UP
© 2001 Pamela P. Peterson
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z
A method of depreciation that results in greater depreciation expenses in the earlier years of an asset's life.
The difference between revenues and expenses of a business enterprise, determined according to a set of accounting principles (e.g., in the U.S., accounting profit is determined according to generally accepted accounting principles, GAAP).
Amounts due to suppliers for goods or services purchased on credit.
Amounts due from customers arising from the extension of trade credit.
The ratio of net credit sales to accounts receivables; a measure of the number of times in a period that credit sales have been created and collected.
The sum of depreciation taken for physical assets in the firm's possession.
A ratio that relates information on a firm's ability to manage its resources efficiently.Addition paid-in capital
An amount paid for shares of stock in excess of the par or stated value of the shares.
An interest arrangement in which interest is added to the loaned amount, and the principal (amount borrowed) and interest are repaid in equal, periodic payments.
A loan, secured by real estate, with an interest rate that varies according to some other, specified rate.
A relation between two parties in which one party (the agent) is authorized by the other party (the principal) to make decisions or take actions for the benefit of the authorizing party.
A person authorized by another person (the principal) to act for him.
A present value that has been transformed into an equivalent series of cash flows considering the time value of money.
A rate of interest stated on an annual basis (i.e., as a rate per year).
A standard for reporting interest rates, in accordance to the Truth in Lending Act, that results in a simplified manner of annualizing and comparing rates. The interest rate per compound period is multiplied by the number of compound periods in a year, producing an annualized rate of interest.
An annualized rate that considers the effects of compounding with the year. See also EAR.
A series of even cash flows that occur at even intervals of time.
A series of periodic, even cash flows in which the first cash flow occurs today.
APR
See annual percentage rate.
The process of buying and selling identical assets in different markets at different prices until the asset have the same price everywhere.
A model of asset prices that states that the expected return on an asset is the sum of the risk free rate and the expected return associated with unanticipated factors.
An asset pricing theory developed by Stephen Ross that is based on the idea that identical assets in different markets should be priced identically.
A document that is filed with the state by a business entity that seeks incorporation; the document describes the business and the rights and responsibilities of its owners.
Property, either real, personal, tangible, or intangible.
A security created by pooling together assets (e.g., home mortgages, credit card accounts receivable) and selling interests in these assets.Assumable mortgage
A mortgage that allows the borrower to sell the property to another party and this party assumes the debt obligation.Average tax rate
The average rate of tax on a dollar of taxable income, calculated as the ratio of taxes to taxable income. The tax rate paid, on average, per dollar of taxable income.
UP |
A statement of assets, liabilities, and net worth at a point in time. Also referred to as the statement of financial position.
Basic earnings per share (Basic EPS)
Net income, less preferred dividends, divided by the number of shares of stock outstanding.
The ratio of a firm's operating income to its total assets; a measure of the return on a firm's investment in assets.
A measure of the sensitivity of an asset's returns to the changes in the returns on the market portfolio.
See profitability index.
A trust in which the grantor has no influence or information regarding the decisions of the trustee.
The governing body of a corporation that is elected by and makes decisions in the interest of the corporation's owners.
An agreement between a lender (the issuer) and a borrower(the investor).
The value of an asset, liability, or equity interest as determined by applying generally accepted accounting principles. For example, the book value of a depreciable asset is its original cost less any accumulated depreciation.
The value of the ownership interest in a company according to the accounting conventions applied; the sum of the par value of equity, additional paid in capital, retained earnings, less treasury stock.
Book value of equity per share
The ratio of the book value of shareholders' equity to the number of shares of stock outstanding.
A debt obligation in which the borrower promises to repay the amount of the borrowed loan at a specified point of time in the future, plus (if agreed upon) pay interest on the borrowed funds.
Costs incurred by an agent in an agency relationship to ensure that he/she will act in the best intersts of the principals.
Promises to repay borrowed funds and to make periodic interest payments.
The carrying value of an investment according to the financial statements; the carrying or reported value of an asset, liability, or equity account according to generally accepted accounting principles.
The carrying value of the common shareholders' investment in the firm; common shareholders' equity divided by the number of common shares outstanding.
A written plan that organizes actual and projected cash inflows and outflows over a period of time.Budgeting
The process of organizing, projecting, monitoring and controlling future cash inflows and outflows.
