Glossary

Obsolete

An asset that is considered to no longer be valuable to a business.

Occupational pension scheme

Scheme set up by companies that entitles employees to a pension upon their retirement.

OEIC (Open ended investment company)

A set of managed funds you can buy into. Shares issued are unlimited to meet demand with their value being derived from the value of the underlying assets of the fund. The price of shares should be the same whether they are bought or sold.

OMO (Open market option)

Scheme dating back to 1975 Finance act that offers an individual upon their retirement the right to buy an annuity from a provider other than the one who has given them a pension fund.

Operating cash flow

Cash generated from the operations of a business during the year. The calculation takes account of non operating cash flows such as interest, tax, depreciation and amortisation, as well as any changes in working capital.

Operating costs

Costs in addition to direct costs generally linked with the selling and administrative activities of a business. Also known as overheads.

Operating expenses

Relates to costs linked in with the selling and administrative activities of a business.

Operating margin

Calculated as operating profit divided by turnover, it reflects the return on a business sales after taking account of the core trading costs.

Operating profit

The profit of a business after deducting operating costs from gross profit.

Option

The right, but not obligation, to buy (call option) or sell (put option) shares or other financial instruments at a predetermined price on or before a predetermined date.

Ordinary shares

Authorised shares issued by a limited company representing the ownership of that company. Shareholders have the right to vote on matters such as corporate policy and the composition of members of the board of directors and usually have an entitlement to any dividends declared. Once issued shares can be traded either privately or publicly, if the company is listed on a recognised stock exchange. Ordinary shares are not secured on the company’s assets.

Output Tax

The VAT charged on the supply of goods or services made by a person or company registered for VAT which must be paid to HM Revenue & Customs.

Overdraft

A short term banking facility enabling an account holder to borrow up to an agreed amount.

Overlap profits

Profits which have been taxed twice because part of an accounting period falls within the basis period for tax computations for more than one year.

Overlap relief

Tax relief given for overlap profits brought forward on a change of accounting date, if the basis period is longer than 12 months, or on the cessation of trade.