|costs of financial distress|
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Definition of costs of financial distress
costs of financial distress
costs arising from bankruptcy or distorted business decisions before bankruptcy.
Legal and administrative costs of liquidation or reorganization. Also includes
Debt levels are chosen to balance interest tax shields against the costs of financial distress.
The incremental costs of having an agent make decisions for a principal.
costs that are identifiable with and able to be influenced by decisions made at the business
When a cost is recorded originally as an increase
costs that increase with increases in the level of investment in current assets.
costs of maintaining current assets, including opportunity cost of capital.
Sources of funds internally provided from operations that alter a company's
Officer who oversees the treasurer and controller and sets overall financial strategy.
The application of financial principals within a corporation to create and
financial planning conducted by a firm that encompasses preparation of both
A particularly egregious form of aggressive cost capitalization
The ability of the national economy to generate enough foreign exchange to meet
costs that are readily traceable to particular products or services.
Highlights the fact that return on assets (ROA) can be expressed in terms
The difference between the execution price of a security and the price that would have
External Financial Statements
Corporate financial statements that have been reported on by an external independent accountant.
The production of financial statements, primarily for those interested parties who are external to the business.
a discipline in which historical, monetary
Also called securities analysts and investment analysts, professionals who analyze
Claims on real assets.
Claims to the income generated by real assets. Also called securities.
Economic assistance provided by unrelated third parties, typically government agencies. They may take the form of loans, loan guarantees, subsidies, tax allowances, contributions, or cost-sharing arrangements.
a plan that aggregates monetary details
The management of a firm's costs and expenses in order to control them in relation to
A feature of a debt or credit agreement that is designed to protect the lender or creditor. It is common to characterize covenants as either positive or negative covenants.
A promise made related to financial conditions or events. Often a promise not to allow certain balance sheet items or ratios to fall below an agreed level. Usually found in loan documents, as a protection mechanism.
Events preceding and including bankruptcy, such as violation of loan contracts.
Combining or dividing existing instruments to create new financial products.
A contract entered into now that provides for the delivery of a specified asset in exchange
a monetary reward provided for performance
An expression of economic benefit that motivates behavior that might otherwise not take place.
Institutions that provide the market function of matching borrowers and lenders or
Firm that raises money from many small investors and provides financing to businesses or other
Any institution, such as a bank, that takes deposits from savers and loans them to borrowers.
The process whereby financial intermediaries channel funds from lender/savers to borrower/spenders.
Long-term, non-cancelable lease.
Lease in which the service provided by the lessor to the lessee is limited to financing equipment. All other responsibilities related to the possession of equipment, such as maintenance, insurance, and taxes, are borne by the lessee. A financial lease is usually noncancellable and is fully paid out amortized over its term.
Use of debt to increase the expected return on equity. financial leverage is measured by
The equity (ownership) capital of a business can serve
Debt financing amplifies the effects of changes in operating income on the returns to stockholders.
Financial leverage clientele
A group of investors who have a preference for investing in firms that adhere to
Financial leverage ratios
Related: capitalization ratios.
An organized institutional structure or mechanism for creating and exchanging financial assets.
Markets in which financial assets are traded.
Financial Numbers Game
The use of creative accounting practices to alter a financial statement
Objectives of a financial nature that the firm will strive to accomplish during the period
A financial blueprint for the financial future of a firm.
The process of evaluating the investing and financing options available to a firm. It
Status of a firm's assets, liabilities, and equity accounts as of a certain time, as shown in its financial statement.
That portion of the media devoted to reporting financial news.
The result of dividing one financial statement item by another. Ratios help analysts interpret
financial reports and statements
financial means having to do with
Financial reports or statements
The Profit and Loss account, Balance Sheet and Cash Flow statement of a business.
The risk that the cash flow of an issuer will not be adequate to meet its financial obligations.
Risk to shareholders resulting from the use of debt.
Ready access to cash or debt financing.
Financial Trend Analysis
Process of analyzing financial statements of a company for any continuing relationship.
The accounting period adopted by a business for the production of its financial statements.
costs that do not change with increases or decreases in the volume of goods or services
costs that do not depend on the level of output.
fixed expenses (costs)
Expenses or costs that remain the same in amount,
Fraudulent Financial Reporting
Intentional misstatements or omissions of amounts or disclosures
costs, both implied and direct, associated with a transaction. Such costs include time, effort,
The price of obtaining capital, either borrowed or equity, with intent to carry on business operations.
Future-Oriented Financial Information
Information about prospective results of operations, financial position and/or changes in financial position, based on assumptions about future economic conditions and courses of action. Future-oriented financial information is presented as either a forecast or a projection.
Incremental costs and benefits
costs and benefits that would occur if a particular course of action were
costs that are necessary to produce a product/service but are not readily traceable to particular products or services – see overhead.
Transaction costs that include the assessment of the investment merits of a financial asset.
London International Financial Futures Exchange (LIFFE)
A London exchange where Eurodollar futures
London International Financial Futures Exchange (LIFFE)
London exchange where Eurodollar futures as well as futures-style options are traded.
Long-term financial plan
financial plan covering two or more years of future operations.
Market impact costs
Also called price impact costs, the result of a bid/ask spread and a dealer's price concession.
Market timing costs
costs that arise from price movement of the stock during the time of the transaction
The costs to firms of changing their prices.
Include such things as freight, insurance, passenger services, and travel.
Notes to the financial statements
A detailed set of notes immediately following the financial statements in
The difference in the performance of an actual investment and a desired investment
Overhead generally refers to indirect, in contrast to direct,
Perfectly competitive financial markets
Markets in which no trader has the power to change the price of
The costs that relate to a period of time.
Policy Acquisition Costs
costs incurred by insurance companies in signing new policies, including expenditures on commissions and other selling expenses, promotion expenses, premium
The costs of additional regulation, including higher taxes, borne by large and
A form of start-up cost incurred in preparing for the opening of a new store or facility.
Price impact costs
Related: market impact costs
Pro forma financial statements
financial statements as adjusted to reflect a projected or planned transaction.
financial statements and financial information made public.
Restatement of Prior-Year Financial Statements
A recasting of prior-year financial statements to remove the effects of an error or other adjustment and report them on a new basis.
Round-trip transactions costs
costs of completing a transaction, including commissions, market impact
costs associated with locating a counterparty to a trade, including explicit costs (such as
costs that are constant within a defined level of activity but that can increase or decrease when
costs that have both fixed and variable components.
Short-term financial plan
A financial plan that covers the coming fiscal year.
costs incurred from shortages in current assets.
Society for Worldwide Interbank Financial Telecommunications (SWIFT)
A dedicated computer network to support funds transfer messages internationally between over 900 member banks worldwide.
A budget cost for materials and labour used for decision-making, usually expressed as a per unit cost that is applied to standard quantities from a bill of materials and to standard times from a
costs related to such onetime activities as opening a new facility, introducing
Statement of Financial Accounting Standards No. 52
This is the currency translation standard currently
Statement of Financial Accounting Standards No. 8
This is a currency translation standard previously in
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