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Financial Terms | |
Acceleration Clause |
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Definition of Acceleration ClauseAcceleration Clauseclause causing repayment of a debt, if specified events occur or are not met.
Related Terms:Accelerationist HypothesisBelief that an effort to keep unemployment below its natural rate results in an accelerating inflation. Incontestable ClauseThis clause in regular life insurance policy provides for voiding the contract of insurance for up to two years from the date of issue of the coverage if the life insured has failed to disclose important information or if there has been a misrepresentation of a material fact which would have prevented the coverage from being issued in the first place. After the end of two years from issue, a misrepresentation of smoking habits or age can still void or change the policy. Inflation-escalator clauseA clause in a contract providing for increases or decreases in inflation based on Multicurrency clauseSuch a clause on a Euro loan permits the borrower to switch from one currency to Negative pledge clauseA bond covenant that requires the borrower to grant lenders a lien equivalent to any Subordination clauseA provision in a bond indenture that restricts the issuer's future borrowing by Suicide ClauseGenerally, a suicide clause in a regular life insurance policy provides for voiding the contract of insurance if the life insured commits suicide within two years of the date of issue of the coverage. ![]() Efficient Market HypothesisIn general the hypothesis states that all relevant information is fully and Efficient Markets HypothesisThe hypothesis that securities are typically in equilibrium--that they are fairly priced in the sense that the price reflects all publicly available information on the security. Expectations hypothesis theoriesTheories of the term structure of interest rates which include the pure Liquidity preference hypothesisThe argument that greater liquidity is valuable, all else equal. Also, the Overreaction hypothesisThe supposition that investors overreact to unanticipated news, resulting in Permanent Income HypothesisTheory that individuals base current consumption spending on their perceived long-run average income rather than their current income. Absolute AdvantageThe ability to produce a good or service with fewer resources than competitors. See also comparative advantage. Abusive Earnings ManagementThe use of various forms of gimmickry to distort a company's true financial performance in order to achieve a desired result. Abusive Earnings ManagementA characterization used by the Securities and Exchange ![]() Accelerated cost recovery system (ACRS)Schedule of depreciation rates allowed for tax purposes. Accelerated depreciationAny depreciation method that produces larger deductions for depreciation in the accelerated depreciation(1) The estimated useful life of the fixed asset being depreciated is Accelerated depreciationAny of several methods that recognize an increased amount Accidental Dismemberment: (Credit Insurance)provides additional financial security should an insured person be dismembered or lose the use of a limb as the result of an accident. Accomodating PolicyA monetary policy of matching wage and price increases with money supply increases so that the real money supply does not fall and push the economy into recession. Accounting changeAn alteration in the accounting methodology or estimates used in Accounting IrregularitiesIntentional misstatements or omissions of amounts or disclosures in Accounting rate of return (ARR)A method of investment appraisal that measures accounting rate of return (ARR)the rate of earnings obtained on the average capital investment over the life of a capital project; computed as average annual profits divided by average investment; not based on cash flow Active portfolio strategyA strategy that uses available information and forecasting techniques to seek a ![]() activity-based management (ABM)a discipline that focuses on the activities incurred during the production/performance process as the way to improve the value received ADF (annuity discount factor)the present value of a finite stream of cash flows for every beginning $1 of cash flow. Adjustable rate preferred stock (ARPS)Publicly traded issues that may be collateralized by mortgages and MBSs. Advance material requestVery early orders for materials before the completion After-tax profit marginThe ratio of net income to net sales. After-tax real rate of returnMoney After-tax rate of return minus the inflation rate. AgenciesFederal agency securities. AgencyA grouping of sales producers according to region. Compare with Branch. Agency bankA form of organization commonly used by foreign banks to enter the U.S. market. An agency Agency basisA means of compensating the broker of a program trade solely on the basis of commission Agency cost viewThe argument that specifies that the various agency costs create a complex environment in Agency costsThe incremental costs of having an agent make decisions for a principal. Agency pass-throughsMortgage pass-through securities whose principal and interest payments are Agency problemConflicts of interest among stockholders, bondholders, and managers. agency problemsConflicts of interest between the firm’s owners and managers. Agency theoryThe analysis of principal-agent relationships, wherein one person, an agent, acts on behalf of AgentThe decision-maker in a principal-agent relationship. AgentOne who represents Canada life when providing services to clients Aggregate Expenditure CurveAggregate demand for goods and services drawn as a function of the level of national