INCREASED EFFICIENCY & INTANGIBLE ASSETS: A Complete Guide To Earnings Season Doublespeak

citizen kane

We’re all pretty used to business-speak these days, whereby real meanings are coded into vague euphemisms in order to sound better.

It’s all part of business spin.

Forecasts aren’t reduced, they’re adjusted.

Workers aren’t laid off, they’re right-sized.

Proctor & Gamble and Goodyear are among the several companies this year that named efficiency as a way around rising commodity costs. That could be a sign of trouble.

Here’s a list of 20 business euphemisms and what they really mean, from Audit Integrity.

[slideshow]
[slide
permalink=”the-company-has-undergone-a-restructuring-in-the-last-12-months-1″
title=””The company has undergone a restructuring in the last 12 months.””
content=”Translation: Serious fundamental problems.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4b4201080000000000df26ba”
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[slide
permalink=”the-company-has-entered-into-multiple-mergers-within-the-last-12-months-2″
title=””The company has entered into multiple mergers within the last 12 months.””
content=”Translation: Management is unable to grow the company organically.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4b41fba200000000008e6ee4″
caption=””
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]
[slide
permalink=”the-ceos-and-cfos-compensation-is-more-highly-weighted-toward-incentive-compensation-than-base-compensation-3″
title=””The CEO’s and CFO’s compensation is more highly weighted toward incentive compensation than base compensation.””
content=”Translation: Management is ignoring long-term sustainability in favour of short-term gain.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4b3a5926000000000004df09″
caption=””
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]
[slide
permalink=”the-board-chairman-is-also-the-ceo-4″
title=””The Board Chairman is also the CEO.””
content=”Translation: The CEO controls the Board.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4b41fe870000000000f3c0ca”
caption=””
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]
[slide
permalink=”the-company-has-encountered-a-public-regulatory-action-in-the-last-12-months-5″
title=””The company has encountered a public regulatory action in the last 12 months.””
content=”Translation: Risk issues and/or control issues were actually documented by regulators. Possibly the tip of an iceberg.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4b42002300000000009f98cd”
caption=””
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]
[slide
permalink=”the-amount-of-goodwill-carried-on-the-balance-sheet-when-compared-to-total-assets-is-high-6″
title=””The amount of Goodwill carried on the balance sheet, when compared to Total Assets, is high.””
content=”Translation: The company overpaid for acquisitions.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4b42029c0000000000702ded”
caption=””
credit=””
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]
[slide
permalink=”the-ratio-of-the-ceos-total-compensation-to-that-of-the-cfo-is-high-7″
title=””The ratio of the CEO’s total compensation to that of the CFO is high.””
content=”Translation: Too much power is centered in one position (see No. 3 previously).

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4b1feb9c0000000000ce8eaf”
caption=””
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]
[slide
permalink=”operating-revenue-is-high-when-compared-to-operating-expenses-8″
title=””Operating Revenue is high when compared to Operating Expenses.””
content=”Translation: The company is relying on financial engineering to mask a weak condition.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4bf1848c7f8b9ae37c160000″
caption=””
credit=””
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]
[slide
permalink=”a-divestiture-has-occurred-in-the-last-12-months-9″
title=””A Divestiture has occurred in the last 12 months.””
content=”Translation: Management had to rectify a mistake.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4b4203730000000000eb359f”
caption=””
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]
[slide
permalink=”the-debt-to-equity-ratio-is-high-10″
title=””The Debt to Equity ratio is high.””
content=”Translation: The company is taking on excessive risk.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4c29f0297f8b9a324fee0000″
caption=””
credit=””
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]
[slide
permalink=”a-repurchase-of-company-stock-has-taken-place-in-the-last-12-months-11″
title=””A repurchase of company stock has taken place in the last 12 months.””
content=”Translation: Management boosted the share price via a buy-back rather than improving operations.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4b42066f0000000000fe9046″
caption=””
credit=””
credit_href=””
]
[slide
permalink=”inventory-valuation-to-total-revenue-is-increasing-12″
title=””Inventory Valuation to Total Revenue is increasing.””
content=”Translation: The company is understating future expenses.

Source: Audit Integrity

Photo: Flickr
image=”http://static.businessinsider.com/image/4b420825000000000002c8c6″
caption=””
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]
[slide
permalink=”the-ratio-of-accounts-receivables-to-sales-is-increasing-13″
title=””The ratio of Accounts Receivables to Sales is increasing.””
content=”Translation: The company is over-stating revenues.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4b7d6ba30000000000008add”
caption=””
credit=””
credit_href=””
]
[slide
permalink=”asset-turnover-has-slowed-when-compared-to-industry-peers-14″
title=””Asset turnover has slowed when compared to industry peers.””
content=”Translation: Organic growth slowed, or merger is not accretive.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4c90d1df7f8b9a7f4cae0400″
caption=””
credit=””
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]
[slide
permalink=”assets-driven-by-financial-models-make-up-a-larger-portion-of-the-balance-sheet-15″
title=””Assets driven by financial models make up a larger portion of the balance sheet.””
content=”Translation: Financial engineering is being used to obfuscate the company’s actual fundamentals.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4b420b0f0000000000c4ec2d”
caption=””
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]
[slide
permalink=”prepaid-expenses-are-high-16″
title=””Prepaid Expenses are high.””
content=”Translation: The company is putting off current expenses to pretty-up earnings.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4af0230b0000000000d90880″
caption=””
credit=””
credit_href=””
]
[slide
permalink=”deferred-tax-assets-are-high-17″
title=””Deferred Tax Assets are high.””
content=”Translation: Current expenses are understated.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4b420cdb0000000000e1a34f”
caption=””
credit=””
credit_href=””
]
[slide
permalink=”the-pension-plan-expected-return-and-discount-rate-are-high-18″
title=””The Pension Plan Expected Return and Discount Rate are high.””
content=”Translation: Current and future pension expenses are understated.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4a8af41c0cf1ef01015fa702″
caption=””
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]
[slide
permalink=”the-ratio-of-work-in-process-over-inventory-is-high-19″
title=””The ratio of Work in Process over Inventory is high.””
content=”Translation: The company is getting ready to write down inventory and whack Cost of Goods Sold.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4b420ddd000000000013dfdd”
caption=””
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]
[slide
permalink=”intangible-assets-are-high-20″
title=””Intangible Assets are high.””
content=”Translation: Subjectively-valued assets are waiting to be written off.

Source: Audit Integrity
image=”http://static.businessinsider.com/image/4b420eb100000000008fee93″
caption=””
credit=””
credit_href=””
]
[slide
permalink=”other-times-theres-no-hiding-the-truth-21″
title=”Other times there’s no hiding the truth…”
content=”Check out the 15 biggest PR disasters of the decade >
image=”http://static.businessinsider.com/image/4b4b4eed0000000000675e60″
caption=””
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]
[/slideshow]