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Glossary of Credit, Financial and Legal Terms
maintained by Creditworthy Co.

Access F - O, Access P - Z

Acceleration Clause: A clause in contracts of debt which makes the entire amount due upon the debtor's default.
Acceptance (with respect to commercial paper): The drawee's engagement to honor the draft as presented.
Accounts Payable Turnover: (Cost of goods sold) / A/P = # of turns in the period.
Accommodation Indorser: One who places his indorsement without compensation on a note, in effect acting as a guarantee of payment.
Accord and Satisfaction: A settlement agreement by which a claim is satisfied and discharged.
Acknowledgment (with respect to an instrument): The statement of a competent officer, usually a notary public, that the person who has executed an instrument has appeared before him and sworn to the facts of its execution.
Action: A suit at law or in equity.
Actionable: Affording grounds for a legal action.
Administrator: One appointed to manage and distribute an estate where the decedent has not left a will, or where for some reason an executor has not been appointed or qualified un the will.
Affidavit: A statement sworn to or affirmed before an official who is authorized to administer oaths - usually a notary public.
After-Acquired Property: Property which a debtor acquires after the execution of a mortgage or other form of indebtedness and which secures such indebtedness.
Agent: A person authorized by another, i.e., the principal, to act for him.
Amicus Curiae: "Friend of the court." A term frequently used to designate one not a party to the proceeding but who has filed a brief regarding the issue or principle of law to be decided.
Arbitration: The determination of a dispute by a disinterested third person, or persons, selected by the disputants.
Assignment: The transfer of property rights by one person, known as the assignor, to another, known as the assignee.
Assignment For Benefit of Creditors: A transfer of all of a debtor's property to another person in trust to collect any money owed to the debtor, to sell property, to distribute proceeds, and to return any surplus to debtor.
Assumpsit: A form of action for the recovery of damages for the nonperformance of a contract.
Attachment: Taking property into custody of the court, either to satisfy a judgment ultimately to be rendered, or as a method of acquiring jurisdiction.
Attestation: The act of witnessing the execution of an instrument.
Attorney-In-Fact: A person who is authorized by power of attorney to act for another.
Audited Financial Statement: A report on the financial position or operations of a company that has been reviewed by an independent auditor.
Automatic Stay: A stay of actions by creditors for 120 days granted to filers of bankruptcy petitions, during which time creditors may take no action against the debtor or its property. Stays are automatically granted to both involuntary and voluntary petitioners.
Bailment: The delivery of property by one, known as the bailor, to another, known as the bailee, to be held in custody for certain purposes.
Balance Sheet: The balance sheet shows the financial condition of a company at a specific point in time. The balance sheet is broken down into the major sections: Assets, liabilities and net worth.
Bankruptcy Trustee: The person appointed by a bankruptcy court to oversee either the running of a buisiness in a reorganization proceeding or the sale of assets and distribution of proceeds in a business liquidation.
Bearer: The person in possession of an instrument, document of title or security payable to bearer or indorsed in blank.
Bequest: A gift of personal property by will.
Bill of Exchange: A written order, which may be negotiable or nonnegotiable, directing one party to pay a certain sum of money to the drawer or to a third person.
Bill of Lading: Receipt and contract issued by a common carrier for the shipment of goods.
Bill of Sale: A written instrument by which one transfers his rights or interest in chattels and goods to another.
Blank Indorsement: Indorsement which consists only of the signature of the indorser and does not state in whose favor it is made.
Blue Sky Laws: State legislation which regulates the issuance and sale of corporate securities.
Bona Fide: In good faith.
Bona Fide Purchaser: One who buys property without knowledge or notice of any defects in the title of the seller.
Bulk Transfer: The transfer of inventory or trade fixtures or a major portion thereof not in the ordinary course of business.
C.A.D.: Cash Against Documents.
CBA: Certified Busness Associate. The first level of accreditation awarded to credit professionals by the NACM.
CBF: Certified Business Fellow. The second level of accreditation awarded to credit professionals by the NACM.
CCE: Certified Credit Executive. The highest accreditation awarded credit professionals by the NACM.
C.I.A.: Cash In Advance.
C.O.D.: Cash On Delivery. (Some people use it as Check On Delivery).
