Definition of Car
A loose quantity term sometimes used to describe a the amount of a commodity underlying one
commodity contract; e.g., "a car of bellies." Derived from the fact that quantities of the product specified in a
contract used to correspond closely to the capacity of a railroad car.
a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock.
This is typically used in control and takeover studies, where stockholders are paid a premium for being taken over. Starting some time period before the takeover (often five days before the first announced bid, but sometimes a longer period), the researchers calculate the actual daily stock returns for the target firm and subtract out the expected market returns (usually calculated using the firmâ€™s beta and applying it to overall market movements during the time period under observation).
The excess actual return over the capital asset pricing model-determined expected return market is called an â€˜â€˜abnormal return.â€™â€™ The cumulation of the daily abnormal returns over the time period under observation is the car. The term car(-5, 0) means the car calculated from five days before the
announcement to the day of announcement. The car(-1, 0) is a control premium, although Mergerstat generally uses the stock price five days before announcement rather than one day before announcement as the denominator in its control premium calculation. However, the car for any period other than (-1, 0) is not mathematically equivalent to a control premium.
Certificates of Amortized Revolving Debt. Pass-through securities backed by credit card receivables.
Related:net financing cost.
Costs that increase with increases in the level of investment in current assets.
Certificates of Automobile Receivables. Pass-through securities backed by automobile receivables.
Purchase of a security and simultaneous sale of a future, with the balance being financed
with a loan or repo.
Related: Net financing cost
Sum of the differences between the expected return on a stock and the
actual return that comes from the release of news to the market.
An analytical technique for solving a problem by performing a large number of trail
runs, called simulations, and inferring a solution from the collective results of the trial runs. Method for
calculating the probability distribution of possible outcomes.
Related: net financing cost
Related:net financing cost
The right of the seller of a Treasury Bond futures contract to give notice of intent to deliver
at or before 8:00 p.m. Chicago time after the closing of the exchange (3:15 p.m. Chicago time) when the
futures settlement price has been fixed. Related: Timing option.
A system of non-financial performance measurement that links innovation, customer and process measures to financial performance.
an approach to performance
measurement that weighs performance measures from four
perspectives: financial performance, an internal business
perspective, a customer perspective, and an innovation and
the total variable cost of carrying one unit of
inventory in stock for one year; includes the opportunity
cost of the capital invested in inventory
a card given to selected employees as a
means of securing greater control over spending and eliminating
the paper-based purchase authorization process
a resource that is essential to production
activity, but is available only in some limited quantity
standard cost card
a document that summarizes the direct
material, direct labor, and overhead standard quantities and
prices needed to complete one unit of product
A mathematical modeling process. For a model that
has several parameters with statistical properties, pick a set of random values
for the parameters and run a simulation. Then pick another set of values, and
run it again. Run it many times (often 10,000 times) and build up a statistical
distribution of outcomes of the simulation. This distribution of outcomes is
then used to answer whatever question you are asking.
The offsetting of a current year loss against the reported taxable
income of previous years.
The offsetting of a current year loss against the reported taxable
income for future years.
Costs of maintaining current assets, including opportunity cost of capital.
A credit card from which payments are deducted over subsequent time periods.
The I-551 Permanent Resident card, held by a resident alien.
A credit card into which a company directly deposits an employee's net pay.
A bank document containing the signatures of all approved signatories
that a company has approved to sign checks.
A document or electronic record on which an employee records his or
her hours worked during a payroll period.
The cost of holding inventory, which can include insurance,
spoilage, rent, and other expenses.
A revolving source of credit with a pre-established limit. You have to pay interest on a credit card if you have an outstanding balance.
A card which enables you to directly access your bank account when paying for purchases. So instead of paying in cash or with a credit card, a debit card allows the specified amount of the purchase to be electronically debited, or withdrawn, from your bank account. See Interac Direct Payment for an explanation of the actual procedures that you follow at the point of sale (POS) terminal to use your debit card.
American Depositary Receipts (ADRs)
Certificates issued by a U.S. depositary bank, representing foreign
shares held by the bank, usually by a branch or correspondent in the country of issue. One ADR may
represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If the ADR's
are "sponsored," the corporation provides financial information and other assistance to the bank and may
subsidize the administration of the ADRs. "Unsponsored" ADRs do not receive such assistance. ADRs carry
the same currency, political and economic risks as the underlying foreign share; the prices of the two, adjusted for the SDR/ordinary ratio, are kept essentially identical by arbitrage. American depositary shares(ADSs) are
a similar form of certification.
