Financial Statements

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It's that time of year when we can expect to see plenty of quarterly/ interim financial statements, and even a few annual reports circulating. With that in mind, there may be some benefit in looking at some of the terminology you're likely to encounter when analyzing these publications as they appears in your mail box.

Obfuscation - 101: A guide to Corpspeak

In these trying times, Chief Executive Officers of firms with faltering bottom lines are less likely to feel egg-faced. After all, everyone seems to be in the same boat. For instance, Alf Powis, CEO of Noranda Mines Ltd., bluntly told shareholders, at this spring’s annual meeting, that the firm’s immediate prospects are “dismal”. President Adam Zimmerman called the company’s 25 unprofitable mines “the ugly facts of life”. However, such forthrightness, more common though it is now, cannot overcome decades of executive obfuscation in discussing just what went wrong, and why. So we’ve compiled a short list of common euphemisms you’ll doubtless encounter while pondering the official explanation of what happened with any number of the companies you might have invested in during the last year.

EUPHEMISM: Economic influences exerted a negative impact on earnings.
WHAT IT MEANS: We lost money

EUPHEMISM: Until conditions are somewhat altered, earnings will remain depressed.
WHAT IT MEANS: We’re losing money.

EUPHEMISM: Our management plan calls for positive austerity.
WHAT IT MEANS: We’re laying people off.

EUPHEMISM: Our number one priority must be to achieve significant progress toward restoring financial strength.
WHAT IT MEANS: We’re in the hole.

EUPHEMISM: Expenditures will be trimmed in view of reduced cash generation and will be under continuing review as the year progresses
WHAT IT MEANS: We’ll be cutting your dividend.

EUPHEMISM: Certain things have been taken for granted over the years. The management group has to be aligned into a different comfort zone.
WHAT IT MEANS: Watch for a fire sale on used company cars.

EUPHEMISM: Certain operations, not directly related to our company’s core business, are under careful study. As a result, a re-orientation of the divisions may take place during the fiscal year.
WHAT IT MEANS: We’ll be having a distress sale of assets to pay down our enormous crushing debt load.

EUPHEMISM: Skepticism is recommended with regard to the extent to which recovery can be expected on a cyclical basis.
WHAT IT MEANS: Even a monster Christmas rush won’t save us now.

EUPHEMISM: Our assessment indicates that continued negative pressure can be expected in the months ahead, and the long-term outlook is in some question.
WHAT IT MEANS: We’ll be losing money again next year.

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INVESTMENT TERMS

Alan Greenspan: God
Bear Market: A six to eighteen month period when typically the kids get no allowance, the wife gets no jewelry, and the husband gets no sex.
Bill Gates: Where God goes for a loan.
Broker: Poorer than you were in 2004.
Bull Market: A random movement in the market causing an investor to mistake himself for a financial genius.
“Buy, Buy”: A flight attendant making market recommendations as you step off the plane.
Call Option: Something people used to do in ancient times before E-mail.
Cash Flow: The movement your money makes as it disappears down the toilet.
Cisco: Sidekick of Pancho.
Day Trader: Someone who is disloyal from 9 to 5.
Financial Planner: A guy who actually remembers his wallet when re runs to the 7-11 for toilet paper and cigarettes.
Institutional Investor: A past year investor who’s now locked up in the nut house.
Market Correction: The day after you buy stocks.
Microsoft: A condition temporarily remedied by Viagra.
Momentum Investing: The fine art of buying high and selling lower.
P/E Ratio: The percentage of investors wetting their pants as the market continues its downward spiral.
Profit: Religious guy who talks to God (hoping for stock tips).
Standard and Poors: Your life in a nutshell.
Stock Analyst: The idiot who just downgraded your stock.
Stock Split: When your ex-wife and her lawyer divide all your assets equally between themselves.
Value Investing: The art of buying low and selling lower.
Windows 2000: What you jump out of when you’re one of the suckers who bought Yahoo at $540 a share.
Yahoo: What you yell when you flog your shares to some poor sucker for $540 a share.