Economic activity that spans temporary phases of activity of expansion, recession and recovery, producing a wave-like pattern of economic activity.
The uncertainty associated with the operating cash flows of business enterprise.
The rules of governance of an organization; for a corporation, the bylaws (along with the articles of incorporation) become part of its corporate charter.
UP |
The uncertainty regarding whether a callable security (e.g., callable bond) will be called (i.e., purchased) from the investor by the issuer.
A firm's resources; funds raised from long-term sources, such as bonds and stocks.
Capital asset pricing model, CAPM
A theory of how assets are priced, where the expected return on an asset is the sum of the risk free rate of interest and a premium for bearing market risk.
The process of identifying and selecting investments in long-lived assets.
A gain (profit) on the sale of an asset used in business, which may receive preferential tax treatment through an exclusion of a portion of the gain from taxation or simply from a lower tax rate.
The discount rate that translates a future series of cash flows into a present value.
A rental obligation that is considered a long-term debt.
The preferred set of portfolios for risk averse investors that are a combination of the optimal portfolio (i.e., market portfolio) and either borrowing or lending opportunities.
A situation in which there is a limit on the amount of spending on long-term investment projects.
See payback period
See book value.
Cash flow from financing activities
Cash flows arising from the issuance, retirement, or repurchase of debt and equity securities.
Cash flow from investing activities
Cash flows related to the purchase or sale of physical assets.
Cash flow from operating activities
Cash flows of the firm arising from day-to-day operations.
Cash flow interest coverage ratio
The ratio of a firm's cash flow available to pay interest to its interest expense; a measure of a firm's use of financial leverage.
The uncertainty associated with the amount and timing of future cash flows from an investment.
A summary of cash inflows and outflows. For an individual using the cash basis of accounting, this statement is a summary of income (i.e., cash inflows) and expenses (i.e., cash outflows) during a period of time (e.g., a year). Also referred to as the income and expenditures statement and the income statement.Certified Financial Planner Board
A non-profit professional regulatory organization that regulates financial planners by means of the trademark law, licensing individuals who meet its certification requirements to use the registered CFP marks.Commercial bank
A corporation that is chartered under federal and state regulations to provide financial services to both individual and business customers.
The residual (last-in-line) ownership of a corporation, represented by shares of stock.
The study of financial statements that have been restated such that each item is reported as a percentage of a base, where the base for the balance sheet is total assets and the base for the income statement is sales revenues.
Property owned by both parties to a marriage. In states with community property laws, any property acquired after marriage becomes community property.
Translating a value today into a future value, considering that interest is earned on interest.
The payment of interest both on the principal amount and accumulated, earned interest.
Consensus forecast
A measure of the forecasts about a particular item, such as gross
domestic product or a company's earnings; in the case of analysts' earnings
forecasts, the average of the available forecasts is often used as the
consensus forecast.
Debt that is created when consumers are given an extenstion in the
time to pay for goods or services.
Consumer price
index (CPI)
A measure of prices or the cost of living published by the Bureau of Labor Statistics of the U.S. Department of Labor. The index is constructed to track the price level of a group of goods and services.
Consumer Credit Protection Act
See Truth in Lending Act
An arrangement in which interest paid on interest such that the compounding period is the smallest unit of time possible; compounding in which there are an infinite number of compounding peiods.
A loan, secured by a home, that has a fixed interest rate and is typically not insured or guarenteed by a governmental agency.Convertible security
A bond or stock that can be exchanged for another security of the issuer.Corporation
A business entity created by law that is capable of entering into contracts, incurring liabilities and carrying out business.
Association of two variables.
A statistical measure of the association between two variables that is bounded by -1 (perfect negative correlation) and +1 (perfect positive correlation); the ratio of the covariance between two variables to the product of the standard deviations of the two variables.
The cost of funds to a business enterprise, usually stated in percentage terms; the weighted average of the cost of debt and equity of a firm.
The interest on a debt.
The annual interest on an interest-bearing debt obligation, expressed as a percentage of the security's face value.
A statistical measure of the association between two variables.
A measure of a firm's ability to satisfy particular obligations (e.g., current ratio is a measure of a firm's ability to satisfy its current liabilities).
The uncertainty regarding the timely payment of amounts owed.