In the words of Warren Buffet, Bill Bane Sr., is, "a great American and one of the last real traders
around. I like to call him 'Salvo.'" His wife, carol, is a huge NAScar fan, and in her own words "delights in
pulling the legs off central bankers." Cooper Bane, son number two, is a thriving artiste who specializes in
making art that is much better than the stuff most folks are doing. Jackson, son number three, is a world
renowned master chef and plans on opening a restaurant. Bill Bane Jr., son number one, plans on giving Mr.
Monroe Trout a run for his money. [Bill Bane, Jr. helped Professor Harvey put the hypertextual glossary
together while an MBA student at Duke University.]
Basic business strategies
Key strategies a firm intends to pursue in carrying out its business plan.
A trade is carried out by the seller delivering securities and the buyer delivering funds in proper form.
A trade that does not clear is said to fail.
The options available to the seller of an interest rate futures contract, including the quality
option, the timing option, and the wild card option. Delivery options make the buyer uncertain of which
Treasury Bond will be delivered or when it will be delivered.
Accounts over which an individual or organization, other than the person in whose
name the account is carried, exercises trading authority or control.
The equilibrium price for futures contracts. Also called the theoretical futures price, which equals
the spot price continuously compounded at the cost of carry rate for some time interval.
Transaction carried out between two units of the same corporation.
All movable goods such as cars, textiles, appliances, etc. and 'f.o.b.' means free on board.
Net financing cost
Also called the cost of carry or, simply, carry, the difference between the cost of financing
the purchase of an asset and the asset's cash yield. Positive carry means that the yield earned is greater than
the financing cost; negative carry means that the financing cost exceeds the yield earned.
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.
OPEC (Organization of Petroleum Exporting Countries)
A cartel of oil-producing countries.
Personal benefits, including direct benefits, such as the use of a firm car or expense account for
personal business, and indirect benefits, such as up-to-date office dÃ©cor.
Planned amortization class CMO
1) One class of CMO that carries the most stable cash flows and the
lowest prepayement risk of any class of CMO. Because of that stable cash flow, it is considered the least risky CMO.
2) A CMO bond class that stipulates cash-flow contributions to a sinking fund. With the PAC,
principal payments are directed to the sinking fund on a priority basis in accordance with a predetermined
payment schedule, with prior claim to the cash flows before other CMO classes. Similarly, cash flows
received by the trust in excess of the sinking fund requirement are also allocated to other bond classes. The
prepayment experience of the PAC is therefore very stable over a wide range of prepayment experience.
A security that shows ownership in a corporation and gives the holder a claim, prior to the
claim of common stockholders, on earnings and also generally on assets in the event of liquidation. Most
preferred stock pays a fixed dividend that is paid prior to the common stock dividend, stated in a dollar
amount or as a percentage of par value. This stock does not usually carry voting rights. The stock shares
characteristics of both common stock and debt.
The use of a mathematical model to imitate a situation many times in order to estimate the
likelihood of various possible outcomes. See: Monte carlo simulation.
The production resource that, as a result of scarce resources, limits the production of goods
or services, i.e. a bottleneck.
The accounts found on the Balance Sheet; these account balances are carried forward for the lifetime of the company.
fixed expenses (costs)
Expenses or costs that remain the same in amount,
or fixed, over the short run and do not vary with changes in sales volume
or sales revenue or other measures of business activity. Over the
longer run, however, these costs increase or decrease as the business
grows or declines. Fixed operating costs provide capacity to carry on
operations and make sales. Fixed manufacturing overhead costs provide
production capacity. Fixed expenses are a key pivot point for the analysis
of profit behavior, especially for determining the breakeven point and for
analyzing strategies to improve profit performance.
