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Definition of Convergence
The movement of the price of a futures contract toward the price of the underlying cash
Same as PV, but usually includes a subtraction for an initial cash outlay.
the value in today’s dollars of cash flows that occur in different time periods.
The net present value analysis of an asset if financed solely by equity
The price at which a willing buyer and a willing unrelated seller would freely agree to
A dealer's price to sell a security; also called the offer price.
Gives the lessee the option to purchase the asset at a price below fair market
price expressed in terms of yield to maturity or annual rate of return.
This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
With respect to convertible bonds, the value the security would have if it were not convertible
A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
The ratio of stockholder equity to the average number of common shares. Book value
Related: Premium payback period.
A guaranteed investment contract purchased with a single (one-shot) premium. Related:
The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a
The price for which a bond can be repaid before maturity under a call provision.
The value of assets that can be converted into cash immediately, as reported by a company. Usually
A forecasted summary of a firm's expected cash inflows and cash outflows as well as its
Cash and carry
Purchase of a security and simultaneous sale of a future, with the balance being financed
Cash and equivalents
The value of assets that can be converted into cash immediately, as reported by a
The actual physical commodity, as distinguished from a futures contract.
Cash conversion cycle
The length of time between a firm's purchase of inventory and the receipt of cash
A company that pays out all earnings per share to stockholders as dividends. Or, a company or
In general, the time between cash disbursement and cash collection. In net working capital
Cash deficiency agreement
An agreement to invest cash in a project to the extent required to cover any cash
The provision of some futures contracts that requires not delivery of underlying assets but
An incentive offered to purchasers of a firm's product for payment within a specified time
A dividend paid in cash to a company's shareholders. The amount is normally based on
A short-term security that is sufficiently liquid that it may be considered the financial
In investments, it represents earnings before depreciation , amortization and non-cash charges.
Cash flow after interest and taxes
Net income plus depreciation.
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 matching
Also called dedicating a portfolio, this is an alternative to multiperiod immunization in
Cash flow per common share
cash flow from operations minus preferred stock dividends, divided by the
Cash flow time-line
Line depicting the operating activities and cash flows for a firm over a particular period.
Cash-flow break-even point
The point below which the firm will need either to obtain additional financing
Cash management bill
Very short maturity bills that the Treasury occasionally sells because its cash
Also called spot markets, these are markets that involve the immediate delivery of a security
A public equity issue that is sold to all interested investors.
The proportion of a firm's assets held as cash.
Cash settlement contracts
futures contracts, such as stock index futures, that settle for cash, not involving
A transaction where exchange is immediate, as contrasted to a forward contract, which
Temporary investments of currently excess cash in short-term, high-quality
An amount the insurance company will pay if the policyholder ends a whole life
Refers to a situation where a firm runs out of cash and cannot readily sell marketable securities.
Bond price excluding accrued interest.
A commodity is food, metal, or another physical substance that investors buy or sell, usually via
Conditional sales contracts
Similar to equipment trust certificates except that the lender is either the
Consumer Price Index (CPI)
The CPI, as it is called, measures the prices of consumer goods and services and is a
A term of reference describing a unit of trading for a financial or commodity future. Also, the actual
The month in which futures contracts may be satisfied by making or accepting a delivery.
Conversion parity price
Related:Market conversion price
The contractually specified price per share at which a convertible security can be
Also called parity value, the value of a convertible security if it is converted immediately.
The most distant months of a futures contract. A bond that sells at a discount and does not
The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the
Devaluation A decrease in the spot price of the currency
Bond price including accrued interest, i.e., the price paid by the bond buyer.
Discounted cash flow (DCF)
Future cash flows multiplied by discount factors to obtain present values.
Discretionary cash flow
cash flow that is available after the funding of all positive NPV capital investment
Dollar price of a bond
Percentage of face value at which a bond is quoted.
Effective call price
The strike price in an optional redemption provision plus the accrued interest to the
Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the
Equivalent annual cash flow
Annuity with the same net present value as the company's proposed investment.
The price at which the underlying future or options contract may be bought or sold.
The amount of advantage over a current market transaction provided by an in-the-money
Expected future cash flows
Projected future cash flows associated with an asset of decision.
The weighted average of a probability distribution.
Expected value of perfect information
The expected value if the future uncertain outcomes could be known
The time when the option contract ceases to exist (expires).
An expiration cycle relates to the dates on which options on a particular security expire. A
The last day (in the case of American-style) or the only day (in the case of European-style)
Extraordinary positive value
A positive net present value.
See: Par value.
Fair market price
Amount at which an asset would change hands between two parties, both having
The equilibrium price for futures contracts. Also called the theoretical futures price, which equals
Fair price provision
Firm's net value of debt
Total firm value minus total firm debt.
Fixed price basis
An offering of securities at a fixed price.
Fixed-price tender offer
A one-time offer to purchase a stated number of shares at a stated fixed price,
Flat price risk
Taking a position either long or short that does not involve spreading.
Flat price (also clean price)
The quoted newspaper price of a bond that does not include accrued interest.
A guaranteed investment contract where the credit rating is tied to some variable
A cash market transaction in which delivery of the commodity is deferred until after the
Forward forward contract
In Eurocurrencies, a contract under which a deposit of fixed maturity is agreed to
Free cash flows
cash not required for operations or for reinvestment. Often defined as earnings before
Also called dirty price, the price of a bond including accrued interest. Related: flat price.
The amount of cash at a specified date in the future that is equivalent in value to a specified
A term used to designate all contracts covering the sale of financial instruments or physical
Futures commission merchant
A firm or person engaged in soliciting or accepting and handling orders for
Agreement to buy or sell a set number of shares of a specific stock in a designated future
Futures contract multiple
A constant, set by an exchange, which when multiplied by the futures price gives
A market in which contracts for future delivery of a commodity or a security are bought or sold.
An option on a futures contract. Related: options on physicals.
The price at which the parties to a futures contract agree to transact on the settlement date.
General cash offer
A public offering made to investors at large.
Guaranteed insurance contract
A contract promising a stated nominal interest rate over some specific time
Guaranteed investment contract (GIC)
A pure investment product in which a life company agrees, for a
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