636 Glossary
Multimedia:The simultaneous use of multiple forms of media on a computer. If
you were to watch a football game on your computer that is coming to you over the
Internet, you would be simultaneously using both video and sound media.
Multistep income statement:An income statement format that includes one or
more profit subtotals such as gross profit and operating profit (also see single-step in-
come statement).
NASD: See National Association of Securities Dealers Inc.
NASDAQ:National Association of Securities Dealers Automated Quotation Sys-
tem. An organized, electronically linked over-the-counter market for stocks. The
NASDAQ stock index comprises stocks that trade on NASDAQ. These stocks are gen-
erally smaller, less capitalized stocks than those that compose the S&P 500.
National Association of Securities Dealers Inc:A self-regulatory organization
which regulates the business of broker/dealers, including under writers who sell secu-
rities to the public. In an IPO or any other public offering, the underwriters must ob-
tain approval of the NASD of their compensation as “fair and reasonable.”
Net cash f low: A form of cash f low. When the term is used, it should be supple-
mented by a qualifier (e.g., “Equity” or “Invested Capital”) and a definition of ex-
actly what it means in the given valuation context.
Net operating loss carry-forward:Under U.S. tax law, operating losses can be
carried back and set off against profits in the previous three years. A refund of taxes
can be obtained. If the loss is greater that the profits in the three previous years, then
the loss can be carried for ward for 20 years and set off against the profits of
future years. The carrying for ward of a loss may produce a future tax savings. In con-
trast, the carrying back of a loss produces a tax refund.
NetWare:The network operating system standard through the early and mid-1990s.
Developed by Novell.
Network:The connecting together of two or more computers, typically with the
purpose of sharing resources, such as printers, data, or an Internet connection.
Nonrecurring items:Items of revenue, gain, expense, and loss that appear in
earnings on only an infrequent or irregular basis, f luctuate significantly in terms of
amount and or sign, and are often not related to the core operational activities of
the firm.
Notional principal:The principal amount specified in a swap agreement, which
though not exchanged, serves as the benchmark to determine all cash f lows. The cash
f lows generally equal the difference between two interest rates, multiplied by the
notional pr incipal.
Operating income:An intermediate, pretax measure of financial performance.
Only operations-related items of revenue, gain, expense, and loss are included in the
computation of operating income.
Operational control system:Systems that run the company’s day-to-day
operations.
Opportunity cost:A benefit forgone as a result of pursuing an alternative action.
Option contract:The right, but not the obligation, to purchase foreign currency at
a fixed price (a call option), or the right, but not the obligation, to sell foreign cur-
rency at a fixed price (a put option).