Steps to Growth Capital

Glossary

A

Acceleration Clause (Clause de remboursement anticipé)

Clause causing repayment of a debt, if specified events occur or are not met.

 

Accounting (Comptabilité)

Process of recording and summarizing the business transactions of a firm during a given period of time to reveal the income or loss for the period, and the value and nature of the firm's assets, liabilities and ownership.

 

Accounting Policies (Conventions comptables)

The principles, bases, conventions, rules and procedures adopted by management in preparing and presenting financial statements.

 

Accounts Payable (Comptes fournisseurs)

Money owed to suppliers.

 

Accounts Receivable (Comptes clients)

Money owed by customers.

 

Accounts Receivable Turnover (Rotation des comptes clients)

Gauges the number of times a business recycles each dollar invested in its accounts receivable during the year.

Calculation          Net sales        Accounts receivable

 

Accruals (Charges à payer)

Continually recurring short-term liabilities. Examples are accrued wages, accrued taxes and accrued interest.

 

Accrued Interest (Intérêts courus)

The amount of interest owing but not paid.

 

Acid Test Ratio (Ratio de liquidité relative)

See Quick Ratio.

 

After-tax Cash Flow (Flux de trésorerie après impôts)

Total cash generated by an investment annually, defined as income after tax plus depreciation.

 

Amortization Schedule (Tableau d'amortissement)

A schedule that shows precisely how a loan will be repaid. The schedule gives the required payment on each specific date and shows how much of it constitutes interest and how much constitutes repayment of principal.

 

Amortize (Amortir)

To liquidate on an instalment basis. An amortized loan is one on which the principal amount of the loan is repaid in instalments during the life of the loan.

 

Angels (Investisseurs providentiels)

Usually professional, retired and individual investors, with business experience and money, interested in investing between $25 000 and $300 000 in a business venture. They usually bring experience and know-how into the business and will want to take an active role in providing some strategic orientation to the company's management team.

 

Annual Report (Rapport annuel)

A report, issued annually by corporations to their shareholders, that contains basic financial statements as well as management's opinion of the past year's operations and future prospects.

 

Annuity (Rente)

A series of payments of a fixed amount for a specified number of years.

 

Anti-dilution Provision (Clause d'antidilution)

A clause in a shareholders agreement preventing a company from issuing additional shares without allowing current shareholders the opportunity to participate in the offering to avoid diluting their percentage of ownership.

 

Asked Price (Cours vendeur)

The price at which a dealer in securities will sell shares.

 

Asset (Actif)

Resources that a business owns to produce goods and provide services. There are tangible assets, such as cash, inventory, land and buildings, and intangible assets, such as patents and good will.

 

Asset-backed Securities (Titres adossés à des éléments d'actif)

Bond or note secured by the assets of a company.

 

Asset Coverage (Couverture par l'actif)

Extent to which a company's net assets cover a particular debt obligation, class of preferred stock or equity position.

 

Asset Turnover (Rotation de l'actif)

A broad measure of asset efficiency.

Calculation   Sales revenue Total assets

 

Average Collection Period (Délai moyen de recouvrement)

The average length of time a firm must wait after making a sale before receiving cash.

Calculation   Accounts receivable Average daily sales

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B

Balance Sheet (Bilan)

Financial statements providing the status of a company's assets, liabilities and shareholders equity on a specific date.

 

Bankers Acceptances (Acceptation bancaire)

A bill of exchange, or draft, drawn by the borrower for payment on a specified date and accepted by a chartered bank. Upon acceptance, the bill becomes, in effect, a post-dated certified cheque.

 

Bankruptcy (Faillite)

A legal procedure for formally liquidating a business carried out under the jurisdiction of courts of law.

 

Bond (Obligation)

Usually a fixed-interest security under which the issuer contracts to pay the lender a fixed principal amount at a stated date in the future and a series of interest payments, either semi-annually or annually. Interest payments may vary throughout the life of the bond.

 

Book Value (Valeur comptable)

The accounting value of an asset.

 

Bookkeeping (Tenue de livres)

The process of collecting, classifying, recording and summarizing a business's financial transactions in what are known as journals and ledgers.

 

Break Even (Seuil de rentabilité)

This is a term used to describe a point at which revenues equal costs (fixed and variable).

 

Bridge Loan (Financement provisoire)

A short-term loan to cover immediate cash requirements until permanent financing is received.

 

Budget (Budget)

A quantitative expression of a contemplated plan of action. It is useful to formulate plans, allocate resources and evaluate organizational and managerial performance.

 

Business Plan (Plan d'affaires)

Document prepared by management that summarizes the operational and financial objectives of a business and the detailed plans and budgets showing how the objectives are to be realized. It is different from an investment proposal in that the business plan is considered an internal document.

 

Business Risk (Risque commercial)

The basic risk inherent in a firm's operations. Business risk plus financial risk resulting from the use of debt equals the total corporate risk.

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C

Capital Assets (Immobilisations/Actif immobilisé)

Land, buildings, plant, equipment and other assets acquired for carrying on the business of a company with a life exceeding one year. Assets are normally expressed in financial accounts as cost minus accumulated depreciation.

 

Capital Budget (Budget des immobilisations)

List of planned investment projects.

 

Capital Cost Allowance (Amortissement fiscal)

A tax deduction that Canadian tax laws allow a business to claim for the loss in value of capital assets due to wear and tear or obsolescence.

