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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Default

Failure to make timely payment of interest or principal on a debt security or to otherwise comply
with the provisions of a bond indenture.

Investment product line (IPML)

The line of required returns for investment projects as a function of beta
(nondiversifiable risk).

Switching

Liquidating an existing position and simultaneously reinstating a position in another futures
contract of the same type. Symmetric cash matching An extension of cash flow matching that allows for the
short-term borrowing of funds to satisfy a liability prior to the liability due date, resulting in a reduction in the
cost of funding liabilities.

Cost-plus pricing

A method of pricing in which a mark-up is added to the total product/service cost.

Intangible assets

Assets owned by the company that do not possess physical substance; they usually take the form of rights and privileges such as patents, copyrights, and franchises.

lead time

see cycle time

common-size income statement

Income statement that presents items as a percentage of revenues.

liquidation value

Net proceeds that would be realized by selling the firm’s assets and paying off its creditors.

present value (PV)

Value today of a future cash flow.

Capital Account

That part of the balance of payments accounts that records demands for and supplies of a currency arising from purchases or sales of assets.

Entitlement Program

A program, such as social security, under which everyone meeting the eligibility requirements is entitled to receive benefits from the program, so that costs are not known in advance.

Price Index

A measure of the price level calculated by comparing the cost of a bundle of goods and services in a given year with its cost in a base year. See also index.

Temporary Difference

A difference between pretax book income and taxable income that
results from the recognition of revenues or gains and expenses or losses in different periods in the
determination of pretax book and taxable income. Temporary differences give rise to either
deferred tax assets or liabilities.

Capital Investments

Money used to purchase fixed assets for a business, such as land, buildings, or machinery. Also, money invested in a business on the understanding that it will be used to purchase permanent assets rather than to cover day-to-day operating expenses.

Letters of Credit

A letter of credit is a guarantee of payment by a bank (issuing institution)to a third party for a specific amount of money, if certain conditions are met.