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Definition of AverageAverageAn arithmetic mean of selected stocks intended to represent the behavior of the market or some
Related Terms:Arithmetic average (mean) rate of returnArithmetic mean return. Average accounting returnThe average project earnings after taxes and depreciation divided by the average Average age of accounts receivableThe weighted-average age of all of the firm's outstanding invoices. Average collection period, or days' receivablesThe ratio of accounts receivables to sales, or the total Average cost of capitalA firm's required payout to the bondholders and to the stockholders expressed as a Average lifeAlso referred to as the weighted-average life (WAL). The average number of years that each Average maturityThe average time to maturity of securities held by a mutual fund. Changes in interest rates Average (across-day) measuresAn estimation of price that uses the average or representative price of a Average rate of return (ARR)The ratio of the average cash inflow to the amount invested. Average tax rateTaxes as a fraction of income; total taxes divided by total taxable income. Dow Jones industrial averageThis is the best known U.S.index of stocks. It contains 30 stocks that trade on Moving averageUsed in charts and technical analysis, the average of security or commodity prices Simple moving averageThe mean, calculated at any time over a past period of fixed length. Weighted average cost of capitalExpected return on a portfolio of all the firm's securities. Used as a hurdle Weighted average couponThe weighted average of the gross interest rate of the mortgages underlying the Weighted average lifeSee:average life. Weighted average maturityThe WAM of a MBS is the weighted average of the remaining terms to maturity Weighted average remaining maturityThe average remaining term of the mortgages underlying a MBS. Weighted average portfolio yieldThe weighted average of the yield of all the bonds in a portfolio. WEIGHTED AVERAGEAn inventory valuation method that calculates a weighted average cost per unit for all the goods available for sale. Weighted average cost of capitalSee cost of capital. Weighted averageA method of accounting for inventory. weighted-average cost of capitalWeighted means that the proportions of Average Collection Periodaverage number of days necessary to receive cash for the sale of Weighted Average Cost of Capital (WACC)The weighted average of the costs of the capital components weighted average cost of capitala composite of the cost of the various sources of funds that comprise a firm’s capital structure; the minimum rate of return that must be earned on new investments so as not to dilute shareholder value weighted average method (of process costing)the method of cost assignment that computes an average cost per Moving averageA price average that is adjusted by adding other Moving-averages chartA financial chart that plots leading and lagging Average inventoryThe beginning inventory for a period, plus the amount at the end of Moving average inventory methodAn inventory costing methodology that calls for the re-calculation of the average cost of all parts in stock after every purchase. average tax rateTotal taxes owed divided by total income. Dow Jones Industrial AverageIndex of the investment performance of a portfolio of 30 “blue-chip” stocks. weighted-average cost of capital (WACC)Expected rate of return on a portfolio of all the firm’s securities, adjusted for tax savings due to interest payments. Average Propensity to ConsumeRatio of consumption to disposable income. See also marginal propensity to consume. Average Propensity to SaveRatio of saving to disposable income. See also marginal propensity to save. Average-Cost Inventory MethodThe inventory cost-flow assumption that assigns the average Average Amortization PeriodThe average useful life of a company's collective amortizable asset base. Weighted Average Cost of Capital (WACC)A weighted average of the component costs of debt, preferred shares, and common equity. Also called the composite cost of capital. Accounts receivable turnoverThe ratio of net credit sales to average accounts receivable, a measure of how Arithmetic mean returnAn average of the subperiod returns, calculated by summing the subperiod returns Arms indexAlso known as a trading index (TRIN)= (number of advancing issues)/ (number of declining Asian optionOption based on the average price of the asset during the life of the option. Book value per shareThe ratio of stockholder equity to the average number of common shares. Book value Days in receivablesaverage collection period. Days' sales in inventory ratioThe average number of days' worth of sales that is held in inventory. Days' sales outstandingaverage collection period. DivergenceWhen two or more averages or indices fail to show confirming trends. Dividends per shareDividends paid for the past 12 months divided by the number of common shares Earnings per share (EPS)EPS, as it is called, is a company's profit divided by its number of outstanding Expected valueThe weighted