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Definition of Asset-specific Risk
The amount of total risk that can be eliminated by diversification by
A merger or consolidation in which an acquirer purchases the selling firm's assets.
Any possession that has value in an exchange.
A resource, recorded through a transaction, that is expected to yield a benefit to a
Something that is owned; a financial claim or a piece of property that is a store of value.
Probable future economic benefit that is obtained or controlled by an entity as a result of
Anything owned by, or owed to, an individual or business which has commercial or exchange value (e.g., cash, property, etc.).
All things of value owned by an individual or organization.
Ratios that measure how effectively the firm is managing its assets.
The decision regarding how an institution's funds should be distributed among the
Bond or note secured by assets of company.
A security that is collateralized by loans, leases, receivables, or installment contracts
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.
Categories of assets, such as stocks, bonds, real estate and foreign securities.
Extent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position.
A bond indenture restriction that permits additional borrowing on if the ratio of assets to
The ratio of total assets to stockholder equity.
Asset for asset swap
Creditors exchange the debt of one defaulting borrower for the debt of another
Also called surplus management, the task of managing funds of a financial
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
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.
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
A firm's productive resources.
Anything of value that a company owns.
Things that the business owns.
Items owned by the company or expenses that have been paid for but have not been used up.
A common element of a financial plan that describes projected capital spending and the
The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.
The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for
risk of a firm measured from the standpoint of an investor who holds a highly diversified portfolio.
The risk that the cash flow of an issuer will be impaired because of adverse economic
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.
an asset used to generate revenues or cost savings
A fixed asset, something that is expected to have long-term usage within
Capital asset pricing model (CAPM)
An economic theory that describes the relationship between risk and
Capital Asset Pricing Model (CAPM)
A model for estimating equilibrium rates of return and values of
capital asset pricing model (CAPM)
Theory of the relationship between risk and return which states that the expected risk
Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized against
The risk that a foreign debtor will be unable to pay its debts because of business events,
Related: Unsystematic risk
See asset-specific risk
The risk that a project will not be brought into operation successfully.
An offset to an asset account that reduces the balance of the asset account.
The risk that the other party to an agreement will default. In an options contract, the risk
Country financial risk
The ability of the national economy to generate enough foreign exchange to meet
Country risk General
Level of political and economic uncertainty in a country affecting the value of loans or
The risk that an issuer of debt securities or a borrower may default on his obligations, or that the
Financial and moral risk that an obligation will not be paid and a loss will result.
Refers to the volatility of returns on international investments caused by events associated
Related: Exchange rate risk
Currency risk sharing
An agreement by the parties to a transaction to share the currency risk associated with
Typically the cash, accounts receivable, and inventory accounts on the
Value of cash, accounts receivable, inventories, marketable securities and other assets that
Cash, things that will be converted into cash within a year (such as accounts receivable), and inventory.
Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.
Current refers to cash and those assets that will be turned
Cash and other company assets that can be readily turned into cash within one year.
Also referred to as credit risk (as gauged by commercial rating companies), the risk that an
Deferred Tax Asset
Future tax benefit that results from (1) the origination of a temporary difference
Related: unsystematic risk.
Dynamic asset allocation
An asset allocation strategy in which the asset mix is mechanistically shifted in
In project financing, the risk that the project's output will not be salable at a price that will
Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the
The risk that the ability of an issuer to make interest and principal payments will change because
Exchange of assets
Acquisition of another company by purchase of its assets in exchange for cash or stock.
Exchange rate risk
Also called currency risk, the risk of an investment's value changing because of currency
The variability of a firm's value that results from unexpected exchange rate changes or the
A type of mortgage pipeline risk that is generally created when the terms of the loan to be
Claims on real assets.
Claims to the income generated by real assets. Also called securities.
The risk that the cash flow of an issuer will not be adequate to meet its financial obligations.
risk to shareholders resulting from the use of debt.
See:diversifiable risk or unsystematic risk.
Long-lived property owned by a firm that is used by a firm in the production of its income.
An item with a longevity greater than one year, and which exceeds a company’s
Fixed asset turnover ratio
The ratio of sales to fixed assets.
Things that the business owns and are part of the business infrastructure – fixed assets may be
An informal term that refers to the variety of long-term operating
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
Flat price risk
Taking a position either long or short that does not involve spreading.
Force majeure risk
The risk that there will be an interruption of operations for a prolonged period after a
Foreign exchange risk
The risk that a long or short position in a foreign currency might have to be closed out
Related: interest rate risk
risk that arises when an issuer has policies concentrated within certain geographic areas,
The risk of loss in foreign exchange trading that one party will deliver foreign exchange but the counterparty financial institution will fail to deliver its end of the contract. It is also referred to as settlement risk.
High-Risk Small Business
Firm viewed as being particularly subject to risk from an investors perspective.
Unsystematic risk or risk that is uncorrelated to the overall market risk. In other words,
Also called purchasing-power risk, the risk that changes in the real return the investor will
The risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk.
A legal claim to some future benefit, typically a claim to future cash. Goodwill, intellectual
A nonphysical asset with a life greater than one year. Examples are
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.
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