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Tag Archives: Buzz words

Buzz word: Money Laundering

What is ‘Money Laundering’

Money laundering is the process of creating the appearance that large amounts of money obtained from serious crimes, such as drug trafficking or terrorist activity, originated from a legitimate source.

Money Laundering Scheme

Money Laundering Cycle Source: http://www.unodc.org

There are three steps involved in the process of laundering money: placement, layering, and integration. Placement refers to the act of introducing “dirty money” (money obtained through illegitimate, criminal means) into the financial system in some way; “layering” is the act of concealing the source of that money by way of a series of complex transactions and bookkeeping gymnastics; and integration refers to the act of acquiring that money in purportedly legitimate means.

One of the more common ways that laundering takes place is when a criminal organization funnels their illegally obtained cash through a cash-based business, slightly inflating the daily take. These organizations are often referred to as “fronts.” In the popular television series “Breaking Bad,” the methamphetamine dealer funnels his earnings from selling illicit drugs through a series of car-wash businesses.

Other common forms of money laundering include smurfing (A smurf is a colloquial term for a money launderer. Also refers to one who seeks to evade scrutiny from government agencies by breaking up a transaction involving a large amount of money into smaller transactions that are below the reporting threshold. The term is derived from the cartoon characters known as The Smurfs) , where a person breaks up large chunks of cash and deposits them over an extended period of time in a financial institution, or simply smuggles large amounts of cash across boarders to deposit them in offshore accounts where money laundering enforcement is less strict.

 

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BUSINESS TERM: Syndicated Loan

DEFINITION of ‘Syndicated Loan’ also known as Syndicated Bank facility

A loan offered by a group of lenders (called a syndicate) who work together to provide funds for a single borrower. The borrower could be a corporation, a large project, or a sovereignty (such as a government). The loan may involve fixed amounts, a credit line, or a combination of the two. Interest rates can be fixed for the term of the loan or floating based on a benchmark rate such as the London Interbank Offered Rate (LIBOR).

Typically there is a lead bank or underwriter of the loan, known as the “arranger”, “agent”, or “lead lender”. This lender may be putting up a proportionally bigger share of the loan, or perform duties like dispersing cash flows amongst the other syndicate members and administrative tasks.

 
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Posted by on September 29, 2015 in Finance

 

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Term of the Day: CASH FLOW LOAN

 

Definition of ‘Cash Flow Loan’

Borrowing cash typically to meet day-to-day operations or acquisitions. It is a type of debt financing, in which a bank lends funds, generally for working capital, using the expected cash flows that a borrowing company generates as collateral for the loan.

Reasons for needing a cash flow loan could be seasonal-demand changes, business expansion or changes in the business cycle.

Cash-flow loans can help in temporary situations, but if cash flow problems persist then companies need to improve their cash conversion cycle and get customers to pay faster.

 

 

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Cash Per Share: definition

Also known as ‘Cash Flow Per Share’ is a measure of a firm’s financial strength, calculated as:

Cash Flow Per Share = (Operating Cash Flow – Preferred Dividends) / Common Shares Outstanding.

Cash flow per share shows the after-tax earnings plus depreciation, on a per share basis.

As a financial analyst i prefer to place more emphasis on the cash flow per share value than on earnings per share values. While an earnings per share value can be easily manipulated to appear more positive than it really is, therefore putting its reliability in question, cash is more difficult to alter, resulting in what some analysts believe is a more accurate value of the strength and sustainability of a particular business model.

A company’s earnings per share is the portion of a company’s profit that is allocated to each outstanding share of common stock, and, like cash flow per share, serves as an indicator of a company’s profitability. Because the cash flow per share takes into consideration a company’s ability to generate cash, it is regarded by some analysts as a more accurate measure of a company’s financial situation than the earnings per share metric. Cash flow per share represents the net cash a firm produces, on a per share basis.

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Business Term: Total Quality Management (TQM)

TQM Model

TQM Model

Total quality managent is A holistic approach to long-term success that views continuous improvement in all aspects of an organization as a process and not as a short-term goal.

It aims to radically transform the organization through progressive changes in the attitudes, practices, structures, and systems.

Total quality management transcends the product quality approach, involves everyone in the organization, and encompasses its every function: administration, communications, distribution, manufacturing, marketing, planning, training, etc.
Coined by the US Naval Air Systems Command in early 1980s, this term has now taken on several meanings and includes:

(1) commitment and direct involvement of highest-level executives in setting quality goals and policies, allocation of resources, and monitoring of results;

(2) realization that transforming an organization means fundamental changes in basic beliefs and practices and that this transformation is everyone’s job;

(3) building quality into products and practices right from the beginning;

(4) understanding of the changing needs of the internal and external customers, and stakeholders, and satisfying them in a cost effective manner;

(5) instituting leadership in place of mere supervision so that every individual performs in the best possible manner to improve quality and productivity, thereby continually reducing total cost;

(6) eliminating barriers between people and departments so that they work as teams to achieve common objectives; and

(7) instituting flexible programs for training and education, and providing meaningful measures of performance that guide the self-improvement efforts of everyone involved.

Source. Business Directory.
 

 
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Posted by on September 22, 2012 in Finance, Economic terms and Buzz Words

 

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Finance Terms: “80 – 20 Rule”

Defition of “80-20 Rule”

A rule of thumb that states that 80% of outcomes can be attributed to 20% of  the causes for a given event. In business, the 80-20 rule is used to help  managers identify problems and determine which operating factors are most  important and should receive the most attention based on an efficient use  of resources. Resources should be allocated to addressing the input factors have  the most effect on a company’s final results.

 

Also known as the “Pareto principle”, the “principle of factor sparsity” and  the “law of the vital few.”

The 80-20 rule was developed by  Joseph Juran, a 20th century figure in the study of management techniques and  principles. The 80-20 rule has been applied to a number of different facets of  business.
An example of the 80-20 rule in economics would be that  80% of a country’s wealth is controlled by 20% of the population, although this  can be explained by the Gini index.

For you who visits the famous 80-20Fashions Blog by Shamim Mwasha ‘Zeze’  This is the meaning behind the name.

 

 
 

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Finance Term: TANSTAAFL – ”There Ain’t No Such Thing As A Free Lunch”

Definition of ‘There Ain’t No Such Thing As A Free Lunch – TANSTAAFL’

An acronym that attempts to describe the cost of decision making and  consumption. “There ain’t no such thing as a free lunch” (TANSTAAFL) expresses  the idea that even if something seems like it is free, there is always a cost,  no matter how indirect or hidden.
In finance, TANSTAAFL refers to the  opportunity cost paid to make a decision. The decision to consume one product  usually comes with the trade-off of giving up the consumption of something  else.
Also known as “there is no such thing as a free lunch”  (TINSTAAFL).

According to Investopedia,  The phrase ‘TANSTAAFL’  is thought to have originated because many saloons  in the U.S. used to provide free lunches to their patrons, but required them to  purchase drinks in order to get them.
Although the phrase is a double  negative, it is not intended to be interpreted as such. Therefore, the alternate  acronym TINSTAAFL is often used.

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