Definition of AD

AD

Aggregate demand.

Absolute Advantage

The ability to produce a good or service with fewer resources than competitors. See also comparative advantage.

Accidental Death Benefit (ADB)

Coverage against accidental death usually payable in addition to base amount of coverage.

ad hoc discount

a price concession made under competitive pressure (real or imagined) that does not relate to quantity purchased

Additional hedge

A protection against borrower fallout risk in the mortgage pipeline.

Additional paid-in capital

Amounts 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 capital

Any payment received from investors for stock that exceeds
the par value of the stock.

additional paid-in capital

Difference between issue price and par value of stock. Also called capital surplus.

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.

Adjusted Cash Flow Provided by Continuing Operations

Cash flow provided by operating
activities adjusted to provide a more recurring, sustainable measure. adjustments to reported cash
provided by operating activities are made to remove such nonrecurring cash items as: the operating
component of discontinued operations, income taxes on items classified as investing or financing activities, income tax benefits from nonqualified employee stock options, the cash effects of purchases and sales of trading securities for nonfinancial firms, capitalized expenditures, and other nonrecurring cash inflows and outflows.

Adjusted Earnings

Net income adjusted to exclude selected nonrecurring and noncash items of reserve, gain, expense, and loss.

Adjusted EBITDA

Conventional earnings before interest, taxes, depreciation, and amortization (EBITDA) revised to exclude the effects of mainly nonrecurring items of revenue or gain and expense or loss.

Adjusted Income from Continuing

Operations Reported income from continuing operations
adjusted to remove nonrecurring items.

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.

Adjusting entries

The entries needed at the end of an accounting period to properly state certain account balances.

administrative department

an organizational unit that performs management activities benefiting the entire organization;
includes top management personnel and organization
headquarters

Administrative pricing rules

IRS rules used to allocate income on export sales to a foreign sales corporation.

Advance

A payment made by a customer to the company, or by the company to a
supplier, in advance of the performance of any associated service or delivery of
product.

Advance commitment

A promise to sell an asset before the seller has lined up purchase of the asset. This
seller can offset risk by purchasing a futures contract to fix the sales price.

Advance material request

Very early orders for materials before the completion
of a product design, given the long lead times required to supply some items.

Adverse selection

A situation in which market participation is a negative signal.

Allowance for bad debts

An offset to the accounts receivable balance, against which
bad debts are charged. The presence of this allowance allows one to avoid severe
changes in the period-to-period bad debt expense by expensing a steady amount to
the allowance account in every period, rather than writing off large bad debts to
expense on an infrequent basis.

American Depositary Receipts (ADRs)

Certificates issued by a U.S. depositary bank, representing foreign
shares held by the bank, usually by a branch or correspondent in the country of issue. One adR may
represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If the adR's
are "sponsored," the corporation provides financial information and other assistance to the bank and may
subsidize the administration of the adRs. "Unsponsored" adRs do not receive such assistance. adRs carry
the same currency, political and economic risks as the underlying foreign share; the prices of the two, adjusted for the SDR/ordinary ratio, are kept essentially identical by arbitrage. American depositary shares(adSs) are
a similar form of certification.

applied overhead

the 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

Bad debt

An account receivable that cannot be collected.

Bad debts

The amount of accounts receivable that is not expected to be collected.

bad debts

Refers to accounts receivable from credit sales to customers
that a business will not be able to collect (or not collect in full). In hindsight,
the business shouldn’t have extended credit to these particular
customers. Since these amounts owed to the business will not be collected,
they are written off. The accounts receivable asset account is
decreased by the estimated amount of uncollectible receivables, and the
bad debts expense account is increased this amount. These write-offs
can be done by the direct write-off method, which means that no
expense is recorded until specific accounts receivable are identified as
uncollectible. Or the allowance method can be used, which is based on
an estimated percent of bad debts from credit sales during the period.
Under this method, a contra asset account is created (called allowance
for bad debts) and the balance of this account is deducted from the
accounts receivable asset account.

Balance of Merchandise Trade

The difference between exports and imports of goods.

Balance of trade

Net flow of goods (exports minus imports) between countries.

Balance of Trade

See balance of merchandise trade.

Basket trades

Related: Program trades.

Bill of lading

A contract between the exporter and a transportation company in which the latter agrees to
transport the goods under specified conditions which limit its liability. It is the exporter's receipt for the goods
as well as proof that goods have been or will be received.

Block trade

A large trading order, defined on the New York Stock Exchange as an order that consists of
10,000 shares of a given stock or a total market value of $200,000 or more.

Brady bonds

Bonds issued by emerging countries under a debt reduction plan.

