Glossary of Financial Terms

Rate of Return – Measure of the profitability of an investment. For a company, it would be expressed as net profits divided by the capital employed.

Raw material supply agreement – An agreement to furnish a specified raw material for a specified period of time.

Real – The act of adjusting for the rate of inflation, such as if an economy’s output has increased by 5 percent over a year, and half of that reflects higher prices, half would be real.

Real account – A ledger account detailing assets and capital , such as machinery or buildings.

Real capital – Wealth represented in financial terms, such as savings account balances, financial securities, and/or real estate.

Real interest rate – Rate of return or interest after deducting the current inflation rate from the actual interest rate.

Receivables – Any outstanding debts or unpaid invoices owed to a company.

Recession – Decrease in economic activity usually measured in terms of Gross National Product (GNP) for two consecutive quarters. A severe recession is called a depression.

Reserve – Refers to the amount withheld by the factor net of the advance. This can be used as a financial cushion to protect against shortages, disputes between the client and the customer or bad debt losses due to customer non-payment. The reserve is released to the client after the customer has paid the factor the total monies due.

Reserve Release – A process of a factoring company releasing final monies due the client once the invoice has been totally satisfied less any applicable fees or charge-backs.

Residuary estate – Remainder of an estate after the payment of debts, expenses and taxes and the distribution of legacies.

Restructuring – Process of replacing debt of one type with another form of debt which can include selling business units, contracting or closing others and writing down inflated asset values. It can also be accompanied by a refinancing to help cover the cash costs and other restructuring expenses.

Return on Equity – Adjusted profit of a company divided by its equity. It is the profit of the company adjusted to exclude the impact of non-recurring exceptional gains, losses, income and charges.

Return on investment – Overall profit (or loss) on an investment expressed as a percentage of the total invested.

Revolving line of credit – A line of credit that can be drawn on by the customer according to need.

Risk – Potential downside on an investment that can take many forms such as currency risk, country risk, settlement, inflation risk, or market risk.

Rollover – Transferring of funds from one investment to another, for example, rolling over the proceeds from a bond which has matured into another bond; the term used when a borrower obtains authority from a bank to delay a principal payment on a loan.