|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. Here’s how you figure it:
A ratio that shows which group—creditors or stockholders—has the biggest stake in or the most control of a company:
The total amount of contributed capital and retained earnings; synonymous with shareholders’ equity.
Although often considered
The value of the owners’ interests in a company.
Capital rationing that under certain circumstances can be violated or even viewed
Part of the return that is not due to systematic influences (market wide influences). In
Goods may be returned to the seller by the purchaser without restrictions.
Schedule of depreciation rates allowed for tax purposes.
Any depreciation method that produces larger deductions for depreciation in the
(1) The estimated useful life of the fixed asset being depreciated is
Any of several methods that recognize an increased amount
Clause causing repayment of a debt, if specified events occur or are not met.
Belief that an effort to keep unemployment below its natural rate results in an accelerating inflation.
A method of investment appraisal that measures
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
accounts receivable turnover ratio
A ratio computed by dividing annual
Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid
A ratio that shows how well a company could pay its current debts using only its most liquid or “quick” assets. It’s a more pessimistic—but also realistic—measure of safety than the current ratio, because it ignores sluggish, hard-toliquidate current assets like inventory and notes receivable. Here’s the formula:
See quick ratio
acid test ratio (also called the quick ratio)
The sum of cash, accounts receivable, and short-term marketable
Active portfolio strategy
A strategy that uses available information and forecasting techniques to seek a
Adjustable rate preferred stock (ARPS)
Publicly traded issues that may be collateralized by mortgages and MBSs.
Adjusted Cash Flow Provided by Continuing Operations
Cash flow provided by operating
After-tax real rate of return
Money after-tax rate of return minus the inflation rate.
All equity rate
The discount rate that reflects only the business risks of a project and abstracts from the
Allowance for bad debts
An offset to the accounts receivable balance, against which
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%
annual percentage rate (APR)
Interest rate that is annualized using simple interest.
The fund return, for any 12-month period, including changes in unit value and the reinvestment of distributions, but not taking into account sales, redemption, distribution or other optional charges or income taxes payable by any unitholder that would reduce returns.
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.
Asset activity ratios
ratios that measure how effectively the firm is managing its assets.
The ratio of total assets to stockholder equity.
asset turnover ratio
A broad-gauge ratio computed by dividing annual
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.
average tax rate
Total taxes owed divided by total income.
An account receivable that cannot be collected.
The amount of accounts receivable that is not expected to be collected.
Refers to accounts receivable from credit sales to customers
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.
Basic Earnings Power Ratio
Percentage of earnings relative to total assets; indication of how
Benchmark interest rate
Also called the base interest rate, it is the minimum interest rate investors will
Benefit Ratio Method
The proportion of unemployment benefits paid to a company’s
Benefit Wage Ratio Method
The proportion of total taxable wages for laid off
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
book rate of return
Accounting income divided by book value.
Book yield is the investment income earned in a year on a portfolio of assets purchased over a number of years and at different interest rates, divided by the book value of those assets.
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
Canadian Deposit Insurance Corporation
Better known as CDIC, this is an organization which insures qualifying deposits and GICs at savings institutions, mainly banks and trust companys, which belong to the CDIC for amounts up to $60,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, annuities of duration of more than five years, and mutual funds.
Placing one or more limits on the amount of new investment undertaken by a firm, either
a condition that exists when there is an
Limit set on the amount of funds available for investment.
A discount rate used to find the present value of a series of future cash receipts. Sometimes called discount rate.
Also called financial leverage ratios, these ratios compare debt to total capitalization
CARs (cumulative abnormal returns)
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.
cash burn rate
A relatively recent term that refers to how fast a business
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
Cash Flow–to–Income Ratio (CFI)
Adjusted cash flow provided by continuing operations
CASH FLOWS FROM OPERATIONS
A section on the cash-flow Stockholders’ equity statement that shows how much cash came into a company and how much went out during the normal course of business.
The proportion of a firm's assets held as cash.
ratio of cash and cash equivalents to liabilities; in the case of a bank, the ratio of cash to total deposit liabilities.
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 foundation for the compensation plan that addresses the role compensation should play in the organization
computer integrated manufacturing (CIM)
the integration of two or more flexible manufacturing systems through the use of a host computer and an information networking system
A single centralized account into which funds collected at regional locations
System whereby customers make payments to a regional collection center which transfers funds to
Movement of cash from different lockbox locations into a single concentration
A review of all engineering documentation used as the basis
Verifying that a delivered product matches authorizing
an organizational strategy in which company management decides to confront, rather than avoid, competition; an organizational strategy in which company management still attempts to differentiate company
A firm engaged in two or more unrelated businesses.
A merger involving two or more firms that are in unrelated businesses.
An account that reduces an equity account. An example is Treasury stock.
contribution margin ratio
the proportion of each revenue dollar remaining after variable costs have been covered;
The percentage tax charged by a state to an employer to
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
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