Bull spread

A spread strategy in which an investor buys an out-of-the-money put option, financing it by
selling an out-of-the money call option on the same underlying.

business-value-added activity

an activity that is necessary for the operation of the business but for which a customer would not want to pay

Canada Pension Plan (CPP)

A plan that provides retirement and long term disability income benefits to residents of Canadian provinces (excluding Quebec).

Canada Savings Bonds

A bond issued each year by the federal government. These bonds can be cashed in at any time for their full face value.

Canadian agencies

Agency banks established by Canadian banks in the U.S.

Canadian Deposit Insurance Corporation

Better known as CDIC, this is an organization which insures qualifying deposits and GICs at savings institutions, mainly banks and trust companys, which belong to the CDIC for amounts up to $60,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, annuities of duration of more than five years, and mutual funds.

Canadian Life and Health Insurance Association (CLHIA)

An association of most of the life and health insurance companies in Canada that conducts research and compiles information about the life and health insurance industry in Canada.

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.

Comparative Advantage

A 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.

Competitive Advantage

The strategies, skills, knowledge, resources or competencies that differentiate a business from its competitors.

computer-aided design (CAD)

a system using computer graphics for product designs

cost leadership strategy

a plan to achieve the position in a
competitive environment of being the low cost producer of
a product or provider of a service; it provides one method
of avoiding competition

Counter trade

The exchange of goods for other goods rather than for cash; barter.

Credit spread

Related:Quality spread

Cumulative-Effect Adjustment

The cumulative, after-tax, prior-year effect of a change in accounting
principle. It is reported as a single line item on the income statement in the year of the
change in accounting principle. The cumulative-effect-type adjustment is the most common accounting
treatment afforded changes in accounting principle.

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.

Day trading

Refers to establishing and liquidating the same position or positions within one day's trading.

Dead cat bounce

A small upmove in a bear market.

Dead Peasants Insurance

Also known as "Dead Janitors Insurance", this is the practice, where allowed, in several U.S. states, of numerous well known large American Corporations taking out corporate owned life insurance policies on millions of their regular employees, often without the knowledge or consent of those employees. Corporations profiting from the deaths of their employees [and sometimes ex-employees] have attracted adverse publicity because ultimate death benefits are seldom, even partially passed down to surviving families.

Direct-Response Advertising

advertising designed to elicit sales to customers who can be
shown to have responded specifically to the advertising in the past. Such costs can be capitalized
when persuasive historical evidence permits formulation of a reliable estimate of the future revenue
that can be obtained from incremental advertising expenditures.

Downgrade

A classic negative change in ratings for a stock, and or other rated security.

EBBS - Earnings before the bad stuff

An acronym attributed to a member of the Securities and
Exchange Commission staff. The reference is to earnings that have been heavily adjusted to
remove a wide range of nonrecurring, nonoperating, and noncash items.

Economic Value Added (EVA)

Operating profit, adjusted to remove distortions caused by certain accounting rules, less a charge
to cover the cost of capital invested in the business.

economic value added (EVA)

a measure of the extent to which income exceeds the dollar cost of capital; calculated
as income minus (invested capital times the cost of capital percentage)

economic value added (EVA)

Term used by the consulting firm Stern Stewart for profit remaining after deduction of the cost
of the capital employed.

Effective spread

The gross underwriting spread adjusted for the impact of the announcement of the common
stock offering on the firm's share price.

Factory overhead

All the costs incurred during the manufacturing process, minus the
costs of direct labor and materials.

Fixed overhead

That portion of total overhead costs which remains constant in size
irrespective of changes in activity within a certain range.

fixed overhead spending variance

the difference between the total actual fixed overhead and budgeted fixed overhead;
it is computed as part of the four-variance overhead analysis

fixed overhead volume variance

see volume variance

Flat trades

1) A bond in default trades flat; that is, the price quoted covers both principal and unpaid,
accrued interest.
2) Any security that trades without accrued interest or at a price that includes accrued
interest is said to trade flat.

Floor trader

A member who generally trades only for his own account, for an account controlled by him or
who has such a trade made for him. Also referred to as a "local".

Forward trade

A transaction in which the settlement will occur on a specified date in the future at a price
agreed upon the trade date.

Free Trade

The absence of any government restrictions, such as tariffs or quotas, on imports or exports.

GENERAL-AND-ADMINISTRATIVE EXPENSES

What was spent to run the non-sales and non-manufacturing part of a company, such as office salaries and interest paid on loans.

grade (of product or service)

the addition or removal of product
or service characteristics to satisfy additional needs, especially price

Gradualism

A policy of decreasing the rate of growth of the money supply gradually over an extended period of time, so that inflation can adjust with smaller unemployment cost. Contrast with cold-turkey policy.