average of a probability distribution. Geometric mean returnAlso called the time weighted rate of return, a measure of the compounded rate of Insurance principleThe law of averages. The average outcome for many independent trials of an experiment Inventory turnoverThe ratio of annual sales to average inventory which measures the speed that inventory Lag response of prepaymentsThere is typically a lag of about three months between the time the weighted Macaulay durationThe weighted-average term to maturity of the cash flows from the bond, where the Management feeAn investment advisory fee charged by the financial advisor to a fund based on the fund's Market value-weighted indexAn index of a group of securities computed by calculating a weighted average Mean of the sampleThe arithmetic average; that is, the sum of the observations divided by the number of Multirule systemA technical trading strategy that combines mechanical rules, such as the CRISMA Noncompetitive bidIn a Treasury auction, bidding for a specific amount of securities at the price, whatever it Operating cycleThe average time intervening between the acquisition of materials or services and the final P/E effectThat portfolios with low P/E stocks have exhibited higher average risk-adjusted returns than high P/E stocks. Portfolio turnover rateFor an investment company, an annualized rate found by dividing the lesser of Progressive tax systemA tax system wherein the average tax rate increases for some increases in income but Receivables turnover ratioTotal operating revenues divided by average receivables. Used to measure how Regression equationAn equation that describes the average relationship between a dependent variable and a Regulatory accounting proceduresAccounting principals required by the FHLB that allow S&Ls to elect Return on assets (ROA)Indicator of profitability. Determined by dividing net income for the past 12 months Tail1) The difference between the average price in Treasury auctions and the stopout price. Terms of tradeThe weighted average of a nation's export prices relative to its import prices. TurnoverMutual Funds: A measure of trading activity during the previous year, expressed as a percentage of 12b-1 fundsMutual funds that do not charge an upfront or back-end commission, but instead take out up to Unmatched bookIf the average maturity of a bank's liabilities is less than that of its assets, it is said to be WACCSee: Weighted average cost of capital. Weekend effectThe common recurrent low or negative average return from Friday to Monday in the stock market. INVENTORY TURNOVERThe number of times a company sold out and replaced its average stock of goods in a year. The formula is: NUMBER OF DAYS SALES IN RECEIVABLES(also called average collection period). The number of days of net sales that are tied up in credit sales (accounts receivable) that haven’t been collected yet. accounts receivable turnover ratioA ratio computed by dividing annual inventory turnover ratioThe cost-of-goods-sold expense for a given price/earnings ratio (price to earnings ratio, P/E ratio, PE ratio)This key ratio equals the current market price DurationThe weighted average of the time until maturity of each of the VarianceThe weighted average of the squared deviations from the Yield to MaturityThe measure of the average rate of return that will be earned on a accounting rate of return (ARR)the rate of earnings obtained on the average capital investment over the life of a capital project; computed as average annual profits divided by average investment; not based on cash flow cost of capital (COC)the weighted average cost of the discount ratethe rate of return used to discount future cash FIFO method (of process costing)the method of cost assignment that computes an average cost per equivalent labor rate variancethe actual rate (or actual weighted average rate) paid to labor for the period minus the standard rate multiplied by all hours actually worked during the period; modified FIFO method (of process costing)the method of cost assignment that uses FIFO to compute a cost per normal capacitythe long-run (5–10 years) average production optimal mix of capitalthe combination of capital sources at which the lowest weighted average cost of capital is achieved regression lineany line that goes through the means (or averages) of the set of observations for an independent variable and its dependent variables; mathematically, there is a line of “best fit,” which is the least squares regression line standard deviationthe measure of variability of data around standard error of the estimatea measure of dispersion that reflects the average difference between actual observations and expected results provided by a regression line Bollinger band chartA financial chart that plots actual asset data along Internal rate of return a. The average annual yield earned by an investment during the period held. Macaulay durationA widely used measure of price sensitivity to yield Mean a. A number that typifies a set of numbers, such as a geometric mean
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