a business owned by a group of people called shareholders, which has its own legal identity separate from its owners. Glossary of Business Terms
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A proprietorship, partnership, corporation, or other form of enterprise that engages in business. Bloomberg Financial Dictionary
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company com‧pa‧ny [ˈkʌmpni] noun companies PLURALFORM [countable]
COMMERCE an organization that makes or sells goods or services in order to make a profit:
• He works for a big pharmaceutical company.
• The new regulations could have a bad effect on small and medium-sized companies.
• The company was established in 1922.
• A lot of companies went bankrupt during the last recession.
afˌfiliated ˈcompany COMMERCE
a company owned by another company; = RELATED COMPANY; SUBSIDIARY:
• Hino Motors, a truck maker in the Toyota group of affiliated companies
asˌsociated ˈcompany also asˌsociate ˈcompany COMMERCE
a company of which more than 20% but less than 51% of the equity is held by another company or group of companies:
• Employees of the National Magazine Company and their associated companies may not enter this competition.
a well-known, successful company whose shares are a very safe investment:
• blue chip companies like Shell, BP and Unilever, which have well-defined, long-term business strategies
ˈcable ˌcompany COMMERCE TELECOMMUNICATIONS
a company that uses cables under the ground to provide services such as cable television:
• It is one of the biggest cable companies in the US, with over 56 million subscribers.
ˈclose ˌcompany also ˈclosed ˌcompany, ˌclosely ˈheld ˌcompany FINANCE
in the US, a company that has five or fewer shareholders owning more than half of the stock
ˌclosed-end inˈvestment ˌcompany also ˌclosed-ended inˈvestment ˌcompany FINANCE
an investment company with a fixed number of shares that an investor can only sell to another investor, not back to the company
comˌmercial ˈcompany COMMERCE
1. a company that has to follow normal accepted business practices and operates in order to make a profit:
• The engines were developed by a commercial company with backing from the California Energy Commission.
2. a company that is not a financial institution:
• As banks trade in cash, this is not such a simple financial calculation as it is for a commercial company.
conˌstituent ˈcompany COMMERCE
a company that is one of a group of organizations that have been joined together
conˌtrolling ˈcompany FINANCE
a company that owns more than 50% of the shares of another company
ˈcredit ˌcompany FINANCE
a company that lends money to people or businesses; = FINANCE COMPANY
ˈdaughter ˌcompany COMMERCE
a company that is completely or partly owned by another company; = SUBSIDIARY
a company that owns and operates a port:
• The firm told the dock company to deal with the timber.
ˈfinance ˌcompany FINANCE ORGANIZATIONS
a financial institution that lends to people or businesses, so that they can buy things such as cars or machinery. Finance companies are often part of commercial bank S, but operate independently; = finance house Bre
ˈholding ˌcompany COMMERCE
a company that completely or partly owns other companies and may also carry out normal business activities itself:
• the state holding company which controls the airline
inˈsurance ˌcompany INSURANCE ORGANIZATIONS
a company that sells insurance:
• If the insurance company that issued your pension is in trouble, is your money safe?
inˈvestment ˌcompany FINANCE
a company that invests its capital in Securities ( bonds, shares etc). The value of the company's shares and dividend S depends on the profit made on these investments; = INVESTMENT TRUST:
• a French investment company with interests in several leading corporations
inˌvestment ˈtrust ˌcompany FINANCE ORGANIZATIONS
a company that manages mutual fund S:
• You will only receive the advantage of low charges if you buy directly from the investment trust company.
ˌlimited (liaˈbility) ˌcompany FINANCE ORGANIZATIONS
abbreviation LLC a company where the shareholders will lose only what they have invested if the company goes bankrupt, and will not lose other property that they own
ˌlisted ˈcompany FINANCE ORGANIZATIONS
a large successful company whose shares are traded on the main financial markets
ˌmanagement ˈcompany FINANCE
a company that manages financial assets or property for people or businesses
ˌmutual ˈcompany FINANCE
a company that has members but no shareholders. Profits from a mutual company are not paid out in dividend S but in another form:
• its plan to convert from a mutual company owned by its policyholders to a stock-owned company
ˌmutual inˈsurance ˌcompany INSURANCE
an insurance company whose owners are its policyholder S (= people insured by the company) rather than shareholders
a company based outside the country in which it does business, usually for legal or tax reasons
off-the-ˈshelf ˌcompany COMMERCE
another name for a shelf company
ˌopen-end inˈvestment ˌcompany also ˌopen-ended inˈvestment ˌcompany FINANCE
an investment company where new shares are created for new investors and which buys back shares from investors who want to sell:
• a proposal to convert the fund from a closed-end to an open-end investment company
ˈparent ˌcompany FINANCE
a company that owns other companies:
• Costs are two thirds lower at Japan Air Charter, a subsidiary that employs foreigners, than at the parent company.
