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Asset-backed security

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Definition of Asset-backed security

Asset-backed Security Image 1

Asset-backed security

A security that is collateralized by loans, leases, receivables, or installment contracts
on personal property, not real estate.



Related Terms:

Acquisition of assets

A merger or consolidation in which an acquirer purchases the selling firm's assets.


Asset

Any possession that has value in an exchange.


Asset

A resource, recorded through a transaction, that is expected to yield a benefit to a
company.


Asset

Something that is owned; a financial claim or a piece of property that is a store of value.


Asset

Probable future economic benefit that is obtained or controlled by an entity as a result of
a past transaction or event.



asset

Anything owned by, or owed to, an individual or business which has commercial or exchange value (e.g., cash, property, etc.).


Asset

All things of value owned by an individual or organization.


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Asset activity ratios

Ratios that measure how effectively the firm is managing its assets.


Asset allocation decision

The decision regarding how an institution's funds should be distributed among the
major classes of assets in which it may invest.


Asset-Backed Securities

Bond or note secured by assets of company.


Asset-based financing

Methods of financing in which lenders and equity investors look principally to the
cash flow from a particular asset or set of assets for a return on, and the return of, their financing.


Asset-Based Financing

Loans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender.


Asset classes

Categories of assets, such as stocks, bonds, real estate and foreign securities.


Asset Coverage

Extent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position.


Asset-coverage test

A bond indenture restriction that permits additional borrowing on if the ratio of assets to
debt does not fall below a specified minimum.


Asset/equity ratio

The ratio of total assets to stockholder equity.


Asset-backed Security Image 3

Asset for asset swap

Creditors exchange the debt of one defaulting borrower for the debt of another
defaulting borrower.


Asset/liability management

Also called surplus management, the task of managing funds of a financial
institution to accomplish the two goals of a financial institution:
1) to earn an adequate return on funds invested, and
2) to maintain a comfortable surplus of assets beyond liabilities.



asset mix

The weighting of assets in an investment portfolio among different asset classes (e.g. shares, bonds, property, cash, overseas investments.


Asset pricing model

A model for determining the required rate of return on an asset.


Asset pricing model

A model, such as the Capital asset Pricing Model (CAPM), that determines the required
rate of return on a particular asset.


Asset-specific Risk

The amount of total risk that can be eliminated by diversification by
creating a portfolio. Also known as company-specific risk or
unsystematic risk.


Asset substitution

A firm's investing in assets that are riskier than those that the debtholders expected.


Asset substitution problem

Arises when the stockholders substitute riskier assets for the firm's existing
assets and expropriate value from the debtholders.


Asset swap

An interest rate swap used to alter the cash flow characteristics of an institution's assets so as to
provide a better match with its iabilities.


Asset turnover

The ratio of net sales to total assets.


asset turnover

a ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets


asset turnover ratio

A broad-gauge ratio computed by dividing annual
sales revenue by total assets. It is a rough measure of the sales-generating
power of assets. The idea is that assets are used to make sales, and the
sales should lead to profit. The ultimate test is not sales revenue on
assets, but the profit earned on assets as measured by the return on
assets (ROA) ratio.



Assets

A firm's productive resources.


ASSETS

Anything of value that a company owns.


Assets

Things that the business owns.


Assets

Items owned by the company or expenses that have been paid for but have not been used up.


Assets requirements

A common element of a financial plan that describes projected capital spending and the
proposed uses of net working capital.


Available-for-Sale Security

A debt or equity security not classified as a held-to-maturity security or a trading security. Can be classified as a current or noncurrent investment depending on the intended holding period.


capital asset

an asset used to generate revenues or cost savings
by providing production, distribution, or service capabilities
for more than one year


Capital asset

A fixed asset, something that is expected to have long-term usage within
a company, and which exceeds a minimum dollar amount (known as the capitalization
limit, or cap limit).


Capital asset pricing model (CAPM)

An economic theory that describes the relationship between risk and
expected return, and serves as a model for the pricing of risky securities. The CAPM asserts that the only risk
that is priced by rational investors is systematic risk, because that risk cannot be eliminated by diversification.
The CAPM says that the expected return of a security or a portfolio is equal to the rate on a risk-free security
plus a risk premium.


