Page 673 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

658 The Complete Guide to Executive Compensation

accounts receivable Funds owed the company for products and services provided that appears as a
current asset on the balance sheet.
accounts receivable turnover Sales divided by receivables.
accredited investor Those able to participate in private placements of unregistered securities
because of their own wealth.
accrual accounting A sale (product or service) is reflected as “revenue” when product is shipped or
service is received regardless of when payment is received. Similarly, obligations by the company are
recognized when they are undertaken regardless of when paid. See cash accounting.
accruals Income and expenses are charged on an estimated basis against the period when incurred on
the income statement regardless of when earned or paid. The final accrual is “trued up” when paid so
that the accrual matches the actual income or expense.
accrued benefit Accumulated funds as of a point in time.
accrued expense Incurred obligation reflected on the income statement and balance sheet.
accrued gain The increase in asset value over a stated period of time.
accrued liability The present value of future benefits.
accumulated benefit obligation Benefits accrued to date, typically separated between vested and
nonvested participants.
acid test ratio See quick ratio.
acquisition The purchase of an asset (e.g., a company).
actual gain See realized gain.
actual versus budgeted performance This scorecard measures the year-end results versus those
established as the budget or target for the year. Typical measurements would be in terms of sales, net
income, or any other quantifiable measurement.
actuarial assumptions Assumptions made by actuaries on investment return, mortality, and
turnover, as well as pay increases and other factors to determine the cost of a benefit.
actuarial equivalent An actuary’s statement that a stated benefit is the present-value equivalent of a
future benefit amount.
actuarial valuation See actuarial equivalent.
actuary An individual who uses statistics to estimate life expectancies and associated risks for purposes
of pension plans and life insurance contracts.
additive grant The increase in number of options (typically in the form of cash SARs) with a like
number of exercised stock options.
add-on plan Benefits in addition to those provided by the base plan. Typically, applies to a supple-
mental pension in addition to that provided by the qualified pension plan formula, typically to address
short-service situations. See restoration plan.
adjustable rate mortgage Interest rate is adjusted with changes in market interest rates.
administrative services only (ASO) When the carrier is only responsible for determining the appro-
priateness of the claim.
adoption expense reimbursement Payment for eligible adoption expenses up to a stated maximum.
ADR See American Depository Receipt.
adverse selection Person with health-care needs who selects plan coverage detrimental to the plan
provider.
advisory board A group of advisors available to the CEO for comment on proposals. If not a legal
entity, financial liability is probably limited.