Definition of Actuals

Actuals

The physical commodity underlying a futures contract. Cash commodity, physical.

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, . . .

Bullet contract

A guaranteed investment contract purchased with a single (one-shot) premium. Related:
Window contract.

Cash

The value of assets that can be converted into Cash immediately, as reported by a company. Usually
includes bank accounts and marketable securities, such as government bonds and Banker's Acceptances. Cash
equivalents on balance sheets include securities (e.g., notes) that mature within 90 days.

Cash budget

A forecasted summary of a firm's expected Cash inflows and Cash outflows as well as its
expected Cash and loan balances.

Cash and carry

Purchase of a security and simultaneous sale of a future, with the balance being financed
with a loan or repo.

Cash and equivalents

The value of assets that can be converted into Cash immediately, as reported by a
company. Usually includes bank accounts and marketable securities, such as government bonds and Banker's
Acceptances. Cash equivalents on balance sheets include securities (e.g., notes) that mature within 90 days.

Cash commodity

The actual physical commodity, as distinguished from a futures contract.

Cash conversion cycle

The length of time between a firm's purchase of inventory and the receipt of Cash
from accounts receivable.

Cash cow

A company that pays out all earnings per share to stockholders as dividends. Or, a company or
division of a company that generates a steady and significant amount of free Cash flow.

Cash cycle

In general, the time between Cash disbursement and Cash collection. In net working capital
management, it can be thought of as the operating cycle less the accounts payable payment period.

Cash deficiency agreement

An agreement to invest Cash in a project to the extent required to cover any Cash
deficiency the project may experience.

Cash delivery

The provision of some futures contracts that requires not delivery of underlying assets but
settlement according to the Cash value of the asset.

Cash discount

An incentive offered to purchasers of a firm's product for payment within a specified time
period, such as ten days.

Cash dividend

A dividend paid in Cash to a company's shareholders. The amount is normally based on
profitability and is taxable as income. A Cash distribution may include capital gains and return of capital in
addition to the dividend.

Cash equivalent

A short-term security that is sufficiently liquid that it may be considered the financial
equivalent of Cash.

Cash flow

In investments, it represents earnings before depreciation , amortization and non-Cash charges.
Sometimes called Cash earnings. Cash flow from operations (called funds from operations ) by real estate and
other investment trusts is important because it indicates the ability to pay dividends.

Cash flow after interest and taxes

Net income plus depreciation.

Cash flow coverage ratio

The number of times that financial obligations (for interest, principal payments,
preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental
payments, and depreciation.

Cash flow from operations

A firm's net Cash inflow resulting directly from its regular operations
(disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing
securities), calculated as the sum of net income plus non-Cash expenses that were deducted in calculating net
income.

Cash flow matching

Also called dedicating a portfolio, this is an alternative to multiperiod immunization in
which the manager matches the maturity of each element in the liability stream, working backward from the
last liability to assure all required Cash flows.

Cash flow per common share

Cash flow from operations minus preferred stock dividends, divided by the
number of common shares outstanding.

Cash flow time-line

Line depicting the operating activities and Cash flows for a firm over a particular period.

Cash-flow break-even point

The point below which the firm will need either to obtain additional financing
or to liquidate some of its assets to meet its fixed costs.

Cash management bill

Very short maturity bills that the Treasury occasionally sells because its Cash
balances are down and it needs money for a few days.

Cash markets

Also called spot markets, these are markets that involve the immediate delivery of a security
or instrument.
Related: derivative markets.

Cash offer

A public equity issue that is sold to all interested investors.

Cash ratio

The proportion of a firm's assets held as Cash.

Cash settlement contracts

futures contracts, such as stock index futures, that settle for Cash, not involving
the delivery of the underlying.

Cash transaction

A transaction where exchange is immediate, as contrasted to a forward contract, which
calls for future delivery of an asset at an agreed-upon price.

Cash-equivalent items

Temporary investments of currently excess Cash in short-term, high-quality
investment media such as treasury bills and Banker's Acceptances.

Cash-surrender value

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

Cashout

Refers to a situation where a firm runs out of Cash and cannot readily sell marketable securities.

Commodity

A commodity is food, metal, or another physical substance that investors buy or sell, usually via
futures contracts.

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.

Contract

A term of reference describing a unit of trading for a financial or commodity future. Also, the actual
bilateral agreement between the buyer and seller of a transaction as defined by an exchange.