ˈprivate ˌcompany
1. COMMERCE a company owned by people or other companies, rather than by the government
2. also privately held company FINANCE a company whose shares are not openly traded and can only pass to another person with the agreement of other shareholders
ˌprivate ˌlimited ˈcompany FINANCE
a company whose shares are not openly traded and can only pass to another person with the agreement of other shareholders
a company that buys land and buildings in order to sell or rent them; = real estate company AmE
proˈprietary ˌcompany FINANCE
a form of limited company in Australia and South Africa, with the letters Pty after its name
ˌpublic ˈcompany
1. COMMERCE a company owned by people or other companies, rather than by the government
ˌpublic ˌlimited ˈcompany FINANCE
in Britain, a limited company whose shares are freely sold and traded, with a minimum share capital of £50,000 and the letters PLC after its name
ˌred ˈchip ˌcompany also red-chip company FINANCE
a Chinese company that is listed on the Hong Kong stockmarket
ˌregistered ˈcompany COMMERCE
in Britain, a company which has been officially registered with the Registrar of Companies
reˌlated ˈcompany COMMERCE
a company that is connected with or owned by another, larger company; = AFFILIATED COMPANY:
• He merged Royex with four related companies to form Corona Ltd.
a company that has already been legally formed, but is not active and can be bought by people who want to start a business quickly:
• You will have to decide if a new company should be formed or if a shelf company will be enough.
ˈshell ˌcompany
1. TAX a company that has been formed for legal or tax reasons but does not trade or do business
2. LAW a company that is used to hide criminal activities such as passing profits from criminal activities into the normal banking system:
• Shell companies are often used to hide the owner's identity and money flows are disguised using false invoices and loans.
ˈsister ˌcompany
COMMERCE one of two or more companies that are owned by the same parent company:
• We also have at our disposal component repair facilities operated by our sister company.
ˌsmall ˌbusiness inˈvestment ˌcompany FINANCE
in the US, a small company in which investors can buy shares. If the shares make a loss, it is treated as an ordinary business loss
ˈstart-up ˌcompany COMMERCE
a company that has just been formed:
• He told them that within five years the start-up company would become Japan's leading software distributor.
ˈstatutory ˌcompany LAW
in Britain, a company formed by a special government law, to provide a public service such as supplying gas or water
ˈstock ˌcompany FINANCE
a company that is owned by people who have shares in it
subˈsidiary ˌcompany COMMERCE
a company of which more than half is owned by another company:
• The group now controls 11 subsidiary companies locally and overseas.
ˈtrading ˌcompany COMMERCE
a company that sells goods or services rather than one that makes its profit from investing in other companies
ˈtrust ˌcompany
1. FINANCE a company that invests people's money for them
2. FINANCE PROPERTY a company that acts as a trustee (= person in charge of a trust) for the property of people who have died, or for property in trust for living people. A trust company may also advise people on investments and invest their money for them
ˌunit ˈtrust ˌcompany FINANCE
in Britain, an investment company that manages unit trust S
unˌlimited ˈcompany FINANCE
a company whose shareholders will lose all their money if the company goes bankrupt, and also risk losing their own property in order to pay the company's debts:
• Unlimited companies are not subject to the strict accounting requirements which govern limited companies.
unˌlisted ˈcompany FINANCE
a small company whose shares are not on the official list of shares traded on a particular stockmarket:
• Trading conditions were tough for smaller unlisted companies.
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Measuring a company
You need to measure a company in two ways. The words in bold are explained more fully under their individual entries.
Look at flows in and out of the business as measured in the profit and loss account, or income statement of a company.
Look at the size and economic health of a business at a particular moment in time as seen in the balance sheet.
1) The profit and loss account
For most companies listed on a stock exchange profit and loss accounts are published at least once a year, more usually twice a year, and increasingly four times a year to match standards in the United States. Each figure in that statement has a comparative figure from the previous period or year, so you can check whether business is expanding or shrinking, getting better or worse. You can compare a profit for the second quarter to that of the first quarter, but this can be misleading when there are strong seasonal influences on a company's business, such as a burst of sales in the spring for a company selling camping equipment. It is sometimes better to compare one quarter's performance with the same quarter in the year before, to compare like with like.
Within the profit and loss account the first thing to take a look at is the company's sales, which are also known as revenues or turnover. This is a crude measure of how much business the company has done in a given period, and it shows whether the company is growing or shrinking. But size isn't everything in sales. A supermarket will have very large sales because that's the nature of its business, whereas a small company selling specialized software may have relatively small sales but may make large profits and have very low costs.
