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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
Parent company

A company that owns or controls subsidiaries by buying up all or the majority of their shares. A company has a controlling interest in another when it has acquired over 50% of its issued shares which have voting rights. Where a parent company does not operate in its own right, it is called a holding company.


A type of business unit in which two or more persons join together to carry on some form of business activity. In what is termed an Ordinary or General partnership, all the partners jointly share the management of the business though their percentage of profits made is normally in proportion to the amount they have invested as capital into the business. All ordinary or general partners are responsible jointly and severally for all the debts and obligations of the business, up to the full value of their personal belongings (with certain minor exceptions). Another name for a partnership is a "firm". See also, Limited liability partnership.

Preference shares

These normally carry a fixed rate of dividend which is paid before the dividend on Ordinary shares. There are many types of preference shares, such as non-cumulative, cumulative, redeemable, etc. Preference shares sometimes do not carry voting rights.

Prepaid expenses

Rates, rent, insurance premiums, etc. normally payable in advance.

Private Company

A private company is any registered company that is not a public company. The shares of a private company may not be offered to the public for sale. The legal requirements for such a company are less strict; for example, there is no minimum issued or paid-up share capital requirement and small and medium-sized companies need not file full accounts.

Pro forma

Can be:

  • An invoice drawn up by seller and sent to the buyer to confirm the details of a contract;
  • A polite reminder that a debt will be due for payment;
  • For despatch to an agent when goods are sent on consignment basis;
  • By an exporter to show charges e.g. packing, freight etc.
Profit (loss)

Profit is the excess of income over expenses. Loss is the excess of expenses over income.

Profit and loss statement

A business financial statement that lists revenues, expenses, and net income throughout a given period. Because of the various methods used to record transactions, the monetary values shown on an income statement often can be misleading. Also known as Earnings report, Earnings statement, Operating statement, or Income statement.

Profit Margin

A measurement of trading success – the calculation of profit as a ratio to (a)net sales (b) capital.


Individual ownership or sole proprietorship; it is the type of business unit in which only one person is liable. It is the simplest form of business organisation. The owner is responsible for all management decisions, takes all the profits and bears all the losses. His liability is unlimited, and not only his business assets, but the whole of his private belongings (with certain minor exceptions) can be taken from him to satisfy business debts.

Public Limited Company

A company registered under the Companies Act (1980) as a public company. Its name must end with the initials `plc'. It must have an authorized share capital of at least £50,000, of which at least £12,500 must be paid up. It may offer shares and securities to the public. The regulation of such companies is stricter than that of private companies. Most public companies are converted from private companies, under the re-registration procedure in the Companies Act.

Public record information

Information obtained on business concerns etc. from sources generally available to any person who may be interested in such information. The sources of this type of information are, for example, the Register of County Court Judgments and the London Gazette.

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