 

Capital Investment (Dépenses en immobilisations)

Money used to purchase fixed assets for a business, such as land, buildings or machinery. It also refers to money invested in a business on the understanding that it will be used to purchase permanent assets rather than to cover day-to-day operating expenses.

 

Capital Lease (Contrat de location-acquisition)

A lease that under financial accounting standards must be reflected on a company's balance sheet as an asset and corresponding liability. Generally, it is a lease under which the lessee acquires all the economic benefits and risks of the leased property as opposed to just paying for the use of the property.

 

Capital Structure (Structure du capital)

The mix of the various types of debt and equity capital maintained by a firm. The more debt capital a firm has in its capital structure, the more highly leveraged the firm is considered to be.

 

Capital Turnover (Rotation des capitaux)

Annual sales divided by average stockholder equity (net worth) (i.e. total sales for each $1 of equity).

 

Capitalization (Capital investi)

The total amount of debt and equity issued by a company.

 

Cash Budget (Budget de trésorerie)

A plan or projection of cash receipts and disbursements for a given period of time. It is essential for the determination of cash deficiencies or excess cash balances.

 

Cash Conversion Cycle (Cycle d'exploitation)

The period of time it takes for a company to pay cash for a product, add its value to the product and then receive cash from the sale of that product.

 

Cash Equivalents (Quasi-espèces)

Instruments or investments of such high liquidity and safety that they are virtually equal to cash.

 

Cash-flow Forecast (Prévisions de trésorerie)

An estimate of the timing and amount of a company's inflow and outflow of money measured over a specific period of time — typically, monthly for one to two years, then annually for an additional one to three years.

 

Cash Ratio (Ratio de liquidité immédiate)

Ratio of cash and cash equivalents to liabilities. Cash ratio provides the most stringent measure of a firm's liquidity position.

Calculation           Cash         Current liabilities

 

Cash Turnover (Taux de rotation du fonds de roulement)

The number of cash cycles completed in one year.

 

Collateral (Bien donné en garantie)

An asset or security that is pledged to support or secure a loan (e.g. a collateral mortgage on a house or a pledge of a bond taken as security by a bank to support a term or operating loan).

 

Commercial Paper (Billet de trésorerie)

Unsecured, short-term promissory notes of large firms.

 

Commitment Fee (Commission d'engagement)

Fee charged by lenders on the committed loan facility.

 

Common Shares (Actions ordinaires)

Shares representing ownership and voting rights in a company.

 

Competitive Advantage (Avantage concurrentiel)

The strategies, skills, knowledge, resources or competencies that differentiate a business from its competitors.

 

Compound Interest (Intérêts composés)

An interest rate that is applicable when interest in succeeding periods is earned not only on the initial principal but also on the accumulated interest of the previous period.

 

Condition Precedent (Condition suspensive)

Clause in contract that requires some event to occur before the contract becomes effective.

 

Confidentiality Agreement (Entente de non-divulgation)

A legal document whereby one party, usually the prospective investor, pledges to keep strictly confidential, and to return on request, any and all information provided by the other party, the entrepreneur seeking funding.

 

Contingency (Éventualité)

An existing situation, the result of which is unknown. This may be positive or negative.

 

Contribution Margin (Marge sur coûts variables)

That portion of the selling price of an item that remains after variable expenses are paid.

 

Cost of Capital (Coût du capital)

The discount rate that should be used in the capital budgeting process.

 

Cost of Goods Sold (Coût des marchandises vendues)

In the case of a retail or wholesale operation, the cost related to purchasing goods; in the case of a manufacturing operation, the cost related to production, which includes the cost of the raw materials, the freight in and the manufacture of goods.

 

Coupon (Coupon)

Interest rate payable on bonds, whether bearer or registered. It also refers to the detachable portion of the certificate entitling the bearer to payment of the interest.

 

Covenant (Engagement de faire ou de ne pas faire)

Promise, usually made in a contract, whereby a party to the contract promises to do or not to do specified things.

 

Coverage Ratios (Ratio de couverture)

Ratios, such as times interest earned, total debt coverage and overall coverage ratio, that measure the ability of a firm to meet its fixed financial obligations.

 

Credit (Cote de crédit)

Rating of a company's credit (ability to pay back debt), usually by a third-party credit agency.

 

Credit Risk (Risque de crédit)

Risk that a borrower may default on obligations, thus a danger that repayment will not take place.

 

Current Assets (Actif à court terme)

Items that are either cash now or are expected to be turned into cash within one year's time. These include cash, accounts receivable, inventory and marketable securities.

 

Current Liabilities (Passif à court terme)

Financial obligations that will have to be paid within one year. These include accounts payable, bank loans and short-term notes.

 

Current Ratio (Ratio de liquidité générale)

Ratio that indicates the extent to which the claims of short-term creditors are covered by assets expected to be converted to cash in the near future.

Calculation     Current assets   Current liabilities

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D

Day's Sales to Inventory (Délai moyen de rotation des stocks)

The amount of inventory a business needs to satisfy its average daily sales requirements.

Calculation              Inventory             Average daily cost of goods sold

 

Deal Breaker (Impasse)

A significant issue relating to proposed financing between the prospective investor and the entrepreneur that must be resolved in order to close the deal.

 

Debenture (Débenture)

A written acknowledgment of debt, usually secured by a lien on assets.

