Financial Terms Bin

# Definition of Bin

## Bin

A storage area, typically a subdivision of a single level of a storage rack.

# Related Terms:

## Binomial option pricing model

An option pricing model in which the underlying asset can take on only two
possible, discrete values in the next time period for each value that it can take on in the preceding time period.

## Combination matching

Also called horizon matching, a variation of multiperiod immunization and cash
flow matching in which a portfolio is created that is always duration matched and also cash-matched in the
first few years.

## Combination strategy

A strategy in which a put and with the same strike price and expiration are either both
bought or both sold. Related: Straddle

## Q ratio or Tobin's Q ratio

Market value of a firm's assets divided by replacement value of the firm's assets.
Quadratic programming Variant of linear programming whereby the equations are quadratic rather than linear.

## Tobin's Q

Market value of assets divided by replacement value of assets. A Tobin's Q ratio greater than 1
indicates the firm has done well with its investment decisions.

## Robinson-Patman Act

a law that prohibits companies from pricing the same products at different amounts when those amounts do not reflect related cost differences

## two-bin system

an inventory ordering system in which two
containers (or stacks) of raw materials or parts are available
for use; when one container is depleted, the removal
of materials from the second container begins and a purchase
order is placed to refill the first container

## Binomial model

A method of pricing options or other equity derivatives in
which the probability over time of each possible price follows a binomial
distribution. The basic assumption is that prices can move to only two values
(one higher and one lower) over any short time period.

## Building a binomial tree

For a binomial option model: plotting the two
possible short-term price-changes values, and then the subsequent two values
each, and then the subsequent two values each, and so on over time, is known
as â€śbuilding a binomial tree.â€ť See binomial model.

## Accumulation bin

A location in which components destined for the shop floor are
accumulated before delivery.

## Bin transfer

A transaction to move inventory from one storage bin to another.

## Two-bin system

A system in which parts are reordered when their supply in one
storage bin is exhausted, requiring usage from a backup bin until the replenishment
arrives.

## fractional interest discount

the combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the ADF, Gordon model, or present value factor.

## Basic balance

In a balance of payments, the basic balance is the net balance of the combination of the current
account and the capital account.

## Bundling, unbundling

A trend allowing creation of securities either by combining primitive and derivative
securities into one composite hybrid or by separating returns on an asset into classes.

## Call risk

The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.

## Capital market line (CML)

The line defined by every combination of the risk-free asset and the market portfolio.

## Collective wisdom

The combination of all of the individual opinions about a stock's or security's value.

## Consolidation

The combining of two or more firms to form an entirely new entity.

## Contract

A term of reference describing a unit of trading for a financial or commodity future. Also, the actual
bilateral agreement between the buyer and seller of a transaction as defined by an exchange.

## Credit scoring

A statistical technique wherein several financial characteristics are combined to form a single
score to represent a customer's creditworthiness.

## Economies of scope

Scope economies exist whenever the same investment can support multiple profitable
activities less expensively in combination than separately.

## Efficient frontier

The combinations of securities portfolios that maximize expected return for any level of
expected risk, or that minimizes expected risk for any level of expected return.

## Financial engineering

Combining or dividing existing instruments to create new financial products.

## Industry

The category describing a company's primary business activity. This category is usually determined
by the largest portion of revenue.

## Interest rate swap

A binding agreement between counterparties to exchange periodic interest payments on
some predetermined dollar principal, which is called the notional principal amount. For example, one party
will pay fixed and receive variable.

## Magic of diversification

The effective reduction of risk (variance) of a portfolio, achieved without reduction
to expected returns through the combination of assets with low or negative correlations (covariances).
Related: Markowitz diversification

## Management/closely held shares

Percentage of shares held by persons closely related to a company, as
defined by the Securities and exchange commission. Part of these percentages often is included in
Institutional Holdings -- making the combined total of these percentages over 100. There is overlap as
institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company.

## Margin account (Stocks)

A leverageable account in which stocks can be purchased for a combination of
cash and a loan. The loan in the margin account is collateralized by the stock and, if the value of the stock
drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock. Margin
rules are federally regulated, but margin requirements and interest may vary among broker/dealers.

## Markowitz diversification

A strategy that seeks to combine assets a portfolio with returns that are less than
perfectly positively correlated, in an effort to lower portfolio risk (variance) without sacrificing return.
Related: naive diversification

## Merger

1) Acquisition in which all assets and liabilities are absorbed by the buyer.
2) More generally, any combination of two companies.

## Multirule system

A technical trading strategy that combines mechanical rules, such as the CRISMA
(cumulative volume, relative strength, moving average) Trading System of Pruitt and White.

## Odd lot dealer

A broker who combines odd lots of securities from multiple buy or sell orders into round lots
and executes transactions in those round lots.

