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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Monthly Financial Term Picks:

CARDs

Certificates of Amortized Revolving Debt. Pass-through securities backed by credit card receivables.

Conditional sales contracts

Similar to equipment trust certificates except that the lender is either the
equipment manufacturer or a bank or finance company to whom the manufacturer has sold the conditional
sales contract.

Continuous random variable

A random value that can take any fractional value within specified ranges, as
contrasted with a discrete variable.

Default risk

Also referred to as credit risk (as gauged by commercial rating companies), the risk that an
issuer of a bond may be unable to make timely principal and interest payments.

Information-motivated trades

Trades in which an investor believes he or she possesses pertinent
information not currently reflected in the stock's price.

Realized compound yield

Yield assuming that coupon payments are invested at the going market interest
rate at the time of their receipt and rolled over until the bond matures.

Skip-day settlement

The trade is settled one business day beyond what is normal.

stock option

a right allowing the holder to purchase shares of common stock during some future time frame and at a specified price

Actual cost

The actual expenditure made to acquire an asset, which includes the supplierinvoiced
expense, plus the costs to deliver and set up the asset.

Last-in, first-out (LIFO)

An inventory costing methodology that bases the recognized cost of
sales on the most recent costs incurred, while the cost of ending inventory is based
on the earliest costs incurred. The underlying reasoning for this costing system is
the assumption that goods are sold in the reverse order of their manufacture.

Obsolescence

The reduction in utility of an inventory item or fixed asset. If it is an
inventory item, then a reserve is created to reduce the value of the inventory by the
estimated amount of obsolescence. If it is a fixed asset, the depreciation method and
timing will be set to approximate the rate and amount of obsolescence.

Operating Income

A measure of results produced by the core operations of a firm. It is common
for both recurring and nonrecurring items that are associated with operations to be included
in this measure. Operating income is typically found in multistep income statements and is a pretax
measure.

Percentage Depletion

A deduction against taxable income permitted companies in the natural
resources industry equal to a percentage of gross income generated by a property. The deduction
is permitted even if it results cumulatively in more than 100% of the cost of the property being
deducted over time. Thus, percentage depletion can create a permanent difference between book
income and taxable income.

Stackability

The ability to safely stack multiple layers of the same SKU on top of
each other.

Lessee

A person to whom a lease is granted; the user of the asset.