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Financial Terms | |
Absolute Advantage |
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Main Page: payroll, inventory control, money, business, credit, financial, investment, inventory, Also see related: homebuyer, first time homebuyer, home insurance, buy home, home financing, condo, credit, insurance, home, |
Definition of Absolute AdvantageAbsolute AdvantageThe ability to produce a good or service with fewer resources than competitors. See also comparative advantage.
Related Terms:Comparative AdvantageA country has a comparative advantage over another country in the production of good A if to produce a unit of A it forgoes more of the production of good B than would the other country when it produces a unit of good A. Its efficiency in the production of good A relative to its efficiency in the production of good B is greater than is the case for the other country. See also absolute advantage. Absolute priorityRule in bankruptcy proceedings whereby senior creditors are required to be paid in full Absolute Right of ReturnGoods may be returned to the seller by the purchaser without restrictions. Competitive AdvantageThe strategies, skills, knowledge, resources or competencies that differentiate a business from its competitors. Net advantage of refundingThe net present value of the savings from a refunding. Net advantage to leasingThe net present value of entering into a lease financing arrangement rather than Net advantage to mergingThe difference in total post- and pre-merger market value minus the cost of the merger. ![]() Mortgage InsuranceCommonly sold in the form of reducing term life insurance by lending institutions, this is life insurance with a death benefit reducing to zero over a specific period of time, usually 20 to 25 years. In most instances, the cost of coverage remains level, while the death benefit continues to decline. Re-stated, the cost of this kind of insurance is actually increasing since less death benefit is paid as the outstanding mortgage balance decreases while the cost remains the same. Lending institutions are the most popular sources for this kind of coverage because it is usually sold during the purchase of a new mortgage. The untrained institution mortgage sales person often gives the impression that this is the only place mortgage insurance can be purchased but it is more efficiently purchased at a lower cost and with more flexibility, directly from traditional life insurance companies. No matter where it is purchased, the reducing term insurance death benefit reduces over a set period of years. Most consumers are up-sizing their residences, not down-sizing, so it is likely that more coverage is required as years pass, rather than less coverage. Comparative credit analysisA method of analysis in which a firm is compared to others that have a desired Priority-based budgetA budget that allocates funds in line with strategies. 48-hour ruleThe requirement that all pool information, as specified under the PSA Uniform Practices, in a Absolute Right of Returngoods may be returned to the seller by the purchaser without restrictions. Accelerated cost recovery system (ACRS)Schedule of depreciation rates allowed for tax purposes. AccountabilityThe process of satisfying stakeholders in the organization that managers have acted in the best interests of the stakeholders, a result of the stewardship function of managers, which takes place through accounting. Accounts receivable turnoverThe ratio of net credit sales to average accounts receivable, a measure of how accounts receivable turnover ratioA ratio computed by dividing annual ![]() Accumulated Other Comprehensive IncomeCumulative gains or losses reported in shareholders' acid test ratio (also called the quick ratio)The sum of cash, accounts receivable, and short-term marketable Additional paid-in capitalAmounts in excess of the par value or stated value that have been paid by the public to acquire stock in the company; synonymous with capital in excess of par. Additional paid-in capitalany payment received from investors for stock that exceeds additional paid-in capitalDifference between issue price and par value of stock. also called capital surplus. Administrative pricing rulesIRS Rules used to allocate income on export sales to a foreign sales corporation. Aggregate Production FunctionAn equation determining aggregate output as a function of aggregate inputs such as labor and capital. applied overheadthe amount of overhead that has been assigned to Work in Process Inventory as a result of productive activity; credits for this amount are to an overhead account Asian currency units (ACUs)Dollar deposits held in Singapore or other Asian centers. Asset CoverageExtent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position. Asset-coverage testA bond indenture restriction that permits additional borrowing on if the ratio of assets to ![]() Asset/liability managementalso called surplus management, the task of managing funds of a financial Asset turnoverThe ratio of net sales to total assets. asset turnovera ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets asset turnover ratioA broad-gauge ratio computed by dividing annual Attribution RulesLegislation under which interest, dividends, or capital gains earned on assets you transfer to your spouse will be treated as your own for tax purposes. Interest or dividends relating to property transferred to children under 18 also will be attributed back to you. The exception to this Rule is that capital gains relating to property transferred to children under 18 will not be attributed back to you. Automatic Benefits PaymentAutomatic payment of moneys derived from a benefit. Availability floatChecks deposited by a company that have not yet been cleared. availability floatChecks already deposited that have not yet been cleared. Balance of paymentsA statistical compilation formulated by a sovereign nation of all economic transactions Balance of PaymentsThe difference between the demand for and supply of a country's currency on the foreign exchange market. Balance of Payments AccountsA statement of a country's transactions with other countries. Bank overdraftMoney owed to the bank in a cheque account where payments exceed receipts. BankruptcyState of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from bankruptcyThe reorganization or liquidation of a firm that cannot pay its debts. Bankruptcy cost viewThe argument that expected indirect and direct bankruptcy costs offset the other Bankruptcy riskThe risk that a firm will be unable to meet its debt obligations. also referred to as default or insolvency