Return on sales (ros). This is a measure of how much
of each unit of sales ends up as reward to the providers
of capital. It may well be that increasing sales reduces
the ros. This could lead
to a conflict of interest
between a company’s shareholders and its sales force,
which is paid (partly at least) on commission.
Reverse repo
See next entry.
Reverse repurchase agreement
The opposite of a repurchase agreement,
in this case
between an investor and a broker. To ensure that it has the
desired quantity of securities available at the right time, a
broker may buy what it lacks from an investor on the under-
standing that it will buy them back at
a future date at an agreed
price. As with repos, reverse repos usually involve government
bonds.
Revolving credit
A loan with a particular condition: as soon as one bit of it is
repaid, it can immediately be borrowed again.
A revolving
credit has an upper limit on the amount that can be borrowed,
but no limit on the number of times the limit can be reached. As
well as interest on the loan, the lender will charge a fee for
making the funds available.
In the capital markets, a re-
volving credit facility is known as a revolver.
Revolving underwriting facility
Commonly called a ruf, a guarantee given by a group of
banks that funds will be made available
to a borrower which
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is raising money through an issue of securities to the public.
(See also note issuance facility and revolving
credit.)
Rights issue
An issue of shares that gives existing shareholders (normally
pro rata according to the number of shares they already hold) to
buy additional shares at a discount to the prevailing market
price and to the price at which they may later be offered to the
wider public. Such an issue (called
an offering in the United
States) is arranged by an investment bank or broker,
which usually makes a commitment to take up on its own
books any rights that are not sold as part of the issue.
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