## Official statement

A statement published by an issuer of a new municipal security describing itself and the issue

## Omnibus account

An account carried by one futures commission merchant with another futures commission
merchant in which the transactions of two or more persons are combined and carried in the name of the
originating broker, rather than designated separately. Related: commission house.

## Operating exposure

Degree to which exchange rate changes, in combination with price changes, will alter a
company's future operating cash flows.

## Pooling of interests

An accounting method for reporting acquisitions accomplished through the use of equity.
The combined assets of the merged entity are consolidated using book value, as opposed to the purchase
method, which uses market value. The merging entities' financial results are combined as though the two
entities have always been a single entity.

## Recourse

Term describing a type of loan. If a loan is with recourse, the lender has a general claim against the
parent company if the collateral is insufficient to repay the debt.

## Shareholders' letter

A section of an annual report where one can find jargon-free discussions by
management of successful and failed strategies which provides guidance for the probing of the rest of the
report.

## Synergistic effect

A violation of value-additivity whereby the value of the combination is greater than the
sum of the individual values.

## Two-fund separation theorem

The theoretical result that all investors will hold a combination of the riskfree
asset and the market portfolio.

## Two-state option pricing model

An option pricing model in which the underlying asset can take on only two
possible (discrete) values in the next time period for each value it can take on in the preceding time period.
Also called the binomial option pricing model.

## Shareholder value

Increasing the value of the business to its shareholders, achieved through a combination of
dividend and capital growth in the value of the shares.

## capital structure, or capitalization

Terms that refer to the combination of
capital sources that a business has tapped for investing in its assetsâ€”in
particular, the mix of its interest-bearing debt and its ownersâ€™ equity. In a
more sweeping sense, the terms also include appendages and other features
of the basic debt and equity instruments of a business. Such things
as stock options, stock warrants, and convertible features of preferred
stock and notes payable are included in the more inclusive sense of the
terms, as well as any debt-based and equity-based financial derivatives

## cost of capital

Refers to the interest cost of debt capital used by a business
plus the amount of profit that the business should earn for its equity
sources of capital to justify the use of the equity capital during the
period. Interest is a contractual and definite amount for a period,
whereas the profit that a business should earn on the equity capital
employed during the period is not. A business should set a definite goal
of earning at least a certain minimum return on equity (ROE) and compare
its actual performance for the period against this goal. The costs of
debt and equity capital are combined into either a before-tax rate or an
after-tax rate for capital investment analysis.

## inventory shrinkage

A term describing the loss of products from inventory
due to shoplifting by customers, employee theft, damaged and
spoiled products that are thrown away, and errors in recording the purchase
and sale of products. A business should make a physical count and
inspection of its inventory to determine this loss.

## Capital Structure

The combination of debt, preferred stock, and common stock used
by a company to provide capital for the purchase of its fixed
assets

the process of combining information technology to create new and more effective
business processes to lower costs, eliminate unnecessary
work, upgrade customer service, and increase
speed to market

## hybrid costing system

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

## mix

any possible combination of material or labor inputs

## 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

## optimal mix of capital

the combination of capital sources at which the lowest weighted average cost of capital is achieved

## sales mix

the relative combination of quantities of sales of the various products that make up the total sales of a company

a predetermined overhead rate used in a standard cost system; it can be a separate variable or fixed rate or a combined overhead rate

## stock appreciation right

a right to receive cash, stock, or a combination of cash and stock based on the difference between a specified dollar amount per share of stock and the quoted market price per share at some future date

## strategic staffing

an approach to personnel management
that requires a department to analyze its staffing needs by
considering its long-term objectives and those of the overall
company and determining a specific combination of
permanent and temporary employees with the best skills
to meet those needs

## value engineering

a disciplined search for various feasible
combinations of resources and methods that will increase
product functionality and reduce costs

## 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

For options, a combination of call or put options on the same stock
with differing exercise prices or maturity dates.

## Merger

The combination of two or more entities into a single entity, usually with one
of the original entities retaining control.

## Negative goodwill

A term used to describe a situation in which a business combination
results in the fair market value of all assets purchased being more than the purchase
price.

## Pooling of interests

An method for accounting for a business combination. When used, the expenses of the combination are charged against income at once, and the net
income of the acquired company is added to the full-year reported results of the acquiring company.

## Purchase method

An accounting method used to combine the financial statements of
companies. This involves recording the acquired assets at fair market value, and the
excess of the purchase price over this value as goodwill, which will be amortized
over time.

## merger

Combination of two firms into one, with the acquirer assuming assets and liabilities of the target firm.

## scenario analysis

Project analysis given a particular combination of assumptions.

## Aggregate Demand Curve

Combinations of the price level and income for which the goods and services market is in equilibrium, or for which both the goods and services market and the money market are in equilibrium.