generally accepted accounting principles (GAAP)
This important term
refers to the body of authoritative rules for measuring profit and preparing
financial statements that are included in financial reports by a business
to its outside shareowners and lenders. The development of these
guidelines has been evolving for more than 70 years. Congress passed a
law in 1934 that bestowed primary jurisdiction over financial reporting
by publicly owned businesses to the Securities and Exchange Commission
(SEC). But the SEC has largely left the development of GAAP to the
private sector. Presently, the Financial Accounting Standards Board is
the primary (but not the only) authoritative body that makes pronouncements
on GAAP. One caution: GAAP are like a movable feast. New rules
are issued fairly frequently, old rules are amended from time to time,
and some rules established years ago are discarded on occasion. Professional
accountants have a heck of time keeping up with GAAP, thatâ€™s for
sure. Also, new GAAP rules sometimes have the effect of closing the barn
door after the horse has left. Accounting abuses occur, and only then,
after the damage has been done, are new rules issued to prevent such
abuses in the future.
Operating expenses that vary in proportion to
changes in total sales revenue (total dollars of sales). Examples are sales
commissions based on sales revenue, credit card discount expenses, and
rents and franchise fees based on sales revenue. These expenses are one
of the key variables in a profit model. Segregating these expenses from
other types of expenses that behave differently is essential for management
decision-making analysis. (These expenses are not disclosed separately
in externally reported income statements.)
The value of an asset as carried on the balance sheet of a
company. In reference to the value of a company, it is the net worth
(equity) of the company.
Cost Accounting Standards Board (CASB)
a body established by Congress in 1970 to promulgate cost accounting
standards for defense contractors and federal agencies; disbanded
in 1980 and reestablished in 1988; it previously issued
pronouncements still carry the weight of law for those
organizations within its jurisdiction
economic order quantity (EOQ)
an estimate of the number
of units per order that will be the least costly and provide
the optimal balance between the costs of ordering
and the costs of carrying inventory
economic production run (EPR)
an estimate of the number
of units to produce at one time that minimizes the total
costs of setting up production runs and carrying inventory
bits of knowledge or fact that have been carefully
chosen from a body of data and arranged in a meaningful way
a number (prefaced as a multiplier
to an unknown variable) that indicates the rate at which each
decision variable uses up (or depletes) the scarce resource
the Japanese word for card; it was the original name
for a JIT system because of the use of cards that indicated
a work centerâ€™s need for additional components during a manufacturing process
Zero-coupon bond, or Zero
A bond that, instead of carrying a coupon, is sold
at a discount from its face value, pays no interest during its life, and pays the
principal only at maturity.
An expenditure that is paid for in one accounting period, but which
will not be entirely consumed until a future period. Consequently, it is carried on the
balance sheet as an asset until it is consumed.
An economic system in which the marketplace, through the pricing mechanism, determines the allocation and distribution of scarce goods and services, with a minimum of government involvement.
The study of the allocation and distribution of scare resources among competing wants.
Federal Insurance Contributions Act of 1935 (FICA)
A federal Act authorizing the government to collect Social Security and Medicare payroll taxes.
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.
Flexible Spending Account
A form of cafeteria plan allowing employees to pay
for some medical or dependent care expenses with pretax pay deductions.
Self-Employment Contributions Act (SECA)
A federal Act requiring self-employed business owners to pay the same total tax rates for Social Security and
Medicare taxes that are split between employees and employers under the Federal Insurance Contributions Act.
A fixed amount of pay benefit available to employees who cannot
work due to sickness. Company policy fixes the amount of this benefit that can
be carried forward into future periods.
Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees
A committee formed in response to SEC chairman Arthur Levitt's initiative to improve the financial
reporting environment in the United States. In a report dated February 1999, the committee
made recommendations for new rules for regulation of financial reporting in the United States that
either duplicated or carried forward the recommendations of the Treadway Commission.
That part of the capital stock of a corporation that carries voting rights and represents
the last claim on assets and dividends.
Deferred Tax Asset
Future tax benefit that results from (1) the origination of a temporary difference
that causes pretax book income to be less than taxable income or (2) a loss, credit, or other
carryforward. Future tax benefits are realized on the reversal of deductible temporary differences
or the offsetting of a loss carryforward against taxable income or a tax-credit carryforward against
the current tax provision.
Free-on-Board (FOB) Shipping Point
A shipping arrangement agreed to between buyer and
seller where title to the goods sold passes when the goods in question are delivered to a common
carrier. When goods are shipped FOB shipping point, revenue is properly recognized when the
goods are delivered to the common carrier.