Cashier's Check: A check whose payment is guaranteed because it is drawn on the bank's account rather than the customer's account. The customer pays in advance or has the funds withdrawn in advance from its account. Cashier's checks are also called bank checks.
Certified Check: A check drawn on the issuer's account but for funds that have been segregated by the bank, guaranteeing payment.
Chattel: Any type of personal property as distinguished from real property.
Chattel Mortgage: Security interest taken by the mortgagee in personal property of the mortgagor. A pre-Uniform Commercial Code device.
Chose: A claim or right to recover a debt or damages.
Collateral Security: A separate obligation which is given to secure the performance of the primary obligation in a contract.
Common Carrier: One whose business it is to transport passengers or freight for the public.
Conditional Sale: An instalment sale in which the goods are delivered to the buyer, but title remains with the seller until payment is made for the goods.
Consideration: The required element in all contracts by which a legal right or promise is exchanged for the act or promise of another party. The inducement to a contract.
Consignment Sale: A sale of merchadise by a seller who receives goods for sale, pays only for what is sold, and has the option to return unsold goods.
Conveyance: The transfer of an interest in realty: a deed. Sometimes includes leases and mortgages.
Copyright: The exclusive right granted by common law or the federal government to publish and reproduce copies of writings and drawings.
Counterclaim: A claim asserted by the defendant in opposition to or deduction from the claim of the plaintiff.
Covenant: A promise made by one person to another.
Creditor's Committee: The committee appointed by a bankruptcy court to represent the classes of creditors in a Chapter 11 reorganization. The committee primarily is responsible for reviewing the reorganization plan and recommending adoption or rejection.
Current Ratio: Current Assets/Current Debt.
DSO: Days Sales Outstanding. Sales / A/R = (# of turns in the period). DSO = (# of days in the sales period) / (# of turns in the period)
Debt to Net Worth Ratio: Total Debt / Net Worth.
Debtor in Possession: A debtor that has filed for protection from creditors under Chapter 11 of the Bankruptcy Code and that is still running the company during the reorganization.
Delivery: With respect to instruments, documents of title, chattel paper or certifiecated securities, means the voluntary transfer of possession.
Discharge: The bankruptcy discharge extinguishes the debtor's liability on a debt and acts as an injunction against any further efforts to collect a dischared debt from the debtor or the debtor's assets.
Dischargeable Debt: Debt that can be removed or forgiven in a Chapter 7 liquidation.
Dishonor: The nonpayment of a negotiable instrument on it due date.
Draft: A bill of exchange.
Drawee: The person on whom a bill of exchange or a draft is drawn.
Drawer: The person who draws a bill or draft.
Equity of Redemption: The right of a mortgagor to redeem his property after the mortgage is past due.
Estoppel: A rule of law which precludes a person from denying certain facts because of previous inconsistent conduct or statements.
Fee Simple: Absolute ownership of real property.
FIFO Inventory: The valuation of inventory on a first-in, first-out basis, which assumes that the earlier, cheaper inventory is sold first, and the later, more expensive inventory is left in stock.
Fixture: A chattel which has been permanently affixed to real estate and may or may not be severable therefrom without injury to the property.
Foreclosure: The legal act by which the owner of a mortgage cuts off the rights or interest of the mortgagor in the mortgaged property.
Garnishment: The legal process by which property due to a debtor and in the hands of a third person is attached.
Gross Profit: Sales minus Cost of Goods Sold (COGS).
Guarantee: To assume the liability for such debts of another in the event of his default.
Guaranty: A contract by which one undertakes to be liable for the debt of another person in the event of his default.
Holder in Due Course: A bona fide holder who takes an instrument for value without notice of it being overdue or of possible defenses.
Inchoate: Not yet completed or finished.
Indemnity: Compensation paid for damage or loss sustained or anticipated.
Indorsement: The signature of the person transferring a negotiable instrument.
Insolvency: Condition of a person who is unable to pay his debts as they fall due.
Intestate: A person who dies without a will.
Inventory Turnover: Net sales / Inventory.
Joint Liability: Liability imposed upoon two or more persons.
Joint Tenancy: The ownership of property by two or more persons with the survivor taking the interest of the deceased.
Joint Venture: A legal entity consisting of several persons jointly undertaking a commercial enterprise for profit.
