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Definition of Endogenous
Determined from within the system. Opposite of exogenous.
A value determined within the context of a model.
A value determined within the context of a model. Also called endogenous variable.
Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
present value of a perpetuity with growth.
Abrams’ model to calculate discount rates as a function of the logarithm of the value of the firm.
Same as PV, but usually includes a subtraction for an initial cash outlay.
the value in today’s dollars of cash flows that occur in different time periods.
model for calculating DLOM for minority interests r the discount rate
Schedule of depreciation rates allowed for tax purposes.
The net present value analysis of an asset if financed solely by equity
Yield curve option-pricing models.
A model for determining the required rate of return on an asset.
A model, such as the Capital Asset Pricing model (CAPM), that determines the required
An option pricing model in which the underlying asset can take on only two
A model for pricing call options based on arbitrage arguments that uses
With respect to convertible bonds, the value the security would have if it were not convertible
A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
Book value per share
The ratio of stockholder equity to the average number of common shares. Book value
Capital asset pricing model (CAPM)
An economic theory that describes the relationship between risk and
An amount the insurance company will pay if the policyholder ends a whole life
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
Also called the Gordon-Shapiro model, an application of the dividend discount
Continuous random variable
A random value that can take any fractional value within specified ranges, as
Also called parity value, the value of a convertible security if it is converted immediately.
Liability-matching models that assume that the liability payments and the asset cash
Discounted dividend model (DDM)
A formula to estimate the intrinsic value of a firm by figuring the
Discrete random variable
A random variable that can take only a certain specified set of discrete possible
Dividend discount model (DDM)
A model for valuing the common stock of a company, based on the
Dividend growth model
A model wherein dividends are assumed to be at a constant rate in perpetuity.
Dupont system of financial control
Highlights the fact that return on assets (ROA) can be expressed in terms
European Monetary System (EMS)
An exchange arrangement formed in 1979 that involves the currencies
The amount of advantage over a current market transaction provided by an in-the-money
A variable whose value is determined outside the model in which it is used. Also called
The weighted average of a probability distribution.
Expected value of perfect information
The expected value if the future uncertain outcomes could be known
Extraordinary positive value
A positive net present value.
Extrapolative statistical models
models that apply a formula to historical data and project results for a
See: Par value.
A way of decomposing the factors that influence a security's rate of return into common and
Federal Reserve System
The central bank of the U.S., established in 1913, and governed by the Federal
Firm's net value of debt
Total firm value minus total firm debt.
Flat price (also clean price)
The quoted newspaper price of a bond that does not include accrued interest.
The amount of cash at a specified date in the future that is equivalent in value to a specified
Garmen-Kohlhagen option pricing model
A widely used model for pricing foreign currency options.
Imputation tax system
Arrangement by which investors who receive a dividend Also receive a tax credit for
A model of stock returns using a market index such as the S&P 500 to represent common or
Intrinsic value of an option
The amount by which an option is in-the-money. An option which is not in-themoney
Intrinsic value of a firm
The present value of a firm's expected future net cash flows discounted by the
Just-in-time inventory systems
systems that schedule materials/inventory to arrive exactly as they are
Net amount that could be realized by selling the assets of a firm after paying the debt.
The amount a policyholder may borrow against a whole life insurance policy at the interest rate
This relationship is sometimes called the single-index model. The market model says that the
1) The price at which a security is trading and could presumably be purchased or sold.
Market value ratios
Ratios that relate the market price of the firm's common stock to selected financial
Market value-weighted index
An index of a group of securities computed by calculating a weighted average
Related: par value.
The process of creating a depiction of reality, such as a graph, picture, or mathematical
A technical trading strategy that combines mechanical rules, such as the CRISMA
Net adjusted present value
The adjusted present value minus the initial cost of an investment.
Net asset value (NAV)
The value of a fund's investments. For a mutual fund, the net asset value per share
Net book value
The current book value of an asset or liability; that is, its original book value net of any
Net present value (NPV)
The present value of the expected future cash flows minus the cost.
Net present value of growth opportunities
A model valuing a firm in which net present value of new
Net present value of future investments
The present value of the total sum of NPVs expected to result from
Net present value rule
An investment is worth making if it has a positive NPV. Projects with negative NPVs
Net salvage value
The after-tax net cash flow for terminating the project.
Nonmarket or firm-specific risk factors that can be eliminated by diversification. Also
Normal random variable
A random variable that has a normal probability distribution.
Original face value
The principal amount of the mortgage as of its issue date.
Also called the maturity value or face value, the amount that the issuer agrees to pay at the maturity date.
Pie model of capital structure
A model of the debt/equity ratio of the firms, graphically depicted in slices of
The amount of cash today that is equivalent in value to a payment, or to a stream of payments,
Present value factor
Factor used to calculate an estimate of the present value of an amount to be received in
Present value of growth opportunities (NPV)
Net present value of investments the firm is expected to make
Price value of a basis point (PVBP)
Also called the dollar value of a basis point, a measure of the change in
Progressive tax system
A tax system wherein the average tax rate increases for some increases in income but
A function that assigns a real number to each and every possible outcome of a random experiment.
The attractiveness measured in terms of risk, liquidity, and return of one instrument relative to
Current cost of replacing the firm's assets.
Usually refers to the value of a lessor's property at the time the lease expires.
Scrap value of plant and equipment.
Single factor model
A model of security returns that acknowledges only one common factor.
Single index model
A model of stock returns that decomposes influences on returns into a systematic factor,
Simple linear trend model
An extrapolative statistical model that asserts that earnings have a base level and
Related: market model
Split-rate tax system
A tax system that taxes retained earnings at a higher rate than earnings that are
Also called the normal deviate, the distance of one data point from the mean, divided by
Liability-matching models that assume that the liability payments and the asset cash flows
Also called investment value, the value of a convertible security without the con-version option.
Common to all businesses.
Also called undiversifiable risk or market risk, the minimum level of risk that can be
Systematic risk principle
Only the systematic portion of risk matters in large, well-diversified portfolios.
The value of a bond at maturity, typically its par value, or the value of an asset (or an entire
Time value of an option
The portion of an option's premium that is based on the amount of time remaining
Time value of money
The idea that a dollar today is worth more than a dollar in the future, because the dollar
Black's zero-beta version of the capital asset pricing model.
Two-state option pricing model
An option pricing model in which the underlying asset can take on only two
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