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Definition of Equity Method
Accounting method for an equity security in cases where the investor has sufficient
a process of service department cost allocation
The discount rate that reflects only the business risks of a project and abstracts from the
A method of adjusting accounts receivable to the amount that is expected to be collected based on company experience.
The ratio of total assets to stockholder equity.
The inventory cost-flow assumption that assigns the average
The proportion of unemployment benefits paid to a company’s
The proportion of total taxable wages for laid off
An arithmetic method for backing an
A management style that de-emphasizes the significance of economic
A method of constructing a replicating portfolio in which the manager purchases a
Value of outstanding common shares at par, plus accumulated retained
A contract accounting method that recognizes contract revenue
An account that reduces an equity account. An example is Treasury stock.
Same as the cost of common stock. Sometimes viewed as the
Under this currency translation method, all foreign currency balance-sheet and income
Indicator of financial leverage. Compares assets provided by creditors to assets provided
A comparison of debt to equity in a company's capital structure.
A widely used financial statement ratio to assess the
A common term for convertible bonds because of their equity component and the
Direct estimate method
A method of cash budgeting based on detailed estimates of cash receipts and cash
A method of preparing the operating section of the Statement of Cash Flows that uses the company’s actual cash inflows and cash outflows.
a service department cost allocation approach
A format for the operating section of the cash-flow statement that reports actual cash receipts and cash disbursements from operating activities.
Direct write-off method
A method of adjusting accounts receivable to the amount that is expected to be collected by eliminating the account balances of specific nonpaying customers.
dividend growth method
a method of computing the cost
Dual syndicate equity offering
An international equity placement where the offering is split into two
Represents ownership interest in a firm. Also the residual dollar value of a futures trading account,
Funds raised from shareholders.
Amounts contributed to the company by the owners (contributed capital) plus the residual earnings of the business (retained earnings).
Refers to one of the two basic sources of capital for a business, the
The difference between the total of all recorded assets and liabilities on the balance
Ownership. Common stock represents equity in a corporation.
The net worth of a business, consisting of capital stock, capital (or paid-in) surplus (or retained earnings), and, occasionally, certain net worth reserves. Common equity is that part of the total net worth belonging to the common shareholders. Total equity includes preferred shareholders. The terms common stock, net worth, and common equity are frequently used interchangeably.
The net worth of a company. This represents the ownership interest of the shareholders (common and preferred) of a company. For this reason, shares or stocks are often known as equities.
Life insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of an equity portfolio.
Refers to the investors percentage ownership of a company that can be re-acquired by the company, usually at a pre-determined amount.
An agreement in which one party, for an upfront premium, agrees to compensate the other at
Also called a residual claim, a claim to a share of earnings after debt obligation have been
The simultaneous purchase of an equity floor and sale of an equity cap.
Equity contribution agreement
An agreement to contribute equity to a project under certain specified
An agreement in which one party agrees to pay the other at specific time periods if a specific
Through equity investment, investors gain part ownership of the corporation. The primary type of equity investment is corporate stock.
Used to refer to warrants because they are usually issued attached to privately placed bonds.
Related: Variable life
Total assets divided by total common stockholders' equity; the amount of total assets per
Securities that give the holder the right to buy or sell a specified number of shares of stock, at
An ownership interest in an enterprise, including preferred and common stock.
A swap in which the cash flows that are exchanged are based on the total return on some stock
Those holding shares of the firm's equity.
Securities sold in the Euromarket. That is, securities initially sold to investors
FIFO method (of process costing)
the method of cost assignment that computes an average cost per equivalent
First in, first-out costing method (FIFO)
A process costing methodology that assigns the earliest
First-In, First-Out (FIFO) Inventory Method
The inventory cost-flow assumption that
The practice of reporting to shareholders using straight-line depreciation and
Foreign equity market
That portion of the domestic equity market that represents issues floated by foreign companies.
A method of accounting for petroleum exploration and development expenditures
GEMs (growing-equity mortgages)
Mortgages in which annual increases in monthly payments are used to
a technique used to determine the fixed
A method of preparing the operating section of the Statement of Cash Flows that does not use the company’s actual cash inflows and cash outflows, but instead arrives at the net cash flow by taking net income and adjusting it for noncash expenses and the changes from last year in the current assets and current liabilities.
A format for the operating section of the cash-flow statement that
The balance of a margin account. Related: buying on margin, initial margin requirement.
judgmental method (of risk adjustment)
an informal method of adjusting for risk that allows the decision maker
Last-In, First-Out (LIFO) Inventory Method
The inventory cost-flow assumption that assigns the most recent inventory acquisition costs to cost of goods sold. The earliest inventory
Stock in a firm that relies on financial leverage. Holders of leveraged equity face the
Log-linear least-squares method
A statistical technique for fitting a curve to a set of data points. One of the
Long-term debt to equity ratio
A capitalization ratio comparing long-term debt to shareholders' equity.
method of least squares
see least squares regression analysis
method of neglect
a method of treating spoiled units in the
modified FIFO method (of process costing)
the method of cost assignment that uses FIFO to compute a cost per
Monetary / non-monetary method
Under this translation method, monetary items (e.g. cash, accounts
Moving average inventory method
An inventory costing methodology that calls for the re-calculation of the average cost of all parts in stock after every purchase.
net present value method
a process that uses the discounted
Net Present Value (NPV) Method
A method of ranking investment proposals. NPV is equal to the present value of the future returns, discounted at the marginal cost of capital, minus the present value of the cost of the investment.
The practice of making a charge in the income account equivalent to the tax savings
Refers to the capital invested in a business by its shareowners
The total of all capital contributions and retained earnings on a business’s
A capital budgeting analysis method that calculates the amount of
A contract accounting method that recognizes contract
Preferred equity redemption stock (PERC)
Preferred stock that converts automatically into equity at a
Accounting for an acquisition using market value for the consolidation of the two entities'
An accounting method used to combine the financial statements of
Funds, other than paid-up capital and retained earnings, employed in a business and which will remain in a business as permanent capital.
RATE OF RETURN ON STOCKHOLDERS’ EQUITY
The percentage return or profit that management made on each dollar stockholders invested in a company. Here’s how you figure it:
RATIO OF DEBT TO STOCKHOLDERS’ EQUITY
A ratio that shows which group—creditors or stockholders—has the biggest stake in or the most control of a company:
A method of allocating the purchase price for the acquisition of another firm among the
Return on Common Equity Ratio
A measure of the percentage return earned on the value of the
Return on equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12
return on equity (ROE)
This key ratio, expressed as a percent, equals net
risk-adjusted discount rate method
a formal method of adjusting for risk in which the decision maker increases the rate used for discounting the future cash flows to compensate for increased risk
Represents the total assets of a corporation less liabilities.
This is a company's total assets minus total liabilities. A company's net worth is the
The total amount of contributed capital and retained earnings; synonymous with stockholders' equity.
The residual interest or owners' claims on the assets of a corporation
Simple compound growth method
A method of calculating the growth rate by relating the terminal value to
an iterative (sequential) algorithm used to solve multivariable, multiconstraint linear programming problems
a high-performance, data-driven approach to analyzing and solving the root causes of business problems
A method of cash budgeting that is organized along the lines of the statement of cash flows.
a process of service department cost allocation
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