A non-profit cooperative that pools depositors' (members') funds and make loans to members. Members have a common bond (e.g., same employer).
The discount rate at which the net present values of two projects are equal; the internal rate of return of the differences in the cash flows of two projects. Also referred to as the cross-over discount rate.
The uncertainty associated with changes in the relative value of currencies. Also referred to as exchange rate risk.
An asset that can reasonbly be expected to be liquidated (i.e., turned into cash) within one operating cycle (which is usually one year).
A debt obligation that is due within one year.
The ratio of a firm's current assets to its current liabilities; a coverage ratio.
UP |
Debt backed only by the general credit of the issuer.
A method of depreciation that applies a constant rate to a declining, undepreciated balance of an asset's book value.
The uncertainty associated with the payment of required cash flows of a security (that is, the interest or principal of a bond) when promised.
A series of level cash flows that occur at regular intervals, though the first cash flow occurs after the end of the first interval.
A tax obligation that is expected in the future, but for which the expense has been deducted from income for financial reporting purposes.
Degree of financial leverage, DFL
The sensitivity of net income to owners to changes in operating income.
Degree of operating leverage, DOL
The sensitivity of operating earnings to change in unit sales.
The sensitivity of net income to owners to changes in unit sales; the product of the degree of operating leverage and the degree of financial leverage.
The allocation of the cost of an asset over its useful life.
the amount of tax that is eliminated because of the tax-deductibility of the depreciation expense for the determination of taxes.
A severe recession, marked by high unemployment, low prices, and severally decreased economic activity.
Securities in which the value is determined (derived) from another security or asset.
Diluted earnings per share (Diluted EPS)
Net income, divided by the number of shares outstanding considering all dilutive securities.
A bond that is selling for less than its face or par value; a bond whose coupon rate is less than the bond's yield-to-maturity.
The time it takes for the initial investment to be paid back in terms of discounted future cash flows, where future cash flows are discounted at the project's cost of capital.
The process of translating a future value (i.e., a value at some future point in time) into a current, present value (i.e., a value at the current point in time, today).
An interest rate on a loan arrangement in which the interest is "paid up front"; that is, the funds available to the borrower are equal to the amount of the loan, less the discount (specified as percentage of the loaned amount).
Risk that can be eliminated by combining assets whose returns are not perfectly, positively correlated with one another.Diversification
The reduction of risk through the inclusion of different securities whose returns are not perfectly positively correlated with one another.
The deduction of a portion (specified in tax law) of dividends received by a corporation from another corporation.
The ratio of dividends to earnings; the percentage of earnings that are paid out to owners in the form of dividends.
The ratio of dividends paid to the number of shares of stock outstanding.
Dividend valuation model (DVM)
A model that relates the price of a share of stock to expected next period dividends, the expected growth rate of future dividends, and the required rate of return.
A method of decomposing return ratios into components, the mosts common use of which is to break return ratios in the profit margin and turnover components.
UP |
The net income of a company, divided by the number of shares outstanding.
Earnings surprise
The deviation of actual earnings from expected earnings; actual
earnings per share less expected or forecasted earnings per share.
The estimate of the length of time that an asset will provide
benefits to a firm. Also referred to as the useful life.
The difference between revenues and costs, where costs include the
opportunity cost of invested funds and normal profits.
Another name for economic
profit; EVA is a trademarked designation of Stern Stewart for the
concept of economic profit.
An annualized rate that considers compound interest; also known as
the effective annual rate of
interest and the effective
rate of interest.
The set of possible portfolios that dominate other portfolios in
terms of risk and return.
A market in which information is reflected rapidly into asset
prices.
The process by which clients ensure that the maximum portion of
their estate will be left to their heirs and beneficiaries.
See Currency
risk.
The anticipated return; regarding a probability distribution, the
weighted average of the possible outcomes, with the weights being the
probabilities.
Effects of an action by one party on another party not directly
involved in the action.
UP |
The responsibility to act in another's best interest.
A relation that is founded on the trust or confidence of one party in the fidelity or integrity of another party.Financial analysis
The evaluation of the financial condition and operating performance of a business enterprise.
Financial distress
The situation in which a business enterprise is having difficulty
satisfying immediate and near-term obligations, which may result in
non-optimal financing and investment decisions in an attempt to meet these
obligations.
