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Du Pont

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Definition of Du Pont

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Du Pont

model a model that indicates the return on investment
as it is affected by profit margin and asset turnover



Related Terms:

Du Pont system

A breakdown of ROE and ROA into component ratios.


Dupont system of financial control

Highlights the fact that return on assets (ROA) can be expressed in terms
of the profit margin and asset turnover.


Aggregate Production Function

An equation determining aggregate output as a function of aggregate inputs such as labor and capital.


Aging schedule

A table of accounts receivable broken down into age categories (such as 0-30 days, 30-60
days, and 60-90 days), which is used to see whether customer payments are keeping close to schedule.


aging schedule

Classification of accounts receivable by time outstanding.



Amortization Schedule

A schedule that shows precisely how a loan will be repaid. The schedule gives the required payment on each specific date and shows how much of it constitutes interest and how much constitutes repayments of principal.


Annuity due

An annuity with n payments, wherein the first payment is made at time t = 0 and the last
payment is made at time t = n - 1.


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Annuity Due

Annuity where the payments are to be made at the beginning of
each period


annuity due

a series of equal cash flows being received or paid at the beginning of a period


annuity due

Level stream of cash flows starting immediately.


by-product

an incidental output of a joint process; it is salable,
but the sales value of by-products is not substantial enough
for management to justify undertaking the joint process; it
is viewed as having a higher sales value than scrap


By-product

A product that is an ancillary part of the primary production process, having
a minor resale value in comparison to the value of the primary product being
manufactured. Any proceeds from the sale of a by-product are typically offset
against the cost of the primary product, or recorded as miscellaneous revenue.


By-product

A material created incidental to a production process, which can be
sold for value.


Comprehensive due diligence investigation

The investigation of a firm's business in conjunction with a
securities offering to determine whether the firm's business and financial situation and its prospects are
adequately disclosed in the prospectus for the offering.


cost of production report

a process costing document that
details all operating and cost information, shows the computation
of cost per equivalent unit, and indicates cost assignment
to goods produced during the period


cost reduction

the practice of lowering current costs, especially
those that may be in excess of what is necessary


Coverdell Education IRA

A form of individual retirement account whose earnings
during the period when funds are stored in the IRA will be tax free at the
time when they are used to pay for the cost of advanced education.


Deductible

A flat amount that an insured must pay before the insurance company makes any benefit payments under a health insurance policy.



Deductive reasoning

The use of general fact to provide accurate information about a specific situation.


Dollar duration

The product of modified duration and the initial price.


Dow Jones industrial average

This is the best known U.S.index of stocks. It contains 30 stocks that trade on
the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest
U.S.companies are performing. There are thousands of investment indexes around the world for stocks,
bonds, currencies and commodities.


Dow Jones Industrial Average

Index of the investment performance of a portfolio of 30 “blue-chip” stocks.


Dual-currency issues

Eurobonds that pay coupon interest in one currency but pay the principal in a different
currency.


dual pricing arrangement

a transfer pricing system that allows
a selling division to record the transfer of goods or
services at one price (e.g., a market or negotiated market
price) and a buying division to record the transfer at another
price (e.g., a cost-based amount)


Dual syndicate equity offering

An international equity placement where the offering is split into two
tranches - domestic and foreign - and each tranche is handled by a separate lead manager.


Due bill

An instrument evidencing the obligation of a seller to deliver securities sold to the buyer.
Occasionally used in the bill market.


Due Diligence

The process of systematically evaluating information, to identify risks and issues relating to a proposed transaction.(i.e. verify that information is what it is proposed to be).


dumping

selling products abroad at lower prices than those
charged in the home country or in other national markets



Duration

A common gauge of the price sensitivity of an asset or portfolio to a change in interest rates.


Duration

The weighted average of the time until maturity of each of the
expected cash flows of a debt security


Duration

The expected life of a fixed-income security considering its coupon
yield, interest payments, maturity, and call features. As market interest rates
rise, the duration of a financial instrument decreases. See Macaulay duration.


Duration

The time it takes for a policy or annuity to reach maturity.


Dutch auction

Auction in which the lowest price necessary to sell the entire offering becomes the price at
which all securities offered are sold. This technique has been used in Treasury auctions.


economic production run (EPR)

an estimate of the number
of units to produce at one time that minimizes the total
costs of setting up production runs and carrying inventory


Educational Assistance Plan

A plan that an employer creates on behalf of its
employees covering a variety of educational expenses incurred on behalf of
employees, for which they can avoid recognizing some income.