Contract month

The month in which futures contracts may be satisfied by making or accepting a delivery.
Also called value managers, those who assemble portfolios with relatively lower betas, lower price-book and
P/E ratios and higher dividend yields, seeing value where others do not.

Deferred futures

The most distant months of a futures contract. A bond that sells at a discount and does not
pay interest for an initial period, typically from three to seven years. Compare step-up bond and payment-inkind
bond.

Discounted cash flow (DCF)

Future Cash flows multiplied by discount factors to obtain present values.

Discretionary cash flow

Cash flow that is available after the funding of all positive NPV capital investment
projects; it is available for paying Cash dividends, repurchasing common stock, retiring debt, and so on.

Equivalent annual cash flow

Annuity with the same net present value as the company's proposed investment.

Expected future cash flows

Projected future Cash flows associated with an asset of decision.

Floating-rate contract

A guaranteed investment contract where the credit rating is tied to some variable
("floating") interest rate benchmark, such as a specific-maturity Treasury yield.

Forward contract

A Cash market transaction in which delivery of the commodity is deferred until after the
contract has been made. It is not standardized and is not traded on organized exchanges. Although the
delivery is made in the future, the price is determined at the initial trade date.

Forward forward contract

In Eurocurrencies, a contract under which a deposit of fixed maturity is agreed to
at a fixed price for future delivery.

Free cash flows

Cash not required for operations or for reinvestment. Often defined as earnings before
interest (often obtained from operating income line on the income statement) less capital expenditures less the
change in working capital.

Futures

A term used to designate all contracts covering the sale of financial instruments or physical
commodities for future delivery on a commodity exchange.

Futures commission merchant

A firm or person engaged in soliciting or accepting and handling orders for
the purchase or sale of futures contracts, subject to the rules of a futures exchange and, who, in connection
with such solicitation or acceptance of orders, accepts any money or securities to margin any resulting trades
or contracts. The FCM must be licensed by the CFTC. Related: commission house , omnibus account

Futures contract

Agreement to buy or sell a set number of shares of a specific stock in a designated future
month at a price agreed upon by the buyer and seller. The contracts themselves are often traded on the futures
market. A futures contract differs from an option because an option is the right to buy or sell, whereas a
futures contract is the promise to actually make a transaction. A future is part of a class of securities called
derivatives, so named because such securities derive their value from the worth of an underlying investment.

Futures contract multiple

A constant, set by an exchange, which when multiplied by the futures price gives
the dollar value of a stock index futures contract.

Futures market

A market in which contracts for future delivery of a commodity or a security are bought or sold.

Futures option

An option on a futures contract. Related: options on physicals.

Futures price

The price at which the parties to a futures contract agree to transact on the settlement date.

General cash offer

A public offering made to investors at large.

Guaranteed insurance contract

A contract promising a stated nominal interest rate over some specific time
period, usually several years.

Guaranteed investment contract (GIC)

A pure investment product in which a life company agrees, for a
single premium, to pay the principal amount of a predetermined annual crediting (interest) rate over the life of
the investment, all of which is paid at the maturity date.

Hell-or-high-water contract

A contract that obligates a purchaser of a project's output to make Cash
payments to the project in all events, even if no product is offered for sale.

Incremental cash flows

Difference between the firm's Cash flows with and without a project.

Ledger cash

A firm's Cash balance as reported in its financial statements. Also called book Cash.

London International Financial Futures Exchange (LIFFE)

A London exchange where Eurodollar futures
as well as futures-style options are traded.

London International Financial Futures Exchange (LIFFE)

London exchange where Eurodollar futures as well as futures-style options are traded.

Most distant futures contract

When several futures contracts are considered, the contract settling last.
Related: nearby futures contract

National Futures Association (NFA)

The futures industry self regulatory organization established in 1982.

Nearby futures contract

When several futures contracts are considered, the contract with the closest
settlement date is called the nearby futures contract. The next futures contract is the one that settles just after
the nearby futures contract. The contract farthest away in time from settlement is called the most distant
futures contract.

Net cash balance

Beginning Cash balance plus Cash receipts minus Cash disbursements.

Next futures contract

The contract settling immediately after the nearby futures contract.

Nexus (of contracts)

A set or collection of something.

Nominal cash flow

A Cash flow expressed in nominal terms if the actual dollars to be received or paid out are given.

Noncash charge

A cost, such as depreciation, depletion, and amortization, that does not involve any Cash outflow.