 

Debt Capacity (Capacité d'endettement)

An assessment of ability and willingness to repay a loan from anticipated future cash flow or other sources.

 

Debt Ratio (Ratio d'endettement)

See Debt to Total Assets Ratio.

 

Debt Service Ratio (Ratio du service de la dette)

See Times Interest Earned Ratio.

 

Debt to Equity Ratio (Ratio d'endettement)

A comparison of debt to equity in a company's capital structure.

Calculation      Total debts    Owners' equity

 

Debt to Total Assets Ratio (Ratio emprunts/capitaux propres)

Measures the proportion of all debts provided by lenders to finance all assets.

Calculation    Total debts  Total assets

 

Deferred Income (Produit comptabilisé d'avance)

A liability for income that has been received but not yet earned.

 

Deferred Taxes (Impôts reportés)

Future tax liability resulting from the difference between depreciation and capital cost allowance.

 

Demand Loan (Prêt remboursable à vue)

A loan that must be repaid in full on demand.

 

Depreciated Replacement Value (Valeur non amortie de remplacement)

The value of an asset with reference to the cost of replacing the asset with a new asset of similar utility minus an amount reflecting the depreciation of the existing asset.

 

Depreciation (Amortissement)

An accounting term reflecting diminishment in value of an asset used in a business. The diminishment in value is reflected by a deduction from income.

 

Dilution (Dilution)

Reduction in per share participation in net earnings and ownership through an increase in issued stock.

 

Discount Rate (Taux d'actualisation)

A rate of return used to convert a monetary sum, payable or receivable in the future, into present value.

 

Discounted Cash Flow (DCF) (Valeur actualisée des flux de trésorerie/Actualisation des flux de trésorerie)

Techniques for establishing the relative worth of a future investment by discounting (at a required rate of return) the expected net cash flow from the project.

 

Discounting (Actualisation)

The process of finding the present value of a series of future cash flows. Discounting is the reverse of compounding.

 

Divestiture (Dessaisissement)

Sale of part of a company. It is the opposite of merger.

 

Dividend (Dividende)

A cash or share payment to shareholders. Ordinarily it is paid from the earnings or retained earnings of a company on a per share basis. Dividends are not deductible by the payor for tax purposes.

 

Dividend Coverage (Couverture des dividendes)

Number of times a company's dividend is covered by earnings available to pay it.

 

Dividend Yield (Rendement des actions/Taux de rendement des actions)

Current dividend as a percentage of a share's market price.

 

Due Diligence (Diligence raisonnable)

The measure of prudence, activity or assiduity that is properly to be expected from, and ordinarily exercised by, a reasonable and prudent person under the particular circumstances.

 

Due Diligence Review (Contrôle préalable)

The investigatory and review procedures carried out by lawyers, public accountants and others prior to the closing of a transaction, such as a property transfer, corporate merger, share issue or loan agreement.

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E

Earnings (Bénéfice)

In general, refers to a company's total sales minus the cost of sales and operating expenses, including interest and income tax.

 

Earnout (Clause d'indexation sur les bénéfices futurs)

A method of structuring a transaction whereby the ultimate purchase price depends in part on the future performance of the business being acquired.

 

EBIT (BAII)

Earnings before interest and taxes.

 

EBITDA (BAIIAD)

Earnings before interest, income taxes, depreciation and amortization

 

Economic Value Added (EVA) (Valeur économique ajoutée à VEA)

After-tax net operating profit minus cost of capital.

 

Empirical Approach (Méthode empirique)

Valuation approach whereby the value of a company is determined by reference to open market transactions involving similar companies or by reference to value relationships implied in the stock price of publicly traded companies.

 

Equity (Capitaux propres)

The residual value of a business or investment after all debts and other claims are settled.

 

Equity Buyback (Rachat de capitaux propres)

The investors' percentage ownership of a company that can be re-acquired by the company, usually at a predetermined amount.

 

Equity Kicker (Clause de participation)

The term usually refers to the situation where an investor has subordinated debt in a company and, in return for a lower interest rate, the investor is given the option to convert some of the debt into equity at a future date.

 

Escrow (Contrat de dépôt entre les mains d'un tiers)

An agreement put into the custody of another party until certain conditions are fulfilled.

 

Exchange Risk (Risque de change)

The risk associated with an asset or liability denominated in a foreign currency. It is vulnerable to the movement of exchange rates.

 

Executive Summary (Sommaire)

A concise summary of an investment proposal that describes a company's background, products or services, financial needs, financial requirements, management capabilities, market description and financial data.

 

Exit Options (Stratégies de retrait)

A variety of options available to investors to recover their invested capital and the return on their investment.

 

Expected Return (Rendement attendu/Rendement escompté/Rendement espéré)

The total amount of money (return) an investor anticipates to receive from an investment.

 

External Financial Statements (États financiers externes)

Corporate financial statements that have been reported on by an external, independent accountant.

 

External Funds (Financement externe)

Funds acquired through borrowing or by selling new common or preferred shares.

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F

Face Value (Valeur nominale)

The nominal value that appears on the face of a document recording an entitlement, generally an amount of money that has to be repaid on the maturity of a debt instrument.

 

Factoring (Affacturage)

When a company sells its receivables to another company at a discount. The purchaser obtains title to the accounts receivable.

