Guide to Analysing Companies

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REMITTANCE
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Renunciation
The decision by shareholders not to take up their rights to a new
issue of securities (usually issued pro rata according to their
existing holdings of shares). If shareholders renounce their
rights, the rights shares can be sold on to somebody else. (See
rights issue.)
Repackaging
The splitting of a security into separate bits (the separate en-
titlements of repayments of interest and principal, for in-
stance). These are then sold as separate financial
instruments, often to different types of investors looking for
different things. (See also strips.)
Replacement cost
The cost of replacing any asset that is wasting over time. To
ensure that they have enough capital to replace old plant and
machinery, wise companies set aside some of their profit
every year. In the United States, replacement cost is also called
current cost and replacement value, but it amounts to the same
thing. Under replacement cost accounting, companies are
allowed to depreciate part of the difference between the origi-
nal cost of plant and the current cost of replacing it. (See also
depreciation.)
Repo
See next entry.
Repurchase agreement
An agreement between a broker and a company with surplus
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cash. The company buys securities (usually government
bonds) from the broker and agrees to sell them back again on
a future date at an agreed price. By the time the securities return
to the broker, it hopes to have found a (longer-term) investor to
buy them.
Repurchase agreements (repos) are common in the United
States. They are attractive to companies with surplus cash
because they are flexible and can be negotiated for as long or as
short a time as the company likes. The federal reserve, the
US central bank, also makes use of repos when tinkering
with the money supply. To boost the supply of money in the
banking system, the Fed buys securities from dealers which,
in turn, deposit the proceeds with their commercial banks, thus
increasing the money supply. (See also reverse repurchase
agreement.)
Rescheduling
The creation of a new payment schedule for a debt, done with
the agreement of both the borrower and the lender; that is, for-
mally putting off until tomorrow what you cannot pay today.
Rescheduling is done by both large debtors (such as Latin Amer-
ican countries which have borrowed from international
lenders) and small ones (such as impecunious consumers of
public utilities). Rescheduling is easiest when there are few
debtors involved. The widespread use of the international
capital markets even by relatively small countries or by
agencies within those countries has made it harder to agree on
deals to reschedule debt. It takes only one disgruntled lender to
scupper a deal.
Reserves
Surplus funds that are stored away by organisations to meet
future expenditure. A company’s capital and reserves belong
to its shareholders. They are an amalgamation of the original
capital put up by the shareholders and the reserves that have