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Offering Memorandum
An Offering Memorandum is a legal document provided to potential investors that details the terms, risks, and business plan of an investment opportunity. It is used in private placements and securities offerings.
For example, a private equity firm might prepare an offering memorandum to present a new investment fund to accredited investors.
Operating Agreement
An Operating Agreement is a legal document that outlines the governance, operations, and ownership structure of a limited liability company (LLC). It details the rights and responsibilities of the members and managers.
For example, an LLC might create an operating agreement to define how profits are distributed, decision-making processes, and member roles.
Operating Cash Flow
Operating Cash Flow is the cash generated from a company’s normal business operations. It indicates whether a company can generate sufficient cash to maintain and grow its operations without external financing.
For example, a company might report positive operating cash flow if it generates more cash from sales than it spends on operating expenses.
Operating Income
Operating Income, also known as operating profit or EBIT (Earnings Before Interest and Taxes), is the profit a company generates from its core business operations, excluding non-operating income and expenses.
For example, a company’s operating income is calculated by subtracting operating expenses, such as cost of goods sold and administrative costs, from its gross profit.
Operating Lease
An Operating Lease is a contract that allows the use of an asset but does not convey ownership rights. It is treated as an expense rather than a capital investment and does not appear on the balance sheet as an asset or liability.
For example, a company might use an operating lease to rent office equipment, paying periodic lease payments without owning the equipment.
Operating Margin
Operating Margin is a financial metric that measures the percentage of a company’s revenue that remains after deducting operating expenses. It is calculated by dividing operating income by total revenue.
For example, if a company has an operating income of $200,000 and total revenue of $1 million, its operating margin is 20%.
Option Agreement
An Option Agreement is a contract that gives one party the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified period. It is commonly used in real estate and financial markets.
For example, a real estate developer might sign an option agreement to purchase land at a fixed price within the next year, providing flexibility to proceed with the purchase if conditions are favorable.
Option Pool
An Option Pool is a reserve of shares set aside by a company to grant stock options to employees, advisors, and other stakeholders as part of their compensation. It helps attract and retain talent by offering equity incentives.
For example, a startup might create an option pool representing 10% of its total shares to provide stock options to new hires and key employees.
Ordinary Shares
Ordinary Shares, also known as common shares, represent equity ownership in a company. Holders of ordinary shares have voting rights and may receive dividends, but they are last in line to claim company assets in case of liquidation.
For example, investors who purchase ordinary shares of a company become partial owners and can vote on important corporate matters at shareholder meetings.
Organizational Structure
Organizational Structure is the system that defines how activities such as task allocation, coordination, and supervision are directed toward achieving organizational goals. It includes the hierarchy, roles, and responsibilities within an organization.
For example, a company might have a hierarchical organizational structure with clear lines of authority from the CEO down to entry-level employees.
Outplacement Services
Outplacement Services are support services provided by employers to help former employees transition to new jobs. These services can include career counseling, resume writing, interview preparation, and job search assistance.
For example, a company undergoing layoffs might offer outplacement services to affected employees to help them find new employment opportunities.
Outstanding Shares
Outstanding Shares are the total number of shares of a company’s stock that are currently owned by shareholders, including both restricted and freely trading shares. It represents the ownership stake in the company.
For example, if a company has issued 1 million shares and has bought back 100,000 shares, it has 900,000 outstanding shares.
Over-The-Counter (OTC)
Over-The-Counter (OTC) refers to securities traded directly between two parties rather than through a formal exchange. OTC transactions are often used for stocks, bonds, derivatives, and other financial instruments that do not meet exchange listing requirements.
For example, a small company might have its shares traded OTC because it does not meet the listing criteria of a major stock exchange like the NYSE or NASDAQ.
Over-Subscribed
Over-Subscribed refers to a situation where the demand for a new issuance of securities, such as an IPO, exceeds the number of securities available. It indicates strong investor interest and can lead to higher initial prices.
For example, if a company plans to issue 1 million shares in its IPO but receives orders for 3 million shares, the offering is over-subscribed.
Owner’s Equity
Owner’s Equity represents the owner’s claim on the assets of a business after all liabilities have been deducted. It is also known as shareholders’ equity in a corporation and is calculated as the difference between total assets and total liabilities.
For example, if a company has $1 million in assets and $400,000 in liabilities, its owner’s equity is $600,000.
Ownership Interest
Ownership Interest refers to the stake or share that an individual or entity holds in an asset or a business. It entitles the holder to a portion of the profits and, in the case of a business, a say in management decisions.
For example, if an investor owns 25% of a company’s shares, they have a 25% ownership interest in the company.
Ownership Structure
Ownership Structure is the arrangement of ownership in a company, detailing who owns shares and how much they own. It includes information on the distribution of equity among founders, investors, and other stakeholders.
For example, a startup might have an ownership structure where the founder owns 50%, early investors own 30%, and employees own 20% through stock options.