 

Fair Market Value (Juste valeur marchande)

The highest price available, expressed in terms of cash, in an open and unrestricted market between informed, prudent parties acting at arm's length and under no compulsion to transact business.

 

Fee (Frais)

A charge for services.

 

Financial Assistance (Soutien financier)

Economic assistance provided by unrelated third parties, typically government agencies. It may take the form of loans, loan guarantees, subsidies, tax allowances, contributions or cost-sharing arrangements.

 

Financial Break-even Point (Point mort)

The level of earnings before interest and taxes at which the earnings per share just equal zero. The higher the financial break-even point, the more financially risky the firm is considered.

 

Financial Covenants (Clause financière restrictive)

A promise made related to financial conditions or events. It is often a promise not to allow certain balance sheet items or ratios to fall below an agreed level and is usually found in loan documents as a protection mechanism.

 

Financial Incentive (Stimulant financier)

An expression of economic benefit that motivates behaviour that might otherwise not take place.

 

Financial Institutions (Établissements financiers)

Establishments that handle monetary affairs, including banks, trust companies, investment dealers, insurance companies, leasing companies and institutional investors.

 

Financial Lease (Crédit-bail financier)

See Capital Lease.

 

Financial Leverage (Levier financier)

Use of debt to increase the expected return and the risk to equity.

 

Financial Needs (Besoins financiers)

Amount of funds a company will need to launch an investment opportunity (e.g. purchase of capital assets, working capital requirements).

 

Financial Risk (Risque financier)

The portion of total corporate risk over and above the basic business risk that results from using debt.

 

Financial Statement (État financier)

A report summarizing the financial condition or financial results of a business on any date or for any period.

 

Financial Structure (Structure financière)

The entire right-hand side of the balance sheet — the way a firm is financed.

 

Financial Trend Analysis (Analyse des tendances financières)

Process of analyzing financial statements of a company for any continuing relationship.

 

Financing Instruments (Instrument de financement)

A generic term that refers to the many different forms of financing a business may use. For example, loans, shares and bonds are all considered financing instruments.

 

Financing Requirements (Besoins de financement)

Sources of funds required to finance a proposed business venture (e.g. working capital financing, mortgage, equity).

 

First Refusal (Droit de préemption)

The right of a second party to buy shares or property on the same terms and conditions as have been offered to a first party.

 

Fixed Assets (Immobilisations/Actif immobilisé)

See Capital Assets.

 

Fixed Assets Turnover (Rotation de l'actif immobilisé)

Measures how intensively a firm's assets, such as land, buildings and equipment, are working.

Calculation      Net sales    Net capital assets

 

Fixed Charges Coverage Ratio (Ratio de couverture des charges fixes)

Similar to the times interest earned ratio except that this ratio includes all fixed charges, or the capacity to service the interest charges and other fixed obligations.

Calculation   EBIT + interest charges + lease payments Interest charges + lease payments

 

Fixed Expenses (Coûts fixes)

Cost of doing business, which does not change with the volume of business. Examples might be rent for business premises, insurance payments, heat and light.

 

Fixed Rate Loan (Prêt à taux fixe)

Loan for a fixed period of time with a fixed interest rate for the life of the loan.

 

Floating Charge (Charge flottante)

Charge or assignment on a company's total assets as security for a loan on total assets without citing specific assets.

 

Floating Rate (Taux variable)

A situation where the interest rate or rate of exchange is determined solely by market forces.

 

Forecast (Prévisions)

Future-oriented financial information prepared using assumptions, all of which reflect the entity's planned courses of action for the period covered, given management's judgment as to the most probable set of economic conditions.

 

Foreign Exchange (Opération de change)

Claims in a foreign currency payable abroad, including bank deposits, bills, cheques. Foreign exchange rates refer to the number of units of one currency required to buy another.

 

Front-end Fees (Frais de montage)

Fees paid when, for example, a financial instrument such as a loan is arranged.

 

Front-end Loading (Frais prélevés à l'acquisition)

Charges or fees that are greater at the start of a loan or investment contract than in its later stages.

 

Funding (Consolidation)

The process of replacing short-term debt with long-term securities (shares or bonds).

 

Funding Costs (Frais de financement)

The price of obtaining capital, either borrowed or equity, with intent to carry on business operations.

 

Future-oriented Financial Information (Informations financières prospectives)

Information about prospective results of operations, financial position and 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.

 

Future Value (Valeur capitalisée)

The amount to which a payment or series of payments will grow by a given future date when compounded by a given interest rate.

 

Futures Contract (Contrat à terme normalisé)

An exchange-traded contract generally calling for delivery of a specified amount of a particular grade of commodity or financial instrument at a fixed date in the future. Contracts are highly standardized, and traders need only agree on the price and number of contracts traded.

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G

Generally Accepted Accounting Principles (GAAP) (Principes comptables généralement reconnus à PCGR)

GAAP is the term used to describe the underlying rules on which financial statements are normally prepared. This is codified in the Handbook of the Canadian Institute of Chartered Accountants.

 

Going Concern Value (Valeur d'exploitation)

The amount received when a firm is sold as an operating business.

 

Going Public (Émettre des actions dans le public/Faire un appel public à l'épargne)

The sale of shares by a closely held corporation (or its principal shareholders) to the public at large.

 

Good Will (Fonds Commercial/Survaleur)

In general, good will results from the location of the company, from brand recognition of the product or service sold by the company or from the excellent relationship the company has with its suppliers, employees and investors translated into a competitive advantage over its competitors.

