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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Concession agreement

An understanding between a company and the host government that specifies the
rules under which the company can operate locally.

Forward differential

Annualized percentage difference between spot and forward rates.

Linter's observations

John Lintner's work (1956) suggested that dividend policy is related to a target level of
dividends and the speed of adjustment of change in dividends.

Low price-earnings ratio effect

The tendency of portfolios of stocks with a low price-earnings ratio to
outperform portfolios consisting of stocks with a high price-earnings ratio.

Operating cycle

The average time intervening between the acquisition of materials or services and the final
cash realization from those acquisitions.

Probability distribution

Also called a probability function, a function that describes all the values that the random variable can
take and the probability associated with each.

Street name

Describes securities held by a broker on behalf of a client but registered in the name of the Wall Street firm.

asset turnover ratio

A broad-gauge ratio computed by dividing annual
sales revenue by total assets. It is a rough measure of the sales-generating
power of assets. The idea is that assets are used to make sales, and the
sales should lead to profit. The ultimate test is not sales revenue on
assets, but the profit earned on assets as measured by the return on
assets (ROA) ratio.

sales value at split-off allocation

a method of assigning joint cost to joint products that uses the relative sales values of the products at the split-off point as the proration basis; use of this method requires that all joint products
are salable at the split-off point

Cash flow

Cash received and paid over time.

Contribution margin

The margin that results when variable production costs are subtracted
from revenue. It is most useful for making incremental pricing decisions
where a company must cover its variable costs, though perhaps not all of its fixed
costs.

Required Reserves

Reserves that the central bank requires commercial banks to hold.

Cumulative Effect of Accounting Change

The change in earnings of previous years assuming
that the newly adopted accounting principle had previously been in use.

EFT (electronic funds transfer)

Funds which are electronically credited to your account (e.g. direct deposit), or electronically debited from your account on an ongoing basis (e.g. a pre-authorized monthly bill payment, or a monthly loan or mortgage payment). A wire transfer is a form of EFT.

Policy

A written document that serves as evidence of insurance coverage and contains pertinent information about the benefits, coverage and owner, as well as its associated directives and obligations.