640 Glossary
Standard of value: The identification of the type of value being utilized in a spe-
cific engagement (e.g., fair market value, fair value, investment value).
Standards:Predetermined, expected levels of efficiency or measures of desired
performance (e.g., a budget amount, a standard cost, or a nonquantitative statement
of desired performance). A standard cost is the predetermined cost of an input per
unit of output. Standards may be unchanging (basic), perfect (ideal), or currently
attainable.
Statements of Financial Accounting Standards (SFAS):Pronouncements of
the Financial Accounting Standards Board that are the central elements of generally
accepted accounting principles.
Stock acquisition: The purchase of a controlling interest in a firm by buying its
outstanding equity.
Strategic information system: An application used by senior management to cre-
ate a company’s strategy.
Streaming media:Typically, refers to Internet sites that send out a continuous
f low of sound or video signal to user. An example might be http://www.radiotango.com,
which plays tangos 24 hours per day.
Strike price: The prespecified purchase or sale price for the underlying asset in an
option contract.
Sustainable earnings base:A revised historical earnings series from which the
effects of all nonrecurring items have been removed (see core earnings).
Sustainable earnings worksheet: A worksheet used to organize and summarize
nonrecurring items so that their effects can be removed from as-reported net income
in order to arrive at a sustainable earnings base.
Swap:An agreement between two parties to exchange cash f lows over a period of
time. Cash f lows are determined by an agreed upon formula specified in the swap
agreement—a formula that is contingent on the performance of other underlying
instruments.
Symmetric risk:An exposure that results in profits when an underlying price or
economic variable moves in one direction, and proportional losses if the variable
moves in the opposite direction.
Synergy:The incremental value generated by the combination of two or more firms.
Synthetic stock portfolio:A portfolio that consists of Treasury bills and a long
position in equity futures contracts. A properly constructed synthetic stock portfolio
behaves the same as a portfolio consisting of actual stocks.
Systematic risk:The risk that is common to all risky securities and cannot be elim-
inated through diversification. When using the capital asset pricing model, system-
atic risk is measured by beta.
Takeover:The transfer of corporate control from one group of shareholders to
another.
Target:A firm that is the subject of takeover or acquisition activities.
Tau:The amount of time remaining prior to an option’s expiration.
Taxable transaction:An acquisition in which the target firm shareholders are im-
mediately subject to capital gains on their sale of shares.