The next thing to look at is operating costs, otherwise known as the cost of sales. What does it cost to produce those goods or services that appear in the sales figures? These costs include raw materials, labour, and sales and administration costs. The supermarket may have very large operating costs. Because it has to buy in everything it sells, its operating margin, or the difference between sales and costs, may be very slim. The software company may have very low operating costs, perhaps just the price of two software writers in a garage, so its operating profit margin may be very high.
The difference between sales and cost of goods sold is the gross profit. But that is not what is left for distribution to shareholders. The company first has to pay interest charges, or the cost of borrowing, for loans used in the business. The supermarket may have very high interest costs because it has borrowed large amounts to build stores and distribution depots, while a software company may not have borrowed at all. Analysts watch the level of a company's interest cover, or how many times interest payments are covered by profits.
Companies also need to set aside cash for depreciation of fixed assets such as building or vehicles and for amortization charges to write off goodwill. What's left is the pretax or operating profit. Then the taxman takes his slice. What's left is the net profit, sometimes known as attributable profit because it belongs to the shareholders. The net profit margin is the net profits expressed as a percentage of overall sales.
Some of that net profit may be earmarked for preference shareholders and for minority interests so the net profit makes allowance for those claims. The net profit is easier to understand if the figure is expressed as earnings per share. There is the possibility that the amount of profit attributable to current shareholders will be reduced or diluted by possible claims from other shares that may be issued through such things as options and warrants. So profit is sometimes expressed as fully diluted
(profit divided by all current and possible ordinary shares). This makes allowances for any new shares that have been issued and makes it easier to see whether earnings have gone up or down.
Cash earning may have doubled but the number of shares may have trebled through a rights issue or through a bonus or scrip issue, so the earnings per share may have fallen. Companies usually publish the number of shares outstanding to give details of changes.
Shareholders are keenly interested in what happens to net profits. Will they be retained in the company as reserves for use as a resource to fund further growth? Or will they be distributed to shareholders in the form of dividends?
Analysts are interested in a company's dividend cover, or the ratio of profits to dividends, to see whether a company can afford to make the cash distribution to shareholders, and whether it is being mean or generous in comparison with similar companies in its market sector. Companies with no need for funds for further expansion may distributed most of their net profit in dividends. Those that are expanding rapidly may choose not to make a dividend distribution at all. The shareholders may settle for capital appreciation of the company and an increase in the price of their shares, rather than a stream of income from dividend payments.
As well as looking at the operating profit and the net profit (the bottom line figure), analysts look at several measures of profitability in between. They can look at earnings before interest and taxation (ebit) or earnings before interest, taxation, depreciation and amortization (ebitda). The latter removes the effects of extraordinary charges, such as the goodwill costs of an acquisition, but may mask serious problems of over-expansion.
2) The balance sheet
Measuring the flows of cash in and out of a business from the profit and loss account can be irrelevant if you don't take into account the size and economic health of a company at that particular moment in time. In order to get a meaningful overview you need to examine the balance sheet, which is usually issued in a detailed form once a year and published in the annual report. The balance sheet shows where the money has come from and what it has been spent on. There are always two sides to a balance sheet - the liabilities or debts, which show the source of a company's funds, and the assets, which show where the money has been spent.
On the liabilities side of the balance sheet the company's first source of funds is equity raised from its shareholders through the sale of shares. Listing on a stock exchange facilitates an initial public offering, but a company can also raise money through a share placing. It may return to the market to raise further funds through a rights issue. The company usually enlists the help of an investment bank to raise those funds.
Part of the profits are retained by the company to be employed by the company instead of being distributed to the shareholders in the form of dividends. These are known as reserves. Shareholders' equity plus reserves are known as shareholders' funds.
The company also has borrowings or debt, in the form of bank overdrafts, short-term borrowing facilities or long-term bonds and debentures. In the case of a company failure the debt must be repaid before the shareholders have any claim on the company's assets, so the shareholders take a greater risk than the debt holders. Analysts watch a company's debt-to-equity ratio. A company with large debts relative to its equity may be perceived as a more risky investment. It may have to continue making large interest payments and debt repayments even in a downturn, whereas a company funded largely by equity can suspend dividend payments.
The company is also partly funded by its creditors who have committed funds to the company by supplying raw materials and services that have not yet been paid for. Again, analysts watch the quick ratio, or the relationship between short-term assets and short-term liabilities, to see whether the company may run into short-term funding problems.
