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The A to Z Glossary of Credit Keywords

There are 166 entries in this glossary.
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Term Definition
Net income/Net loss

Profit (or loss) after tax less extraordinary items.

Net worth

Indicates the financial strength of a company and comprises:

  • Issued capital
  • Share premium A/C
  • Capital reserves
  • Any general reserves
  • Profits and losses etc. (revenue reserves)
  • Grants, donations etc.

Net worth is calculated as: total assets (not including fictitious assets) minus current and long-term liabilities (also known as net assets). Many credit managers place more importance on tangible net worth, i.e. net worth less any intangibles such as goodwill, formation expenses, patents, etc. In simple terms net worth can be described as what would belong to the shareholders if a company were to cease trading, turn all assets into cash and settle all liabilities (assuming that the balance sheet figures would translate into the actual cash figures represented).

Nominal Capital

This is the amount of money that can be put into a Limited or Unlimited company in the form of shares. For Public companies this is known as Authorised capital. The term Registered capital is also sometimes used. Nominal capital is divided into shares which can be of different classes and values. Different classes of shares may carry varied voting rights, divided rights etc.

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