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Definition of Consumption Function
The relationship between consumption demand and disposable income. More generally, it refers to the relationship between consumption demand and all factors that affect this demand.
An equation determining aggregate output as a function of aggregate inputs such as labor and capital.
a separation of costs into groups based on the similar reason for their incurrence; it includes
the linear mathematical equation that
The probability function for a continuous random variable.
A function that assigns a probability to each and every possible outcome.
A mathematical expression that assigns a value to all possible choices. In portfolio theory the
capital rationing that under certain circumstances can be violated or even viewed
Amounts in excess of the par value or stated value that have been paid by the public to acquire stock in the company; synonymous with capital in excess of par.
Any payment received from investors for stock that exceeds
Difference between issue price and par value of stock. Also called capital surplus.
Total quantity of goods and services demanded.
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 demand for goods and services drawn as a function of the level of national income.
A budgeting process using summary-level information to
Total quantity of goods and services supplied.
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.
Aggressive Capitalization Policies
capitalizing and reporting as assets significant portions of
Aggressive Cost Capitalization
Cost capitalization that stretches the flexibility within generally
Allowance for bad debts
An offset to the accounts receivable balance, against which
Allowance for doubtful accounts
A contra account related to accounts receivable that represents the amounts that the company expects will not be collected.
Allowance for Doubtful Accounts
An estimate of the uncollectible portion of accounts receivable
A method of adjusting accounts receivable to the amount that is expected to be collected based on company experience.
authorized share capital
Maximum number of shares that the company is permitted to issue, as specified in the firm’s articles of incorporation.
Average cost of capital
A firm's required payout to the bondholders and to the stockholders expressed as a
Money invested in a firm.
The money, raised by selling stock or bonds or taking out loans, that you use to start, operate, and grow a business.
The shareholders’ investment in the business; the difference between the assets and liabilities
A very broad term rooted in economic theory and referring to
The investment by a company’s owners in a business, plus the impact of any
a) Physical capital: buildings, equipment, and any materials used to produce other goods and services in the future rather than being consumed today.
Expenditures Purchases of productive long-lived assets, in particular, items of property,
Any asset or stock of assets, financial or physical, capable of producing income.
Net result of public and private international investment and lending activities.
That part of the balance of payments accounts that records demands for and supplies of a currency arising from purchases or sales of assets.
decision Allocation of invested funds between risk-free assets versus the risky portfolio.
an asset used to generate revenues or cost savings
A fixed asset, something that is expected to have long-term usage within
Capital asset pricing model (CAPM)
An economic theory that describes the relationship between risk and
Capital Asset Pricing Model (CAPM)
A model for estimating equilibrium rates of return and values of
capital asset pricing model (CAPM)
Theory of the relationship between risk and return which states that the expected risk
A firm's set of planned capital expenditures.
management’s plan for investments in longterm
List of planned investment projects.
The process of choosing the firm's long-term capital assets.
Refers generally to analysis procedures for ranking
The process of ranking and selecting investment alternatives and
a process of evaluating an entity’s proposed
The series of steps one follows when justifying the decision to purchase
capital budgeting decision
Decision as to which real assets the firm should acquire.
Capital Cost Allowance (CCA)
The annual depreciation expense allowed by the Canadian Income Tax Act.
The total of debt and equity, i.e. the total funds in the business.
Amount used during a particular period to acquire or improve long-term assets such as
Refers to investments by a business in long-term
The transfer of capital abroad in response to fears of political risk.
Purchase by foreigners of our assets (capital inflows) or our purchase of foreign assets (capital outflows).
When a stock is sold for a profit, it's the difference between the net sales price of securities and
The gain recognized on the sale of a capital item (fixed asset), calculated
An increase in the value of an asset.
The positive difference between the adjusted cost base of an investment held as a capital property and the proceeds of disposition you receive when you sell it. When you sell such an investment for more than you paid, you realize a capital gain.
Capital gains yield
The price change portion of a stock's return.
CAPITAL IN EXCESS OF PAR VALUE
What a company collected when it sold stock for more than the par value per share.
Capital in excess par
Amounts in excess of the par value or stated value that have been paid by the public to acquire stock in the company; synonymous with additional paid-in capital.
capital investment analysis
Refers to various techniques and procedures
Money used to purchase fixed assets for a business, such as land, buildings, or machinery. Also, money invested in a business on the understanding that it will be used to purchase permanent assets rather than to cover day-to-day operating expenses.
A lease obligation that has to be capitalized on the balance sheet.
A lease in which the lessee obtains some ownership rights over the asset
One where substantially all of the benefits and risks of ownership are transferred to the lessee. It must be reflected on the company's balance sheet as an asset and corresponding liability.
The difference between the net cost of a security and the net sale price, if that security is sold at a loss.
The negative difference between the adjusted cost base of an investment held as a capital property and the proceeds of disposition you receive when you sell it. When you sell such an investment for less than you paid, you incur a capital loss.
The market for trading long-term debt instruments (those that mature in more than one year).
The market in which investors buy and sell shares of companies, normally associated with a Stock Exchange.
A market that specializes in trading long-term, relatively high risk
The market in which savings are made available to those needing funds to undertake investment projects. A financial market in which longer-term (maturity greater than one year) bonds and stocks are traded.
Capital market efficiency
Reflects the relative amount of wealth wasted in making transactions. An efficient
Capital market imperfections view
The view that issuing debt is generally valuable but that the firm's
Capital market line (CML)
The line defined by every combination of the risk-free asset and the market portfolio.
Markets for long-term financing.
A situation in which assets can easily be purchased by foreigners.
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.
Refers to recouping, or regaining, invested capital over
Ownership shares issued by a business corporation. A business
The total amount of plant, equipment, and other physical capital.
The makeup of the liabilities and stockholders' equity side of the balance sheet, especially
The combination of debt, preferred stock, and common stock used
Firm’s mix of long-term financing.
The mix of the various types of debt and equity capital maintained by a firm. The more debt capital a firm has in its capital structure, the more highly leveraged the firm is considered to be.
capital structure, or capitalization
Terms that refer to the combination of
Amounts of directly contributed equity capital in excess of the par value.
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 debt and/or equity mix that fund a firm's assets.
The total amount of debt and equity issued by a company.
A method of constructing a replicating portfolio in which the manager purchases a
capitalization of costs
When a cost is recorded originally as an increase
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
A table showing the capitalization of a firm, which typically includes the amount of
To make a payment that might otherwise be an expense (in the Profit and Loss account) an asset
A purchase that has been recorded on the company books as an asset. The
To report an expenditure or accrual as an asset as opposed to expensing it and
In Finance: to find the present value of a stream of cash flows.
Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures
Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized against
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