Definition of End-of-year convention

End-of-year convention

Treating cash flows as if they occur at the end of a year as opposed to the date
convention. Under the end-of-year convention, the present is time 0, the end of year 1 occurs one year hence,
etc.

Calendar

List of new issues scheduled to come to market shortly.

Calendar effect

The tendency of stocks to perform differently at different times, including such anomalies as
the January effect, month-of-the-year effect, day-of-the-week effect, and holiday effect.

Capital expenditures

Amount used during a particular period to acquire or improve long-term assets such as
property, plant or equipment.

Cash dividend

A dividend paid in cash to a company's shareholders. The amount is normally based on
profitability and is taxable as income. A cash distribution may include capital gains and return of capital in
addition to the dividend.

Cash-surrender value

An amount the insurance company will pay if the policyholder ends a whole life
insurance policy.

Closed-end fund

An investment company that sells shares like any other corporation and usually does not
redeem its shares. A publicly traded fund sold on stock exchanges or over the counter that may trade above or
below its net asset value. Related: Open-end fund.

Closed-end mortgage

Mortgage against which no additional debt may be issued.

Common-base-year analysis

The representing of accounting information over multiple years as percentages
of amounts in an initial year.
Common-size analysis The representing of balance sheet items as percentages of assets and of income
statement items as percentages of sales.

Convention statement

An annual statement filed by a life insurance company in each state where it does
business in compliance with that state's regulations. The statement and supporting documents show, among
other things, the assets, liabilities, and surplus of the reporting company.

Conventional mortgage

A loan based on the credit of the borrower and on the collateral for the mortgage.

Conventional pass-throughs

Also called private-label pass-throughs, any mortgage pass-through security not
guaranteed by government agencies. Compare agency pass-throughs.

Conventional project

A project with a negative initial cash flow (cash outflow), which is expected to be
followed by one or more future positive cash flows (cash inflows).

Cum dividend

With dividend.

Cumulative dividend feature

A requirement that any missed preferred or preference stock dividends be paid
in full before any common dividend payment is made.

Dates convention

Treating cash flows as being received on exact dates - date 0, date 1, and so forth - as
opposed to the end-of-year convention.

Dependent

Acceptance of a capital budgeting project contingent on the acceptance of another project.

Detrend

To remove the general drift, tendency or bent of a set of statistical data as related to time.

Discounted dividend model (DDM)

A formula to estimate the intrinsic value of a firm by figuring the
present value of all expected future dividends.

Dividend

A dividend is a portion of a company's profit paid to common and preferred shareholders. A stock
selling for $20 a share with an annual dividend of $1 a share yields the investor 5%.

Dividend clawback

With respect to a project financing, an arrangement under which the sponsors of a project
agree to contribute as equity any prior dividends received from the project to the extent necessary to cover
any cash deficiencies.

Dividend clientele

A group of shareholders who prefer that the firm follow a particular dividend policy. For
example, such a preference is often based on comparable tax situations.

Dividend discount model (DDM)

A model for valuing the common stock of a company, based on the
present value of the expected cash flows.

Dividend growth model

A model wherein dividends are assumed to be at a constant rate in perpetuity.

Dividend limitation

A bond covenant that restricts in some way the firm's ability to pay cash dividends.

Dividend payout ratio

Percentage of earnings paid out as dividends.

Dividends per share

Amount of cash paid to shareholders expressed as dollars per share.

Dividend policy

An established guide for the firm to determine the amount of money it will pay as dividends.

Dividend rate

The fixed or floating rate paid on preferred stock based on par value.

Dividend reinvestment plan (DRP)

Automatic reinvestment of shareholder dividends in more shares of a
company's stock, often without commissions. Some plans provide for the purchase of additional shares at a
discount to market price. Dividend reinvestment plans allow shareholders to accumulate stock over the Long
term using dollar cost averaging. The DRP is usually administered by the company without charges to the
holder.

Dividend rights

A shareholders' rights to receive per-share dividends identical to those other shareholders receive.

Dividend yield (Funds)

Indicated yield represents return on a share of a mutual fund held over the past 12
months. Assumes fund was purchased 1 year ago. Reflects effect of sales charges (at current rates), but not
redemption charges.