Capital Asset Pricing Model (CAPM)

A model for estimating equilibrium rates of return and values of
assets in financial markets; uses beta as a measure of asset risk
relative to market risk


capital asset pricing model (CAPM)

Theory of the relationship between risk and return which states that the expected risk
premium on any security equals its beta times the market risk premium.


Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized against

future-period revenue.


Contra-asset account

An offset to an asset account that reduces the balance of the asset account.


Convertible security

A security that can be converted into common stock at the option of the security holder,
including convertible bonds and convertible preferred stock.


Current asset

Typically the cash, accounts receivable, and inventory accounts on the
balance sheet, or any other assets that are expected to be liquidated within a short
time interval.


Current assets

Value of cash, accounts receivable, inventories, marketable securities and other assets that
could be converted to cash in less than 1 year.


Current assets

Cash, things that will be converted into cash within a year (such as accounts receivable), and inventory.


Current assets

Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.


current assets

Current refers to cash and those assets that will be turned
into cash in the short run. Five types of assets are classified as current:
cash, short-term marketable investments, accounts receivable, inventories,
and prepaid expenses—and they are generally listed in this order in
the balance sheet.


Current Assets

Cash and other company assets that can be readily turned into cash within one year.


Debt Security

A security representing a debt relationship with an enterprise, including a government
security, municipal security, corporate bond, convertible debt issue, and commercial
paper.


Deferred Tax Asset

Future tax benefit that results from (1) the origination of a temporary difference
that causes pretax book income to be less than taxable income or (2) a loss, credit, or other
carryforward. Future tax benefits are realized on the reversal of deductible temporary differences
or the offsetting of a loss carryforward against taxable income or a tax-credit carryforward against
the current tax provision.


Derivative security

A financial security, such as an option, or future, whose value is derived in part from the
value and characteristics of another security, the underlying security.


Dynamic asset allocation

An asset allocation strategy in which the asset mix is mechanistically shifted in
response to -changing market conditions, as in a portfolio insurance strategy, for example.


Employee Retirement Income Security Act of 1974 (ERISA)

A federal Act that sets minimum operational and funding standards for employee benefit
plans.


Equity Security

An ownership interest in an enterprise, including preferred and common stock.


Exchange of assets

Acquisition of another company by purchase of its assets in exchange for cash or stock.


Exchangeable Security

security that grants the security holder the right to exchange the security for the
common stock of a firm other than the issuer of the security.


Financial assets

Claims on real assets.


financial assets

Claims to the income generated by real assets. Also called securities.


Fixed asset

Long-lived property owned by a firm that is used by a firm in the production of its income.
Tangible fixed assets include real estate, plant, and equipment. Intangible fixed assets include patents,
trademarks, and customer recognition.


Fixed asset

An item with a longevity greater than one year, and which exceeds a company’s
minimum capitalization limit. It is not purchased with the intent of immediate
resale, but rather for productive use within a company.


Fixed asset turnover ratio

The ratio of sales to fixed assets.


Fixed assets

Things that the business owns and are part of the business infrastructure – fixed assets may be
tangible or intangible.


fixed assets

An informal term that refers to the variety of long-term operating
resources used by a business in its operations—including real
estate, machinery, equipment, tools, vehicles, office furniture, computers,
and so on. In balance sheets, these assets are typically labeled property,
plant, and equipment. The term fixed assets captures the idea that the
assets are relatively fixed in place and are not held for sale in the normal
course of business. The cost of fixed assets, except land, is depreciated,
which means the cost is allocated over the estimated useful lives of the
assets.


Fixed Assets

Land, buildings, plant, equipment, and other assets acquired for carrying on the business of a company with a life exceeding one year. Normally expressed in financial accounts at cost, less accumulated depreciation.


Fixed Assets Turnover Ratio

A measure of the utilization of a company's fixed assets to
generate sales. It is calculated by dividing the sales for the period
by the book value of the net fixed assets.


Fixed-dollar security

A nonnegotiable debt security that can be redeemed at some fixed price or according to
some schedule of fixed values, e.g., bank deposits and government savings bonds.