Open contracts

contracts which have been bought or sold without the transaction having been completed by
subsequent sale or purchase, or by making or taking actual delivery of the financial instrument or physical
commodity.

Operating cash flow

Earnings before depreciation minus taxes. It measures the Cash generated from
operations, not counting capital spending or working capital requirements.

Optimal contract

The contract that balances the three types of agency costs (contracting, monitoring, and
misbehavior) against one another to minimize the total cost.

Options contract

A contract that, in exchange for the option price, gives the option buyer the right, but not
the obligation, to buy (or sell) a financial asset at the exercise price from (or to) the option seller within a
specified time period, or on a specified date (expiration date).

Options contract multiple

A constant, set at $100, which when multiplied by the Cash index value gives the
dollar value of the stock index underlying an option. That is, dollar value of the underlying stock index = Cash
index value x $100 (the options contract multiple).

Options on physicals

Interest rate options written on fixed-income securities, as opposed to those written on
interest rate futures contracts.

Real cash flow

A Cash flow is expressed in real terms if the current, or date 0, purchasing power of the Cash
flow is given.

Scheduled cash flows

The mortgage principal and interest payments due to be paid under the terms of the
mortgage not including possible prepayments.

Set of contracts perspective

View of corporation as a set of contracting relationships, among individuals
who have conflicting objectives, such as shareholders or managers. The corporation is a legal contrivance that
serves as the nexus for the contracting relationships.

Spot futures parity theorem

Describes the theoretically correct relationship between spot and futures prices.
Violation of the parity relationship gives rise to arbitrage opportunities.

Statement of cash flows

A financial statement showing a firm's Cash receipts and Cash payments during a
specified period.

Statement-of-cash-flows method

A method of Cash budgeting that is organized along the lines of the statement of Cash flows.

Symmetric cash matching

An extension of Cash flow matching that allows for the short-term borrowing of
funds to satisfy a liability prior to the liability due date, resulting in a reduction in the cost of funding liabilities.

Take-or-pay contract

A contract that obligates the purchaser to take any product that is offered to it (and pay
the Cash purchase price) or pay a specified amount if it refuses to take the product.

Target cash balance

Optimal amount of Cash for a firm to hold, considering the trade-off between the
opportunity costs of holding too much Cash and the trading costs of holding too little Cash.

Theoretical futures price

Also called the fair price, the equilibrium futures price.

Turnkey construction contract

A type of construction contract under which the construction firm is
obligated to complete a project according to prespecified criteria for a price that is fixed at the time the
contract is signed.

Underlying asset

The asset that an option gives the option holder the right to buy or to sell.

Underlying security

Options: the security subject to being purchased or sold upon exercise of an option
contract. For example, IBM stock is the underlying security to IBM options. Depository receipts: The class,
series and number of the foreign shares represented by the depository receipt.

Wanted for cash

A statement displayed on market tickers indicating that a bidder will pay Cash for same day
settlement of a block of a specified security.

Window contract

A guaranteed investment contract purchased with deposits over some future designated
time period (the "window"), usually between 3 and 12 months. All deposits made are guaranteed the same
credit rating.
Related: bullet contract.

CASH AND CASH EQUIVALENTS

The balance in a company’s checking account(s) plus short-term or temporary investments (sometimes called “marketable securities”), which are highly liquid.

CASH-FLOW STATEMENT

A statement that shows where a company’s Cash came from and where it went for a period of time, such as a year.

CASH FLOWS FROM FINANCING ACTIVITIES

A section on the Cash-flow statement that shows how much Cash a company raised by selling stocks or bonds this year and how much was paid out for Cash dividends and other finance-related obligations.

CASH FLOWS FROM INVESTING ACTIVITIES

A section on the Cashflow statement that shows how much Cash came in and went out because of various investing activities like purchasing machinery.

CASH FLOWS FROM OPERATIONS

A section on the Cash-flow Stockholders’ equity statement that shows how much Cash came into a company and how much went out during the normal course of business.

Cash accounting

A method of accounting in which profit is calculated as the difference between income
when it is received and expenses when they are paid.

Cash cost

The amount of Cash expended.

Cash Flow statement

A financial report that shows the movement in Cash for a business during an accounting period.

Cash value added (CVA)

A method of investment appraisal that calculates the ratio of the net present value of an
investment to the initial capital investment.

Discounted cash flow (DCF)

A method of investment appraisal that discounts future Cash flows to present value using a discount rate, which is the risk-adjusted cost of capital.

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