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 3 of 3.
accounting · intermediate
Financial arrangements, assets, or obligations that do not appear directly on a company's balance sheet, such as certain lease arrangements or special purpose entities, though accounting rule changes over time have progressively required more of these items to be disclosed or recorded directly.
accounting · intro
The percentage of revenue remaining after subtracting both the direct cost of goods sold and operating expenses such as marketing, administration, and research and development, but before interest and taxes. It reflects the profitability of a company's core operations, independent of its financing structure or tax situation.
risk · intro
The risk of loss arising from inadequate or failed internal processes, systems, human error, or external events, as distinguished from financial risks such as credit or market risk. It covers a broad range of exposures, from technology failures to fraud to supply chain disruption.
organizational · intro
The deliberate process of structuring an organisation's roles, reporting relationships, workflows, and decision rights to align with its strategy and goals. It encompasses choices such as how centralised decision-making should be, how many layers of management to have, and how work should be divided among teams.
strategy · intermediate
A significant, deliberate change in a startup's business model, product, or target market, typically made in response to evidence that the original strategy is not working, while retaining some core element, such as the founding team or a piece of underlying technology, from the original venture.
ma · intermediate
Also called: shareholder rights plan
A defensive measure adopted by a company's board to deter a hostile takeover, typically by giving existing shareholders, other than the hostile acquirer, the right to purchase additional shares at a discount if a bidder crosses a specified ownership threshold, diluting the acquirer's stake and making the takeover more expensive.
governance · intermediate
A provision, often included in a company's bond covenants, giving bondholders the right to demand early repayment if the company undergoes a change of control, such as a takeover, intended to protect creditors from the increased risk that often accompanies a change in ownership.
strategy · intermediate
A framework, developed by economist Michael Porter, for analysing the competitive intensity and profitability potential of an industry by examining five forces: the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products, and rivalry among existing competitors.
finance · intermediate
A valuation method that estimates a company's worth by examining the prices paid, and the valuation multiples implied, in prior comparable mergers and acquisitions transactions. Because acquisition prices often include a control premium not present in ordinary public trading, this method typically produces higher valuations than comparable company analysis.
organizational · intermediate
A conflict of interest that arises when one party, the agent, is empowered to make decisions on behalf of another party, the principal, but the agent's own interests are not perfectly aligned with the principal's, creating a risk that the agent will act in their own interest at the principal's expense. The relationship between corporate managers and shareholders is a classic example studied extensively in corporate governance and finance.
finance · intro
Also called: PE
Investment capital, typically pooled from institutional and wealthy individual investors, that is used to acquire ownership stakes in private companies, or to take public companies private, with the goal of improving performance and later selling the stake at a profit. Private equity firms frequently use significant borrowed capital to fund acquisitions, a strategy known as a leveraged buyout.
governance · intermediate
A document a public company is required to distribute to shareholders ahead of a shareholder meeting, disclosing matters to be voted on, including director elections and executive compensation, and providing the information shareholders need to cast an informed vote, often by proxy rather than in person.
accounting · intermediate
Also called: QoE
An analysis, typically performed during due diligence, that examines whether a target company's reported earnings accurately reflect its sustainable, ongoing operating performance, adjusting for one-time items, aggressive accounting choices, or other factors that could make reported profitability misleading.
risk · intro
The risk that changes in laws, regulations, or their enforcement will adversely affect a company's business model, costs, or competitive position. It is a significant consideration in heavily regulated industries such as banking, healthcare, and energy.
governance · intermediate
A business transaction between a company and an individual or entity with a pre-existing relationship to it, such as a director, executive, or major shareholder, which carries an inherent risk of conflict of interest and is therefore typically subject to additional disclosure requirements and board approval.
ma · intermediate
Factual statements and assurances made by each party in an acquisition agreement about the state of the business, its assets, liabilities, and legal standing, on which the other party is entitled to rely. If a representation later proves false, it typically gives the other party a contractual basis to seek a remedy, such as indemnification.
risk · intro
The risk that negative public perception, whether from a scandal, poor product quality, ethical lapse, or public controversy, will damage a company's brand value, customer trust, or ability to attract talent and capital, in ways that can be difficult to reverse and hard to quantify precisely in advance.
accounting · intermediate
The revision and republication of a company's previously issued financial statements to correct a material error, often triggered by an accounting mistake, fraud discovery, or a change in the application of accounting standards. A restatement can significantly damage investor confidence, especially when it reveals that previously reported profitability was overstated.
accounting · intro
The set of accounting principles governing when and how a company records revenue from a sale or contract, generally requiring that revenue be recognised when it is earned and the associated goods or services have been substantially delivered, rather than simply when cash is received.
risk · intro
The amount and type of risk an organisation is willing to accept in pursuit of its strategic objectives, typically formalised by the board as a guiding framework for management decision-making across the company.
governance · intermediate
A non-binding shareholder vote on a company's executive compensation practices, giving shareholders a formal, though generally advisory, mechanism to express approval or disapproval of how senior executives are being paid.
strategy · intro
The capacity of a business model to handle significantly increased volume or demand without a proportional increase in cost or operational complexity. Software businesses are frequently cited as highly scalable, since the marginal cost of serving an additional customer is often very low compared to businesses with significant physical production or service delivery costs.
governance · intermediate
Efforts by shareholders, particularly those holding significant stakes, to influence a company's strategy, governance, or management, ranging from private engagement with management to public campaigns, proxy fights, or lawsuits. Activist investors often target companies they believe are undervalued due to poor strategic or operational decisions.
governance · intermediate
The view that a company's central purpose is to maximise value for its shareholders, and that this objective should take priority over the interests of other stakeholders when the two are in tension. It has historically been the dominant framework in American corporate law and finance, though it has faced growing challenge from stakeholder-oriented models.
