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Attribute bias

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Definition of Attribute bias

Attribute Bias Image 1

Attribute bias

The tendency of stocks preferred by the dividend discount model to share certain equity
attributes such as low price-earnings ratios, high dividend yield, high book-value ratio or membership in a
particular industry sector.



Related Terms:

attribute-based costing (ABC II)

an extension of activitybased costing using cost-benefit analysis (based on increased customer utility) to choose the product attribute
enhancements that the company wants to integrate into a product


Biased expectations theories

Related: pure expectations theory.


Unbiased predictor

A theory that spot prices at some future date will be equal to today's forward rates.


ABC

see activity-based costing


ABC inventory classification

A method for dividing inventory into classifications,
either by transaction volume or cost. Typically, category A includes that 20% of
inventory involving 60% of all costs or transactions, while category B includes
the next 20% of inventory involving 20% of all costs or transactions, and category
C includes the remaining 60% of inventory involving 20% of all costs or
transactions.



ABC Test

A test used to determine the status of an employee under a state unemployment
insurance program, where a person is a contractor only if there is
an Absence of control by the company, Business conducted by the employee is
substantially different from that of the company, and the person Customarily
works independently from the company.


Absorption costing

A method of costing in which all fixed and variable production costs are charged to products or services using an allocation base.


Attribute Bias Image 1

absorption costing

a cost accumulation and reporting
method that treats the costs of all manufacturing components
(direct material, direct labor, variable overhead, and
fixed overhead) as inventoriable or product costs; it is the
traditional approach to product costing; it must be used for
external financial statements and tax returns


Absorption costing

A methodology under which all manufacturing costs are assigned
to products, while all non-manufacturing costs are expensed in the current period.


Activity-based budgeting

A method of budgeting that develops budgets based on expected activities and cost drivers – see also activity-based costing.


activity-based budgeting (ABB)

planning approach applying activity drivers to estimate the levels and costs of activities necessary to provide the budgeted quantity and
quality of production


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.


activity based costing (ABC)

A relatively new method advocated for the
allocation of indirect costs. The key idea is to classify indirect costs,
many of which are fixed in amount for a period of time, into separate
activities and to develop a measure for each activity called a cost driver.
The products or other functions in the business that benefit from the
activity are allocated shares of the total indirect cost for the period based
on their usage as measured by the cost driver.


activity-based costing (ABC)

a process using multiple cost drivers to predict and allocate costs to products and services;
an accounting system collecting financial and operational
data on the basis of the underlying nature and extent
of business activities; an accounting information and
costing system that identifies the various activities performed
in an organization, collects costs on the basis of
the underlying nature and extent of those activities, and
assigns costs to products and services based on consumption
of those activities by the products and services


Activity-based costing (ABC)

A cost allocation system that compiles costs and assigns
them to activities based on relevant activity drivers. The cost of these activities can
then be charged to products or customers to arrive at a much more relevant allocation
of costs than was previously the case.


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
by a customer and the resulting profit achieved by providing
this value


Attribute Bias Image 2

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.



backflush costing

a streamlined cost accounting method that speeds up, simplifies, and reduces accounting effort in an environment that minimizes inventory balances, requires
few allocations, uses standard costs, and has minimal variances
from standard


direct costing

see variable costing


Direct costing

A costing methodology that only assigns direct labor and material costs
to a product, and which does not include any allocated indirect costs (which are all
charged off to the current period).


Equity-based insurance

Life insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of an equity portfolio.


Expectations hypothesis theories

theories of the term structure of interest rates which include the pure
expectations theory, the liquidity theory of the term structure, and the preferred habitat theory. These theories
hold that each forward rate equals the expected future interest rate for the relevant period. These three theories
differ, however, on whether other factors also affect forward rates, and how.
expectations theory of forward exchange rates A theory of foreign exchange rates that holds that the
expected future spot foreign exchange rate t periods in the future equals the current t-period forward exchange
rate.


expectations theory of exchange rates

Theory that expected spot exchange rate equals the forward rate.


FIFO method (of process costing)

the method of cost assignment that computes an average cost per equivalent
unit of production for the current period; keeps beginning
inventory units and costs separate from current period production
and costs


First in, first-out costing method (FIFO)

A process costing methodology that assigns the earliest
cost of production and materials to those units being sold, while the latest costs
of production and materials are assigned to those units still retained in inventory.


full costing

see absorption costing


GNMA-II

Mortgage-backed securities (MBS) on which registered holders receive an aggregate principal and
interest payment from a central paying agent on all of their certificates. Principal and interest payments are
disbursed on the 20th day of the month. GNMA-ii MBS are backed by multiple-issuer pools or custom pools
(one issuer but different interest rates that may vary within one percentage point). Multiple-issuer pools are
known as "Jumbos." Jumbo pools are generally longer and offer certain mortgages that are more
geographically diverse than single-issuer pools. Jumbo pool mortgage interest rates may vary within one
percentage point.