Preferred Stock Stock that has a claim on assets and dividends of a corporation that are prior
to that of common stock. Preferred stock typically does not carry the right to vote.
This is the person designated to receive the death benefit of a life insurance policy if the primary beneficiary dies before the life insured. This is a consideration when husband and wife make each other the beneficiary of their coverage. Should they both die in the same car accident or plane crash, the death benefits would go to each others estate and creditor claims could be made against them. Particularly if minor children could be survivors, then a trustee contingent beneficiary should be named.
Commonly sold in the form of reducing term life insurance by lending institutions, this is life insurance with a death benefit reducing to zero over a specific period of time, usually 20 to 25 years. In most instances, the cost of coverage remains level, while the death benefit continues to decline. Re-stated, the cost of this kind of insurance is actually increasing since less death benefit is paid as the outstanding mortgage balance decreases while the cost remains the same. Lending institutions are the most popular sources for this kind of coverage because it is usually sold during the purchase of a new mortgage. The untrained institution mortgage sales person often gives the impression that this is the only place mortgage insurance can be purchased but it is more efficiently purchased at a lower cost and with more flexibility, directly from traditional life insurance companies. No matter where it is purchased, the reducing term insurance death benefit reduces over a set period of years. Most consumers are up-sizing their residences, not down-sizing, so it is likely that more coverage is required as years pass, rather than less coverage.
The cost of mortgage lender's insurance group coverage is based on a blended non-smoker/smoker rate, not having any advantage to either male or female. Mortgage lender's group insurance certificate specifies that it [the lender] is the sole beneficiary entitled to receive the death benefit. Mortgage lender's group insurance is not portable and is not guaranteed. Generally speaking, your coverage is void if you do not occupy the house for a period of time, rent the home, fall into arrears on the mortgage, and there are a few others which vary by institution. If, for example, you sell your home and buy another, your current mortgage insurance coverage ends and you will have to qualify for new coverage when you purchase your next home. Maybe you won't be able to qualify. Not being guaranteed means that it is possible for the lending institution's group insurance carrier to cancel all policy holder's coverages if they are experiencing too many death benefit claims.
Mortgage insurance purchased from a life insurance company, is priced, based on gender, smoking status, health and lifestyle of the purchaser. Once obtained, it is a unilateral contract in your favour, which cannot be cancelled by the insurance company unless you say so or unless you stop paying for it. It pays upon the death of the life insured to any "named beneficiary" you choose, tax free. If, instead of reducing term life insurance, you have purchased enough level or increasing life insurance coverage based on your projection of future need, you can buy as many new homes in the future as you want and you won't have to worry about coverage you might loose by renewing or increasing your mortgage.
It is worth mentioning mortgage creditor protection insurance since it is many times mistakenly referred to simply as mortgage insurance. If a home buyer has a limited amount of down payment towards a substantial home purchase price, he/she may qualify for a high ratio mortgage on a home purchase if a lump sum fee is paid for mortgage creditor protection insurance. The only Canadian mortgage lenders currently known to offer this option through the distribution system of banks and trust companies, are General Electric Capital [GE Capital] and Central Mortgage and Housing Corporation [CMHC]. The lump sum fee is mandatory when the mortgage is more than 75% of the value of the property being purchased. The lump sum fee is usually added onto the mortgage. It's important to realize that the only beneficiary of this type of coverage is the morgage lender, which is the bank or trust company through which the buyer arranged their mortgage. If the buyer for some reason defaults on this kind of high ratio mortgage and the value of the property has dropped since being purchased, the mortgage creditor protection insurance makes certain that the bank or trust company gets paid. However, this is not the end of the story, because whatever the difference is, between the disposition value of the property and whatever sum of unpaid mortgage money is outstanding to either GE Capital or CMHC will be the subject of collection procedures against the defaulting home buyer. Therefore, one should conclude that this kind of insurance offers protection only to the bank or trust company and absolutely no protection to the home buyer.
In October 1996 it was announced in the international news that scientists had finally located the link between cigarette smoking and lung cancer. In the early 1980's, some Canadian Life Insurance Companies had already started recognizing that non-smokers had a better life expectancy than smokers so commenced offering premium discounts for life insurance to new applicants who have been non-smokers for at least 12 months before applying for coverage. Today, most life insurance companies offer these discounts.