## Aggregate Supply Curve

Combinations of price level and income for which the labor market is in equilibrium. The short-run aggregate supply curve incorporates information and price/wage inflexibilities in the labor market, whereas the long-run aggregate supply curve does not.

## Defined Benefit Plan

A pension plan that pays out a predetermined dollar
amount to participants, based on a set of rules that typically combine the number
of years of employment and wages paid over the time period when each
employee worked for the company.

## FICA

The acronym for the Federal Insurance Contributions Act, also used to describe
the combined amount of Social Security and Medicare deductions from
an employeeâ€™s pay.

## Audit Committee

A subcommittee of a company's board of directors assigned the responsibility
of ensuring that corporate financial reporting is fair and honest and that an audit is conducted
in a probing and diligent manner.

## Other-than-Temporary Decline in Market Value

The standard used to describe a decline in market value that is not expected to recover. The use of the other-than-temporary description as
opposed to describing a loss as permanent stresses the fact that the burden of proof is on the
investor who believes a decline is only temporary. That investor must have the intent and financial
ability to hold the investment until its market value recovers. In the absence of an ability to
demonstrate that a decline is temporary, the conclusion must be that a decline in value is other
than temporary, in which case the decline in value must be recognized in income.

## Restructuring Charges

Costs associated with restructuring activities, including the consolidation and/or relocation of operations or the disposition or abandonment of operations or productive assets.
Such charges may be incurred in connection with a business combination, a change in an enterprise's strategic plan, or a managerial response to declines in demand, increasing costs, or other environmental factors.

## Batch picking

Picking for several summarized orders at the same time, thereby
reducing the total number of required picks. The combined picks must still be
separated into their constituent orders, typically at some central location.

## First-in, first-out (FIFO)

An inventory valuation method under which one assumes that the
first inventory item to be stored in a bin is the first one to be used, irrespective of
actual usage.

## Last-in, first-out (LIFO)

An inventory valuation method under which one assumes that the
last inventory item to be stored in a bin is the first one to be used, irrespective of
actual usage.

## Locator file

A file identifying where inventory items are situated, by bin location.

## Packing slip

A document attached to a customer shipment, describing the contents
of the items shipped, as well as their part number and quantity.

## Back To Back Annuity

This term refers to the simultaneous issue of a life annuity with a non-guaranteed period and a guaranteed life insurance policy [usually whole life or term to 100]. The face value of the life insurance would be the same amount that was used to purchase the annuity. This combination of life annuity providing the highest payout of all types of annuities, along with a guaranteed life insurance policy allowed an uninsurable person to convert his/her RRSP into the best choice of annuity and guarantee that upon his/her death, the full value of the annuity would be paid tax free through the life insurance policy to his family members. However, in the early 1990's, the Federal tax authorities put a stop to the issuing of standard life rates to rated or uninsurable applicants. Insuring a life annuity in this manner is still an excellent way to provide guaranteed tax free funds to family members but the application for the annuity and the application for the life insurance are separate transactions and today, most likely conducted through two different insurance companies so that there is no suspicion of preferential treatment given to the life insurance application.

## Compound Interest

Interest earned on an investment at periodic intervals and added to principal and previous interest earned. Each time new interest earned is calculated it is on a combined total of principal and previous interest earned. Essentially, interest is paid on top of interest.

## Insured Retirement Plan

This is a recently coined phrase describing the concept of using Universal Life Insurance to tax shelter earnings which can be used to generate tax-free income in retirement. The concept has been described by some as "the most effective tax-neutralization strategy that exists in Canada today."
In addition to life insurance, a Universal Life Policy includes a tax-sheltered cash value fund that cannot exceed the policy's face value. Deposits made into the policy are partially used to fund the life insurance and partially grow tax sheltered inside the policy. It should be pointed out that in order for this to work, you must make deposits into this kind of policy well in excess of the cost of the underlying insurance. Investment of the cash value inside the policy are commonly mutual fund type investments. Upon retirement, the policy owner can draw on the accumulated capital in his/her policy by using the policy as collateral for a series of demand loans at the bank. The loans are structured so the sum of money borrowed plus interest never exceeds 75% of the accumulated investment account. The loans are only repaid with the tax free death benefit at the death of the policy holder. Any remaining funds are paid out tax free to named beneficiaries.
Recognizing the value to policy holders of this use of Universal Life Insurance, insurance companies are reworking features of their products to allow the policy holder to ask to have the relationship of insurance to investment growth tracked so that investment growth inside the policy may be maximized. The only potential downside of this strategy is the possibility of the government changing the tax rules to prohibit using a life insurance product in this manner.

## Trust Company

Organization usually combined with a commercial bank, which is engaged as a trustee for individuals or businesses in the administration of Trust funds, estates, custodial arrangements, stock transfer and registration, and other related services.