Fixed-income security

A security that pays a specified cash flow over a
specific period. Bonds are typical fixed-income securities.


floating-rate security

security paying dividends or interest that vary with short-term interest rates.


Held-to-Maturity Security

A debt security for which the investing entity has both the positive
intent and the ability to hold until maturity.


Host security

The security to which a warrant is attached.


Hybrid security

A convertible security whose optioned common stock is trading in a middle range, causing
the convertible security to trade with the characteristics of both a fixed-income security and a common stock
instrument.


Intangible asset

A legal claim to some future benefit, typically a claim to future cash. Goodwill, intellectual
property, patents, copyrights, and trademarks are examples of intangible assets.


Intangible asset

A nonphysical asset with a life greater than one year. Examples are
goodwill, patents, trademarks, and copyrights.


Intangible assets

assets owned by the company that do not possess physical substance; they usually take the form of rights and privileges such as patents, copyrights, and franchises.


Intangible fixed assets

Non-physical assets, e.g. customer goodwill or intellectual property (patents and trademarks).


Limitation on asset dispositions

A bond covenant that restricts in some way a firm's ability to sell major assets.


Liquid asset

asset that is easily and cheaply turned into cash - notably cash itself and short-term securities.


Long-term assets

Value of property, equipment and other capital assets minus the depreciation. This is an
entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect
the market value of the assets.


Longer-Term Fixed Assets

assets having a useful life greater than one year but the duration of the 'long term' will vary with the context in which the term is applied.


Marketable security

An easily traded investment, such as treasury bills, which is
recorded as a current asset, since it is easily convertible into cash.


Monthly income preferred security (MIP)

Preferred stock issued by a subsidiary located in a tax haven.
The subsidiary relends the money to the parent.


Mortgage-backed securities

Securities backed by a pool of mortgage loans.


Mortgage-Backed Securities Clearing Corporation

A wholly owned subsidiary of the Midwest Stock
Exchange that operates a clearing service for the comparison, netting, and margining of agency-guaranteed
MBSs transacted for forward delivery.


Mortgage pass-through security

Also called a passthrough, a security created when one or more mortgage
holders form a collection (pool) of mortgages sells shares or participation certificates in the pool. The cash
flow from the collateral pool is "passed through" to the security holder as monthly payments of principal,
interest, and prepayments. This is the predominant type of MBS traded in the secondary market.


net asset value

The value of all the holdings of a mutual fund, less the fund's liabilities.


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 assets

The difference between total assets on the one hand and current liabilities and noncapitalized longterm
liabilities on the other hand.


Non-reproducible assets

A tangible asset with unique physical properties, like a parcel of land, a mine, or a
work of art.


Nonmarketable Security

A debt or equity security for which there is no posted price or bidand-
ask quotation available on a securities exchange or over-the-counter market.


Other assets

A cluster of accounts that are listed after fixed assets on the balance sheet,
and which contain minor assets that cannot be reasonably fit into any of the other
main asset categories.


Other current assets

Value of non-cash assets, including prepaid expenses and accounts receivable, due
within 1 year.


Personal Assets

assets, the title of which are held personally rather than in the name of some other legal entity.


Policy asset allocation

A long-term asset allocation method, in which the investor seeks to assess an
appropriate long-term "normal" asset mix that represents an ideal blend of controlled risk and enhanced
return.


Preferred Stock Stock that has a claim on assets and dividends of a corporation that are prior

to that of common stock. Preferred stock typically does not carry the right to vote.


Primitive security

An instrument such as a stock or bond for which payments depend only on the financial
status of the issuer.


Publicly traded assets

assets that can be traded in a public market, such as the stock market.


Quick asset

Any asset that can be converted into cash on short notice. This is a subset
of a current asset, for it does not include inventory. Its most common components
are the cash, marketable securities, and accounts receivable accounts.


Quick assets

Current assets minus inventories.


RATE OF RETURN ON TOTAL ASSETS

The percentage return or profit that management made on each dollar of assets. The formula is:
(Net income) / (Total assets)



 

 

 

 

 

 

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