|degree of operating leverage (DOL)
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Definition of degree of operating leverage (DOL)
degree of operating leverage (DOL)
Percentage change in profits given a 1 percent change in sales.
For investment companies, the management fee and "other expenses,"
The amplification of the return earned on equity when an investment or firm is financed
Municipal revenue bonds for which quotes are given in dollar prices. Not to be confused with
The product of modified duration and the initial price.
Percentage of face value at which a bond is quoted.
The return realized on a portfolio for any evaluation period, including (1) the change in market
Similar to the reverse repurchase agreement - a simultaneous agreement to sell a security held in a
The dollar equivalent of the safety cushion for a portfolio in a contingent immunization
Also called the internal rate of return, the interest rate that will make the
This is an American dollar that has been deposited in a European bank or an U.S. bank branch
Eurobonds denominated in U.S.dollars.
Use of debt to increase the expected return on equity. Financial leverage is measured by
A group of investors who have a preference for investing in firms that adhere to
Related: capitalization ratios.
Conventional bonds for which the coupon rate is set as a fixed percentage of the par value.
A nonnegotiable debt security that can be redeemed at some fixed price or according to
Highly leveraged transaction (HLT)
Bank loan to a highly leveraged firm.
Idea that as long as individuals borrow (or lend) on the same terms as the firm, they can
The use of debt financing.
A group of shareholders who, because of their personal leverage, seek to invest in
Measures of the relative contribution of stockholders and creditors, and of the firm's ability
Making transactions to adjust (rebalance) a firm's leverage ratio back to its target.
The beta of a leveraged required return; that is, the beta as adjusted for the degree of
Leveraged buyout (LBO)
A transaction used for taking a public corporation private financed through the use
Stock in a firm that relies on financial leverage. Holders of leveraged equity face the
A lease arrangement under which the lessor borrows a large proportion of the funds needed
A portfolio that includes risky assets purchased with funds borrowed.
Leveraged required return
The required return on an investment when the investment is financed partially by debt.
he use of debt financing.
A portfolio that includes risky assets purchased with funds borrowed.
Net benefit to leverage factor
A linear approximation of a factor, T*, that enables one to operationalize the
Net operating losses
Losses that a firm can take advantage of to reduce taxes.
Net operating margin
The ratio of net operating income to net sales.
Operating cash flow
Earnings before depreciation minus taxes. It measures the cash generated from
The average time intervening between the acquisition of materials or services and the final
degree to which exchange rate changes, in combination with price changes, will alter a
Operating profit margin
The ratio of operating margin to net sales.
Short-term, cancelable lease. A type of lease in which the period of contract is less than the
Fixed operating costs, so-called because they accentuate variations in profits.
The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is
Short-run operating activities
Events and decisions concerning the short-term finance of a firm, such as
The value of research services that brokerage houses supply to investment managers "free of
Total dollar return
The dollar return on a nondollar investment, which includes the sum of any
The beta of an unleveraged required return (i.e. no debt) on an investment when the
Unleveraged required return
The required return on an investment when the investment is financed entirely
The total amount that was spent to run a company this year.
The profit made by the business for an accounting period, equal to gross profit less selling, finance, administration etc. expenses, but before deducting interest or taxation.
cash flow from operating activities, or cash flow from profit
This equals the cash inflow from sales during the period minus the cash
The equity (ownership) capital of a business can serve
Includes all the sales and expense activities of a business.
operating cash flow
See cash flow from operating activities.
A relatively small percent increase or decrease in
See earnings before interest and income tax (EBIT).
Operating Cash Flow
Income available after the payment of taxes, plus the value of the
degree of operating leverage
a factor that indicates how a percentage change in sales, from the existing or current
dollar days (of inventory)
a measurement of the value of inventory for the time that inventory is held
a budget expressed in both units and dollars
the proportionate relationship between
Constant dollar accounting
A method for restating financial statements by reducing or
The purchase of one business entity by another, largely using borrowed
Any expense associated with the general, sales, and administrative
The net income of a business, less the impact of any financial activity,
The rental of an asset from a lessor, but not under terms that would
dollars held on deposit in a bank outside the United States.
Debt financing amplifies the effects of changes in operating income on the returns to stockholders.
leveraged buyout (LBO)
Acquisition of the firm by a private group using substantial borrowed funds.
degree to which costs are fixed.
operating risk (business risk)
Risk in firmâ€™s operating income.
See real dollars.
A variable like GDP is measured in current dollars if each year's value is measured in prices prevailing during that year. In contrast, when measured in real or constant dollars, each year's value is measured in a base year's prices.
Deposits denominated in U.S. dollars but held in banks located outside the United States, such as in Canada or France.
A line representing equilibrium in the goods and services market, on a diagram with aggregate demand on the vertical axis and aggregate supply on the horizontal axis.
Cash Flow Provided by Operating Activities
With some exceptions, the cash effects of transactions
A term frequently used to describe earnings after the removal of the
A measure of results produced by the core operations of a firm. It is common
Dollar Cost Averaging
A way of smoothing out your investment deposits by investing regularly. Instead of making one large deposit a year into your RRSP, you make smaller regular monthly deposits. If you are buying units in a mutual fund or segregated equity fund, you would end up buying more units in the month that values were low and less units in the month that values were higher. By spreading out your purchases, you don't have to worry about buying at the right time.
Split Dollar Life Insurance
The split dollar concept is usually associated with cash value life insurance where there is a death benefit and an accumulation of cash value. The basic premise is the sharing of the costs and benefits of a life insurance policy by two or more parties. Usually one party owns and pays for the insurance protection and the other owns and pays for the cash accumulation. There is no single way to structure a split dollar arrangement. The possible structures are limited only by the imagination of the parties involved.
The relationship between interest bearing debt and equity in a company(financial leverage) or the effect of fixed expense on after tax earnings(operating leverage).
One where the risks and benefits, as well as ownership, stays with the lessor.
Operating Line of Credit
A bank's commitment to make loans to a particular borrower up to a specified maximum for a specified period, usually one year.
A loan advanced under an operating line of credit.
The amount of money the company must spend on overhead, distribution, taxes, underwriting the risk and servicing the policy. It is a factor in calculating premium rates.
margin of safety
the excess of the budgeted or actual sales
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