 

Grace Period (Délai de grâce)

Length of time during which repayments of loan principal are excused. It usually occurs at the start of the loan period.

 

Gross Margin (Marge [bénéficiaire] brute)

Total sales revenue of a period's operations minus the cost of goods sold before allowance for operating expenses, other income and expenses, and taxes.

 

Gross Margin on Sales (Pourcentage de marge [bénéficiaire] brute)

The interrelationship between a firm's sales structure and its purchase and production costs.

Calculation   Gross margin Net sales

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H

Horizontal Analysis (Analyse horizontale)

The process of comparing consecutive financial statements by examining the increases or decreases between the periods in terms of absolute dollars and percentages.

 

Hurdle Rate (Taux étalon)

A predetermined benchmark rate of return. If the rate of return expected from the project or investment falls below the benchmark, the projected investment will no longer be accepted. The hurdle rate should be the marginal cost of capital adjusted for the project's risk.

 

Hypothecation (Nantissement)

The pledge of property and assets to secure a loan. Hypothecation does not transfer title, but it does provide the right to sell the hypothecated property in the event of default.

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I

Income After Taxes to Sales (Bénéfice après impôts)

The bottom-line financial performance after taking into account income tax obligations. Evaluates the ability of a business to squeeze income from each sales dollar.

Calculation   Income after taxes Net sales

 

Income Statement (État des résultats)

A financial statement that displays a breakdown of total sales and total expenses.

 

Informal Investors (Anges investisseurs)

See Angels.

 

Insolvency (Insolvabilité)

The condition of having debts greater than the realizable value of one's assets.

 

Intangible Value (Valeur incorporelle)

The economic benefit derived from an asset that cannot be perceived by the senses.

 

Interest (Intérêts)

A charge for the use of money supplied by a lender.

 

Intermediary (Intermédiaire)

An independent third party that may act as a mediator during negotiations.

 

Internal Financing (Financement interne)

Funds made available for capital budgeting and working capital expansion through the normal operations of the firm. Internal financing is approximately equal to retained earnings plus depreciation.

 

Internal Rate of Return (IRR) (Taux de rendement interne — TRI)

The discount rate that reduces to zero the net present value of a stream of cash outflow and inflow.

 

Intrinsic Value (Valeur intrinsèque)

The value of an asset that, in the mind of the analyst, is justified by the facts, often as distinguished from the asset's current market price or its book value.

 

Inventory (Stocks)

Merchandise being held for resale or other uses in a business.

 

Inventory Turnover (Rotation des stocks)

Ratio used to evaluate the effectiveness of inventory management.

Calculation   Cost of goods sold Inventory

 

Investment Dealer or Banker (Courtier en valeurs mobilières/Maison de courtage de valeurs/Preneur ferme)

One who underwrites and distributes new investment securities, or more broadly, one who helps business firms obtain financing.

 

Investment Proposal (Projet d'investissement)

Document prepared by management that summarizes for readers independent of the business, presumably lenders and investors, the nature of the business, its historical activities (if any), its growth potential, including its financial needs, and its financing requirements in order to help the company realize its financial objectives and implement its strategies.

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J

There are no definition under this letter.

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K

There are no definition under this letter.

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L

Labour-sponsored Venture Funds (Société de capitaux de risque de travailleurs)

Venture capital corporations established by labour unions. They function as other venture capital corporations but are subject to government regulation.

 

Letter of Credit (Lettre de crédit)

A guarantee of payment by a bank (issuing institution) to a third party for a specific amount of money, if certain conditions are met.

 

Letter of Intent (Lettre d'intention)

A document signifying genuine interest in reaching a final agreement, conditional on the results of more detailed due diligence and negotiations.

 

Leverage (Effet de levier)

The relationship between interest-bearing debt and equity in a company (financial leverage) or the effect of fixed expense on after-tax earnings (operating leverage).

 

Leverage Ratio (Ratio de levier financier)

A financial ratio that measures a firm's debt burden. The debt, times interest earned and fixed charges coverage ratios are leverage ratios.

 

Liability (Dette)

An obligation to pay an amount or perform a service.

 

LIBID (LIBID)

London Interbank Bid Rate. The rate that a bank is willing to pay for funds in the international interbank market. It is set at 125 basis points below LIBOR.

 

LIBOR (TIOL)

London Interbank Offered Rate for Eurodollar funds, usually three or six months, although it can range from overnight to five years. Different banks may quote differing LIBORs simply because they use different source banks. Information on this rate is usually gathered in London at 11:00 am daily.

 

Lien (Privilège)

The right of a party to a contract to take possession of an asset unless payment under the contract is received in full. A lien must be registered under various provincial laws in order to be valid and enforceable.

 

Line of Credit (Marge de crédit)

An agreement negotiated between a borrower and a lender that establishes the maximum amount against which a borrower may draw. The agreement also sets out other conditions, such as how and when money borrowed against the line of credit is to be repaid.

 

Liquid Asset (Élément d'actif liquide)

Any asset that can be quickly converted to cash without significant loss of value.

 

Liquidation (Liquidation)

Dissolving a firm through the sale of its assets.

 

Liquidation Value (Valeur de liquidation)

Value that would be assigned to a business being sold in order to satisfy its creditors.