The use of debt to finance a business which, because of the fixed
financing expenses associated with debt, results in a "leveraging" or
accentuating effect on the returns to owners; also referred to as
gearing.
A ratio that reflects the extent to which a firm has financed its
assets with debt.
The management of the cash flows of a business to make a profit
for the firm's owners.
A set of strategies and products that are available to meet the
client's objectives.
Financial
planning
Planning that includes the key aspects of a client's financial affairs and is targeted to achieve the client's financial goals.
The decomposition of the nominal interest rate into the inflation rate, the real return, and the cross-product of the inflation rate and the real return.
The ratio of sales to fixed assets; a measure of the firm's ability to put fixed assets to work to generate sales.
The ratio of a firm's income available to cover fixed financing obligations to its fixed financing obligation; a measure of a firm's use of financial leverage.
A security that represents an arrangement to buy or sell an asset at a fixed price at a fixed time in the future.
The value at some time in the future of a current value or a series of cash flows.
The sum of compound factors that is used to translate an annuity (i.e., a series of even, periodic cash flows) into a value in the future.
UP |
A partnership in which each partner is liable for the debts of the business (partner referred to as a general partner). Each partner is liable for the debts of the partnership: "joint and several" liability.
The nth root of the product of a series of n values; with respect to returns or interest rates, geometric average rate = [(1 + i1)(1 + i2) ... (1 + in)]1/n - 1 , where ii is the interest rate or return for the ith item or time period.
A compensation package that provides a significant benefit to an employee that loses his or her job in the event of a change in control of a business.
A measure of the value of all goods and services produced by workers and capital in the U.S.
The total cost of physical assets in the possession of the business.
The ratio of gross profit (i.e., sales less cost of goods sold) to sales; a measure of a firm's profitability.
The rate of change in the value of an asset, generally stated on an annual basis.
UP |
In tax law, one half year's depreciation is taken in the first year of an asset's life no matter when in the year the asset is placed in service.
A loan that uses the home as security (i.e., collateral), usually based on the difference between the market value of the home and the amount due on the existing mortgage.
UP |
Trading on material, non-public information.Income and expenditures statement
See cash flow statement.
A financial statement that conveys the revenues and expenses of a business enterprise.
In the context of capital budgeting, projects in which the acceptance of one does not preclude the acceptance of another.
The increase in the general level of prices for goods and services.
The additional return necessary to compensate for uncertainty associated with the level of prices for goods and services.
Credit that is repaid in two or more payments.Insurable interest
What an insured person must stand to lose something if there is a loss associated with the property. In the case of an insurable interest, the insured cannot lose more than his/her financial interest in the property.
An asset that has no physical existence, such as a patent or a trademark.
The compensation for the opportunity cost of funds and the uncertainty of repayment of the amount borrowed.
The ratio of a firm's operating income (i.e., earnings before interest and taxes) to its interest obligation; a measure of a firm's use of financial leverage.
The sensitivity of a security's price to a change in market yields.
The return that equates the present value of an investment's inflows with the present value of the investment's outflows; the return or interest rate that equates the cost of the investment with the present value of the investment's future cash flows.
See living trust.
Raw materials and work-in-process used in the production of goods, as well as finished goods held for sale.
The ratio of the cost of goods sold to inventory; a measure of how many times the investment in inventory "turns over" or completely cycles through the firm from raw materials to sold finished goods.
The process of purchasing securities for the long-term in the expectation of receiving future benefits in terms of price appreciation and/or cash dividends.
Debt that has a credit quality rating of BBB (using Standard and Poor's system) or Baa (using Moody's system) or better.
A statement that specifies, in general terms, the goals or objectives of the financial plan considering the client's return objectives, risk tolerance, liquidity needs, time horizon, tax situation, and estate goals.
See net present value profile.
A credit against taxes payable as a specific percentage of an asset's cost.
UP |
A liability in which a creditor may sue one or more parties to a liability separately or all together.
Joint tenants with rights to survivorship
A form of ownership where the person shares the asset equally with one or more joint owners and at an owner's death the assets automatically trnsfer to the other joint owner(s). In this form of title, if one of the parties dies, the other joint owners have title to the property and the property does not get tied up in probate and an owner cannot generaly sell property without the consent of the other joint owners.
A partnership or a corporation that is formed by two or more entities for a specific business purpose.
See speculative grade debt.
