Please find below a list of investor and financial words Kabuse uses throughout it’s websites and their respective meanings. We have combined questions and definitions in one location for ease of use. Please note every effort is made to ensure the correct and current terms and definitions are in use and this page is frquently updated. Please see our Terms and Conditions for more information about the quality of this website.
Best Efforts – A designation that a certain financial result is not guaranteed, but that a good faith effort will be made to provide the result that is represented.
Burn Rate – Burn rate is usually quoted in terms of cash spent per month. For example, a burn rate of 1 million would mean the company is spending 1 million per month. When the burn rate begins to exceed forecasts, or revenue fails to meet expectations, the usual recourse is to reduce the burn rate (which, in most companies, means reducing staff).
Charity – In its traditional legal meaning, the word “charity” encompasses religion, education, assistance to the government, promotion of health, relief of poverty or distress and other purposes that benefit the community. A registered charity is a kind of non-profit and therefore tax exempt organization that solicits and is able to accept donations or gifts from individual and corporate donors, typically as a tax deduction. Also known as a Foundation.
Cooling-Off Rule – A term referring to law pertaining to newly-entered contracts that allows both sides of the party a period of time (after the contract has been signed) to release themselves from any obligations without penalty. Different types of transactions will have different cooling-off rules, and not all types of contracts have such provisions. Typically this period will be three days; however, it is imperative that all the rules and regulations listed in the fine print are read before entry into a contract. In the U.S., federal law usually requires a three-day penalty-free period for the rescission/withdrawal from any refinancing contract associated with the primary residence.
Exit Strategy – A fund’s intended method for liquidating its holdings while achieving the maximum possible return. These strategies depend on the exit climates including market conditions and industry trends. Exit strategies can include selling or distributing the portfolio company’s shares after an initial public offering (IPO), a sale of the Portfolio Company or a recapitalization.
Firm Commitment – In a firm commitment, underwriters act as a dealer and are responsible for any unsold inventory. The dealer profits from the spread between the purchase price and the public offering price. Also known as a “firm commitment underwriting”.
Foundation – See Charity.
Fund – An open-ended fund operated by an investment company which raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives. mutual funds raise money by selling shares of the fund to the public, much like any other type of company can sell stock in itself to the public. Mutual funds then take the money they receive from the sale of their shares (along with any money made from previous investments) and use it to purchase various investment vehicles, such as stocks, bonds and money market instruments. In return for the money they give to the fund when purchasing shares, shareholders receive an equity position in the fund and, in effect, in each of its underlying securities. For most mutual funds, shareholders are free to sell their shares at any time, although the price of a share in a mutual fund will fluctuate daily, depending upon the performance of the securities held by the fund. Benefits of mutual funds include diversification and professional money management. Mutual funds offer choice, liquidity, and convenience, but charge fees and often require a minimum investment. A closed-end fund is often incorrectly referred to as a mutual fund, but is actually an investment trust.
Holdings Company – A company that owns enough shares of another company to secure voting control. In finance, the purchase of a financial product or other item of value with an expectation of favorable future returns. In general terms, investment means the use of money in the hope of making more.
Interest Rate – The cost of borrowing money, expressed as a percentage, usually over a period of one year usually over the LIBOR and fixed to a maximum by governments.
Institutional Investor – Entity with large amounts to invest, such as investment companies, mutual funds, brokerages, insurance companies, pension funds, investment banks and endowment funds. Institutional investors are covered by fewer protective regulations because it is assumed that they are more knowledgeable and better able to protect themselves. They account for a majority of overall volume.
Investment – In finance, the purchase of a financial product or other item of value with an expectation of favorable future returns. In general terms, investment means the use of money in the hope of making more.
Kabuse – A Japanese word literally meaning “to cover” but used in Japanese candle stick charting as “Dark Cloud Cover”. This indicator is often used as a signal to sell or short an investment. This move is a little controversial and is where Kabuse’s roots can be found; doing something a little different! Based on Japanese candlestick chart patterns and called ‘dark cloud cover’, has in the first interval a white candle followed in the second interval by a black candlestick that opens at a higher price but closes lower than the first interval. The black candlestick should open approximately half way up the white candle’s body. It is the black candle which negates the previous interval’s movement that gives the pattern it’s name, a dark cloud cover (or kabuse candlestick). This pattern is considered a bearish reversal or sell signal.
LIBOR – London Inter-Bank Offered Rate, the rate charged by one bank to another for lending money.
Red Herring – No history of company so Herring is first marketing attempt.
Security – An instrument representing ownership (stocks), a debt agreement (bonds), or the rights to ownership (derivatives). A security is essentially a contract that can be assigned a value and traded. Examples of a security include a note, stock, preferred share, bond, debenture, option, future, swap, right, warrant, or virtually any other financial asset.
Trust – In common law legal systems, a trust is a relationship in which a person or entity (the trustee) holds legal title to certain property (the trust property or trust corpus), but is bound by a fiduciary duty to exercise that legal control for the benefit of one or more individuals or organizations (the beneficiary), who hold “beneficial” or “equitable” title. The trust is governed by the terms of the (usually) written trust agreement and local law. The entity (one or more individuals, a partnership, or a corporation) that creates the trust is called the settlor, and in the United States, the trustor, grantor, donor, or creator, as well.
Underwriter – A financial institution which, in return for a fee or commission, agrees to purchase unsold shares in a new issue, if the issue is not fully subscribed. From the company’s point of view, having its new issue underwritten is a form of insurance. It means that if it has priced an issue too high and the market shuns it, the company can still be sure that it will get money from the new issue. Of course, security comes at a price. Underwriters charge a fee for the back-up they provide. If the new issue is very popular, it will pocket that fee and make a handsome profit. Occasionally, they get badly burned. New issues underwritten immediately before the 1987 stock market crash lost a lot of money. Sometimes companies do a rights issue at a deep discount to reduce the underwriting fees.
Venture Capital – Capital invested into small and young companies in return for equity ownership. Generally speaking, venture capitalists (VCs) supply capital to companies that are small, may be start-ups, are high risk, and which could not get the funds by listing on the stock market or borrowing from banks. In return for taking the extra risk, the VCs look for substantial equity, a seat on the board, and possibly the ratcheting up of their equity stake if performance targets are not met. Sometimes, they provide management and financial support to their investee companies, as well as just money. They will look for an exit through a trade sale or a flotation of the company within 2-5 years. Also called ‘risk capital’.