|Effective margin (EM)
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Definition of Effective margin (EM)
Effective margin (EM)
Used with SAT performance measures, the amount equaling the net earned spread, or
the additional value inherent in the control interest as contrasted to a minority interest, which reflects its power of control
Schedule of depreciation rates allowed for tax purposes.
The ratio of net income to net sales.
Conflicts of interest among stockholders, bondholders, and managers.
Date on which particular news concerning a given company is announced to the public.
Also called surplus management, the task of managing funds of a financial
Arises when the stockholders substitute riskier assets for the firm's existing
A common element of a financial plan that describes projected capital spending and the
An international bank headquartered in Basel, Switzerland, which
The ratio of net income before taxes to net sales.
A contract for privately placed debt.
A management style that de-emphasizes the significance of economic
An agreement signed by the original United Nations members in 1944 that
A transaction in which an investor borrows to buy additional shares, using the shares
An agreement to invest cash in a project to the extent required to cover any cash
Cash management bill
Very short maturity bills that the Treasury occasionally sells because its cash
Cash settlement contracts
Futures contracts, such as stock index futures, that settle for cash, not involving
Temporary investments of currently excess cash in short-term, high-quality
Clearing House Automated Payments System (CHAPS)
A computerized clearing system for sterling funds
Clearing House Interbank Payments System (CHIPS)
An international wire transfer system for high-value
A member firm of a clearing house. Each clearing member must also be a member of the
Committee, AIMR Performance Presentation Standards Implementation Committee
The Association for Investment Management and Research (AIMR)'s Performance Presentation Standards Implementation
An understanding between a company and the host government that specifies the
The difference between variable revenue and variable cost.
A service that provides for a single presentation of checks each day (typically in
An annual statement filed by a life insurance company in each state where it does
The percentage by which the conversion price in a convertible security exceeds the
Corporate financial management
The application of financial principals within a corporation to create and
Cost company arrangement
Arrangement whereby the shareholders of a project receive output free of
In the balance of payments, counterpart items are analogous to unrequited transfers in the
Purchase of the financial guarantee of a large insurance company to raise funds.
The amount of borrowing that leasing displaces. Firms that do a lot of leasing will be
A differential in promised yield that compensates the investor for the risk inherent in
Checking accounts that pay no interest and can be withdrawn upon demand.
Demand line of credit
A bank line of credit that enables a customer to borrow on a daily or on-demand basis.
Demand master notes
Short-term securities that are repayable immediately upon the holder's demand.
An event that affects the demand for goods in services in the economy.
Selling a new issue not by offering it for sale publicly, but by placing it with one of several
A decrease in book cash but no immediate change in bank cash, generated by checks
Dollar safety margin
The dollar equivalent of the safety cushion for a portfolio in a contingent immunization
Agreement between two countries that taxes paid abroad can be offset against
Dupont system of financial control
Highlights the fact that return on assets (ROA) can be expressed in terms
Effective annual interest rate
An annual measure of the time value of money that fully reflects the effects of
Effective annual yield
Annualized interest rate on a security computed using compound interest techniques.
Effective call price
The strike price in an optional redemption provision plus the accrued interest to the
The convexity of a bond calculated with cash flows that change with yields.
In an interest rate swap, the date the swap begins accruing interest.
The duration calculated using the approximate duration formula for a bond with an
A measure of the time value of money that fully reflects the effects of compounding.
The gross underwriting spread adjusted for the impact of the announcement of the common
An option that is part of the structure of a bond that provides either the bondholder or
The financial markets of developing economies.
Employee stock fund
A firm-sponsored program that enables employees to purchase shares of the firm's
Employee stock ownership plan (ESOP)
A company contributes to a trust fund that buys stock on behalf of
An innovation that has a positive impact on one or more of a firm's existing products.
Equity contribution agreement
An agreement to contribute equity to a project under certain specified
European Monetary System (EMS)
An exchange arrangement formed in 1979 that involves the currencies
Instruments exempt from the registration requirements of the Securities Act of 1933 or the
Federal Reserve System
The central bank of the U.S., established in 1913, and governed by the Federal
Fiscal agency agreement
An alternative to a bond trust deed. Unlike the trustee, the fiscal agent acts as an
Fisher's separation theorem
The firm's choice of investments is separate from its owner's attitudes towards
A currency trades at a forward premium when its forward price is higher than its spot price.
Forward rate agreement (FRA)
Agreement to borrow or lend at a specified future date at an interest rate
GEMs (growing-equity mortgages)
Mortgages in which annual increases in monthly payments are used to
Good delivery and settlement procedures
Refers to PSA Uniform Practices such as cutoff times on delivery
Gross profit margin
Gross profit divided by sales, which is equal to each sales dollar left over after paying
Demands for securities to hedge particular sources of consumption risk, beyond the usual
Sale of some shares of stock to get cash that would be similar to receiving a cash dividend.
Idea that as long as individuals borrow (or lend) on the same terms as the firm, they can
Delivery and settlement of securities within five business days.
Imputation tax system
Arrangement by which investors who receive a dividend also receive a tax credit for
Income statement (statement of operations)
A statement showing the revenues, expenses, and income (the
Incremental cash flows
Difference between the firm's cash flows with and without a project.
Incremental costs and benefits
Costs and benefits that would occur if a particular course of action were
Incremental internal rate of return
IRR on the incremental investment from choosing a large project
Initial margin requirement
When buying securities on margin, the proportion of the total market value of
Interest rate agreement
An agreement whereby one party, for an upfront premium, agrees to compensate the
Interest rate parity theorem
Interest rate differential between two countries is equal to the difference
Joint clearing members
Firms that clear on more than one exchange.
Just-in-time inventory systems
Systems that schedule materials/inventory to arrive exactly as they are
Forward rate minus expected future short-term interest rate.
Maintenance margin requirement
A sum, usually smaller than -but part of the original margin, which must
Management/closely held shares
Percentage of shares held by persons closely related to a company, as
Management buyout (MBO)
Leveraged buyout whereby the acquiring group is led by the firm's management.
An investment advisory fee charged by the financial advisor to a fund based on the fund's
A report from management to the shareholders that accompanies the firm's
Mandatory redemption schedule
Schedule according to which sinking fund payments must be made.
This allows investors to buy securities by borrowing money from a broker. The margin is the
Margin account (Stocks)
A leverageable account in which stocks can be purchased for a combination of
A demand for additional funds because of adverse price movement. Maintenance margin
Margin requirement (Options)
The amount of cash an uncovered (naked) option writer is required to
Marginal tax rate
The tax rate that would have to be paid on any additional dollars of taxable income earned.
Materials requirement planning
Computer-based systems that plan backward from the production schedule
An operations research technique that solves problems in which an optimal
Errors in measuring an explanatory variable in a regression that leads to biases in
or a seat on the exchange A limited number of exchange positions that enable the holder to
Related: Investment management.
Money market demand account
An account that pays interest based on short-term interest rates.
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