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Multistep income statement: An income statement format that includes one or more profit subtotals
such as gross profit and operating profit (see also Single-step income statement).
National Association of Securities Dealers Automated Quotation (NASDAQ) system: An
electronic system set up by NASD for trading stocks. It is commonly referred to as the over-thecounter
(OTC) market.
Net cash flow: Cash inflows less cash outflows. When the term is used, it should be supplemented by
a qualifier (for instance, “to equity holders” or “to the firm”) and a definition of exactly what it means
in the given valuation context.
Net cash flows to equity holders: Those cash inflows less outflows flows available to pay out to
equity holders (in the form of dividends) after funding operations of the business enterprise, making
necessary capital investments, and reflecting increases or decreases in debt financing.
Net cash flows to the firm: Cash received by the firm less the associated cash expenditures.
Net operating loss carryforward: Under U.S. tax law, operating losses can be carried back and set
off against profits in the previous three years. A refund of taxes can be obtained. If the loss is greater
than the profits in the three previous years, then the loss can be carried forward for 20 years and set off
against the profits of future years. The carrying forward of a loss may produce a future tax savings. In
contrast, the carrying back of a loss produces a tax refund.
Net present value: Total present value of cash flows over a time period.
Noncurrent: Generally means longer than a year.
Nonrecurring items: Items of revenue, gain, expense, and loss that appear in earnings on only an
infrequent or irregular basis, fluctuate significantly in terms of amount and/or sign, and are often not
related to the core operational activities of the firm.
Nonsystematic risk: The risk associated with the unique or nonmarket factors that affect only a
particular company. These factors are reduced or diversified when the company‟s common stock is
held in a portfolio. Nonsystematic risk is not relevant and is not rewarded in stock investing, because
it can be diversified away.
NPER or Nper: N = number of periods.
Offshore outsourcing: The outsourcing of a manufacture, process, design, or function to a third-party
company located outside the company‟s base of operations in its own country.
Operating income: An intermediate, pretax measure of financial performance. Only operationsrelated
items of revenue, gain, expense, and loss are included in the computation of operating income.
Often considered equivalent to earnings before interest and taxes (EBIT).
Opportunity cost: A benefit forgone as a result of pursuing an alternative action.