LIFO Inventory: The valuation of inventory on a last-in, first-out basis, which assumes that the later, more expensive inventory is sold first and the earlier, cheaper inventory is left in stock.
Letter of Credit: A promise by a debtor's bank to pay the creditor upon presentation of specified documents.
Lien: The right to satisfy a debt out of certain property owned by the debtor.
Lis Pendens: A pending suit.
Mechanics Lien: The right given by state law for a supplier of goods or services to impose a lien on the property that has been improved by the goods or services, where payment has not been received, even if there is no contractual agreement between the owner and the creditor.
Minor: A person who has not reached legal maturity; an infant.
Mortgage: An interest in land created by a written instrument providing security for a debt.
Negligence: The failure by a reasonable person to use sufficient care, dilligence, and skill which he is required to use for the protection of others from injury or damage.
Negotiable: That species of property which can be transferred by endorsement and delivery.
Nondischargeable Debt: Debt, such as taxes, that cannot be forgiven in a bankruptcy liquidation.
Perfection: The proper recording or filing of an instrument, thereby giving notice to the world.
Personal Property Right: All rights and interest owned in goods or chattels as distinguished from an interest in real property.
Preference: Paying or securing to one or more creditors, by an insolvent debtor, of all or part of an antecedent debt to the exclusion of other creditors. Under the U.S. Bankruptcy Code such payment is a preference if to a regular creditor within 90 days or to an insider within one year of insolvency.
Prima Facie: Evidence sufficient in law to establish a fact unless rebutted.
Priority of Claims: The specified order in which creditors' claims are paid when the assets of a debtor are liquidated in a bankruptcy. The priority of claims is regulated by the Bankruptcy Code.
Probate: The act or process of proving a will or other instrument valid or invalid.
Profit and Loss Statement: Part of the financial statement that shows Sales, expenses and profits for a specific period of time. Also known as Income Statement
Quick Ratio: (Cash + Marketable Securities + A/R) / (Current Liabilities).
ROI: Return on Investment
Real Property: Land and everything that is permanently affixed to it.
Receiver: A person appointed by the court to take custody over property in litigation or insolvency.
Reclamation: A term used in bankruptcy to denote a right or proceeding on the part of a person having title to property to recover the same when it is in possession of the bankrupt, debtor, receiver, or trustee.
Replevin: An action to recover the possession of personal property taken or withheld from the owner unlawfully.
Rescission: The annulment of a contract as a result of which both parties are returned to their former positions.
S.D.B.L.: Sight Draft Bill of Lading.
Satisfaction: The discharge of an obligation by paying a party what is due.
Security Interest: Any interest in property acquired by contract for the purpose of securing payment or performance of an obligation.
Sight Draft: Terms of sale common in manufacturing by which goods are shipped via common carrier to purchaser. An invoice, sight draft document, and bill of lading are presented to the customer's bank. When the bank debits the customer's account, the bill of lading is released and the goods are delivered.
Statute of Limitations: A law which limits the length of time within which a suit must be commenced before the right to sue is lost.
Subrogation: The substitution of one person in place of a creditor whose rights he acquires.
Summons: A writ or notice requiring a person to appear before a court to answer a complaint.
Surety: A person who agrees to be liable for the debt or contractual obligations of another.
Tenancy by the entirety: The joint ownership of property by a husband and wife with the right of survivorship.
Tenancy in common: The common and undivided ownership of property with no right of survivorship.
Testator: A person who makes a will.
Tort: A private or civil wrong exclusive of a breach of contract.
Tortious: Wrongful; having the quality or nature of a tort.
Ultra Vires: The unauthorized acts of a corporation in violation of it certificate or charter of incorporation.
Usury: The charge of illegal interest.
Venue: Used to indicate the county, district, or other place where a case is or will be tried.
Waiver: The relinquishment of or refusal to accept some right or benefit.
Warranty: The representation that an article has certain properties, the breach of which subjects one to financial liability.
Workout: The plan by which a financially distressed company, not in bankruptcy, seeks to rehabilitate itself.
Working capital: Current asset minus current liabilities.
Writ: An order issued from a court in the name of the sovereign or state directing the person named to comply with the directions contained therein.

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