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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Common stock/other equity

Value of outstanding common shares at par, plus accumulated retained
earnings. Also called shareholders' equity.

Deferred-annuities

Tax-advantaged life insurance product. Deferred annuities offer deferral of taxes with the
option of withdrawing one's funds in the form of life annuity.

Eligible bankers' acceptances

In the BA market, an acceptance may be referred to as eligible because it is
acceptable by the Fed as collateral at the discount window and/or because the accepting bank can sell it
without incurring a reserve requirement.

Portfolio internal rate of return

The rate of return computed by first determining the cash flows for all the
bonds in the portfolio and then finding the interest rate that will make the present value of the cash flows
equal to the market value of the portfolio.

Underwriting income

For an insurance company, the difference between the premiums earned and the costs
of settling claims.

Declining balance

An accelerated depreciation method that calculates depreciation each year by applying a fixed rate to the asset’s book (cost–accumulated depreciation) value. Depreciation stops when the asset’s book value reaches its salvage value.

Pareto principle

a rule which states that the greatest effects
in human endeavors are traceable to a small number of
causes (the vital few), while the majority of causes (the
trivial many) collectively yield only a small impact; this
relationship is often referred to as the 20:80 rule

performance evaluation

the process of determining the degree
of success in accomplishing a task; it equates to both
effectiveness and efficiency

total variance

the difference between total actual cost incurred
and total standard cost for the output produced during
the period

Basis point

One hundredth of one percentage point, or 0.0001.

Direct cost

A cost that can be clearly associated with specific activities or products.

Average Propensity to Consume

Ratio of consumption to disposable income. See also marginal propensity to consume.

Neutrality of Money

The doctrine that the money supply affects only the price level, with no long-run impact on real variables.

Contingent Beneficiary

This is the person designated to receive the death benefit of a life insurance policy if the primary beneficiary dies before the life insured. This is a consideration when husband and wife make each other the beneficiary of their coverage. Should they both die in the same car accident or plane crash, the death benefits would go to each others estate and creditor claims could be made against them. Particularly if minor children could be survivors, then a trustee contingent beneficiary should be named.

Bond

Fixed interest security issued by a corporation or government, having a specific maturity date.