risk. Bankruptcy viewThe argument that expected bankruptcy costs preclude firms from being financed entirely Bargain-purchase-price optionGives the lessee the option to purchase the asset at a price below fair market Base probability of lossThe probability of not achieving a portfolio expected return. Basic IRR ruleAccept the project if IRR is greater than the discount rate; reject the project is lower than the Before-tax profit marginThe ratio of net income before taxes to net sales. Best-interests-of-creditors testThe requirement that a claim holder voting against a plan of reorganization Blue-chip companyLarge and creditworthy company. Break-even lease paymentThe lease payment at which a party to a prospective lease is indifferent between Break-even payment rateThe prepayment rate of a MBS coupon that will produce the same CFY as that of Capital market efficiencyReflects the relative amount of wealth wasted in making transactions. An efficient capital recoveryRefers to recouping, or regaining, invested capital over Cash flow coverage ratioThe number of times that financial obligations (for interest, principal payments, Cash TurnoverThe number of cash cycles completed in one year. Clearing House Automated Payments System (CHAPS)A computerized clearing system for sterling funds Clearing House Interbank Payments System (CHIPS)An international wire transfer system for high-value Closing purchaseA transaction in which the purchaser's intention is to reduce or eliminate a short position in Common stock/other equityValue of outstanding common shares at par, plus accumulated retained Company AcquisitionsAssets acquired to create money. May include plant, machinery and equipment, shares of another company etc. company cost of capitalExpected rate of return demanded by investors in a company, determined by the average risk of the company’s assets and operations. Company-specific riskRelated: Unsystematic risk Companyspecific RiskSee asset-specific risk Competitive AdvantageThe strategies, skills, knowledge, resources or competencies that differentiate a business from its competitors. Concentration servicesMovement of cash from different lockbox locations into a single concentration Contingent LiabilityAn obligation that is dependent on the occurrence or nonoccurrence of Contingent pension liabilityUnder ERISA, the firm is liable to the plan participants for up to 39% of the net Cost company arrangementArrangement whereby the shareholders of a project receive output free of cost of goods manufactured (CGM)the total cost of the Cost of goods soldThe cost of merchandise that a company sold this year. For manufacturing companies, the cost of raw Cost of goods soldSee cost of sales. Cost of goods soldThe cost of the items that were sold during the current period. Cost of goods soldThe accumulated total of all costs used to create a product or service, Cost of goods soldThe charge to expense of the direct materials, direct labor, and cost of production reporta process costing document that Country betaCovariance of a national economy's rate of return and the rate of return the world economy Country financial riskThe ability of the national economy to generate enough foreign exchange to meet Country risk GeneralLevel of political and economic uncertainty in a country affecting the value of loans or Country selectionA type of active international management that measures the contribution to performance Coupon paymentsA bond's interest payments. CoverThe purchase of a contract to offset a previously established short position. Coverage ratiosRatios used to test the adequacy of cash flows generated through earnings for purposes of Coverdell Education IRAA form of individual retirement account whose earnings Covered callA short call option position in which the writer owns the number of shares of the underlying Covered call writing strategyA strategy that involves writing a call option on securities that the investor Covered interest arbitrageA portfolio manager invests dollars in an instrument denominated in a foreign Covered or hedge option strategiesStrategies that involve a position in an option as well as a position in the Covered PutA put option position in which the option writer also is short the corresponding stock or has CreditorsPurchases of goods or services from suppliers on credit to whom the debt is not yet paid. Or a Crossover rateThe return at which two alternative projects have the same net present value. Cumulative probability distributionA function that shows the probability that the random variable will Current liabilityThis is typically the accounts payable, short-term notes payable, and Current Tax Payment Act of 1943A federal Act requiring employers to withhold income taxes from employee pay. Date of paymentDate dividend checks are mailed. Debt serviceInterest payment plus repayments of principal to creditors, that is, retirement of debt. Debt-service coverage ratioEarnings before interest and income taxes plus one-third rental charges, divided Debt service parity approachAn analysis wherein the alternatives under consideration will provide the firm defective unita unit that has been rejected at a control inspection Deferred Tax LiabilityFuture tax obligation that results from the origination of a temporary Delivery versus paymentA transaction in which the buyer's payment for securities is due at the time of Depository Trust Company (DTC)DTC is a user-owned securities depository which accepts deposits of design for manufacturability (DFM)a process that is part of the project management of a new product; concerned with finding optimal solutions to minimizing product failures Direct stock-purchase programsThe purchase by investors of securities directly from the issuer. DisabilityInability to work due to injury or sickness. Disability InsuranceInsurance that pays you an ongoing income if you become disabled and are unable to pursue employment or business activities. There are limits to how much you can receive based on your pre-disability earnings. Rates will vary based on occupational duties and length of time in a particular industry. This kind of coverage has a waiting period before you can begin collecting benefits, usually 30, 60 or 90 days. The benefit paying period also varies from 2 years to age 65. A short waiting period will cost more that a longer waiting period. As well, a long benefit paying period will cost more than a short benefit paying period. Disability Insurance (Credit Insurance)Group Insurance designed to cover monthly obligations due to a borrower being unable to work due to sickness or injury. Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |