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Securities and Exchange Commission (SEC): The federal government regulatory authority over
U.S. financial markets.
Shareholder class action: A lawsuit brought by a group of shareholders of a public company against
usually the officers and directors of the company for breach of their fiduciary duties or fraud.
Simple interest: Interest paid only on the principal.
Single-step income statement: An income statement format that simply deducts expenses and losses
from revenues and gains in arriving at a single measure of income from continuing operations.
Solvency: The ability to pay the bills and to meet all financial commitments.
SOX: The Sarbanes-Oxley Act of 2002.
Standard of value: The identification of the type of value being utilized in a specific engagement
(e.g., fair market value, fair value, investment value).
Statement of Financial Accounting Standards (SFAS): A pronouncement of the Financial
Accounting Standards Board; these statements are the central elements of generally accepted
accounting principles (GAAP).
Stock acquisition: The purchase of a controlling interest in a firm by buying its outstanding equity.
Sustainable earnings base: A revised historical earnings series from which the effects of all
nonrecurring items have been removed (see Core earnings).
Sustainable earnings worksheet: A worksheet used to organize and summarize nonrecurring items
so that their effects can be removed from as-reported net income in order to arrive at a sustainable
earnings base.
Synergy: The incremental value generated by the combination of two or more firms; sources may
include cost savings and revenue enhancement.
Systematic risk: The risk associated with common or market factors that affect all of the companies
in an economy. These factors cannot be diversified away by holding a portfolio, because all of the
assets or stocks in the portfolio are affected by these factors. When using the capital asset pricing
model, systematic risk is measured by beta.
Takeover: The transfer of corporate control from one group of shareholders to another. Target: A
firm that is the subject of takeover or acquisition activities.
Taxable transaction: An acquisition in which the target firm shareholders are immediately subject to
capital gains on their sale of shares.