Glossary 633Giga-:The prefix given to another number which means a billion. Thus, a 10 giga-
byte hard drive has the capacity to store 10 billion bytes of data.
Going private:The conversion of a public firm into a private company, usually by
either a leveraged buyout (LBO) or a management buyout (MBO).
Goodwill:As it relates to valuation, that intangible asset arising as a result of name,
reputation, customer loyalty, location, products, and similar factors not separately
identified. The excess of purchase price over fair market value of net assets acquired
under the purchase method of accounting; goodwill appears on the acquirer ’s bal-
ance sheet as an intangible asset and is amortized over a period of not more than 40
years.
Hedge:To reduce risk by taking a position that offsets some preexisting risk
exposure.
Hedging: Steps taken to protect the dollar value of a foreign-currency asset or to
hold constant the dollar burden of a foreign-currency liability, in the presence of
f luctuating exchange rates, by maintaining offsetting foreign-currency positions.
Horizontal merger:A merger of firms producing similar goods or services.
Hypertext:Hypertext is the data-connecting protocol of the Internet that allows a
document on the World Wide Web to connect with (or link to) other documents on
the Web.
Income (income-based) approach:A general way of determining a value indica-
tion of a business, business ownership interest, security, or intangible asset using one
or more methods that convert anticipated benefits into a present single amount.
Income from continuing operations:A measure of financial performance for the
period that excludes the effects of discontinued operations, extraordinary items, and
the cumulative effect of accounting changes. All other revenues, gains, expenses, and
losses are included in the computation of income from continuing operations.
Intangible assets: Nonphysical assets (such as franchises, trademarks, patents,
copyrights, goodwill, equities, mineral rights, securities, and contracts as distin-
guished from physical assets) that grant rights, privileges, and have economic bene-
fits for the owner.
International Accounting Standards Committee (IASC):An organization rep-
resenting accounting bodies from over 70 countries whose mission is to harmonize
accounting standards internationally.
In-the-money: An option is in-the-money when exercise would be profitable. For a
call option this is when the underlying stock price is above the strike price. For a put
option, this is when the stock price is below the strike price.
Intrinsic Value:The amount of money earned when an option is exercised, or zero,
whichever is greater. For a call option, intrinsic value is the maximum of zero or the
stock price minus the strike price. For a put option it is the maximum of zero or the
strike price minus the stock price.
Invested capital: The sum of equity and debt in a business enterprise. Debt is typ-
ically (a) long-term liabilities or (b) the sum of short-term interest-bearing debt and
long-term liabilities.
Invested capital net cash f lows:Those cash f lows available to pay out to equity
holders (in the form of dividends) and debt investors (in the form of principal and