Glossary of Terms

Weighted Average Cost of Capital.

Payment in return for work or services, especially that made to workers on a daily, hourly, weekly, or piece-work basis.

Wealth Added Index.

Wealth Added Index and WAI are both registered trademarks of the consulting firm Stern Stewart & Co.

The voluntary and intentional surrender of a known right or claim.
Often applies to loan agreements when a minor covenant breach has occurred and, potentially, a default might result.

Weighted Average Maturity.

Wide Area Network.

Economics.
An individual's desire for goods and services without regard to the ability to pay for these goods and services.

Entering into a swap without having entered into a matching swap, but with the expectation of hedging either through a matched swap or a portfolio of swaps.

An attachment to a debt security which gives a right, normally to purchase another financial instrument, for a specified price under specified conditions. The financial instrument is often an ordinary share.

Documentation.
Representations and warranties.

A term in a contract containing the statement of a fact (or occasionally an opinion) by the warrantor which reflects an important basis upon which the parties to the agreement have entered into that agreement.

Successful value investor, chairman and CEO of Berkshire Hathaway.

UK Tax.
A chattel with an expected life of less than 50 years.

Credit rating.
Credit Watch.

UK Tax.
Writing Down Allowance.

One form of the Efficient Market Hypothesis (EMH).
The EMH is the general hypothesis that markets operate efficiently. In other words that assets are fairly priced by the market mechanism to incorporate available information.

There are three forms of potential efficiency: the weak form, the semi-strong form and the strong form. The weak form states that past prices are no guide to future prices, so charting techniques cannot be used to make excess returns.

(WAI).
A measure of senior management performance.
WAI compares the capital growth and dividends enjoyed by the shareholders with the shareholders' required rate of return on their capital investment.

Wealth Added Index and WAI are both registered trademarks of the consulting firm Stern Stewart & Co.

Applies in some (non UK) countries to pay a percentage tax based on the difference of a taxpayer’s assets and liabilities.

A low-cost online service provided by Companies House in the UK to make company accounts and other company information readily available to the public.

Limited summary information is provided free of charge.

(WACC).
1.
The average cost of capital of a firm, taking into account all sources of capital, weighted by their current market values.

For a firm with both equity and debt capital, the WACC would be calculated as:

WACC = Ke x E/[D+E] + Kd(1-t) x D/[D+E]

Where:
Ke = cost of equity.
Kd(1-t) = after tax cost of debt.
E = market value of equity.
D = market value of debt.

For example where:
Ke = cost of equity = 10%
Kd(1-t) = after tax cost of debt = 3.6%
E = market value of equity = $100m
D = market value of debt = $100m

WACC = Ke x E/[D+E] + Kd(1-t) x D/[D+E]
= 10% x 100/[100+100=200] + 3.6% x 100/[100+100=200]
= 5% + 1.8%
= 6.8%

This weighted average is exactly mid-way between the cost of equity and the after-tax cost of debt, because the proportions of equity and debt are exactly equal in this example.

2.
In order to create or add shareholder value, the managers of this firm would need to earn an after-tax rate of return on their investment projects of more than the WACC of 6.8%.

(WAM). The average maturity of securities held in a fixed income or money market fund.

Also known as Average weighted maturity.

1. Pensions.
The statutory duty (in the UK) imposed on the Scheme Actuary, the Scheme Auditor, trustees, the employer and various other named parties to advise the Pensions Regulator immediately in writing if they have reasonable cause to believe there is a material problem with an Occupational Pension Scheme. Others may do so, but have no statutory duty to do so.
The duty was originally introduced under the Pensions Act 1995 and extended under the Pensions Act 2004.


2. More generally, disclosing misconduct to the relevant authorities, especially when disclosed by an insider.

Whistle blowing.

A worker who performs non-manual tasks.

Near enough the same as Large-value funds transfer system.

Lockboxes characterised by a moderate number of large cash remittances, usually from corporate payors.

Corporate and government public debt and money markets.

(WMBA). London based organisation which represents the interests of the inter-dealer brokers who operate in the wholesale financial markets in interest rates, credit, foreign exchange and equity derivatives.

(WAN). A network that connects computers and local area networks (LANs) in several locations.

An additional tax levied on businesses in a selected industry for a limited period, following a period of above-normal profits in that industry.

Winding-up.

1. A process whereby a company prepares for dissolution – the assets of the company are applied to discharge its liabilities and any surplus is returned to those who are entitled to it provided there is any excess remaining.

2. Pensions.
The process of terminating a pension scheme, usually by applying the assets to the purchase of individual insurance contracts for the beneficiaries, or by transferring the assets and liabilities to another pension scheme.

A time during which certain deals can occur because of particular market conditions.

Term widely used in North America. Near enough the same as, same-day value electronic credit transfer.

Economics.
Leakage.

A tax deducted at source on earnings, including employment income, dividends and interest payments, and can also include intangible services.

A phrase followed by the signature of a drawer or endorser of a negotiable instrument, whereby liability is disclaimed to subsequent holders in the event of non-payment.

Wholesale Markets Brokers' Association.

Partly completed manufactured goods, or the cost of work done to date.

1. Working capital is commonly defined as the excess of current assets over current liabilities. This working capital requirement for a company has to be financed by borrowings, shareholders' funds, or a combination of both of them.

2. Some practitioners define 'working capital' more widely, to include fixed assets (in addition to the other working capital items included in the narrower definition in 1. above). This - more broadly defined - working capital requirement similarly has to be financed by borrowings, shareholders' funds, or a combination of both of them.

An aspect of working capital management, measuring the length of time - positive or negative - between paying creditors and receiving cash from customers.

Working capital operates as a continuous cycle.
At its simplest, a creditor provides stock, the stock is then sold on credit, creating a debtor. In due course, the debtor pays, thus providing the firm with cash resources which are then used to pay the creditor and the surplus cash is retained in the firm. Firms can increase their financial efficiency by minimising the length of time this cycle takes. A firm that reduces its working capital cycle will reduce its working capital levels.

However, there are practical, operational and commercial limitations on how low working capital levels can fall without adversely affecting operations and relationships. As a result, the management of working capital is essentially a compromise between levels high enough for smooth commercial operation and levels low enough to be financially efficient.

A global organisation established in 1944 to provide financial and technical assistance to developing countries around the world.

The global system of information accessed and linked by the internet.

1. (WDA). UK Tax.
The annual tax allowance given to a business in respect of capital allowances for their qualifying capital expenditure.

For example, 18% per year on the reducing balance of unrelieved capital expenditure for many types of assets, from April 2012.

2. Tax.
Similar tax relief under other tax systems.

Sometimes known as 'tax depreciation' to distinguish it from accounting depreciation (which is not normally an allowable expense for tax purposes).

Where a director allows the company to continue trading when he knows or ought to have concluded that the company could not settle its debts.

World Wide Web.