Graduated-payment mortgages (GPMs)

A type of stepped-payment loan in which the borrower's payments
are initially lower than those on a comparable level-rate mortgage. The payments are gradually increased over
a predetermined period (usually 3,5, or 7 years) and then are fixed at a level-pay schedule which will be
higher than the level-pay amortization of a level-pay mortgage originated at the same time. The difference
between what the borrower actually pays and the amount required to fully amortize the mortgage is added to
the unpaid principal balance.

Gross spread

The fraction of the gross proceeds of an underwritten securities offering that is paid as
compensation to the underwriters of the offering.

Head & shoulders

In technical analysis, a chart formation in which a stock price reaches a peak and declines,
rises above its former peak and again declines and rises again but not to the second peak and then again
declines. The first and third peaks are shoulders, while the second peak is the formation's head. Technical
analysts generally consider a head and shoulders formation to be a very bearish indication.

Homemade dividend

Sale of some shares of stock to get cash that would be similar to receiving a cash dividend.

Homemade leverage

Idea that as long as individuals borrow (or lend) on the same terms as the firm, they can
duplicate the affects of corporate leverage on their own. Thus, if levered firms are priced too high, rational
investors will simply borrow on personal accounts to buy shares in unlevered firms.

Horizontal spread

The simultaneous purchase and sale of two options that differ only in their exercise date.

Information-motivated trades

Trades in which an investor believes he or she possesses pertinent
information not currently reflected in the stock's price.

Informationless trades

Trades that are the result of either a reallocation of wealth or an implementation of an
investment strategy that only utilizes existing information.

Insider trading

Trading by officers, directors, major stockholders, or others who hold private inside
information allowing them to benefit from buying or selling stock.

Intermarket spread swaps

An exchange of one bond for another based on the manager's projection of a
realignment of spreads between sectors of the bond market.

Intramarket sector spread

The spread between two issues of the same maturity within a market sector. For
instance, the difference in interest rates offered for five-year industrial corporate bonds and five-year utility
corporate bonds.

Inventory adjustment

A transaction used to adjust the book balance of an inventory
record to the amount actually on hand.

investment grade

Bonds rated Baa or above by Moody’s or BBB or above by Standard & Poor’s.

Investment grade bonds

A bond that is assigned a rating in the top four categories by commercial credit
rating companies. For example, S&P classifies investment grade bonds as BBB or higher, and Moodys'
classifies investment grade bonds as Ba or higher. Related: High-yield bond.

judgmental method (of risk adjustment)

an informal method of adjusting for risk that allows the decision maker
to use logic and reason to decide whether a project provides
an acceptable rate of return

Ladder strategy

A bond portfolio strategy in which the portfolio is constructed to have approximately equal
amounts invested in every maturity within a given range.

Last trading day

The final day under an exchange's rules during which trading may take place in a particular
futures or options contract. Contracts outstanding at the end of the last trading day must be settled by delivery
of underlying physical commodities or financial instruments, or by agreement for monetary settlement
depending upon futures contract specifications.

Lead

Payment of a financial obligation earlier than is expected or required.

Lead manager

The commercial or investment bank with the primary responsibility for organizing syndicated
bank credit or bond issue. The lead manager recruits additional lending or underwriting banks, negotiates
terms of the issue with the issuer, and assesses market conditions.

lead time

see cycle time

Leading economic indicators

Economic series that tend to rise or fall in advance of the rest of the economy.

Leading Indicator

A variable that reaches a turning point (a peak or a trough) before the economy reaches a turning point.

Load fund

A mutual fund with shares sold at a price including a large sales charge -- typically 4% to 8% of
the net amount indicated. Some "no-load" funds have distribution fees permitted by article 12b-1 of the
Investment Company Act; these are typically 0. 25%. A "true no-load" fund has neither a sales charge nor
Freddie Mac program, the aggregation that the fund purchaser receives some investment advice or other
service worthy of the charge.

Load-to-load

Arrangement whereby the customer pays for the last delivery when the next one is received.

loads

Loads are sales fees (or commissions) that are charged when you buy a mutual fund.

Long straddle

A straddle in which a long position is taken in both a put and call option.

Make-ready

See set-up.

maquiladora

a business (typically U.S.-owned on the Mexican
side of the United States-Mexico border) that exists
under a special trade agreement in which foreign companies
import materials into Mexico duty-free for assembly,
then export the goods back out of Mexico, and only pay
duty on the value added to inventory in the process

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