 

Liquidity (Liquidités)

The extent to which a company has assets that are readily available to meet obligations (e.g. acid test or current ratio).

 

Liquidity Crisis (Crise des liquidités)

Situation in which a firm is unable to meet due bills, a period of technical insolvency.

 

Liquidity Ratio (Ratio de liquidité)

Any ratio used to estimate a company's liquidity.

Calculation   Current assets Current liabilities

 

Long-term Liabilities (Passif à long terme)

Amounts owed by a business to creditors for more than one year. This includes bonds and mortgages.

 

Loss Carried Forward (Report de perte prospectif/Report de perte(s) sur des exercices ultérieurs)

Losses for tax purposes that may be used to reduce income for tax purposes in future years. This ability effectively reduces the taxes payable in future years and is therefore a benefit to a company.

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M

Management (Direction)

Individuals in an entity that have the authority and the responsibility to manage the entity. The positions of these individuals, and their titles, vary from one entity to another and, to some extent, from one country to another depending on the local laws and customs. Thus, when the context requires it, the term includes the board of directors or committees of the board that are designated to oversee certain matters (e.g. audit committee).

 

Management Leveraged Buyout (Rachat de l'entreprise par les cadres)

The situation when the management of a company purchases all the company's shares or assets. Usually, the company's assets become security for the loans necessary to make the purchase.

 

Market Capitalization (Capitalisation boursière)

Aggregate value of a corporation as determined by the market price of its total issued and outstanding stock.

 

Market Risk (Risque de marché)

The part of a security's risk that cannot be eliminated by diversification.

 

Maturity Date (Date d'échéance)

Date on which a debt is due for payment.

 

Mentor (Mentor)

A close personal contact, usually in your industry, who has a network of contacts in the investment community and can assist in achieving your objectives.

 

Mezzanine Debt (Crédit mezzanine)

Non-conventional debt that has a greater element of risk than secured debt, but less risk than equity.

 

Minority Shareholders (Actionnaires minoritaires)

Shareholders who by virtue of their percentage ownership of the company do not have voting control of the company.

 

Mortgage (Hypothèque)

Debt instrument by which the borrower (mortgagor) gives the lender (mortgagee) a lien on property as security for the repayment of a loan.

 

Multiple (Multiplicateur)

A factor that, when applied to a financial activity such as earnings or cash flow, results in a value of the item that generated the financial activity. It is equal to the inverse of a rate of return (i.e. a rate of return of 2% is equal to a multiple of five times).

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N

Negative Covenant (Sûreté négative)

A promise not to do certain things.

 

Net Income (Bénéfice net)

The level of profit in a business after the deduction of income taxes, depreciation, operating expenses and other expenses. It is also known as after-tax profit or net profit.

 

Net Present Value (NPV) (Valeur actualisée nette — VAN)

A method of ranking investment proposals. NPV is equal to the present value of future returns, discounted at the cost of capital, minus the present value of the cost of the investment.

 

Net Realizable Value (Valeur de réalisation nette)

Selling price of an asset minus the expenses of bringing the asset into a saleable state and expenses of the sale.

 

Net Working Capital (Fonds de roulement net)

Total of all current assets minus the total of all current liabilities of a business.

 

Net Worth (Valeur nette)

The difference between the total assets and total liabilities of a company. Note that the value of the preferred shares is deducted from the net worth because the preferred shares are usually redeemed before any value is paid to the common shareholders.

 

Networking (Réseautage)

Making use of contacts, associates and friends.

 

Non-assignability (Clause d'incessibilité)

Restriction in a contract limiting the ability of a shareholder to transfer the rights, benefits or obligations pursuant to that contract.

 

Non-compete (Clause de non-concurrence)

Generally refers to a clause in a contract that restricts a person from starting a similar business or working for a competitor. It is normally time and area specific.

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O

Offering Memorandum/Offering Document (Notice d'offre)

A document providing detailed descriptions of a company's past, present and prospective business operations. It is normally prepared for the use of potential purchasers of securities offered under the seed capital or private placement prospectus exemptions. These documents are provided to investors in order to assist them in making informed decisions with respect to the purchase, sale or exchange of securities, they are a prospectus, statement of material facts, takeover bid circular, issuer bid circular, information circular or similar document.

 

Operating Leverage (Levier d'exploitation)

The existence of fixed operating costs in a business's cost structure; the extent to which fixed costs are used, relative to variable costs, in a firm's operations.

 

Operating Loan (Prêt d'exploitation)

A loan intended for short-term financing to support cash flow or cover day-to-day operating expenses. Loans of this type are part of the line of credit.

 

Opportunity Cost (Valeur de renonciation)

The economic benefit given up by pursuing a certain action rather than an alternative action.

 

Option (Option)

Right to buy or sell a specified property at a specified amount at some time in the future.

 

Overdraft System (Facilité de caisse)

System whereby a depositor may write cheques in excess of the balance, with the bank automatically extending a loan to cover the shortage.

 

Owners' Equity (Capitaux propres)

The total funds invested in a business by the owners. This represents the total assets of a business minus total liabilities, and is also known as equity capital or net worth.

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P

Participating Preferred Share (Action privilégiée participante)

Preferred share that, in addition to paying a fixed dividend, provides for the right to participate with the common shares in the earnings of the company. Usually, participation arises under specific circumstances.

 

Participation Fee (Commission de participation)

Fee charged by a bank for taking part in providing a loan.

