Definition of Account Value

Account Value

The sum of all the interest options in your policy, including interest.

NPV (net present value of cash flows)

Same as PV, but usually includes a subtraction for an initial cash outlay.

PV (present value of cash flows)

the value in today’s dollars of cash flows that occur in different time periods.
present value factor equal to the formula 1/(1 - r)n, where n is the number of years from the valuation date to the cash flow and r is the discount rate.
For business valuation, n should usually be midyear, i.e., n = 0.5, 1.5, . . .

Accounting exposure

The change in the value of a firm's foreign currency denominated accounts due to a
change in exchange rates.

Accounting earnings

Earnings of a firm as reported on its income statement.

Accounting insolvency

Total liabilities exceed total assets. A firm with a negative net worth is insolvent on
the books.

Accounting liquidity

The ease and quickness with which assets can be converted to cash.

Accounts payable

Money owed to suppliers.

Accounts receivable

Money owed by customers.

Accounts receivable turnover

The ratio of net credit sales to average accounts receivable, a measure of how
quickly customers pay their bills.

Adjusted present value (APV)

The net present value analysis of an asset if financed solely by equity
(present value of un-levered cash flows), plus the present value of any financing decisions (levered cash
flows). In other words, the various tax shields provided by the deductibility of interest and the benefits of
other investment tax credits are calculated separately. This analysis is often used for highly leveraged
transactions such as a leverage buy-out.

Average accounting return

The average project earnings after taxes and depreciation divided by the average
book value of the investment during its life.

Average age of accounts receivable

The weighted-average age of all of the firm's outstanding invoices.

Bond value

With respect to convertible bonds, the value the security would have if it were not convertible
apart from the conversion option.

Book value

A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
company's book value might be more or less than its market value.

Book value per share

The ratio of stockholder equity to the average number of common shares. Book value
per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation
(and not necessarily market valuation).

Capital account

Net result of public and private international investment and lending activities.

Carrying value

Book value.

Cash-surrender value

An amount the insurance company will pay if the policyholder ends a whole life
insurance policy.

Concentration account

A single centralized account into which funds collected at regional locations
(lockboxes) are transferred.

Conversion value

Also called parity value, the value of a convertible security if it is converted immediately.

Cumulative Translation Adjustment (CTA) account

An entry in a translated balance sheet in which gains
and/or losses from translation have been accumulated over a period of years. The CTA account is required
under the FASB No. 52 rule.

Current account

Net flow of goods, services, and unilateral transactions (gifts) between countries.

Discretionary account

accounts over which an individual or organization, other than the person in whose
name the account is carried, exercises trading authority or control.

Exercise value

The amount of advantage over a current market transaction provided by an in-the-money
option.

Expected value

The weighted average of a probability distribution.

Expected value of perfect information

The expected value if the future uncertain outcomes could be known
minus the expected value with no additional information.

Extraordinary positive value

A positive net present value.

Face value

See: Par value.

Firm's net value of debt

Total firm value minus total firm debt.

Future value

The amount of cash at a specified date in the future that is equivalent in value to a specified
sum today.

Generally Accepted Accounting Principals (GAAP)

A technical accounting term that encompasses the
conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.

Intrinsic value of an option

The amount by which an option is in-the-money. An option which is not in-themoney
has no intrinsic value. Related: in-the-money.

Intrinsic value of a firm

The present value of a firm's expected future net cash flows discounted by the
required rate of return.

Investment value

Related:straight value.

IRA/Keogh accounts

Special accounts where you can save and invest, and the taxes are deferred until money
is withdrawn. These plans are subject to frequent changes in law with respect to the deductibility of
contributions. Withdrawals of tax deferred contributions are taxed as income, including the capital gains from
such accounts.

Joint account

An agreement between two or more firms to share risk and financing responsibility in
purchasing or underwriting securities.

Liquidation value

Net amount that could be realized by selling the assets of a firm after paying the debt.

Loan value

The amount a policyholder may borrow against a whole life insurance policy at the interest rate
specified in the policy.

Margin account (Stocks)

A leverageable account in which stocks can be purchased for a combination of
cash and a loan. The loan in the margin account is collateralized by the stock and, if the value of the stock
drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock. Margin
rules are federally regulated, but margin requirements and interest may vary among broker/dealers.

Market value

1) The price at which a security is trading and could presumably be purchased or sold.
2) The value investors believe a firm is worth; calculated by multiplying the number of shares outstanding by the
current market price of a firm's shares.

Market value ratios

Ratios that relate the market price of the firm's common stock to selected financial
statement items.

Market value-weighted index

An index of a group of securities computed by calculating a weighted average
of the returns on each security in the index, with the weights proportional to outstanding market value.

Maturity value

Related: par value.

Money market demand account

An account that pays interest based on short-term interest rates.

Net adjusted present value

The adjusted present value minus the initial cost of an investment.

Net asset value (NAV)

The value of a fund's investments. For a mutual fund, the net asset value per share
usually represents the fund's market price, subject to a possible sales or redemption charge. For a closed end
fund, the market price may vary significantly from the net asset value.

Net book value

The current book value of an asset or liability; that is, its original book value net of any
accounting adjustments such as depreciation.

Net present value (NPV)

The present value of the expected future cash flows minus the cost.

Net present value of growth opportunities

A model valuing a firm in which net present value of new
investment opportunities is explicitly examined.

Net present value of future investments

The present value of the total sum of NPVs expected to result from
all of the firm's future investments.

Net present value rule

An investment is worth making if it has a positive NPV. Projects with negative NPVs
should be rejected.

Net salvage value

The after-tax net cash flow for terminating the project.

