“I could do this all year”

“Run-Rate Basis” is a technical finance term that has almost nothing to do with the individual words in the phrase. But no matter, it’s a trope that sounds really cool and that Wall Street people use to reinforce the notion that they are of above-average intelligence.

The phrase simply means to take a given metric such as revenue or profits for a recent period of performance, typically a quarter, and annualize the result (for a quarter, times the number by four). The purpose of doing this is to extrapolate recent past performance into the future. The potential problems with such fortune telling should be obvious.

Junior bankers, called analysts, are known to develop multiple techniques in their work to save time and energy. Anything that can shorten the period between when “face time” ends (typically 9 or 10 PM.) and when the analyst can actually get through his meaningless work and go home for the night is a welcome device. Using a “run-rate basis” is one such technique to make life easier, if used with caution. Continue reading →

Will it confuse the client? Then make it more accessible to the reader.

“More accessible to the reader,” adjective phrase, capable of being understood; comprehensible.  Usage note:  After an analyst or associate has taken a first crack at a presentation to a client, a vice president will usually sit down with the minion and review a printed copy of the document.  It should be noted that a typical VP, in particular if he’s achieved that title by surviving a stint as an associate, considers himself a genius, god’s gift to corporate finance. Continue reading →

Going forward into Cliché Land…

“Going forward,” adverbial phrase, henceforth; in the future.  Usage note:  When talking about a retailer’s ability to cut costs, an equity analyst, working himself into a lather of financial bullspit, might say, “We think the company will be able to ‘leverage’ SG&A ‘spend’ going forward.” Continue reading →

On the receiving end of finance-speak…

“Out of pocket,” adjective, unavailable (as for a meeting).  Usage note:  When a normal person engages in a conversation with a heavy user of financial lingo, translational problems can arise because Wall Street types can’t help but sprinkle their non-work exchanges with asinine entries from their industry lexicon.  For example, if a plumber sizes up a repair problem at a Wall Streeter’s house and then says, “I’ll call you later in the week when I have the parts I need,” he may hear the following response:  “I’ll be out of pocket.” Continue reading →

Another serving of those pro-forma results…

“Pro-forma” adjective, referring to financial statements this word describes the various “adjustments” to an actual, reported result (eg. revenue, income, costs, etc.) to show a hypothetical, expected or potential outcome that did not actually happen due to any number of factors. Companies and their bankers present pro-forma numbers in their attempt to get buy-siders and investors to ignore reality and believe their good story.  Perhaps the word, being Latin instead of plain English, was adopted so the smart finance guys could convey a sense of “it sounds complicated and it is… you wouldn’t understand.  Just trust us on this one.” Continue reading →