 

Partnership (Partenariat)

Non-incorporated business venture of two or more individuals or companies. Profits or losses flow, directly and equally, to the partners.

 

Piggyback Rights (Droit de cessibilité conditionnelle)

A clause in a contract that gives one party the same rights as another party if the other party takes certain actions. (For example, if one party attempts to sell shares, the other party will have the option to sell shares at the same price.)

 

Positional Bargaining (Négociation sur positions)

The situation where a person stipulates terms and conditions that have to be met for an agreement to be reached.

 

Pre-emptive Right (Droit préférentiel de souscription)

Right of shareholders and others to maintain their proportional control of, and equity in, a corporation when additional shares are issued.

 

Preferred Shares (Actions privilégiées)

Like common shares, they represent ownership in a company. However, these shares are usually non-voting and have a fixed dividend rate. In the event of liquidation, preferred shareholders rank ahead of common shareholders but behind creditors for claims against the assets of the company.

 

Present Value (Valeur actualisée)

The value today of a future payment, or stream of payments, discounted at an appropriate rate (usually the cost of capital).

 

Price/Earnings Ratio (Ratio cours/bénéfice)

Price of a stock divided by its earnings per share, typically over the last 12 months.

 

Prime Rate (Taux d'intérêt préférentiel)

The interest rate charged by banks to their most credit-worthy customers.

 

Principal Amount (Principal)

Generally refers to the face value of a debt.

 

Private Placement (Placement privé)

Sale of stock or debt to a limited group of investors that is not required to comply with the rules and regulations of disclosure that restrict the normal placement procedure.

 

Profit Margin on Sales (Pourcentage de marge bénéficiaire)

Shows the efficiency of the business.

Calculation   Operating income Net sales

 

Project Financing (Financement de projets)

Debt financing, usually non-recourse, provided by financial institutions for the development and construction of a new project.

 

Projection (Pronostics financiers)

Future-oriented financial information prepared using assumptions that reflect the entity's planned courses of action for the period.

 

Prospectus (Prospectus)

A securities disclosure document that provides full, true and plain disclosure of all facts that may materially affect the market price or value of a company's securities (whether issued or proposed to be issued). It is prepared in accordance with the requirements of the governing securities legislation.

 

Published Financial (États financiers publics)

Financial statements and financial information made public.

 

Purchase Agreement (Convention d'achat)

A legal document recording the final understanding of the parties with respect to the proposed transaction.

 

Put Option (Droit d'option)

Contract that grants the right to sell at a specified price at some time in the future.

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Q

Quick Ratio (Ratio de liquidité relative)

Supplements the current ratio in measuring liquidity a business has in meeting its current obligations. This ratio places more emphasis on those liquid assets that can be quickly converted into cash.

Calculation   Current assets - inventory Current liabilities

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R

Ratchet Clause (Clause d'indexation à la hausse)

A clause in a contract that adjusts the rights of the parties to the contract on the completion of mutually agreed upon performance criteria.

 

Rate of Return (Taux de rendement)

Return on invested capital (calculated as a percentage). Often an investor has, as one investment criterion, a minimum acceptable rate of return on an acquisition.

 

Real Property (Biens immobiliers)

Real estate, including land and buildings.

 

Recourse (Garantie)

The right to receive payment in the event a person defaults on a loan. Recourse could give the lender the ability to take possession of the borrower's assets.

 

Redundant Assets (Actifs excédentaires/Actif hors exploitation/ Éléments d'actif hors exploitation)

Assets that are not required for the ongoing operation of the business and could be withdrawn without affecting future earning potential.

 

Replacement Value (Coût de remplacement)

Cost of acquiring a new asset to replace an existing asset with the same functional utility.

 

Representations (Déclarations)

Statements made by either party with respect to certain elements of the proposed transaction that, if proven untrue, may give the other party the right to claim for damages from the party making the warranty.

 

Research and Development Incentives (Mesures incitatives en matière de recherche et de développement)

Government programs to promote research and development.

 

Residual Value (Valeur résiduelle)

Typically estimated based on the present value of the after-tax cash flow expected to be earned after the forecast period.

 

Restricted Liquidity (Liquidité restreinte)

Inability of an individual or company to convert an asset into cash, or cash equivalent, without significant cost.

 

Retained Earnings (Bénéfices non répartis)

The amount of earnings retained and reinvested in a business and not distributed to the shareholders as dividends.

 

Return on Equity (Rendement des capitaux propres)

A ratio used to show how profitable a business is to the shareholders.

Calculation   Income after taxes Net worth

 

Return on Invested Capital (Rendement du capital investi)

Measures the return on funds invested in the business by both long-term lenders and owners.

Calculation   Income after taxes Long-term debt + Equity

 

Return on Total Assets (Rendement de l'actif total)

Measures the return on funds invested in the business by both owners and lenders.

Calculation   Income after taxes Total assets

 

Revenue (Produit)

Money earned from the sale of products or services.

 

Revolving Credit (Crédit renouvelable)

Line of credit against which funds may be borrowed at any time, with regular scheduled repayments of a predetermined minimum amount.

 

Risk (Risque)

The probability that actual future returns will be less than expected returns.

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S

Secured Creditor (Créancier garanti)

One whose obligation is backed by the pledge of some assets. In liquidation, the secured creditor receives the cash from the sale of the pledged asset to the extent of the loan.

