|Conflict between bondholders and stockholders
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Definition of Conflict between bondholders and stockholders
Conflict between bondholders and stockholders
These two groups may have interests in a corporation that
The percentage return or profit that management made on each dollar stockholders invested in a company. Hereâ€™s how you figure it:
A ratio that shows which groupâ€”creditors or stockholdersâ€”has the biggest stake in or the most control of a company:
The value of the ownersâ€™ interests in a company.
The total amount of contributed capital and retained earnings; synonymous with shareholdersâ€™ equity.
Although often considered
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.
the rate of return on investment that would be required by a prudent investor to invest in an asset with a specific level risk. Also, a rate of return used to convert a monetary sum, payable or receivable in the future, into present value.
Part of the return that is not due to systematic influences (market wide influences). In
Schedule of depreciation rates allowed for tax purposes.
Any depreciation method that produces larger deductions for depreciation in the
Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid
A strategy that uses available information and forecasting techniques to seek a
Publicly traded issues that may be collateralized by mortgages and MBSs.
Money after-tax rate of return minus the inflation rate.
The discount rate that reflects only the business risks of a project and abstracts from the
Amortizing interest rate swap
Swap in which the principal or national amount rises (falls) as interest rates
Annual percentage rate (APR)
The periodic rate times the number of periods in a year. For example, a 5%
Annualized holding period return
The annual rate of return that when compounded t times, would have
The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard
Arithmetic average (mean) rate of return
Arithmetic mean return.
Arithmetic mean return
An average of the subperiod returns, calculated by summing the subperiod returns
Articles of incorporation
Legal document establishing a corporation and its structure and purpose.
The ratio of total assets to stockholder equity.
Asset activity ratios
ratios that measure how effectively the firm is managing its assets.
Auction rate preferred stock (ARPS)
Floating rate preferred stock, the dividend on which is adjusted every
Average accounting return
The average project earnings after taxes and depreciation divided by the average
Average rate of return (ARR)
The ratio of the average cash inflow to the amount invested.
Average tax rate
Taxes as a fraction of income; total taxes divided by total taxable income.
A strategy in which the maturities of the securities included in the portfolio are concentrated
Base interest rate
Related: Benchmark interest rate.
Basic business strategies
Key strategies a firm intends to pursue in carrying out its business plan.
Benchmark interest rate
Also called the base interest rate, it is the minimum interest rate investors will
Bottom-up equity management style
A management style that de-emphasizes the significance of economic
Break-even payment rate
The prepayment rate of a MBS coupon that will produce the same CFY as that of
Break-even tax rate
The tax rate at which a party to a prospective transaction is indifferent between entering
Broker loan rate
Related: Call money rate.
A strategy in which a portfolio is constructed so that the maturities of its securities are highly
A passive investment strategy with no active buying and selling of stocks from the
Call money rate
Also called the broker loan rate , the interest rate that banks charge brokers to finance
Placing one or more limits on the amount of new investment undertaken by a firm, either
Also called financial leverage ratios, these ratios compare debt to total capitalization
Cash flow coverage ratio
The number of times that financial obligations (for interest, principal payments,
Cash flow from operations
A firm's net cash inflow resulting directly from its regular operations
The proportion of a firm's assets held as cash.
A strategy in which a put and with the same strike price and expiration are either both
Common stock/other equity
Value of outstanding common shares at par, plus accumulated retained
Common stock ratios
ratios that are designed to measure the relative claims of stockholders to earnings
A single centralized account into which funds collected at regional locations
Movement of cash from different lockbox locations into a single concentration
A firm engaged in two or more unrelated businesses.
A merger involving two or more firms that are in unrelated businesses.
Controlled foreign corporation (CFC)
A foreign corporation whose voting stock is more than 50% owned
The number of shares of common stock that the security holder will receive from
The acquisition of one firm by anther firm.
debt obligations issued by corporations.
A legal document creating a corporation.
One of the three areas of the discipline of finance. It deals with the operation of the firm
Corporate financial management
The application of financial principals within a corporation to create and
Corporate financial planning
Financial planning conducted by a firm that encompasses preparation of both
Corporate processing float
The time that elapses between receipt of payment from a customer and the
Corporate tax view
The argument that double (corporate and individual) taxation of equity returns makes
Corporate taxable equivalent
rate of return required on a par bond to produce the same after-tax yield to
A legal "person" that is separate and distinct from its owners. A corporation is allowed to own
The net present value of an investment divided by the investment's initial cost. Also called
In bonds, notes or other fixed income securities, the stated percentage rate of interest, usually
ratios used to test the adequacy of cash flows generated through earnings for purposes of
Covered call writing strategy
A strategy that involves writing a call option on securities that the investor
Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the
The interest rate offered on an investment type insurance policy.
The exchange rate between two currencies expressed as the ratio of two foreign exchange rates
The return at which two alternative projects have the same net present value.
Cumulative abnormal return (CAR)
Sum of the differences between the expected return on a stock and the
Current rate method
Under this currency translation method, all foreign currency balance-sheet and income
Indicator of short-term debt paying ability. Determined by dividing current assets by current
Customary payout ratios
A range of payout ratios that is typical based on an analysis of comparable firms.
Days' sales in inventory ratio
The average number of days' worth of sales that is held in inventory.
Indicator of financial leverage. Compares assets provided by creditors to assets provided
Ability to borrow. The amount a firm can borrow up to the point where the firm value no
The amount of borrowing that leasing displaces. Firms that do a lot of leasing will be
An asset requiring fixed dollar payments, such as a government or corporate bond.
The amplification of the return earned on equity when an investment or firm is financed
A bond covenant that restricts in some way the firm's ability to incur additional indebtedness.
The market for trading debt instruments.
Total debt divided by total assets.
Reducing the principal and/or interest payments on LDC loans.
IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
Interest payment plus repayments of principal to creditors, that is, retirement of debt.
Debt service parity approach
An analysis wherein the alternatives under consideration will provide the firm
Debt-service coverage ratio
Earnings before interest and income taxes plus one-third rental charges, divided
A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank
Debtor in possession
A firm that is continuing to operate under Chapter 11 bankruptcy process.
New debt obtained by a firm during the Chapter 11 bankruptcy process.
The date on which a firm's directors meet and announce the date and amount of the next
Refers to multi-period cash flow matching.
A common term for convertible bonds because of their equity component and the
The interest rate that the Federal Reserve charges a bank to borrow funds when a bank is
Dividend payout ratio
Percentage of earnings paid out as dividends.
The fixed or floating rate paid on preferred stock based on par value.
The product of modified duration and the initial price.
The return realized on a portfolio for any evaluation period, including (1) the change in market
Dollar-weighted rate of return
Also called the internal rate of return, the interest rate that will make the
Domestic International Sales Corporation (DISC)
A U.S. corporation that receives a tax incentive for
Dual syndicate equity offering
An international equity placement where the offering is split into two
A common gauge of the price sensitivity of an asset or portfolio to a change in interest rates.
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