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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Average rate of return (ARR)

The ratio of the average cash inflow to the amount invested.

Liquidation rights

The rights of a firm's securityholders in the event the firm liquidates.

Perfect market view (of capital structure)

Analysis of a firm's capital structure decision, which shows the
irrelevance of capital structure in a perfect capital market.

Portfolio insurance

A strategy using a leveraged portfolio in the underlying stock to create a synthetic put
option. The strategy's goal is to ensure that the value of the portfolio does not fall below a certain level.

Split-fee option

An option on an option. The buyer generally executes the split fee with first an initial fee,
with a window period at the end of which upon payment of a second fee the original terms of the option may
be extended to a later predetermined final notification date.

ABM

see activity-based management
abnormal loss a decline in units in excess of normal expectations
during a production process

data

bits of knowledge or facts that have not been summarized
or categorized in a manner useful to a decision maker

out-of-pocket cost

a cost that is a current or near-current cash expenditure

Indirect labor

The cost of any labor that supports the production process, but which is
not directly involved in the active conversion of materials into finished products.

Salvage value

The expected revenue to be garnered from the sale of a fixed asset at the
end of its useful life.

NPV

See net present value.

percentage of sales models

Planning model in which sales forecasts are the driving variables and most other variables are
proportional to sales.

Reserve Ratio

See reserve requirement.

SDR

Special drawing right, the name given to the "currency" of the IMF.

Related Party

An entity whose management or operating policies can be controlled or significantly
influenced by another party.