Rabbi Trust
A nonqualified deferred compensation plan whereby an employer and employee agree to defer payment for the employee's services until a specified future date. The rabbi trust features an irrevocable grantor trust that is set up by the employer to hold the contributions set aside for the employee. While this provides the employee some degree of safety that the money will be available when desired, the terms of the trust must be such that exposes the trust assets to the claims of the employer's creditors.

Rate of Return
Money made on invested capital. It is the gain or loss for a security in a particular period, consisting of income plus capital gains relative to investment, usually quoted as a percentage. The real rate of return is the annual return realized on that investment, adjusted for changes in the price due to inflation.

Ratio Analysis
A technique for analyzing financial statements in which meaningful relationships are shown between components of financial statements.

Real-Estate Investment Trust (REIT)
A trust that owns real estate and sells shares from the profits of that ownership to investors.

Realization Principle
That revenue should be recognized at the time goods is sold and services are rendered.

Realized Net Income
In relation to a particular investment, is the amount by which the total cash gains from an investment exceeds the total losses from the investment. The Realized Net Income from any investment cannot be less than zero.

Real Property
Land and buildings on the land, as opposed to personal property, which comprises movable items such as jewelry and equipment.

Real Rate of Return
The rate of return on an investment that takes into account how rates are affected by inflation. The real rate of return is the rate of return less the rate of inflation over the length of the investment.

Realized Gain/Loss
In securities, is a capital gain or loss on securities held in a portfolio that has become actual by the sale or other type of surrender of one or many securities. See also CAPITAL GAIN.

Reasonable Certainty
The degree of certainty that would be found to be in existence by a reasonable person.

Recapitalization
It is dependent upon how you use the term. The term recapitalization in itself is, dependent upon the scenario, simply an adjustment of the relationships between the debt and equity that funds a firms assets. However, it can become quite complex dependent upon under what conditions or reasons the firm is being recapitalized. This is specially true if recapitalization is being pursued to ward off a hostile takeover.

Reconciliation
The adjusting of the difference between two items (e.g., balances, amounts, statements, or accounts) so that the figures are in agreement. Often the reasons for the differences must be explained. One example would be reconciling a checking account (bringing the checking ledger and bank balance statement into agreement).

Recourse
Being able to compel a debtor to cover debts.

Red Herring
A preliminary registration statement describing the issue (the IPO) and prospects of the company that must be filed with the SEC or provincial securities commission. There is no price or issue size stated in the red herring. Red Herring's are sometimes updated several times before it is called the final prospectus. It is known as a red herring because it contains a statement typed in red that the company is not attempting to sell their shares before the registration is approved by the SEC.

Related Party Transaction
An interaction between two parties, one of whom can exercise control or significant influence over the operating policies of the other. A special relationship may exist, e.g. a corporation and a major shareholder.

Reorganization
After a business has declared bankruptcy, the restructuring of its assets in order to make it profitable again.

Reserve
An accounting entry that properly reflects contingent liabilities.

Residual Value (see Salvage Value)
The estimated net scrap, salvage, or trade-in value of a tangible asset at the estimated date of disposal. Another way to describe residual value is the value an asset has when the asset’s user or owner is finished using it.

Responsibility Accounting
The collection, summarization, and reporting of financial information about various decision centers throughout an organization; can also be called profitability accounting or activity accounting. It tracks costs, revenues, or profits to the individual managers who are responsible for making the decisions about costs, revenues, or profits and taking action about them.

Restrictive Covenant
A clause in an agreement or contract prohibiting a party or parties from taking certain actions. The most common restrictive covenant in business is one that prohibits a seller of a business from engaging in the same business for a certain number of years.

Retained Earnings
Business profits that are retained for expansion rather than paid in dividends to stockholders. They are profits of the business that have not been paid out to the owners as of the balance sheet date. The earnings have been "retained" for use in the business (Retained Earnings is an account in the equity section of the balance sheet). It is comprised of the balance, either debit or credit, of appropriated or unappropriated earnings of an entity that are retained in the business. NOTE: Appropriated earnings are not available for dividends, but may be used to reduce a deficit or may be transferred to stated capital. Other appropriations of profits require a vote of the shareholders

Return on Equity
A measure of profitability related to the amount earned by a business in relation to the owners' investment in the business.

Revenue
The total income from a given endeavor. Also gross income from an investment.

Review
An accounting service providing some assurance to the Board of Directors and interested parties as to the reliability of financial data without the CPA conducting an examination in accordance with generally accepted accounting standards. The AICPA auditing standards board formulates review standards for public companies while the AICPA Accounting and Review Services Committee provides review standards for non-public businesses.

Revocable Trust
A trust giving property to heirs that can be changed or revoked at any time by the person who originates the trust. Under this arrangement, the property is transferred to the heirs on the death of the trust originator, and the estate does not need to go through probate.

Right of Survivorship
The right of surviving spouses to inherit the property of deceased spouses.

Risk
In financial terms, the possibility that an investment will not be repaid and that the method of investment will be rendered unprofitable by market conditions.

Rollover
The automatic renewal of a certificate of deposit (CD) at present rates of interest. Also, the automatic reinvestment of money market funds.

Rule of 72
A way of determining how long it will take for a sum of money to double at a specific interest rate, by dividing 72 by the interest rate. For example, a savings account earning 6 percent interest will double in 12 years, since 72 divided by 6 equals 12.

Running Total
Is the sum of any given set of numbers that is incremented/decremented as additional numbers become available over time. For example, a retail store makes sales throughout a time period, the running total is the sum of their sales, including returns/credits, at any given point of time during that time period: day, week, month, quarter, year.