Omnibus account

An account carried by one futures commission merchant with another futures commission
merchant in which the transactions of two or more persons are combined and carried in the name of the
originating broker, rather than designated separately. Related: commission house.

Open account

Arrangement whereby sales are made with no formal debt contract. The buyer signs a receipt,
and the seller records the sale in the sales ledger.

Original face value

The principal amount of the mortgage as of its issue date.

Par value

Also called the maturity value or face value, the amount that the issuer agrees to pay at the maturity date.

Parity value

Related:conversion value

Present value

The amount of cash today that is equivalent in value to a payment, or to a stream of payments,
to be received in the future.

Present value factor

Factor used to calculate an estimate of the present value of an amount to be received in
a future period.

Present value of growth opportunities (NPV)

Net present value of investments the firm is expected to make
in the future.

Price value of a basis point (PVBP)

Also called the dollar value of a basis point, a measure of the change in
the price of the bond if the required yield changes by one basis point.

Purchase accounting

Method of accounting for a merger in which the acquirer is treated as having purchased
the assets and assumed liabilities of the acquiree, which are all written up or down to their respective fair
market values, the difference between the purchase price and the net assets acquired being attributed to goodwill.

Regulatory accounting procedures

accounting principals required by the FHLB that allow S&Ls to elect
annually to defer gains and losses on the sale of assets and amortize these deferrals over the average life of the
asset sold.

Relative value

The attractiveness measured in terms of risk, liquidity, and return of one instrument relative to
another, or for a given instrument, of one maturity relative to another.

Replacement value

Current cost of replacing the firm's assets.

Residual value

Usually refers to the value of a lessor's property at the time the lease expires.

Salvage value

Scrap value of plant and equipment.

Standardized value

Also called the normal deviate, the distance of one data point from the mean, divided by
the standard deviation of the distribution.

Statement of Financial Accounting Standards No. 8

This is a currency translation standard previously in
use by U.S. accounting firms. See: Statement of accounting Standards No. 52.

Statement of Financial Accounting Standards No. 52

This is the currency translation standard currently
used by U.S. firms. It mandates the use of the current rate method. See: Statement of Financial accounting
Standards No. 8.

Straight value

Also called investment value, the value of a convertible security without the con-version option.

Sweep account

account in which the bank takes all of the excess available funds at the close of each business
day and invests them for the firm.

Terminal value

The value of a bond at maturity, typically its par value, or the value of an asset (or an entire
firm) on some specified future valuation date.

Time value of an option

The portion of an option's premium that is based on the amount of time remaining
until the expiration date of the option contract, and that the underlying components that determine the value of
the option may change during that time. Time value is generally equal to the difference between the premium
and the intrinsic value. Related: in-the-money.

Time value of money

The idea that a dollar today is worth more than a dollar in the future, because the dollar
received today can earn interest up until the time the future dollar is received.

TT&L account

Treasury tax and loan account at a bank.

Utility value

The welfare a given investor assigns to an investment with a particular return and risk.

Value-added tax

Method of indirect taxation whereby a tax is levied at each stage of production on the value
added at that specific stage.

Value-at-Risk model (VAR)

Procedure for estimating the probability of portfolio losses exceeding some
specified proportion based on a statistical analysis of historical market price trends, correlations, and volatilities.

Value additivity principal

Prevails when the value of a whole group of assets exactly equals the sum of the
values of the individual assets that make up the group of assets. Stated differently, the principle that the net
present value of a set of independent projects is just the sum of the net present values of the individual projects.

Value date

In the market for Eurodollar deposits and foreign exchange, value date refers to the delivery date
of funds traded. Normally it is on spot transactions two days after a transaction is agreed upon and the future
date in the case of a forward foreign exchange trade.

Value dating

Refers to when value or credit is given for funds transferred between banks.

Value manager

A manager who seeks to buy stocks that are at a discount to their "fair value" and sell them at
or in excess of that value. Often a value stock is one with a low price to book value ratio.

Zero-balance account (ZBA)

A checking account in which zero balance is maintained by transfers of funds
from a master account in an amount only large enough to cover checks presented.

ACCOUNTS PAYABLE

Amounts a company owes to creditors.

ACCOUNTS RECEIVABLE

Amounts owed to a company by customers that it sold to on credit. Total accounts receivable are usually reduced by an allowance for doubtful accounts.

BOOK VALUE

An asset’s cost basis minus accumulated depreciation.

BOOK VALUE OF COMMON STOCK

The theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. Book value equals:
(Stockholders’ equity) / (Common stock shares outstanding)

CAPITAL IN EXCESS OF PAR VALUE

What a company collected when it sold stock for more than the par value per share.

PAR VALUE

An arbitrary value that a company may assign to its stock. Par value has no relationship to what the stock is selling for on the open market.

SALVAGE VALUE

The amount management estimates a piece of equipment will be worth at the end of its useful life, either as a trade-in or if it were sold for scrap.

Account

An explanation or report in financial terms about the transactions of an organization.

Accountability

The 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.

Accounting

A collection of systems and processes used to record, report and interpret business transactions.

Accounting equation

The representation of the double-entry system of accounting such that assets are equal to liabilities plus capital.

Accounting period

The period of time for which financial statements are produced – see also financial year.

Accounting rate of return (ARR)

A method of investment appraisal that measures
the profit generated as a percentage of the
investment – see return on investment.

Accounting system

A set of accounts that summarize the transactions of a business that have been recorded on source documents.

Accounts

‘Buckets’ within the ledger, part of the accounting system. Each account contains similar transactions (line items) that are used for the production of financial statements. Or commonly used as an abbreviation for financial statements.

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