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Definition of Asset-based financing
Methods of financing in which lenders and equity investors look principally to the
Loans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender.
Acquisition of assets
A merger or consolidation in which an acquirer purchases the selling firm's assets.
Any possession that has value in an exchange.
The ratio of total assets to stockholder equity.
Also called surplus management, the task of managing funds of a financial
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
A security that is collateralized by loans, leases, receivables, or installment contracts
Categories of assets, such as stocks, bonds, real estate and foreign securities.
A bond indenture restriction that permits additional borrowing on if the ratio of assets to
Asset for asset swap
Creditors exchange the debt of one defaulting borrower for the debt of another
Asset pricing model
A model for determining the required rate of return on an asset.
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
An interest rate swap used to alter the cash flow characteristics of an institution's assets so as to
The ratio of net sales to total assets.
Asset pricing model
A model, such as the Capital asset Pricing Model (CAPM), that determines the required
A firm's productive resources.
A common element of a financial plan that describes projected capital spending and the
An intercompany loan channeled through a bank.
Interim financing of one sort or another used to solidify a position until more permanent
Capital asset pricing model (CAPM)
An economic theory that describes the relationship between risk and
Cost of lease financing
A lease's internal rate of return.
Value of cash, accounts receivable, inventories, marketable securities and other assets that
New debt obtained by a firm during the Chapter 11 bankruptcy process.
Dynamic asset allocation
An asset allocation strategy in which the asset mix is mechanistically shifted in
Exchange of assets
Acquisition of another company by purchase of its assets in exchange for cash or stock.
Federal Financing Bank
A federal institution that lends to a wide array of federal credit agencies funds it
Claims on real assets.
Decisions concerning the liabilities and stockholders' equity side of the firm's balance
Long-lived property owned by a firm that is used by a firm in the production of its income.
Fixed asset turnover ratio
The ratio of sales to fixed assets.
A legal claim to some future benefit, typically a claim to future cash. Goodwill, intellectual
asset that is easily and cheaply turned into cash - notably cash itself and short-term securities.
Value of property, equipment and other capital assets minus the depreciation. This is an
Limitation on asset dispositions
A bond covenant that restricts in some way a firm's ability to sell major assets.
Multi-option financing facility
A syndicated confirmed credit line with attached options.
Net asset value (NAV)
The value of a fund's investments. For a mutual fund, the net asset value per share
The difference between total assets on the one hand and current liabilities and noncapitalized longterm
Net financing cost
Also called the cost of carry or, simply, carry, the difference between the cost of financing
A tangible asset with unique physical properties, like a parcel of land, a mine, or a
financing that is not shown as a liability in a company's balance sheet.
Other current assets
Value of non-cash assets, including prepaid expenses and accounts receivable, due
Planned financing program
Program of short-term and long-term financing as outlined in the corporate
Policy asset allocation
A long-term asset allocation method, in which the investor seeks to assess an
Production payment financing
A method of nonrecourse asset-based financing in which a specified
Publicly traded assets
assets that can be traded in a public market, such as the stock market.
Current assets minus inventories.
Identifiable assets, such as buildings, equipment, patents, and trademarks, as distinguished from a
A tangible asset with physical properties that can be reproduced, such as a building or
assets that remain after sufficient assets are dedicated to meet all senior debtholder's claims in full.
Return on assets (ROA)
Indicator of profitability. Determined by dividing net income for the past 12 months
Return on total assets
The ratio of earnings available to common stockholders to total assets.
Riskless or risk-free asset
An asset whose future return is known today with certainty. The risk free asset is
An asset whose future return is uncertain.
An asset whose future return is known today with certainty.
Tactical Asset Allocation (TAA)
An asset allocation strategy that allows active departures from the normal
An asset whose value depends on particular physical properties. These i nclude reproducible
Threshold for refinancing
The point when the WAC of an MBS is at a level to induce homeowners to
Total asset turnover
The ratio of net sales to total assets.
The asset that an option gives the option holder the right to buy or to sell.
An asset which has a limited life and thus, decreases in value (depreciates) over time. Also
Anything of value that a company owns.
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, things that will be converted into cash within a year (such as accounts receivable), and inventory.
RATE OF RETURN ON TOTAL ASSETS
The percentage return or profit that management made on each dollar of assets. The formula is:
A method of budgeting that develops budgets based on expected activities and cost drivers – see also activity-based costing.
A method of costing that uses cost pools to accumulate the cost of significant business activities and then assigns the costs from the cost pools to products or services based on cost drivers.
Things that the business owns.
Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.
Things that the business owns and are part of the business infrastructure – fixed assets may be
Intangible fixed assets
Non-physical assets, e.g. customer goodwill or intellectual property (patents and trademarks).
A budget that allocates funds in line with strategies.
Tangible fixed assets
Physical assets that can be seen and touched, e.g. buildings, machinery, vehicles, computers etc.
A variety of approaches that emphasize increasing shareholder value as the primary goal of every business.
A method of budgeting that ignores historical budgetary allocations and identifies the costs that are necessary to implement agreed strategies.
Items owned by the company or expenses that have been paid for but have not been used up.
An offset to an asset account that reduces the balance of the asset account.
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.
activity based costing (ABC)
A relatively new method advocated for the
asset turnover ratio
A broad-gauge ratio computed by dividing annual
Current refers to cash and those assets that will be turned
One of the three classes of cash flows reported in the
An informal term that refers to the variety of long-term operating
return on assets (ROA)
Although there is no single uniform practice for
The amount of total risk that can be eliminated by diversification by
Capital Asset Pricing Model (CAPM)
A model for estimating equilibrium rates of return and values of
Fixed Assets Turnover Ratio
A measure of the utilization of a company's fixed assets to
Return on Total Assets Ratio
A measure of the percentage return earned on the value of the
Total Asset Turnover Ratio
A measure of the utilization of all of a company's assets to
Total Debt to Total Assets Ratio
See debt ratio
activity-based budgeting (ABB)
planning approach applying activity drivers to estimate the levels and costs of activities necessary to provide the budgeted quantity and
activity-based costing (ABC)
a process using multiple cost drivers to predict and allocate costs to products and services;
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
a ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets
attribute-based costing (ABC II)
an extension of activitybased costing using cost-benefit analysis (based on increased customer utility) to choose the product attribute
an asset used to generate revenues or cost savings
a judgment made regarding the method
Activity-based costing (ABC)
A cost allocation system that compiles costs and assigns
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