Page 693 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

678 The Complete Guide to Executive Compensation

downside risk The possible reduction in value of an acquired asset (e.g., company stock) or the
difference between competitive pay and a person’s salary.
downsize The reduction in size of a business, usually accompanied by a reduction in the number of
employees.
dry rabbi trust A rabbi trust with no funds.
DTC See Depository Trust Company.
due diligence Assurance that all material information of an issue is publicly disclosed.
early-career crisis Belief around age 30 that no future promotional opportunities exist.
early exercise Permission for exercising option before vesting is completed (typically pre-IPO), with
receipt of share of restricted stock subject to vesting schedule of exercise option.
early retirement When an employee decides to retire from the company before reaching “normal
retirement.”
early withdrawals Receipt of deferred payments before scheduled date of payment.
earned income Payments received in form of salary, bonuses, as well as pensions, but not to include
dividends and interest.
earned surplus Stockholder equity minus par or stated value of the stock.
earnings What remains after income is reduced by expenses. See earnings before interest and taxes
(EBIT); earnings before interest, taxes, depreciation, and amortization (EBITDA); and net earnings.
earnings before interest and taxes (EBIT) An item found on the income statement. See operating
income.
earnings before interest, taxes, depreciation, and amortization (EDITDA) Gross margin less
operating expenses; stated another way, it is EBIT (operating income) with depreciation and amortiza-
tion added back in.
earnings before taxes See pretax earnings.
earnings charge An expense that lowers an organization’s earnings. Compensation expenses would
be in the Sales, General and Administrative (SG&A) category on the income statement.
earnings per share (EPS) Net income divided by the average total number of shares outstanding.
earnings price ratio Earnings per share divided by stock price.
earnings restatement A reissue of published earnings necessitated by a change in revenue and/or
earnings.
earnings statement A quarterly or annual report of revenue and all related costs resulting in income.
See also earnings before interest and taxes (EBIT); earnings before interest, taxes, depreciation, and
amortization (EBITDA); and net earnings. For individuals, it might simply be a statement of earnings
without any deductions.
earnings yield See earnings per share.
earn-out When purchase price is tied to future earnings.
EBIT Earnings before interest and taxes.
EBITDA Earnings before interest, taxes, depreciation, and amortization.
e-business The electronic purchasing of goods and services through the Internet.
economic benefit When something of value is bestowed on deferred compensation it is subject to
current taxation.
economic profit What remains after the cost of capital is subtracted from net operating profit after
taxes.