Glossaryof its effective life. It is a means of raising finance.
(p. 244)
Satisficing A business objective that seeks to provide
all stakeholders with satisfactory returns, rather than
promoting the interests of any single one of them.
(p. 23)
Scenario building A decision-analysis tool where
various feasible combinations of input data are
combined in an attempt to assess possible outcomes.
In effect, an extension of sensitivity analysis. (p. 158)
Scrip dividend The issue of bonus shares to certain
shareholders as an alternative to a cash dividend.
The expression usually applies only where there is
a choice for the shareholders between the shares and
cash. (p. 448)
Seasoned equity offering A public issue of shares by
a business that has already made at least one previ-
ous offering of shares to the public. (p. 225)
Secondary capital market A market in which
‘second-hand’ securities issued by businesses (for
example, shares) and other organisations are traded.
(p. 218)
Secured creditors People or organisations owed
money under a contract that links the obligation with
a particular asset of the borrower. (p. 15)
Securities Shares and loan notes of businesses and
other organisations. (p. 184)
Securitisation Turning an expected future stream of
positive cash flows into a security and selling it as
a means of raising finance. (p. 241)
Security market line The straight line on a graph of
return against risk (as measured by beta). (p. 199)
Sell-offs Divestment devices where one business
sells part of its undertaking to another business.
(p. 402)
Semi-strong-form capital market efficiency A situ-
ation where security prices, at all times, rationally
reflect all publicly known information about the
securities concerned. (p. 259)
Sensitivity analysis An examination of the key vari-
ables affecting a project, to see how changes in each
input might influence the outcome. (p. 154)
Separation theorem The notion that business financ-
ing and investment decisions are strictly separate.
(p. 31)
Servicing (of finance) The cost of providing returns
to suppliers of finance (for example, interest and
dividends). (p. 218)
Share repurchase Where a business buys some of
its own shares from existing shareholders, usually to
cancel them. (p. 334)
Shareholder value analysis A method of measuring
and managing business value based on the long-termcash flows generated. It identifies various factors that
are seen as the key ‘value drivers’. (p. 137)
Short-termism A tendency for managers to make
decisions that will provide benefits in the short term,
while possibly jeopardising the long-term future of
the business. (p. 27)
Signalling A business indicating, through its
behaviour (such as having a particular level of
capital gearing or paying a particular level of divi-
dend), something about itself to the outside world.
(p. 308)
Soft capital rationing This arises where a business’s
capital rationing is caused by a self-imposed unwill-
ingness to provide funds to meet all desirable poten-
tial investments. (p. 126)
Specific risk That aspect of total risk that arises from
factors that are related to the particular investment
concerned as opposed to general/macroeconomic
factors. It can, in theory, be eliminated by diversi-
fication of investments. (p. 165)
Spin-off Where a business takes part of its operations
and turns it into a separate business. Shareholders of
the old business are issued with shares in the new
business in proportion to the size of their investment
in the old business. (p. 402)
Spot (foreign exchange) rate The rate of exchange
between two currencies where the foreign exchange
transaction is to be completed immediately. (p. 412)
Standard deviation A statistical measure of the dis-
persion of individual outcomes about their mean or
expected value; it is the square root of the variance.
(p. 186)
Strategic planning The act of establishing the best
area of activity and style of approach for the business.
(p. 135)
Strong-form capital market efficiency A situation
where security prices, at all times, rationally reflect
all publicly and privately known information about
the securities concerned. (p. 259)
Subjective probabilities Probabilities based on opin-
ion rather than past data. (p. 160)
SWOT analysis A framework in which many busi-
nesses set a position analysis. Here the business lists
its strengths, weaknesses, opportunities and threats.
(p. 136)
Synergy The name given to the phenomenon that
when two or more businesses combine, the com-
bined business is more effective and valuable than
the sum of the constituent businesses. (p. 391)
Systematic risk That aspect of total risk that arises
from general/macroeconomic factors as opposed to
factors that are related to the particular investment
concerned. (p. 166)BUSF_Z04.qxd 11/19/08 10:34 Page 504