Dividend yield (Stocks)

Indicated yield represents annual dividends divided by current stock price.

Dividends per share

Dividends paid for the past 12 months divided by the number of common shares
outstanding, as reported by a company. The number of shares often is determined by a weighted average of
shares outstanding over the reporting term.

Economic dependence

Exists when the costs and/or revenues of one project depend on those of another.

Endogenous variable

A value determined within the context of a model.

Endowment funds

Investment funds established for the support of institutions such as colleges, private
schools, museums, hospitals, and foundations. The investment income may be used for the operation of the
institution and for capital expenditures.

Exclusionary self-tender

The firm makes a tender offer for a given amount of its own stock while excluding
targeted stockholders.

Extendable bond

Bond whose maturity can be extended at the option of the lender or issuer.

Extendable notes

Note the maturity of which can be extended by mutual agreement of the issuer and
investors.

Extra or special dividends

A dividend that is paid in addition to a firm's "regular" quarterly dividend.

Ex-dividend

This literally means "without dividend." The buyer of shares when they are quoted ex-dividend
is not entitled to receive a declared dividend.

Ex-dividend date

The first day of trading when the seller, rather than the buyer, of a stock will be entitled to
the most recently announced dividend payment. This date set by the NYSE (and generally followed on other
US exchanges) is currently two business days before the record date. A stock that has gone ex-dividend is
marked with an x in newspaper listings on that date.

Fixed-price tender offer

A one-time offer to purchase a stated number of shares at a stated fixed price,
usually a premium to the current market price.

Homemade dividend

Sale of some shares of stock to get cash that would be similar to receiving a cash dividend.

Independent project

A project whose acceptance or rejection is independent of the acceptance or rejection of
other projects.

Indicated dividend

Total amount of dividends that would be paid on a share of stock over the next 12 months
if each dividend were the same amount as the most recent dividend. Usually represent by the letter "e" in
stock tables.

Lend

To provide money temporarily on the condition that it or its equivalent will be returned, often with an
interest fee.

Liquidating dividend

Payment by a firm to its owners from capital rather than from earnings.

Open-end fund

Also called a mutual fund, an investment company that stands ready to sell new shares to the
public and to redeem its outstanding shares on demand at a price equal to an appropriate share of the value of
its portfolio, which is computed daily at the close of the market.

Open-end mortgage

Mortgage against which additional debts may be issued. Related: closed-end mortgage.

Path dependent option

An option whose value depends on the sequence of prices of the underlying asset
rather than just the final price of the asset.

Perfect market view (of dividend policy)

Analysis of a decision on dividend policy, in a perfect capital
market environment, that shows the irrelevance of dividend policy in a perfect capital market.

Planned capital expenditure program

Capital expenditure program as outlined in the corporate financial plan.

Residual dividend approach

An approach that suggests that a firm pay dividends if and only if acceptable
investment opportunities for those funds are currently unavailable.

Signaling view (on dividend policy)

The argument that dividend changes are important signals to investors
about changes in management's expectation about future earnings.

Simple linear trend model

An extrapolative statistical model that asserts that earnings have a base level and
grow at a constant amount each period.

Special dividend

Also referred to as an extra dividend. Dividend that is unlikely to be repeated.

Spot lending

The origination of mortgages by processing applications taken directly from prospective borrowers.

Stock dividend

Payment of a corporate dividend in the form of stock rather than cash. The stock dividend
may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders.
Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock
dividends are not taxed until sold.

Sum-of-the-years'-digits depreciation

Method of accelerated depreciation.

Tax differential view ( of dividend policy)

The view that shareholders prefer capital gains over dividends,
and hence low payout ratios, because capital gains are effectively taxed at lower rates than dividends.

Tender

To offer for delivery against futures.

Tender offer

General offer made publicly and directly to a firm's shareholders to buy their stock at a price
well above the current market price.

Tender offer premium

The premium offered above the current market price in a tender offer.

Traditional view (of dividend policy)

An argument that "within reason," investors prefer large dividends to
smaller dividends because the dividend is sure but future capital gains are uncertain.

Trend

The general direction of the market.

Weekend effect

The common recurrent low or negative average return from Friday to Monday in the stock market.