UP |
UP |
Debt obligation.
Insurance that protects the insured against losses from legal actions.
Limited liability company (LLC)
A form of business permitted in some (but not all) states that is a hybrid of the partnership and corporate forms. The LLC is taxed as a partnership (that is, the business' taxable income flows through to the owners' income), yet has limited liability similar to a corporation.
A partnership in which one or more of the partners has limited liability.
A ratio that conveys the ability of a business to satisfy its immediate obligations.
A trust created during the lifetime of the grantor, with assets being transferred to the trust during the grantor's lifetime.
The process of determining the payments necessary to pay off a loan, considering the compounding of interest.
Credit (borrowing) created by a financial institution.
Long term debt to assets ratio
The ratio of a firm's long-term debt (i.e., debt due beyond one year) to its total assets; a measure of a firm's financial leverage.
Long term debt to equity ratio
The ratio of a firm's long-term debt (i.e., debt obligations due beyond one year) to its shareholders' equity.
Debt obligations that are due beyond one year into the future.
UP |
See modified accelerated cost recovery system.
The rate of tax on next dollar of taxable income.
Securities that may be readily sold.
The value of the equity interest; the product of the market price per share of stock and the number of shares of stock outstanding.
A situation in a market where assets are bought and sold such that buying and selling are in balance.
The portfolio of assets that includes all investable assets; often proxied by the Standard and Poor's 500 stock index.
Non-diversifiable risk; the risk that is systematic across assets.
The additional compensation required by investors for bearing market risk.
The current price of an asset, as determined in a market.
the difference between the market value of a firm's capital and
The current value of the ownership interest. In the case of a corporation, the product of the market price of a share of stock and the number of shares outstanding.
A limited partnership in which the ownership units are traded in the public security market.
The collection of theories that address the reduction of risk that results from the combination of investments in a portfolio whose returns are not perfectly, positively correlated with one another.
Modified accelerated cost recovery system (MACRS)
A depreciation system used in U.S. tax law that is based on a double declining balance system with a half-year convention and no salvage value.
Modified internal rate of return, MIRR
The return or yields on an investment that considers the reinvestment of any cash flows generated from the investment at a specified rate.
Costs incurred by an principal in an agency relationship for monitoring the actions of an agent.
A loan secured by real estate.Municipal bond
A debt security issued by a state or local government.
An investment company that raises funds by selling stock to the public and then investing the proceeds in other securities. The value of the stock of the mutual fund fluctuates with the value of the individual securities that make up its investment portfolio.
A financial institution that is owned by its members (its depositors) and that provides consumer loans and accepts interest earning savings accounts.
In the context of capital budgeting, projects in which the acceptance of one precludes the acceptance of the other(s).
UP |
In the context of capital budgeting, the sum of the investment cash flow and operating cash flow for a given period.
The length of time that it takes for a business to turn its investment of cash in goods and services back into cash considering that both sales and purchases are made on credit.
An excess of deductions over gross income from business operations.
The difference between the gross plant and equipment and the accumulated depreciation; the book value of physical assets.
The difference between the present value of the future cash inflows and the present value of the cash outflows of a project, where all cash flows are discounted at the cost of capital for the project.
A graphical representation of the net present value of a project for different discount rates. Also referred to as the investment profile.
The ratio of net income to sales; a measure of a firm's profitability.
Net working capital to sales ratio
The ratio of net working capital (i.e., current assets minus current liabilities) to sales; a measure of liquidity.
A rate of interest that is quoted without regard to compounding of interest within the specified period of time (e.g., within a year); also known as the stated rate.
See nominal interest rate.
See speculative grade debt.
Normal profit
The minimum return suppliers of capital demand for the use of
their funds.
Debt obligations of a business evidenced by promissory notes.
The number of days worth of inventory on hand, on average, throughout the period; the ratio of the balance in inventory to the average day's cost of goods sold.
The number of days of payables due, on average, throughout the period; the ratio of the balance in accounts payable to the average day's purchases.
The number of days of receivables, on average, throughout the period; the ratio of the balance in accounts receivable to the average day's credit sales.
UP |
The length of time it takes to turn the investment of cash in goods and services back into cash in terms of collections from customers.
The ratio of operating income (i.e., earnings before interest and taxes) to sales; a measure of a firm's profitability.
The right to buy (call option) or sell (put option) a specified asset at a specified price within a specified period of time.Ordinary annuity
A set of periodic, even cash flows in which the first cash flow occurs one period in the future.
UP |
A business enterprise owned by two or more persons who share the income and liability of the business.
Face value of a security; for a share of stock, a nominal amount assigned per share according to the company's charter; for a debt obligation, the amount owed.
The number of periods in which it takes the original investment to be paid off in terms of expected future cash flows. Also referred to as the capital recovery period and the payoff period.
See payback period.
A series of even cash flows that continue ad infinitum (i.e., forever).
Assets that have a physical existence, such as a building or a piece of equipment.
A collection of investments.
The time beyond an investment's payback period during which the investment continues to generate cash flows.
A trust that combines aspects of the living and testamentary trust; the trust is created during the life of the grantor, yet the trust receives assets at the time of the granotr's death (e.g., life insurance proceeds).
The uncertainty regarding whether a loan will be paid off early, resulting in an immediate need to reinvest the loan proceeds in another investment vehicle.
A bond that has a price below the par or face value; bonds whose coupon rate is greater than the yield-to-maturity on the bond.
The current value of a cash flow or a series of cash flows.
The sum of discount factors that is used to translate an annuity (i.e., a series of even, periodic cash flows) into a value today.
The ratio of the market price per share of stock to the earnings per share of a corporation.
A market in which a security is first sold, raising funds for the issuer.Principal
In a loan situation, the amount borrowed. In an agency relationship, the party that gives another party (the agent) authority to act in the principal's interest.
The possible outcomes to an uncertain event and their respective likelihoods of occurence.
The concept that an insured party cannot be compensated for more than the economic loss suffered.
UP |
The ratio of current assets less inventory to current liabilities; a measure of the firm's ability to meet its most immediate obligations.
UP |
A statistical measure of dispersion that is the difference between the highest and lowest valued observations or outcomes.
The return or yield on an investment after taking out the effects of inflation.
The difference between the lesser of an asset's original cost or sales price and its book value for tax purposes, which is taxed as ordinary income for tax purposes.
A decline in business activity (output, employment, income and trade), that typically lasts from six months to a year and is usually accompanied by contractions in the economy.
In the context of economic conditions, a period of time in which levels of production, employment, and sales begin to improve.
An individual who provides investment advice and is required by the Investment Adviser Act to register with the Securities and Exchange Commission.
The uncertainty associated with the yield on the reinvestment of intermediate cash flows (e.g., the interest earned on a bond).
The return that shareholders demand to compensate themm for the time value of money tied up in their investment and the uncertainty of the future cash flows from this investment.
The implicit cost in an agency relationship that remains after monitoring and bonding efforts, resulting from the misalignment of managers and owners' interests.
The expected value of an asset at the end of its useful life. Also referred to as the salvage value.
In a balance sheet, the accumulation of prior periods' earnings, less any paid dividends; in an income statement, the amount of earnings for the period not paid out in dividends.
The income on an investment, generally stated as a percentage of the original investment or beginning of year value.
The ratio of net income to total assets; a measure of a firm's return on its investment in total assets.
The ratio of earnings available to common shareholders to common shareholders' equity; a measure of common shareholdes' return on their investment.
The ratio of net income to shareholders' equity; a measure of shareholders' return on their investment.
The profit on a business activity, stated as a percentage of the amount invested.
A measure of the net benefit from the employment of resources, expressed as a ratio of the net benefit to the amount of resources expended.
A loan, secured by real estate, that provides periodic payments to the homeowner from the financial institution, increasing the amount loan over time.Right of subrogation
The right of the insurer to seek reimbursement from the party that caused the loss (or from the person's insurance company).Risk
In insurance, a danger or a hazard of a loss of the insured property. The chance of deviating from the average or expected value.
An individual's dislike for risk such that the individual must be compensated for bearing risk.
Indifferent towards risk.
A desire to take on risk; a willingness to pay to take on risk.
An individual's ability to emotionally and financially deal with the exposure to a financial loss.
A rule of thumb that can be used to determine the length of time it takes for an amount to double. The product of the number of periods and the interest rate (as a whole number) is equal to 72 for the doubling of an amount.
A method of determining the proportions of paid installments that are interest and repayments of principal, and is, effectively, a penalty for early repayment of the loan.
