on one hundred dollars gives a 6% rate of return. See also yield.
ready cash items: Cash, certificates of deposit, stocks, bonds, and other investments that have clear market value and
can be turned into cash in very short order.
real accounts: Accounts that are not closed to a zero balance at the end of each accounting period; permanent accounts
appearing on the balance sheet.
real estate investment trust (REIT): A company that specializes in real estate investments. A REIT must meet strict
ownership, investment, and income distribution tests to qualify for tax treatment as a REIT. REIT's allow individual investors
to diversify their real estate investments. REIT's are like mutual funds except the underlying investments are in real estate
rather than stocks and bonds.
realized gains and losses: Gains and losses resulting from the sale of securities in an arm's length transaction.
Realtor: A designation reserved for those who are affiliated with the National Association of Realtors.
recapitalization: A substantial restructuring of the stock and/or bonds of a corporation by amending the articles of
incorporation or by merger with a parent or subsidiary.
receivables: Claims for money, goods, or services.
recourse: The right to seek payment on a discounted note from the payee if the maker defaults.
recovery period: The time period designated by Congress for depreciating business assets.
redemption value: The price, stated in the contract, to be paid by a company to repurchase preferred stock.
registered bonds: Bonds for which the names and addresses of the bondholders are kept on file by the issuing company.
reinsurance: An agreement between two insurance companies to share the risk taken on by one company for insurance
policies where the risk of loss is substantial.
related taxpayers: The tax law does not allow tax losses between certain related taxpayers. The prohibited relationship
can be that of family members, a shareholder and his or her corporation, or the cross ownership of two or more legal
entities such as corporations and partnerships.
relative fair market value method: A way of allocating a lump-sum or "basket" purchase price to the individual assets
acquired based on their respective market values.
remainderman:
The one entitled to an interest in property after the termination of a life estate. For example, a surviving spouse may have
the use of real estate until her death, at which time the remainder interest passes to her child (the remainderman). See also
life tenant.
residential property: Residential property includes houses, condos, trailers, and boats if they have sleeping, eating, and
bathroom facilities. If you have more than one residence, only one will quality for the preferred tax treatment as your
principal residence. Your principal residence will be the place where you spent the greatest part of the year.
residual income: The amount of net income an investment center is able to earn above a specified minimum rate of
return on assets.
retail inventory method: A procedure for estimating the dollar amount of ending inventory; the ending inventory at retail
prices is converted to a cost basis by using a ratio of the cost and the retail prices of goods available for sale.
retained earnings: The portion of a corporation's owners' equity that has been earned from profitable operations and not
distributed to stockholders.
return on investment (ROI): A measure of operating performance and efficiency in utilizing assets computed in its
simplest form by dividing net income by average total assets.
return on sales revenue: A measure of operating performance; computed by dividing net income by total sales revenue.
return on stockholders' equity: A measure of overall performance from a stockholder's viewpoint; includes
management of operations, uses of assets, and management of debt and equity, and is computed by dividing net income
by average stockholder's equity.
return on total assets: An overall measure of the return to both stockholders and creditors; includes operating
performance and asset turnover.
revenue recognition principle: The idea that revenues should be recorded when (1) the earnings process has been
substantially completed and (2) an exchange has taken place.
revenues: Increases in a company's resources from the sale of goods or services.
reverse mortgage: A source of funds for older people who have equity in their homes and need additional retirement
money. The homeowner gets monthly payments that add to the mortgage balance. When the homeowner dies, sells the
home, or moves out, the mortgage is paid off from the proceeds of the home sale. A reverse mortgage allows older people
to remain in their homes while borrowing against the equity.
revocable trust: A trust that can be altered or terminated by the grantor (the person who established it).
ROI (return on investment): A measure of operating performance and efficiency in utilizing assets computed in its
simplest form by dividing net income by average total assets.
Roth IRA: A Roth IRA is treated like a traditional IRA except for several important differences. Contributions to a Roth are
never tax-deductible. Qualified withdrawals from a Roth are not taxable. There are income limits that determine who may
set up and contribute to a Roth. Contact us for assistance in determining whether or not a Roth is better for you than a
traditional IRA.