organizational · intermediate
The number of subordinates or direct reports that a single manager oversees. A wider span of control generally produces a flatter organisational structure with fewer management layers, while a narrower span produces a taller, more hierarchical structure.
governance · intermediate
A view of corporate purpose holding that a company should be managed to serve the interests of all its stakeholders, including employees, customers, suppliers, and the community, rather than shareholders alone. It is generally contrasted with shareholder primacy, which holds that a company's central obligation is to maximise value for its shareholders.
ma · intermediate
A contractual provision, often used in the early stages of deal discussions or in the context of a hostile approach, under which a party agrees not to acquire additional shares, launch a takeover bid, or take other specified actions for a defined period.
ma · intermediate
An acquisition structure in which the buyer purchases the outstanding shares of a target company directly from its shareholders, thereby acquiring the entire company, including all of its assets and liabilities, known and unknown, as distinguished from an asset purchase.
strategy · intermediate
An agreement between two or more companies to collaborate on a specific initiative, such as a joint product development effort or shared distribution arrangement, while each partner remains an independent company, as distinguished from a merger or acquisition in which one or both companies lose their separate identity.
risk · intermediate
An analytical exercise that evaluates how a company, portfolio, or financial system would perform under a severely adverse, but plausible, hypothetical scenario, such as a sharp economic downturn or market crash. Regulators require large banks to undergo formal stress tests to assess whether they hold sufficient capital to withstand a severe shock.
governance · intro
The process by which an organisation identifies and develops potential future leaders to ensure continuity in key roles, particularly the chief executive position, when a current leader departs, retires, or becomes unable to serve. Boards are typically responsible for chief executive succession planning as a core governance function.
strategy · intro
The cost, whether financial, effort-based, or psychological, that a customer incurs when changing from one product or supplier to another. High switching costs can lock in existing customers and reduce a company's vulnerability to competition, forming an important component of many competitive moats.
strategy · intro
A strategic planning framework that structures analysis around four categories: a company's internal Strengths and Weaknesses, and external Opportunities and Threats in its operating environment. Despite being one of the simplest and most widely taught strategy tools, it is frequently criticised for encouraging shallow, unprioritised lists rather than deep strategic insight.
ma · intro
The anticipated increase in combined value expected to result from a merger or acquisition, beyond the sum of the two companies' standalone values, arising from cost savings, revenue growth, or other efficiencies unlocked by combining operations. Synergy estimates are notoriously prone to overoptimism and are frequently used to justify a deal price that later proves difficult to earn back.
risk · intermediate
The risk that the failure of one company, or a disruption within one part of a financial system, could trigger cascading failures across the broader economy or financial system, rather than remaining contained to the initial point of failure. It was a central concept in analysing the causes and spread of the 2008 global financial crisis.
organizational · intro
The set of organisational strategies and practices aimed at keeping valued employees from leaving, including competitive compensation, career development opportunities, and a positive working environment. It is treated as a strategic priority in most organisations because losing experienced, high-performing employees carries significant direct and indirect costs.
ma · intermediate
A public offer made directly to a company's shareholders to purchase their shares at a specified price, typically at a premium to the current market price, often used as a mechanism in hostile takeover attempts to bypass a resistant board of directors.
finance · intermediate
The estimated value of a business or investment at the end of an explicit forecast period, representing all cash flows expected to occur beyond that point, typically calculated assuming a stable, perpetual growth rate. In many discounted cash flow valuations, the terminal value accounts for the large majority of the total estimated value, making its underlying assumptions especially consequential.
strategy · intro
Also called: TAM
An estimate of the total revenue opportunity available for a product or service if a company achieved one hundred percent market share within its defined target market. It is commonly used in business plans and investor pitches, though estimates vary widely depending on how broadly or narrowly the target market is defined.
strategy · intro
The direct revenues and costs associated with a single unit of a business, such as one customer or one product sold, used to assess whether a business model is fundamentally viable independent of its overall scale. A company can grow rapidly while still having poor unit economics, a combination that is often unsustainable in the long run without significant changes.
strategy · intermediate
The full sequence of activities a company performs to design, produce, market, deliver, and support its product or service, used as a framework for analysing where within that sequence a company creates the most value and where it holds a genuine competitive advantage relative to rivals.
finance · intro
Also called: VC
Investment capital provided to early-stage, high-growth-potential companies, typically in exchange for equity, in return for the high risk of investing before a business model is fully proven. Venture capital investors generally expect that most individual investments will fail, with returns concentrated in a small number of highly successful companies.
strategy · intermediate
A strategy in which a company expands its operations to control multiple stages of its supply chain or production process, either backward toward suppliers or forward toward distribution and customers, rather than relying on external companies for those stages. It can improve control and margin capture, but also increases the operational complexity a company must manage directly.
finance · intro
Also called: WACC
The average rate a company is expected to pay to finance its assets, weighted by the relative proportions of debt and equity in its capital structure, and commonly used as the discount rate in valuation models. It reflects the blended return required by both lenders and shareholders to compensate them for the risk of financing the business.
governance · intermediate
A formal organisational policy establishing channels through which employees can confidentially report suspected misconduct, fraud, or legal violations, along with protections against retaliation for those who report in good faith.
finance · intro
The difference between a company's current assets, such as cash, inventory, and receivables, and its current liabilities, such as accounts payable and short-term debt, representing the funds available for day-to-day operations. Insufficient working capital can cause a business to struggle to meet short-term obligations even when it is fundamentally profitable.
accounting · intermediate
A mechanism in an acquisition agreement that adjusts the final purchase price based on the actual level of a target company's working capital at closing, compared to an agreed target level, protecting the buyer from acquiring a business that has been stripped of normal operating cash or inventory before the deal closes.