Savings to non-smokers can be up to 50% of regular premium depending on age and insurance company. Most life insurance companies offering non-smoker rates insist that the person applying for coverage have abstained from any form of tobacco or marijuana for at least twelve months, some companies insist on longer periods, up to 15 years.
Tobacco use is generally considered to be cigarettes, cigarillos, cigars, pipes, chewing tobacco, nicorette gum, snuff, marijuana and nicotine patches. In addition to these, if anyone tests positive to cotinine, a by-product of nicotine, they are also considered a smoker. There are some insurance companies which allow moderate or occasional use of cigars, cigarillos or pipes as acceptable for non-smoker status. Experienced brokers are aware of how to locate these insurance companies and save you money.
Special care should be taken by applicants for coverage who qualify for non-smoker rates by virtue of having ceased a smoking habit for the required period before application, but for some reason, fall back into the smoking habit some time after obtaining coverage. While contractually, the insurance company is still bound to a non-smoking rate, the facts of the applicant's smoking hiatus may become vague over the subsequent years of the resumed habit and at time of death claim, the insurance company may decide to contest the original non-smoking declaration. The consequence is not simply a need to back pay the difference between non-smoker and smoker rates but in reality the possibility of denial of death claim. It is therefore, important to advise the servicing broker as well as the insurance company of the change in smoking habits to make certain that sufficient evidence is documented to track the non-smoking period.
A dictionary meaning for the word viatica is "the eucharist as given to a dying person or to one in danger of death". In the context of Viatical Settlement it means the selling of one's own life insurance policy to another in exchange for an immediate percentage of the death benefit. The person or in many cases, group of persons buying the rights to the policy have high expectation of the imminent death of the previous owner. The sooner the death of the previous owner, the higher the profit. Consumer knowledge about this subject is poor and little is known about the entities that fund the companies that purchase policies. People should be very careful when considering the sale of their policy, and they should remember a sale of their life insurance means some group of strangers now owns a contract on their life. If a senior finds it difficult to pay for an insurance policy it might be a better choice to request that current beneficiaries take over the burden of paying the premium. The practice selling personal life insurance policies common in the United States and is spilling over into Canada. It would appear to have a definite conflict with Canada's historical view of 'insurable interest'.
This is a legal document detailing how you want your assets to be distributed upon your death. You may also stipulate how you wish to be buried or who you would like to take care of any surviving dependent family members. In my opinion, it is very important to be quite specific about your wishes for the distribution of special assets such as the antique grandfather clock, the classic silver tea set or the antique piano. If you think that your beneficiaries may dispute how your things are to be distributed, consider stipulating that an auction be held in which all beneficiaries may bid on the item which they value and all moneys collected are then shared in the same manner in which you distributed your other liquid assets. Your might want to remember that a will is automatically revoked upon marriage unless the will specifically states that the will is made in contemplation of marriage.
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.
Optional periods of time which the conditions of a contract will be carried out.
The price of obtaining capital, either borrowed or equity, with intent to carry on business operations.
On your bank statement, 'credit' represents funds that you have deposited into your account. The opposite of a credit is a debit.
However, â€˜creditâ€™ also means money that you borrow from a financial lender, like a bank. A credit card, for example, is a card that allows you to access funds which you then have to repay.
InteracÂ® Direct Payment
Instead of paying with cash or a credit card, Interac Direct Payment allows you to pay for your purchase with a debit card, such as your bank card. The amount of the purchase is electronically debited, or withdrawn, from your bank account (see debit card).
Here's how to pay for items using Interac Direct Payment and your bank account:
1. Swipe your bank card (or debit card) through the point of sale (POS) terminal at the store's check-out
2. Enter your personal identification number (PIN), confirm the amount to be paid and indicate the account (chequing) from which the money is to be drawn.
3. The specified amount is then electronically debited from your account.
Canada's bank machine and electronic debit system. If you use your bank card at a bank machine which displays the Interac symbol (and that bank machine is not your bank's machine), you will be charged a fee.
point of sale (POS)
The terminal at which a customer uses his/her debit card to make a direct payment transaction. See also Interac Direct Payment.
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