- NATO
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Short for: No Action Talk Only!
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Image: Shutterstock
Short for: No Action Talk Only!
Image: Shutterstock
NDA is an abbreviation of "Non-Disclosure Agreement" and means secrecy agreement or confidentiality agreement. The agreement governs how the parties must deal with the confidential information which they share with one another during a business negotiation or in the process of a transaction.
An NDA will contain:
Confidentiality clauses are also common in other business agreements, consultancy agreements and employment agreements.
There are a lot of other designations and abbreviations for secrecy agreements, for example "Confidentiality Agreement" (CA), "Confidential disclosure agreement" (CDA) or "Secrecy agreement". You just need to choose!
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A "Newco" is a newly-formed company (New Company) and is a legal entity in the form of a corporation. There are usually already-registered, empty Newco to purchase if you are in a great hurry. The new company may have a registered name such as "Shelf company 123 Ltd (Inc.)".
An example of a situation in which a Newco is used is in connection with a larger enterprise acquisition. It is then the newly-formed company which is the legal entity which obtains financing in order to carry through the purchase itself and which is presented as the formal new owner. The Newco, in turn, is owned by those who are responsible for the financing, for example an investment company, an industrial company or a venture capitalist. After the transaction has been carried out, the owners of the Newco will decide upon a new, suitable company name.
A company which does not itself, through its own business, create sufficient cash in order to be able to cover its costs and make its investments has negative cash flow. If the situation is temporary, the company must obtain new, external financing via a new issuance, other owner contributions, or loans. This can be acceptable in a start-up phase but is not a sustainable situation long-term. If the situation is not temporary, more comprehensive restructuring measures are needed.
In a new issuance, a corporation issues new shares. The company issues shares to existing, and sometimes also to new, owners. A new issuance is a way of financing the company. The company may need capital for growth (expansion) or for an acquisition. A new issuance of shares may also be needed in a crisis situation to strengthen the liquidity and the balance sheet.
Issuance of new shares means that the quantity of the company's outstanding shares increases and thus that existing owners' risk being diluted, that is, holding a lower percentage share of the company if they do not participate in the issuance. In order for shareholders to avoid being diluted, it is common for there to be preference issuances. In these the existing shareholders have preferential rights and are offered the opportunity to subscribe for new share in proportion to their existing holdings (pro rata). If a shareholder has 10% of the company's shares, she or he has a right to subscribe for 10% of the new shares.
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An enterprise which focuses its business on a limited part of the market. The total marked is divided up into appropriate segments and the enterprise then chooses a segment, a niche, within which it has competitive advantages and can differentiate itself.
Many new companies are started because there is a niche that is not well provided for by existing companies. There may even be an entirely new, niche need which comes in to being and in which the established businesses do not move quickly enough to adapt to customer demand.
NIHS stands for Not Invented Here Syndrome. It is a term for the tendency to reject appropriate external solutions to problems.
NIHS may include individuals, an organization, or an entire business. It occurs in a variety of situations, such as strategic planning, new product development, or organizational changes. Those who are set to solve a problem choose to develop their proprietary solution, although an available external solution is superior to the proprietary.
Causes of NIHS are often uncertainty and fear. The staff are afraid that the external solution will threaten their positions, which in some cases is a legitimate fear.
Example: A company chooses to purchase a product component from a sub-contractor instead of making it in house. The engineers responsible for the in-house development may then become redundant and lose their jobs. Hence, they will do everything possible to show that the external solution is inferior to the proprietary — even if it is superior and costs less.
A similar situation may arise, for example, in a reorganization when an external service provider is chosen to deliver office services. The employees recognize that the service provider will take over their tasks. They will now try to show that the service provider is inferior and in total more costly than the in-house-produced services. Unless the affected employees are offered new tasks within the organization, the fear and the uncertainty over their positions are justified.
Chronic NIHS, however, is a dangerous syndrome because it leads to stagnation. The business may not keep up with the development of new technologies, work processes, markets, business models, and customer behaviours. The company is in danger of losing its competitive advantage, which in a changing world goes very fast. The Board of Directors, and the management of the business must be observant and not allow chronic NIHS to develop.
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NPV stands for "Net Present Value" and describes the current value of future cash flows in investments. NPV is calculated with the help of the future, unencumbered net cash flow which is discounted at a chosen rate of interest (WACC). The term "net cash flow" means the difference between what is paid in and what is paid out as generated by the investment.
NPV calculations are used to evaluate and prioritize investments within a company, for instance in a new product line or machine. The net cash flows which the investment generates are calculated to present value using an interest rate which corresponds to the company's average cost of capital (WACC).
NPV is also used as one device (among many) to value an entire company, where the calculations are based on the enterprise's free cash flow (more or less the cash flow which could be distributed to the owners). An investor in the company, who evaluates various alternative investments, would use a discount rate of interest which corresponds to the alternative return from investments of equal value.
Compare with the DCF calculation, which gives the same result as an NPV when net cash flow is used in the calculations.
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