income. Aggregate SupplyTotal quantity of goods and services supplied. Aggregate Supply CurveCombinations of price level and income for which the labor market is in equilibrium. The short-run aggregate supply curve incorporates information and price/wage inflexibilities in the labor market, whereas the long-run aggregate supply curve does not. algebraic methoda process of service department cost allocation All equity rateThe discount rate that reflects only the business risks of a project and abstracts from the Allowance for bad debtsAn offset to the accounts receivable balance, against which Allowance methodA method of adjusting accounts receivable to the amount that is expected to be collected based on company experience. Alternative mortgage instrumentsVariations of mortgage instruments such as adjustable-rate and variablerate American Stock Exchange (AMEX)The second-largest stock exchange in the United States. It trades Amortization (Credit Insurance)Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity. Amortization factorThe pool factor implied by the scheduled amortization assuming no prepayemts. Amortizing interest rate swapSwap in which the principal or national amount rises (falls) as interest rates Announcement datedate on which particular news concerning a given company is announced to the public. Annual percentage rate (APR)The periodic rate times the number of periods in a year. For example, a 5% annual percentage rate (APR)Interest rate that is annualized using simple interest. Annual percentage yield (APY)The effective, or true, annual rate of return. The APY is the rate actually Annuity factorPresent value of $1 paid for each of t periods. annuity factorPresent value of an annuity of $1 per period. ArbitrageThe simultaneous buying and selling of a security at two different prices in two different markets, ArbitrageThe purchase of securities on one market for immediate resale on ArbitrageTransactions designed to make a sure profit from inconsistent prices. Arbitrage-free option-pricing modelsYield curve option-pricing models. Arbitrage Pricing Theory (APT)An alternative model to the capital asset pricing model developed by ArbitrageursPeople who search for and exploit arbitrage opportunities. Arithmetic average (mean) rate of returnArithmetic mean return. Arithmetic mean returnAn average of the subperiod returns, calculated by summing the subperiod returns 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 Asymmetric informationinformation that is known to some people but not to other people. Asymmetric taxesA situation wherein participants in a transaction have different net tax rates. AsymmetryA lack of equivalence between two things, such as the unequal tax treatment of interest expense Auction rate preferred stock (ARPS)Floating rate preferred stock, the dividend on which is adjusted every Automated storage/retrieval systemA racking system using automated systems Autonomous ExpenditureElements of spending that do not vary systematically with variables such as GDP that are explained by the theory. See also exogenous expenditure. AverageAn arithmetic mean of selected stocks intended to represent the behavior of the market or some Average accounting returnThe average project earnings After taxes and depreciation divided by the average Average (across-day) measuresAn estimation of price that uses the average or representative price of a Average age of accounts receivableThe weighted-average age of all of the firm's outstanding invoices. Average Amortization PeriodThe average useful life of a company's collective amortizable asset base. Average Collection PeriodAverage number of days necessary to receive cash for the sale of Average collection period, or days' receivablesThe ratio of accounts receivables to sales, or the total Average-Cost Inventory MethodThe inventory cost-flow assumption that assigns the average Average cost of capitalA firm's required payout to the bondholders and to the stockholders expressed as a Average inventoryThe beginning inventory for a period, plus the amount at the end of Average lifeAlso referred to as the weighted-average life (WAL). The average number of years that each Average maturityThe average time to maturity of securities held by a mutual fund. changes in interest rates Average Propensity to ConsumeRatio of consumption to disposable income. See also marginal propensity to consume. Average Propensity to SaveRatio of saving to disposable income. See also marginal propensity to save. Average rate of return (ARR)The ratio of the average cash inflow to the amount invested. Average tax rateTaxes as a fraction of income; total taxes divided by total taxable income. average tax rateTotal taxes owed divided by total income. Avoidable costsCosts that are identifiable with and able to be influenced by decisions made at the business Back-up1) When bond yields and prices fall, the market is said to back-up. Bad debtAn account receivable that cannot be collected. Bad debtsThe amount of accounts receivable that is not expected to be collected. bad debtsRefers to accounts receivable from credit sales to customers 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 Barbell strategyA strategy in which the maturities of the securities included in the portfolio are concentrated Bargain-purchase-price optionGives the lessee the option to purchase the asset at a price below fair market Base interest rateRelated: Benchmark interest rate. Basic business strategiesKey strategies a firm intends to pursue in carrying out its business plan. Beggar-My-Neighbor PolicyA policy designed to increase an economy's prosperity at the expense of another country's prosperity. Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |