Financial Terms Main Page

This site contains comprehensive definitions for a wide range of terms that cover topics such as financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit...

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Bullish, bearish

Words used to describe investor attitudes. Bullish refers to an optimistic outlook while
bearish means a pessimistic outlook.

Federal funds market

The market where banks can borrow or lend reserves, allowing banks temporarily
short of their required reserves to borrow reserves from banks that have excess reserves.

Law of one price

An economic rule stating that a given security must have the same price regardless of the
means by which one goes about creating that security. This implies that if the payoff of a security can be
synthetically created by a package of other securities, the price of the package and the price of the security
whose payoff it replicates must be equal.

Trough

The transition point between economic recession and recovery.

Weighted average portfolio yield

The weighted average of the yield of all the bonds in a portfolio.

Overhead allocation

The process of spreading production overhead equitably over the volume of production of goods or services.

Market to Book Ratio

Measure of the book value of a company on a per share basis. It is
calculated by dividing the book value of the company by the
number of common shares outstanding.

economic production run (EPR)

an estimate of the number
of units to produce at one time that minimizes the total
costs of setting up production runs and carrying inventory

processing time

the actual time consumed performing the
functions necessary to manufacture a product

Collar

Interest-rate option that guarantees that the rate on a floating-rate
loan will not exceed a certain upper level nor fall below a lower level. It is
designed to protect an investor against wide fluctuations in interest rates.

Capital asset

A fixed asset, something that is expected to have long-term usage within
a company, and which exceeds a minimum dollar amount (known as the capitalization
limit, or cap limit).

rights issue

Issue of securities offered only to current stockholders.

Asset-Based Financing

Loans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender.

Commercial Mortgage

A loan made on real estate collateral, other than a residential property, in which a mortgage is given to secure payment of principal and interest.

credit bureau

An organization that provides financial institutions with credit information concerning existing or potential customers who are looking to obtain credit services.