Business Editing in Depth:10 Things You’d Better Know

May 1, 2012

Business editing can be tricky. We’ll cover 10 things that frequently trip up even the seasoned business pro — and help your stock as an editor reach record heights.

• About bankruptcy

• The World Bank and the IMF

• Debt vs. deficit

• Treasury securities

• Company designations

• Trademarks

• The SEC

• How to keep numbers relevant

• Rating agencies

• Stock-price reporting

Quiz Question #1:

What’s (probably) wrong about this statement?

Bloomberg news reports that US Airways, the nation’s sixth largest airline by traffic, is talking with creditors of bankrupt American Airlines, and negotiations, thus far, have reportedly been positive.

U.S. bankruptcy filings come in three common flavors:

Chapter 7Chapter 11Chapter 13

They are for different circumstances.

Bankruptcy

Chapter 7 bankruptcy is for business or individuals.

Bankruptcy

Pockets: danielmoyne/Flickr

Bennigan's: infrogmation

•As soon as Chapter 7 is filed, debt collection actions cease.

•A business is usually liquidated, its assets sold to pay off creditors.

•An individual’s personal assets, such as a car and a home, are generally protected, and the debts are simply dismissed.

If a business files for Chapter 7, you can say it is “in bankruptcy.” Not “bankrupt.”

Bankruptcy

Ed Yourdon-Flickr

Once it’s been dissolved, you can call it “bankrupt.” But if parts were sold, its name can live on, and it’s no longer the same “bankrupt” company.

Chapter 11 bankruptcy is usually for businesses.

Bankruptcy

• The business seeks protection from its creditors, so they won’t foreclose on assets.

• The business usually continues to operate, with a trustee appointed by the court, as it seeks to restructure itself or renegotiate its debts.

Chapter 11 is not a death knell.

Many businesses emerge from bankruptcy and go on to profitable futures.

That’s why it is crucial to say a company “has filed for bankruptcy protection” or is “operating in bankruptcy.” Never “is bankrupt.”

Bankruptcy

Chapter 13 bankruptcy is for individuals orunincorporated businesses.

Bankruptcy

• The individual cannot have more than about $350,000 in unsecured debt (like credit cards) and more than about $1.1 million in secured debts (like mortgages).

• Chapter 13 works for individuals similar to the way Chapter 11 works for corporations. The person is not “bankrupt.”

401k-Flickr

Quiz Question #2:

You want to invest in a new business in a poor country. Are you more likely to get help from the World Bank or the International Monetary Fund?

World Bankand IMF

The World Bank and the IMF are very similar yet very different.

They were even formed at the same time (Bretton Woods in 1944.)

The World Bank is really a development fund: It gives grants and loans to poor countries. The International Monetary Fund is really an international bank: It tries to keep money flowing among all its member nations.

World Bank and IMF

If it makes you feel any better, even John Maynard Keynes, who helped found them, was also confused by what their roles were.

World Bank and IMF

The World Bank tries to lift nations out of poverty at little or no cost to

the nations’ governments, through loans or grants .

World Bank and IMF

World Bank

The International Monetary Fund lends money, too, but mainly to countries having trouble with loans, debts and other parts of their monetary systems.

World Bank and IMF

Think of the World Bank as the Red Cross and the IMF

as your rich but stern Aunt Agatha. One won’t ask many questions; the other will require you to curb your lifestyle.

World Bank and IMF

Quiz Question #3:

What’s the difference between the national debt and the national deficit?

The national deficit is the difference between what the government takes in (in taxes and other income) and what it spends.

It’s calculated by the current fiscal year’s budget.

Debt vs. Deficit

The national debt is the money the government owes when it

borrows to cover its deficit.Think of the debt as accumulated

deficits.

Debt vs. Deficit

Rafiq Phillips/flickr

Quiz Question #4:

What’s (probably) wrong with this sentence?

The government auction of 10-year T–bills yielding 3 percent was successful.

Treasury bills are short-term securities, for a year or less.Buyers get no interest during the term; they buy T-bills at some discount off of face value.

Treasuries

• For example, a one-year T-bill might sell for $750. At the end of its term, it can be redeemed for $1,000.

Treasury notes are longer term, from

2 to 10 years.

They pay interest twice a year.

Treasuries

Treasury bonds are even longer term, up to 30 years.