Homogenous expectations assumption

An assumption of Markowitz portfolio construction that investors
have the same expectations with respect to the inputs that are used to derive efficient portfolios: asset returns,
variances, and covariances.


hybrid costing system

a costing system combining characteristics
of both job order and process costing systems


Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA)

A federal Act shielding employers from liability if they have made
a good-faith effort to verify a new employee’s identity and employment eligibility.


Job costing

A method of accounting that accumulates the costs of a product/service that is produced either
customized to meet a customer’s specification or in a batch of identical product/services.


job order costing system

a system of product costing used
by an entity that provides limited quantities of products or
services unique to a customer’s needs; focus of recordkeeping
is on individual jobs


Kaizen costing

The process of continual cost reduction that occurs after a product
design has been completed and is now in production. Cost reduction techniques can
include working with suppliers to reduce the costs in their processes, implementing
less costly re-designs of the product, or reducing waste costs.


life cycle costing

the accumulation of costs for activities that
occur over the entire life cycle of a product from inception
to abandonment by the manufacturer and consumer


Lifecycle costing

An approach to costing that estimates and accumulates the costs of a product/service over
its entire lifecycle, i.e. from inception to abandonment.


Local expectations theory

A form of the pure expectations theory which suggests that the returns on bonds
of different maturities will be the same over a short-term investment horizon.


manufacturing resource planning (MRP II)

a fully integrated materials requirement planning system that involves
top management and provides a basis for both strategic
and tactical planning


Manufacturing resource planning (MRP II)

An expansion of the material requirements planning concept, with additional computer-based capabilities in the areas of
direct labor and machine capacity planning.


MM's proposition II

The required rate of return on equity increases as the firm’s debt-equity ratio increases.


modified FIFO method (of process costing)

the method of cost assignment that uses FIFO to compute a cost per
equivalent unit but, in transferring units from a department,
the costs of the beginning inventory units and the
units started and completed are combined and averaged


Modigliani and Miller Proposition II

A proposition by Modigliani and Miller which states that the cost of
equity is a linear function of the firm's debt-equity-ratio.


MRP II

see manufacturing resource planning


Priority-based budget

A budget that allocates funds in line with strategies.


Process costing

A method of costing for continuous manufacture in which costs for an accounting compared are compared with production for the same period to determine a cost per unit produced.


Process costing

A costing methodology that arrives at an individual product cost through the calculation of average costs for large quantities of identical products.


process costing system

a method of accumulating and assigning costs to units of production in companies producing large quantities of homogeneous products;
it accumulates costs by cost component in each production department and assigns costs to units using equivalent units of production


Pure expectations theory

A theory that asserts that the forward rates exclusively represent the expected
future rates. In other words, the entire term structure reflects the markets expectations of future short-term
rates. For example, an increasing sloping term structure implies increasing short-term interest rates. Related:
biased expectations theories


Rational expectations

The idea that people rationally anticipate the future and respond to what they see ahead.


Rational Expectations

The best forecasts that can be made given the data available and knowledge of how the economy operates. Rational expectations implies random errors, no systematic errors.


relevant costing

a process that compares, to the extent possible
and practical, the incremental revenues and incremental costs of alternative decisions


Return-to-maturity expectations

A variant of pure expectations theory which suggests that the return that an
investor will realize by rolling over short-term bonds to some investment horizon will be the same as holding
a zero-coupon bond with a maturity that is the same as that investment horizon.


strict FIFO method (of process costing)

the method of cost assignment that uses FIFO to compute a cost per equivalent unit and, in transferring units from a department, keeps the
cost of the beginning units separate from the cost of the
units started and completed during the current period


Target costing

A method of costing that is concerned with managing whole-of-life costs of a product/service during the product design phase – the difference between target price (to achieve market share) and the target profit margin.


target costing

a method of determining what the cost of a
product should be based on the product’s estimated selling
price less the desired profit


Unbiased predictor

A theory that spot prices at some future date will be equal to today's forward rates.


Value-based management

A variety of approaches that emphasize increasing shareholder value as the primary goal of every business.


Variable costing

A method of costing in which only variable production costs are treated as product costs and in which all fixed (production and non-production) costs are treated as period costs.


variable costing

a cost accumulation and reporting method
that includes only variable production costs (direct material,
direct labor, and variable overhead) as inventoriable
or product costs; it treats fixed overhead as a period cost;
is not acceptable for external reporting and tax returns


weighted average method (of process costing)

the method of cost assignment that computes an average cost per
equivalent unit of production for all units completed during
the current period; it combines beginning inventory units
and costs with current production and costs, respectively,
to compute the average


Zero-based budgeting

A method of budgeting that ignores historical budgetary allocations and identifies the costs that are necessary to implement agreed strategies.



 

 

 

 

 

 

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