 

Securities Legislation (Législation en matière de valeurs mobilières)

Rules and regulations governing securities transactions. Security, in general, refers to, but is not limited to, shares, bonds and rights of profit participation.

 

Security (garantie)

Assets pledged to support a loan. In the case of term loans, the property (e.g. land, buildings, equipment) being purchased with the loan usually forms the security for the loan.

 

Seed Financing/Capital (Capitaux de lancement)

Generally refers to the first contribution of capital toward the financing requirements of a start-up business.

 

Sensitivity Analysis (Analyse de sensibilité)

Technique used to determine the effects on net income or cash flow due to changes in assumptions (i.e. "what if" analysis).

 

Settlement Value (Valeur de règlement)

Dollar amount of the final payment in a lease.

 

Share Capital (Capital-actions)

Total shares authorized to be issued, or actually issued, by a company.

 

Shareholders (Actionnaires)

Owners of one or more shares in a company.

 

Shareholders Equity (Capitaux propres)

See Equity.

 

Shotgun (Clause de coercition)

A clause in a shareholders agreement whereby if one party offers to buy out the other at a certain price, the other party has, within a limited period, the right either to accept the price or buy the offeror out at the same price.

 

Sinking Funds (Fonds d'amortissement)

A required annual payment designed to amortize a bond or an issue of preferred shares. The sinking fund may be held in the form of cash or marketable securities, but generally the money put into the fund is used to retire some of the securities in question each year.

 

Spread (Écart)

The difference between items, typically between two rates of interest or currencies.

 

Standby Fee (Droit d'usage)

A fee charged on the unused portion of the credit under a revolving credit or line of credit arrangement.

 

Statement of Changes in Financial Position (État de l'évolution de la situation financière)

A financial document that presents the increases or decreases in funds of a business for all its accounts broken down under three major headings: operating activities, financing activities and investing activities.

 

Statement of Retained Earnings (État des bénéfices non répartis)

A financial document that shows how much of the net income of a business has been retained over a given period of time, and how much has been paid out to the owners.

 

Stock Dividend (Dividende en actions)

A dividend paid in shares as opposed to cash.

 

Subordinated Debt (Créance de rang inférieur)

A non-conventional financing instrument where the lender accepts a reduced rate of interest in exchange for equity participation.

 

Sustainable Growth Rate (Taux de croissance prévisible)

The rate of increase in sales a company can attain without changing its profit margin, assets to sales ratios, debt to equity ratio or dividend payout ratio. It is the rate of growth a company can finance without excessive borrowing or a new stock issue.

 

Syndication (Syndication)

A method of selling an investment through the use of a group of companies or investors.

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T

Tag-along Provision (Clause d'égalité de traitement)

Provision giving the investor a right to dispose of part or all of the investment in the company at the time the company is raising additional financing. Usually, the acquisition of the investor's share is made with the new funds raised.

 

Term (Terme)

Usually the duration of a loan.

 

Term Loan (Prêt à terme)

A loan, generally obtained from a bank or insurance company, with a maturity of more than one year. Term loans are generally amortized.

 

Term Sheet (Offre de souscription)

A list of the major points of the proposed financing being offered by an investor.

 

Times Interest Earned Ratio (Ratio de couverture des intérêts)

Measures the ability of the firm to meet its annual interest charges.

Calculation   EBIT + interest charges Interest charges

 

Total Assets Turnover (Rotation de l'actif total)

Measures the intensity by which all assets, that is, current and capital assets, are used to generate sales.

Calculation   Sales revenue Total assets

 

Trade Credit (Crédit commercial)

Debt arising through credit sales and recorded as an account receivable by the seller and as an account payable by the buyer.

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U

Undepreciated Capital Costs (Fraction non amortie du coût en capital)

The tax definition of the value of an asset that is eligible for tax depreciation.

 

Undercapitalization (Sous-capitalisation)

Situation in which a business does not have sufficient equity in its capital structure.

 

Unencumbered (Non grevé)

Property free and clear of all liens (creditors' secured claims).

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V

Valuation (Évaluation)

The act or process of determining the value or price of something (see Fair Market Value).

 

Venture Capital (Capital de risque)

The capital invested by stockholders or owners in a business that entails a greater degree of risk than is normally assumed in a business undertaking. It also refers to the capital supplied by organizations whose express purpose is to "channel equity capital into risk enterprise". Synonym: Risk capital

 

Venture Capitalist (Société de capital de risque)

Entity investing in companies that have an element of risk but offer potentially above-average returns.

 

Vertical Analysis (Analyse verticale)

The process of reducing all items in the balance sheet and income statement to a percentage of total assets or sales revenue, respectively.

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W

What If Scenarios (Analyse par simulation)

Analysis of the economic effect of possible future situations, such as economic downturns, loss of key customers, changes in interest rates or price levels, or new competitors or technologies.

 

Working Capital (Fonds de roulement)

The excess of current assets over current liabilities. This represents the amount of net non-fixed assets required in day-to-day operations.

 

Working Capital Turnover (Rotation du fonds de roulement)

Measures how actively the working capital in a business is being put to work to generate sales.

Calculation   Sales revenue Net working capital

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X

There are no definition under this letter.

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Y

There are no definition under this letter.

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Z

Z-score (Cote de santé financière)

Linear analysis where five measures are objectively weighted to give an overall score that becomes the basis for classifying the financial health of a business.