UP |
Credit created by the seller of the goods or services.
The uncertainty associated with the number of units to be sold and the price at which these units will be sold.
The expected value of an assetat the end of its useful life. Also referred to as the residual value.
A financial institution that accepts savings deposits and provides home loans.Secondary market
A market in which assets are sold among investors (e.g., NYSE).
Debt backed by collateral; in the event of non-payment of interest and/or principal, the specified asset can be sold and the proceeds used to pay the creditor.
The relationship between the expected return on a security and the security's beta.
See sensiticity analysis.
A method of analyzing a decision by examining the possible outcomes when one of the decision variables is changed (e.g., examine the different future cash flows that result from changeing the tax rate assumption in capital budgeting).
A ratio that restates financial data in terms of a share of stock.
An interest arrangement on a loan such that interest is calculated based on the loaned amount only.
A method of analyzing a decision that takes into account the probability distributions associated with the uncertain elements (for example, in a capital budgeting problem, if both the tax rate and the number of units to be sold is uncertain, drawings are made at random from both the distribution of the possible tax rates and the distribution of the possible number of units to be sold in order to produce a distribution of possible cash flows).
A business enterprise owned by one person.
Debt that is rated BB -- using Standard and Poor's system (or Ba using Moody's system) -- or less; non-investment grade debt; also referred to as junk bond.
A statistical measure of dispersion; the square root of the variance.
Persons who have an interest in the well-being of a company; the shareholders, employees, community, and customers of a company.
A financial statement that summarizes the cash flows from operating activities, the cash flows from (or for) financing activities, and the cash flows from (or for) investing activities.
A nominal amount assigned to a share of stock for accounting purposes.
Statement of financial position
See Balance sheet.
Interest specified as a fixed percentage of the security's face value.
A method of depreciation that expenses the same amount of an asset's cost each year of the asset's life.
Subchapter S corporation ("Sub S")
A corporation that qualifies for a special tax status that allows the corporation to be treated as a partnership for tax purposes, bringing any losses directly to the owners' individual tax returns.
A method of depreciation that expenses an amount equal to ratio of the years remaining in the asset's life to the sum of the years' of an assets's life.
See market risk.
UP |
A trust established at the time of the death of the grantor.
A credit against taxes payable, which reduces taxes paid dollar-for-dollar.Tenants in common
A form of ownership in which each owner's share can be sold, deeded, or given away without the other owners' consent.
A form of ownership reserved for married persons in which the property is owned jointly but the consent of the other spouse is required to divide or sell the property.
In the context of capital budgeting, the future value of an investment that includes both the cash flows generated from the investment and the returns from reinvesting any intermediate cash flows.
An insurance policy in which the insurer agrees to pay a specified amount of money in he event of the death of the insured during the policy period. There is no savings aspect to term insurance and the specified amount may be fixed throughout the policy period (straight term insurance) or decreasing throughout the policy period (decreasing term insurance).
The ratio of a firm's total debt (i.e., current and long term debt) to its total assets; a measure of a firm's financial leverage.
The value of the shares of a corporation's own stock that is bought and held by the corporation.
A legal document that transfer the property and/or income of one party to another party/parties.
A law that is intended to assure that every consumer who has the need for consumer credit is given meaningful information with respect to the cost of credit. Also referred to as the Consumer Credit Protection Act.
A measure of the gross benefit from the employment of resources, expressed as a ratio of this gross benefit (e.g., sales revenue) to resources (e.g. total assets).
UP |
The risk of an asset's returns that is unrelated to changes in the returns of the market in general; also referred to as company-specific risk.
UP |
UP |
An insurance policy in which the insurer agrees to pay a specified amount of money in the event of the death of the insured. Whole life policies also have a saving feature such that there is a cash value of a policy, based on earnings on paid-in premiums, which increases throughout the life of the policy.
UP |
UP |
The amount earned on a security over a period of time, generally stated as a percentage of the value of the security at the beginning of the period.Yield curve
A representation of interest rates for different time remaining to maturity.
The return on a callable security calculated assuming that the security will be called (that is, bought back by the security issuer) at a specific point in time at a specified call price; usually calculated using the first available call.
The yield or return calculated assuming that the investor buys the security and holds it to maturity.
UP |
A debt obligation that does not pay explicit interest.
UP |