They pay interest twice a year.

Treasuries

• The price of a note or bond at issue is determined by its interest rate and its “yield to maturity” (how much profit you’d get if you held it until it matured).

• The higher the interest rate, the lower the price.

Treasuries

Most government securities can be traded.

• The interest rate does not change, but the price and yield might.

• “Yield” and “price” move in opposite directions: The amount you get at the end of the bond doesn’t change, but if you pay more for a bond than it sold for originally, it cuts into your profit, so the yield goes down.

Treasuries

Quiz Question #5:Which of these is not a trademark?

• Jet ski

• Thermos

• Kleenex

• Frisbee

TrademarksTrademarks are a company’s way

of protecting its brand

• Anyone can trademark anything (that is not already trademarked), depending on jurisdiction, just by putting the symbol ™ next to the product name.

• A trademark is a lot like a copyright; it does not have to be registered, just declared.

Trademarks

Registered trademarks are stronger legal protection of a brand.

• Registered trademarks are listed with the U.S. Office of Patents and Trademarks.

• Only a registered trademark can use the symbol ®.

Trademarks

Overuse of a trademark to refer to something not of that brand

can result in the loss of the trademark.

• That’s what happened to aspirin, escalator, kerosene, laundromat, thermos, zipper and even Webster’s dictionary. Thermos: towodo/flickr

Zipper: cursedthing/flickr

Trademarks

If you don’t know that the thing you’re mentioning is a brand name, use a

generic term.

• One clue: If the name is also a logo, it’s probablya trademark.

• Search TESS (the U.S. Trademark Electronic Search System) or the International Trademark Association checklist for trademarks.

• Warning: Neither list is comprehensive!

Trademarks

Frequently misused trademarksand alternatives

• AstroTurf: artificial turf• Band-Aid: bandage• Dumpster: waste container• Frisbee: flying disk• Jet Ski: water scooter• Jetway: jet bridge• Onesies: baby crawlers

• Realtor: real-estate agent• Rollerblade: in-line wheeled skates• Speedo: swimsuit• Styrofoam: plastic foam• Taser: stun gun• Velcro: hook-and-eye fastener

Trademarks

What about ?It’s still a trademark, as a noun for a specific search engine.

As a verb, it’s still a trademark, but:• Even its founders have used “google” as a verb.• Some dictionaries include “google” as a verb.

It’s probably only a matter of time before Google loses its trademark.

Quiz Question #6:

What’s the difference between a company and a corporation?

All Corporations are companies. All Companies are not

corporations.

Co., Corp., Inc., LLC, etc.

How a business entity is formed determines what designation it can put after its name.

“Company” is both a generic term for any business entity and one way of setting up

a business.

A business can also be set up as a “sole proprietorship” or a “partnership.” Both are simpler to set up, but can put the

owners’ personal assets at risk.

Co., Corp., Inc., LLC, etc.

A “Corporation” is a business that has been set up with shareholders (even if it is not

publicly traded), to protect the owners from being held personally liable.

Co., Corp., Inc., LLC, etc.

An “LLC” is a “limited liability company.”

• An LLC is a combination of a corporation and a partnership.

• Many small businesses are formed as LLCs. They are more flexible than corporations, with their shareholders and structures, but still offer the owners protection for personal assets.

Co., Corp., Inc., LLC, etc.

Quiz Question #7:

What is (probably) wrong with this sentence?

The SEC filed criminal charges against the investor, claiming he made $5 million from insider trading.

The SEC watches over the stock, bond, currency and other markets.

Securities and Exchange Commission

• It sets requirements for what information about a business or investment instrument needs to disclose, and how.

• It rose out of the stock market crash of 1929.

When something goes wrong …

Securities and Exchange Commission

• While it is a law enforcement agency, the SEC makes rules, not laws.

• It investigates allegations of insider trading, irregularities in markets, etc.

• It cannot impose criminal charges, though it can request that other law-enforcement agencies bring them.

The SEC brings civil or administrative actions. Many

cases are settled.

Securities and Exchange Commission

• Until recently, a company or person could settle SEC cases that had accompanying criminal cases without admitting or denying guilt.

• A company can still settle SEC administrative or civil cases without admitting or denying guilt.

Quiz Question #8:

What is (probably) wrong with this paragraph?