Effective duration

The duration calculated using the approximate duration formula for a bond with an
embedded option, reflecting the expected change in the cash flow caused by the option. Measures the
responsiveness of a bond's price taking into account the expected cash flows will change as interest rates
change due to the embedded option.


equivalent units of production (EUP)

an approximation of the number of whole units of output that could have been
produced during a period from the actual effort expended
during that period; used in process costing systems to assign
costs to production


Factor of Production

A resource used to produce a good or service. The main macroeconomic factors of production are capital and labor.


Fraudulent Financial Reporting

Intentional misstatements or omissions of amounts or disclosures
in financial statements done to deceive financial statement users. The term is used interchangeably
with accounting irregularities. A technical difference exists in that with fraud, it
must be shown that a reader of financial statements that contain intentional and material misstatements
must have used those financial statements to his or her detriment. In this book, accounting
practices are not alleged to be fraudulent until done so by an administrative, civil, or
criminal proceeding, such as that of the Securities and Exchange Commission, or a court.


Good delivery and settlement procedures

Refers to PSA Uniform Practices such as cutoff times on delivery
of securities and notification, allocation, and proper endorsement.


grade (of product or service)

the addition or removal of product
or service characteristics to satisfy additional needs, especially price


Gradualism

A policy of decreasing the rate of growth of the money supply gradually over an extended period of time, so that inflation can adjust with smaller unemployment cost. Contrast with cold-turkey policy.


Graduated-payment mortgages (GPMs)

A type of stepped-payment loan in which the borrower's payments
are initially lower than those on a comparable level-rate mortgage. The payments are gradually increased over
a predetermined period (usually 3,5, or 7 years) and then are fixed at a level-pay schedule which will be
higher than the level-pay amortization of a level-pay mortgage originated at the same time. The difference
between what the borrower actually pays and the amount required to fully amortize the mortgage is added to
the unpaid principal balance.


Gross Domestic Product

Total output of final goods and services produced within a country during a year.


Gross domestic product (GDP)

The market value of goods and services produced over time including the
income of foreign corporations and foreign residents working in the U.S., but excluding the income of U.S.
residents and corporations overseas.


Gross National Product

Total output of final goods and services produced by a country's citizens during a year.


Gross national product (GNP)

Measures and economy's total income. It is equal to GDP plus the income
abroad accruing to domestic residents minus income generated in domestic market accruing to non-residents.


Individual Insurance

Insurance that is offered to individuals rather than groups.


Individual Retirement Account

A personal savings account into which a defined
maximum amount may be contributed, and for which any resulting interest
is tax deferred.


Individual Retirement Annuity

An IRA comprised of an annuity that is managed
through and paid out by a life insurance company.


Inductive reasoning

The attempt to use information about a specific situation to draw a conclusion.


Industrial revenue bond (IRB)

Bond issued by local government agencies on behalf of corporations.


Industry

The category describing a company's primary business activity. This category is usually determined
by the largest portion of revenue.


Institutionally Induced Unemployment

Unemployment due to institutional phenomena such as the degree of labor force unionization, the level of discrimination, and government policies such as unemployment insurance programs, minimum wages, or regulations on business.


Investment product line (IPML)

The line of required returns for investment projects as a function of beta
(nondiversifiable risk).


Joint product

A product that has the highest sales value from among a group of products
that are the result of a joint production process.


Lean production

The technique of stripping all non-value-added activities from
the production process, thereby using the minimum possible amount of resources
to accomplish manufacturing goals.


Loan amortization schedule

The schedule for repaying the interest and principal on a loan.


Macaulay duration

The weighted-average term to maturity of the cash flows from the bond, where the
weights are the present value of the cash flow divided by the price.


Macaulay duration

A widely used measure of price sensitivity to yield
changes developed by Frederick Macaulay in 1938. It is measured in years and
is a weighted average-time-to-maturity of an instrument. The Macaulay
duration of an income stream, such as a coupon bond, measures how long, on
average, the owner waits before receiving a payment. It is the weighted
average of the times payments are made, with the weights at time T equal to
the present value of the money received at time T.


Mandatory redemption schedule

Schedule according to which sinking fund payments must be made.


