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...

• Browse terms by the Alphabetical Index:
  1 4 A B C D E F G H I J K L M N O P Q R S T U V W Y Z

• Search terms for definitions using keywords:
  Keyword(s):

Monthly Financial Term Picks:

economic components model

Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
This model consists of four components: the measure of the economic impact of the delay-to-sale, monopsony power to buyers, and incremental transactions costs to both buyers and sellers.

Agent

The decision-maker in a principal-agent relationship.

Backwardation

A market condition in which futures prices are lower in the distant delivery months than in
the nearest delivery month. This situation may occur in when the costs of storing the product until eventual
delivery are effectively subtracted from the price today. The opposite of contango.

Baker Plan

A plan by U.S. Treasury Secretary James Baker under which 15 principal middle-income debtor
countries (the Baker 15) would undertake growth-oriented structural reforms, to be supported by increased
financing from the World Bank and continued lending from commercial banks.

Capital budget

A firm's set of planned capital expenditures.

Customary payout ratios

A range of payout ratios that is typical based on an analysis of comparable firms.

Net change

This is the difference between a day's last trade and the previous day's last trade.

Put

An option granting the right to sell the underlying futures contract. Opposite of a call.

Risk premium approach

The most common approach for tactical asset allocation to determine the relative
valuation of asset classes based on expected returns.

Cost of quality

The difference between the actual costs of production, selling and service and the costs that would be incurred if there were no failures during production or usage of products or services.

Treasury stock

Shares that were sold to the public but have since been repurchased by the company in the open market. Treasury stock is deducted from the equity section, and is therefore a contraequity account.

CASB

see Cost Accounting Standards Board

overhead

any factory or production cost that is indirect to
the product or service; it does not include direct material
or direct labor; any production cost that cannot be directly
traced to the product

piece rate

a pay plan in which workers are paid a flat rate
for each unit of work accomplished

Covariance

A measure of the degree to which returns on two assets move in
tandem. A positive covariance means that asset returns move together; a
negative covariance means they vary inversely.