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Definition of bad debts
Refers to accounts receivable from credit sales to customers
The amount of accounts receivable that is not expected to be collected.
An offset to the accounts receivable balance, against which
Short-term, non-interest-bearing debts owed to a
Refers to the accounting method that records increases
An account receivable that cannot be collected.
An acronym attributed to a member of the Securities and
A contra account related to accounts receivable that represents the amounts that the company expects will not be collected.
An estimate of the uncollectible portion of accounts receivable
Amounts owed to a company by customers that it sold to on credit. Total accounts receivable are usually reduced by an allowance for doubtful accounts.
An operating expense recorded when the allowance for
Abramsâ€™ model for calculating DLOM based on the interaction of discounts from four economic components.
a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity.
The change in the value of a firm's foreign currency denominated accounts due to a
Earnings of a firm as reported on its income statement.
Total liabilities exceed total assets. A firm with a negative net worth is insolvent on
The ease and quickness with which assets can be converted to cash.
Money owed to suppliers.
Money owed by customers.
Accounts receivable turnover
The ratio of net credit sales to average accounts receivable, a measure of how
Acquisition of assets
A merger or consolidation in which an acquirer purchases the selling firm's assets.
Adjustable rate preferred stock (ARPS)
Publicly traded issues that may be collateralized by mortgages and MBSs.
A means of compensating the broker of a program trade solely on the basis of commission
All or none
Requirement that none of an order be executed unless all of it can be executed at the specified price.
An arrangement whereby a security issue is canceled if the Underwriter is unable
Annual fund operating expenses
For investment companies, the management fee and "other expenses,"
Annual percentage rate (APR)
The periodic rate times the number of periods in a year. For example, a 5%
Annual percentage yield (APY)
The effective, or true, annual rate of return. The APY is the rate actually
Annualized holding period return
The annual rate of return that when compounded t times, would have
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
methods of financing in which lenders and equity investors look principally to the
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 option is at-the-money if the strike price of the option is equal to the market price of the
Average accounting return
The average project earnings after taxes and depreciation divided by the average
Average age of accounts receivable
The weighted-average age of all of the firm's outstanding invoices.
Average collection period, or days' receivables
The ratio of accounts receivables to sales, or the total
Balance of payments
A statistical compilation formulated by a sovereign nation of all economic transactions
Balance of trade
Net flow of goods (exports minus imports) between countries.
Also called the statement of financial condition, it is a summary of the assets, liabilities, and
Balance sheet exposure
Balance sheet identity
Total assets = Total Liabilities + Total Stockholders' Equity
An investment company that invests in stocks and bonds. The same as a balanced mutual fund.
Balanced mutual fund
this is a fund that buys common stock, preferred stock and bonds. The same as a
Bank collection float
The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank.
Bank discount basis
A convention used for quoting bids and offers for treasury bills in terms of annualized
In a balance of payments, the basic balance is the net balance of the combination of the current
Basic business strategies
Key strategies a firm intends to pursue in carrying out its business plan.
Regarding a futures contract, the difference between the cash price and the futures price observed in the
In the bond market, the smallest measure used for quoting yields is a basis point. Each percentage
Price expressed in terms of yield to maturity or annual rate of return.
The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for
The requirement that a claim holder voting against a plan of reorganization
The method used for computing the bond-equivalent yield.
A guaranteed investment contract purchased with a single (one-shot) premium. Related:
Repetitive cycles of economic expansion and recession.
A business that has terminated with a loss to creditors.
The risk that the cash flow of an issuer will be impaired because of adverse economic
Exchange rate between British pounds sterling and the U.S.$.
Call money rate
Also called the broker loan rate , the interest rate that banks charge brokers to finance
A financial security such as a bond with a call option attached to it, i.e., the issuer has the right to
Net result of public and private international investment and lending activities.
Capital asset pricing model (CAPM)
An economic theory that describes the relationship between risk and
A method of constructing a replicating portfolio in which the manager purchases a
A table showing the capitalization of a firm, which typically includes the amount of
Cash settlement contracts
Futures contracts, such as stock index futures, that settle for cash, not involving
Changes in Financial Position
Sources of funds internally provided from operations that alter a company's
The negative float that is created between the time when you deposit a check in your account
The percentage of a given month's sales collected during the month of sale and each
Procedures followed by a firm in attempting to collect accounts receivables.
The combination of all of the individual opinions about a stock's or security's value.
Related: Unsystematic risk
Comparative credit analysis
A method of analysis in which a firm is compared to others that have a desired
An excess balance that is left in a bank to provide indirect compensation for loans
An Undertaking either (1) to complete a project such that it meets certain specified
The length of the time period (for example, a quarter in the case of quarterly
A single centralized account into which funds collected at regional locations
Conditional sales contracts
Similar to equipment trust certificates except that the lender is either the
credit granted by a firm to consumers for the purchase of goods or services. Also called
Contingent deferred sales charge (CDSC)
The formal name for the load of a back-end load fund.
Continuous random variable
A random value that can take any fractional value within specified ranges, as
A term of reference describing a unit of trading for a financial or commodity future. Also, the actual
The month in which futures contracts may be satisfied by making or accepting a delivery.
Convertible exchangeable preferred stock
Convertible preferred stock that may be exchanged, at the
Corporate taxable equivalent
Rate of return required on a par bond to produce the same after-tax yield to
Covered call writing strategy
A strategy that involves writing a call option on securities that the investor
The process of analyzing information on companies and bond issues in order to estimate the
Purchase of the financial guarantee of a large insurance company to raise funds.
The length of time for which the customer is granted credit.
The risk that an issuer of debt securities or a borrower may default on his obligations, or that the
A statistical technique wherein several financial characteristics are combined to form a single
The interest rate offered on an investment type insurance policy.
Lender of money.
Cumulative Translation Adjustment (CTA) account
An entry in a translated balance sheet in which gains
Net flow of goods, services, and unilateral transactions (gifts) between countries.
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