Glossary 637Other comprehensive income:A set of unrealized income elements that are
added to conventional net income to arrive at comprehensive income. The key other
comprehensive income items are foreign currency translation adjustments, unreal-
ized gains and losses on certain securities, and adjustments related to underfunded
pension plans.
Out-of-the-money:An option is out of the money when exercise would generate a
loss. For a call option this is when the underlying stock price is below the strike price.
For a put option this is when the stock price is above the strike price.
Overhead variance: A measure of the change in the cost of overhead items, ana-
lyzed according to price and salary changes and changes in labor productivity.
Over-the-counter:Description of contracts that are negotiated between two par-
ties, often with the help of an intermediary. Over-the-counter derivatives are cus-
tom-tailored to meet the needs of the parties involved. Over-the-counter derivatives
are not traded on exchanges.
Participative budgeting:The process of preparing the budget using input from
managers who are held responsible for budget performance.
PDA:Personal Digital Assistants are small, pocket-sized computers, usually with
LCD screens, which allow users to keep their calendar, list of contacts, play games,
and, in some cases, send and receive e-mail.
Physical delivery:A future contract that stipulates actual delivery of the underly-
ing asset upon expiration of the contract.
“Plain English”:The standards for clarity in drafting various portions of a
Prospectus, as set forth in SEC Rule 421.
Plain vanilla:The most common type of swap. It is a fixed for f loating interest rate
swap, where LIBOR is the f loating rate. The fixed rate is the current rate of the
Treasury bond with the same maturity as the swap.
Pooling method:After the acquisition, the bidder and target firm balance sheets
are combined simply by adding book values
Premise of value:An assumption regarding the most likely set of transactional
circumstances that may be applicable to the subject valuation (e.g., going concern,
liquidation).
Premium:The amount paid to the target over current market price to execute an
acquisition.
Premoney valuation:The valuation ascribed to a business enterprise prior to the
issuance of additional equity securities, for the purpose of pricing those securities to
their public or private purchasers.
Private placement:An offering of securities to a sufficiently small or to a suffi-
ciently sophisticated group of purchasers, such that registration of the transaction is
not required with the Securities and Exchange Commission.
Private Securities Litigation Reform Act of 1995:A U.S. statute that estab-
lishes a safe harbor for for ward-looking statements by public companies, insulating
the company and management from liability for statements that ultimately prove to
be inaccurate if they are believed to be true when made and if the contingencies on
which their accuracy depend are properly articulated.
Productivity:Output divided by input. Productivity rates measure the input re-
quired for a unit of output. Compare the definition of efficiency.