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Date: Tuesday 13th 2008f May 2008 09:10:05 AM

Glossary
 

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Obligation:  The responsibility to satisfy an agreement.

Our take: Liability on the balance sheet is an obligation to the company in question.

 

Obligor: Entity that is obligated to satisfy debt obligation.

Our take: This is commonly known as the debtor.
 

Obsolete Inventory: Refers to inventory that cannot be sold at its full value and has to be discarded. .

Our take: Obsolete Inventory is usually worthless and has to be sold at salvage value.
 

Off Balance Sheet Financing: A way to raise money without disclosing it on the balance sheet.
Our take: This is unlike debt where the money raised is disclose in the liability section of the balance sheet.
 
Offline Debit Card: Card that combines the feature of online debit card and credit card.
Our take: This is also referred to as check card.
 
Offshore: Located on outside the national boundaries.
Our take: For example offshore saving accounts indicate that the account is held by banks outside the boundary of the nation.
 
Old Economy: Refers to old style established companies with relatively simple technology.
Our take: This include the auto industry, which flourish in the early twentieth century, or steel industry which flourish even earlier.
 
Oligopoly: An industry where only several firms are available to compete against each other.
Our take: The oil industry is an example of oligopoly.
 
Online Banking: Performing banking activities via the internet.
Our take: For example, we can now pay our utilities bill, wireless and TV bill online. Online Banking also enables clients to transfer funds, check balances and other things that are typically done in local branch.
 
Online Trading: The process of buying and selling stocks through the internet.
Our take: This include market order, limit order, trailing stop order and trading options. The advent of low computer price and high speed internet connection has made online trading possible.
 
Opening Bell: The bell that sounds at the start of every trading day.
Our take: This signifies that the trading for the day has begun.
 
Operating Cash Flow: The amount of cash generated by business operations of a company.
Our take: Operating Cash Flow can be used to measure the quality of earnings. If the company is earning a high profit but with negative operating cash flow, this means that the quality of its earning is low.
 
Operating Earnings: Profits due to business activities of a firm.
Our take: This takes into accounts production cost, marketing and administrative expense, as well as depreciation and amortization expense.
 
Opportunity Cost: The difference between the investment path that we chose with the other investment alternative that we forgo.
Our take: For example, you have decided to invest in stock instead of putting your money in a certificate of deposit in a bank that gives 3% of interest. A year later, your stock returns a paltry 1% return. From here, your opportunity cost is the different of the two, which is 2 %.
 
Option: A financial instrument which entitle the owner the right but not the obligation to buy or sell certain securities at a predetermined price.
Our take: Option is a double edge sword. Used prudently, it can be used to hedge against the risk of loss. On the other hand, it is now often used to create more leverage which means that investors were utilizing higher risk to achieve high reward.
 
Option Contract: represents 100 shares of the underlying common stock.
Our take: Option trading requires investors to buy option per contract, which is controlling the equivalent amount of 100 shares of the common stock.
 
Ordinary Income: Income that is derived from a firm's primary business activity.
Our take: Capital gain is not considered as ordinary income. It is important to make this distinction as capital gain is taxed at a different rate.
 
Organic Growth: The growth of a company due to internal improvement of the strategies imposed by management. It excludes the growth due to merger & acquisitions
Our take: Organic growth is more desirable as it indicates that customers has warmed up to the firm's business and are buying more of the firm's products.
 
Original Cost: All the cost associated with obtaining an asset.
Our take: Freight and sales tax are normally included in the original cost.
 
Outside Director: Individual other than investors or management that seats in the board of director of a firm.
Our take: Outside director have little conflict of interest and can give invaluable advise to management regarding the firm's business strategy.
 
Outsourcing: Transferring certain portion of a firm's work to other companies in the hope of achieving operational savings.
Our take: For example HR function and payroll function can be outsourcing candidate.
 
Outstanding Shares: The number of shares that are available for trading to the general public.
Our take: You can find the number of outstanding shares by looking under capital stock in the balance sheet of a firm.
 
Overhead cost: One type of cost that is cannot be traced into individual products. This include security maintenance, the salary of the CEO or the rent of using an office building.
Our take: Also called manufacturing overhead.
 
Overnight rate: The interest rate charged by a financial institution to another institution to enable it to borrow overnight.
Our take: This method of lending is efficient where banks can access short-term capital from central bank depositories.
 
Overvalued: A stock that is deemed to be trading above its fair value.
Our take: Investors believe that buying overvalued stocks will not give a good return on investment. However, the definition of overvalued might vary from one investor to another. The reason is that determining the fair value of a common stock involves doing a lot of prediction and assumption.
 
Overweight: A term used to describe an investor who hold a position in a common stock that are larger than he intended to.
Our take: This may be due to large price appreciation that causes the entire portfolio to be dominated by the appreciating asset.
 

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