With dividend

Purchase of shares in which the buyer is entitled to the forthcoming dividend. Related: exdividend.

Dividend

A payment a company makes to stockholders. Earnings before income tax. The profit a company made
before income taxes.

SUM-OF-THE-YEARS’ DIGITS

An accelerated depreciation method that makes the sum of the digits in an asset’s expected
life the denominator for a series of yearly depreciation fractions.
The numerators of these fractions are the asset’s years of life in reverse order.
An increasingly smaller depreciation fraction is applied to the asset’s (cost–salvage) value each year.

Dividend

The payment of after-tax profits to shareholders as their share of the profits of the business for an accounting period.

Financial year

The accounting period adopted by a business for the production of its financial statements.
Finished goods Inventory that is ready for sale, either having been purchased as such or the result of a conversion from raw materials through a manufacturing process.

Dividend income

Income that a company receives in the form of dividends on stock in other companies that it holds.

Dividends

Amounts paid to the owners of a company that represent a share of the income of the company.

capital expenditures

Refers to investments by a business in long-term
operating assets, including land and buildings, heavy machinery and
equipment, vehicles, tools, and other economic resources used in the
operations of a business. The term capital is used to emphasize that
these are relatively large amounts and that a business has to raise capital
for these expenditures from debt and equity sources.

dividend payout ratio

Computed by dividing cash dividends for the year
by the net income for the year. It’s simply the percent of net income distributed
as cash dividends for the year.

dividend yield ratio

Cash dividends paid by a business over the most
recent 12 months (called the trailing 12 months) divided by the current
market price per share of the stock. This ratio is reported in the daily
stock trading tables in the Wall Street Journal and other major newspapers.

Independent Projects

A situation where an increase (or decrease) in the benefits of one
project has no effect on the benefits of another project. Also, a
situation where the acceptance of one project does not preclude
the acceptance of another project.

contract vendor

an external party that has been granted an
outsourcing contract to provide a service activity for an entity

dependent variable

an unknown variable that is to be predicted
using one or more independent variables

dividend growth method

a method of computing the cost
of common stock equity that indicates the rate of return
that common shareholders expect to earn in the form of
dividends on a company’s common stock

fixed overhead spending variance

the difference between the total actual fixed overhead and budgeted fixed overhead;
it is computed as part of the four-variance overhead analysis

independent project

an investment project that has no specific
bearing on any other investment project

independent variable

a variable that, when changed, will
cause consistent, observable changes in another variable;
a variable used as the basis of predicting the value of a
dependent variable

overhead spending variance

the difference between total actual overhead and total budgeted overhead at actual
hours; it is computed as part of three-variance analysis; it
is equal to the sum of the variable and fixed overhead
spending variances

variable overhead spending variance

the difference between total actual variable overhead and the budgeted amount of variable overhead based on actual input activity

vendor-managed inventory

a streamlined system of inventory
acquisition and management by which a supplier can
be empowered to monitor EDI inventory levels and provide
its customer company a proposed e-order and subsequent
shipment after electronic acceptance

Dividend

A payment made to shareholders that is proportional to the number of shares
owned. It is authorized by the Board of Directors.

Expenditure

A payment or the incurrence of a liability by an entity.

Fiscal year

A 12 month period over which a company reports on the activities that
appear in its annual financial statements. The 12 month period may conform to the
calendar year, or end on some other date that more closely conforms to a company’s
natural business cycle.

cash dividend

Payment of cash by the firm to its shareholders.

constant-growth dividend discount model

Version of the dividend discount model in which dividends grow at a constant rate.

dividend

Periodic cash distribution from the firm to its shareholders.

dividend discount model

Computation of today’s stock price which states that share value equals the present value of all expected future dividends.

dividend payout ratio

Percentage of earnings paid out as dividends.

ex-dividend date

Date that determines whether a stockholder is entitled to a dividend payment; anyone holding stock before this date is entitled to a dividend.

information content of dividends

Dividend increases send good news about cash flow and earnings. Dividend cuts send bad news.

MM dividend-irrelevance proposition

Theory that under ideal conditions, the value of the firm is unaffected by dividend policy.

stock dividend

Distribution of additional shares to a firm’s stockholders.

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