Modified duration

The ratio of Macaulay duration to (1 + y), where y = the bond yield. Modified duration is
inversely related to the approximate percentage change in price for a given change in yield.


Modified duration

The Macaulay duration discounted by the per-period
interest rate; i.e., divided by (1+rate/frequency).


Modular bill of material

A bill of material format in which components and subassemblies
are clustered by product option, so one can more easily plan for the
assembly of finished goods with different configurations.


Mortgage duration

A modification of standard duration to account for the impact on duration of MBSs of
changes in prepayment speed resulting from changes in interest rates. Two factors are employed: one that
reflects the impact of changes in prepayment speed or price.


National Income and Product Accounts

The national accounting system that records economic activity such as GDP and related measures.


Negative duration

A situation in which the price of the MBS moves in the same direction as interest rates.


Net Domestic Product

GDP minus depreciation.


Net National Product

GNP minus depreciation.


Non-production overhead

A general term referring to period costs, such as selling, administration and financial expenses.


Non-reproducible assets

A tangible asset with unique physical properties, like a parcel of land, a mine, or a
work of art.


Offering memorandum

A document that outlines the terms of securities to be offered in a private placement.


Offering Memorandum

A "prosperous-like" document providing detailed descriptions of a company's past, present, and prospective business operations. It is normally prepared for the use of potential purchasers of securities offered under the seed capital or private placement prospectus exemptions.


Process flow production

A production configuration in which products are continually
manufactured with minimal pauses or queuing.


process productivity

the total units produced during a period
using value-added processing time


Product

Any item intended for sale.


product complexity

an assessment about the number of components in a product


product contribution margin

the difference between selling price and variable cost of goods sold


Product cost

The cost of goods or services produced.


product cost

This is a key factor in the profit model of a business. Product
cost is the same as purchase cost for a retailer or wholesaler (distributor).
A manufacturer has to accumulate three different types of production
costs to determine product cost: direct materials, direct labor, and
manufacturing overhead. The cost of products (goods) sold is deducted
from sales revenue to determine gross margin (also called gross profit),
which is the first profit line reported in an external income statement
and in an internal profit report to managers.


product cost

a cost associated with making or acquiring inventory


Product cost

The total of all costs assigned to a product, typically including direct
labor, materials (with normal spoilage included), and overhead.


Product cycle

The time it takes to bring new and/or improved products to market.


product life cycle

a model depicting the stages through
which a product class (not necessarily each product) passes


product line margin

see segment margin


Product market

A business’s investment in technology, people and materials in order to make, buy and sell products or services to customers.


product- (or process-) level cost

a cost that is caused by the development, production, or acquisition of specific products or services


Product risk

A type of mortgage-pipeline risk that occurs when a lender has an unusual loan in production or
inventory but does not have a sale commitment at a prearranged price.


Product/service mix

See sales mix.


product variety

the number of different types of products
produced (or services rendered) by a firm


Production-flow commitment

An agreement by the loan purchaser to allow the monthly loan quota to be
delivered in batches.


Production overhead

A general term referring to indirect costs.


Production payment financing

A method of nonrecourse asset-based financing in which a specified
percentage of revenue realized from the sale of the project's output is used to pay debt service.


Production yield variance

The difference between the actual and budgeted proportions
of product resulting from a production process, multiplied by the standard unit cost.


productive capacity

the number of total units that could be
produced during a period based on available equipment time
productive processing time the proportion of total time that
is value-added time; also known as manufacturing cycle
efficiency


Productivity

Output per unit of input, usually measured as output per hour of labor.


profit module

This concept refers to a separate source of revenue and
profit within a business organization, which should be identified for
management analysis and control. A profit module may focus on one
product or a cluster of products. Profit in this context is not the final, bottom-
line net income of the business as a whole. Rather, other measures
of profit are used for management analysis and decision-making purposes—
such as gross margin, contribution margin, or operating profit
(earnings before interest and income tax).


Regulatory accounting procedures

Accounting principals required by the FHLB that allow S&Ls to elect
annually to defer gains and losses on the sale of assets and amortize these deferrals over the average life of the
asset sold.


REMIC (real estate mortgage investment conduit)

A pass-through tax entity that can hold mortgages
secured by any type of real property and issue multiple classes of ownership interests to investors in the form
of pass-through certificates, bonds, or other legal forms. A financing vehicle created under the Tax Reform
Act of 1986.



 

 

 

 

 

 

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