credit sales into cash. A rising figure over time can be an early warning sign of deteriorating customer credit quality or collection practices.
organizational · intermediate
The distribution of decision-making authority away from a central point, such as corporate headquarters, toward lower levels of an organisation, such as regional units or individual teams. It can increase responsiveness and local accountability, at some cost to overall consistency and central control.
ma · intermediate
The final, legally binding contract that sets out the complete, enforceable terms of a merger or acquisition, following the preliminary understanding typically established in a letter of intent. It includes detailed provisions covering price, representations and warranties, closing conditions, and remedies for breach.
organizational · intro
The process by which a manager or leader assigns responsibility and authority for specific tasks or decisions to someone else, typically a subordinate, while retaining ultimate accountability for the outcome. Effective delegation is widely considered essential for an organisation to scale beyond what a single leader can personally oversee.
accounting · intro
The accounting method of allocating the cost of a tangible, physical asset, such as equipment or a building, over its estimated useful life, rather than expensing the full cost in the year of purchase. It reflects the gradual consumption of the asset's economic value and reduces reported net income without representing an actual cash outflow in the period recorded.
finance · intro
The reduction in existing shareholders' percentage ownership of a company that occurs when new shares are issued, such as in a new financing round or an employee option pool expansion. Investors and founders alike track dilution carefully across financing rounds because it directly affects the ultimate value of their stake.
finance · intro
Also called: DCF
A valuation method that estimates the value of an investment or business by projecting its future cash flows and discounting them back to a present value using a rate that reflects the time value of money and investment risk. It is one of the most widely used intrinsic valuation methods, though its output is highly sensitive to the growth and discount-rate assumptions fed into it.
strategy · intro
A theory, developed by academic Clayton Christensen, describing how a smaller company with fewer resources can successfully challenge established incumbents by initially targeting overlooked market segments with a simpler, cheaper offering, then progressively moving upmarket as its product improves, eventually displacing the incumbents.
risk · intro
A risk management strategy of spreading investment or business exposure across a range of assets, markets, or activities, so that poor performance in any single area has a limited effect on overall results. It is one of the most fundamental principles in both investment portfolio management and broader corporate risk management.
strategy · intermediate
A corporate growth strategy in which a company expands into new products, markets, or industries beyond its original core business, pursued either to reduce overall business risk or to capture new growth opportunities. It is distinguished from the investment concept of diversification, though the underlying logic of spreading exposure is related.
strategy · intermediate
The sale, spin-off, or closure of a business unit, subsidiary, or asset that a company has determined no longer fits its strategic priorities, often pursued to sharpen focus on core operations, raise capital, or satisfy regulatory requirements following an acquisition.
finance · intro
A distribution of a portion of a company's earnings paid to shareholders, typically in cash or additional shares, representing one of the two main ways, alongside share buybacks, that public companies return capital to shareholders. A company's dividend policy, including whether and how much to pay, reflects a balance between rewarding shareholders and retaining capital for reinvestment.
governance · intermediate
A share structure in which a company issues more than one class of stock with different voting rights, commonly used by founders to retain outsized voting control over a company even after selling a majority of its economic ownership to public shareholders through an IPO.
ma · intro
The comprehensive investigation and verification process a buyer undertakes before completing an acquisition, examining a target company's financial records, legal standing, operations, and other material risks. Its purpose is to confirm that a target is what it appears to be and to surface risks that could affect the deal's price or structure before it becomes binding.