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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Buck

Slang for one million dollars.

Dollar-weighted rate of return

Also called the internal rate of return, the interest rate that will make the
present value of the cash flows from all the subperiods in the evaluation period plus the terminal market value
of the portfolio equal to the initial market value of the portfolio.

Interest rate parity theorem

Interest rate differential between two countries is equal to the difference
between the forward foreign exchange rate and the spot rate.

Opening purchase

A transaction in which the purchaser's intention is to create or increase a long position in
a given series of options.

Price/earnings ratio (PE ratio)

Shows the "multiple" of earnings at which a stock sells. Determined by dividing current
stock price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio is
determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher
"multiple" means investors have higher expectations for future growth, and have bid up the stock's price.

Seasoned new issue

A new issue of stock after the company's securities have previously been issued. A
seasoned new issue of common stock can be made by using a cash offer or a rights offer.

Stated annual interest rate

The interest rate expressed as a per annum percentage, by which interest
payment is determined.

Yield to call

The percentage rate of a bond or note, if you were to buy and hold the security until the call date.
This yield is valid only if the security is called prior to maturity. Generally bonds are callable over several
years and normally are called at a slight premium. The calculation of yield to call is based on the coupon rate,
length of time to the call and the market price.

Dividend income

Income that a company receives in the form of dividends on stock in other companies that it holds.

Notes payable

Amounts owed by the company that have been formalized by a legal document called a note.

T account

The format used for a general ledger page. The name of the account is put on the top line, and a vertical line is dropped from the top line (hence the "T"). Debits are recorded on the left side, and credits are recorded on the right.

net present value method

a process that uses the discounted
cash flows of a project to determine whether the
rate of return on that project is equal to, higher than, or
lower than the desired rate of return

net realizable value at split-off allocation

a method of allocating joint cost to joint products that uses, as the proration base, sales value at split-off minus all costs necessary
to prepare and dispose of the products; it requires
that all joint products be salable at the split-off point

Underground Economy

Economic activity not observed by tax collectors and government statisticians.

Premium Mode

Payment schedule of policy premiums, usually selected by the policy owner (monthly, quarterly, annually).