Passenger traffic at JFK, LaGuardia and Newark airports totaled some 83.9 million, up 3.6 percent from the previous year. At the agency’s four bridges and two tunnels, total vehicular traffic, measured in the eastbound direction only, was approximately 118 million, a 3.9 percent increase from 1996 levels. On PATH, ridership grew 2.6 percent to about 62.2 million passengers. Overall, the agency’s gross operating revenues rose last year by $52 million to $2.2 billion, and operating expenses fell $8 million to $1.5 billion. Its net income rose to $161 million, an increase of $72 million over 1996.

The root of “numbers” is “numb”

The relevance of numbers

• Keep in mind that many readers’ eyes just pass over numbers.

• Limit the number of numbers you use to avoid numbing your readers.

• Three per paragraph is a good rule of thumb.

Break large numbers down

The relevance of numbers

• If, say, a report says 350,000 cars use a local bridge each year, break it down into days.

• Take that number (about 1,000 cars a day) and compare it to what you know of the traffic on that bridge.

• You don’t have to show the reader the math, but it could help you spot errors.

Alex E. Proimos/flickr

Break large numbers down

The relevance of numbers

• For really big numbers, come up with a comparison your readers can digest: The wildfire burned nearly 500 square miles, an area half the size of Rhode Island

clearlyambiguous/flickr

But make sure the numbers are relevant

• Equating Bill Gates’ net worth to, say, 400,673,910 top-of-the-line iPads is meaningless.

• Comparing something to the “size of Central Park” is irrelevant to readers who don’t know how big Central Park is.

Quiz Question #9:

The U.S. credit rating was lowered from AAA to AA+ last year. How important is that?

Rating agencies are to corporate and governmental debt much like Equifax

and TransUnion are to consumer debt.

• The higher the rating, the lower the interest rate the debt has to offer to get people to buy it (lend money).

• The agencies investigate the issuing entity to determine how likely it will be able to pay the interest and/or principal on the debt or bonds it issues.

Ratings agencies

Standard & Poor’s

Ratings agencies

• The highest rating is AAA; its scale then goes AA, A, A.; BBB, BB, B, etc. Ratings from AA to CCC can be modified with a + or -.

• Anything above BBB- is “investment grade,” meaning the debt is likely to be paid off, so you can invest in it with some confidence.

• Below that is considered “speculative grade,” meaning there’s a good chance the debt won’t be paid. Many “speculative grade” bonds are also known as “junk bonds.”

Moody’s

Ratings agencies

• Moody’s highest rating is Aaa. Its scale then goes Aa, A, Baa, Ba, B, Caa, Ca, C. Ratings from Aa to Caa can be modified with a 1, 2 or 3 to indicate how high (or low) in that category the bond ranks.

• Debt with any A rating is considered “investment grade.” Baa is considered a moderate risk. Below that lies speculative securities.

• A C rating means there’s almost no chance any principal or interest will be recoverable.

Quiz Question #10:

Which stock performed better?

Landsin jumped $14, to $154; Peach gained $2, to $8.50; and Hermata rose $10, to $354.

Numbers need context.

Sometimes percentages tell more than raw numbers.

Stock reporting

MikeBaird/flickr

For example, the largest point drop in the Dow Jones Industrial Average was

777.68, in 2008. But the market was at a high then, so the percentage

drop, 6.98, was not as great.

Stock reporting

The greatest percentage drop was 22.61 in 1987.

The DJIA dropped 508 pointsthat day.

The higher the number, the greater the proportional change needs to be to have an impact.

Stock reporting

For individual stocks, small numbers can yield big changes.

• Apple trades around $600 a share. If it goes up or down by 10 points, that would be a change of less than 2 percent.

• Microsoft trades around $30 a share. If it goes up or down by 10 points, that’s a 33 percent change.

Stock reporting

mashable.com

Beware of the words• Did Apple stock “soar” by 10 points? Did Microsoft “plunge” by 10 points?

• Make the verb match the action. A stock that gained 1 percent should not “jump” when a stock that gained 5 percent merely “rose.”

Stock reporting

Beware of the words• Avoid using the word “crash,” especially when it’s a one-day decline in the Dow.

• While there’s no real definition of a “crash,” it’s generally considered to be a broad double-digit decline in the market over several days.

• “Crash” has all sorts of emotional connotations. Let experts call a “crash.”

Stock reporting

Questions?