Analysts also watch whether a company has negative or positive cash flow overall. They want to know whether its activities are producing cash or consuming cash too rapidly, known as a cash burn. It may be sensible for a company to consume cash when it is rapidly expanding, but that is not a situation that can continue indefinitely.
The assets side of the balance sheet shows where the money has gone. It is usually spent on fixed assets such as land and buildings, on raw materials and stocks of semi-finished and finished goods, on debts that have not yet been paid by its debtors, and on keeping available a certain amount of cash.
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company UK US /ˈkʌmpəni/ noun [C] (plural companies) COMMERCE
► an organization that sells goods or services in order to make money: a big/large/small, etc. company »
We're a medium-sized company giving good value for money.
join/work for/leave a company »Her husband has worked for the same company for 18 years.
set up/found/establish a company »They want to set up a company selling children's clothing.
run/own a company »She runs a company designing interactive computer programmes, websites, and CD-ROMS.
dissolve/liquidate a company »This flowchart shows the steps you need to take in order to liquidate your company.
buy/buy out/take over a company »The bank had bought out the company for $29 a share.
a company expands/shrinks »At that time the company was expanding rapidly, opening a new branch every couple of months.
a company fails/ goes bankrupt/goes into liquidation »Hargreaves lost thousands when the company went bankrupt.
»company executives/policy/profits
→ See also AND COMPANY(Cf. ↑and Company), ASSOCIATED COMPANY(Cf. ↑associated company), BLUE CHIP(Cf. ↑blue chip) noun, CABLE COMPANY(Cf. ↑cable company), CLOSE COMPANY(Cf. ↑close company), CLOSED COMPANY(Cf. ↑closed company), CLOSELY HELD COMPANY(Cf. ↑closely held company), CLOSED-END INVESTMENT COMPANY(Cf. ↑closed-end investment company), COMMERCIAL COMPANY(Cf. ↑commercial company), CONSTITUENT COMPANY(Cf. ↑constituent company), CONTROLLING COMPANY(Cf. ↑controlling company), CREDIT COMPANY(Cf. ↑credit company), DAUGHTER COMPANY(Cf. ↑daughter company), DOCK COMPANY(Cf. ↑dock company), DUAL LISTED COMPANY(Cf. ↑dual listed company), FINANCE COMPANY(Cf. ↑finance company), HOLDING COMPANY(Cf. ↑holding company), INSURANCE COMPANY(Cf. ↑insurance company), INVESTMENT COMPANY(Cf. ↑investment company), JOINT-STOCK COMPANY(Cf. ↑joint-stock company), LIMITED COMPANY(Cf. ↑limited company), LISTED COMPANY(Cf. ↑listed company), MANAGEMENT COMPANY(Cf. ↑management company), MUTUAL(Cf. ↑mutual) noun, MUTUAL INSURANCE COMPANY(Cf. ↑mutual insurance company), OFFSHORE COMPANY(Cf. ↑offshore company), OFF-THE-SHELF COMPANY(Cf. ↑off-the-shelf company), OPEN-ENDED INVESTMENT COMPANY(Cf. ↑open-ended investment company), PARENT COMPANY(Cf. ↑parent company), PRIVATE COMPANY(Cf. ↑private company), PRIVATE LIMITED COMPANY(Cf. ↑private limited company), PROPERTY COMPANY(Cf. ↑property company), PROPRIETARY COMPANY(Cf. ↑proprietary company), PUBLIC COMPANY(Cf. ↑public company), PUBLIC LIMITED COMPANY(Cf. ↑public limited company), QUOTED COMPANY(Cf. ↑quoted company), REAL ESTATE COMPANY(Cf. ↑real estate company), RED CHIP(Cf. ↑red chip), REGISTERED COMPANY(Cf. ↑registered company), RELATED COMPANY(Cf. ↑related company), SHELF COMPANY(Cf. ↑shelf company), SHELL(Cf. ↑shell), SMALL COMPANY(Cf. ↑small company), SMALL BUSINESS INVESTMENT COMPANY(Cf. ↑Small Business Investment Company), START-UP(Cf. ↑start-up), STATUTORY COMPANY(Cf. ↑statutory company), STOCK COMPANY(Cf. ↑stock company), SUBSIDIARY(Cf. ↑subsidiary), TARGET COMPANY(Cf. ↑target company), TRADING COMPANY(Cf. ↑trading company), TRUST COMPANY(Cf. ↑trust company), UNIT TRUST COMPANY(Cf. ↑unit trust company), UNLIMITED COMPANY(Cf. ↑unlimited company), UNQUOTED COMPANY(Cf. ↑unquoted company)
Financial and business terms. 2012.