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Definition of Equity Method
Accounting method for an equity security in cases where the investor has sufficient
The discount rate that reflects only the business risks of a project and abstracts from the
The ratio of total assets to stockholder equity.
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
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 common term for convertible bonds because of their equity component and the
A method of cash budgeting based on detailed estimates of cash receipts and cash
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,
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.
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
Used to refer to warrants because they are usually issued attached to privately placed bonds.
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
A swap in which the cash flows that are exchanged are based on the total return on some stock
Related: Variable life
Those holding shares of the firm's equity.
Securities sold in the Euromarket. That is, securities initially sold to investors
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.
GEMs (growing-equity mortgages)
Mortgages in which annual increases in monthly payments are used to
The balance of a margin account. Related: buying on margin, initial margin requirement.
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.
Monetary / non-monetary method
Under this translation method, monetary items (e.g. cash, accounts
The practice of making a charge in the income account equivalent to the tax savings
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'
A method of allocating the purchase price for the acquisition of another firm among the
Return on equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12
This is a company's total assets minus total liabilities. A company's net worth is the
Simple compound growth method
A method of calculating the growth rate by relating the terminal value to
A method of cash budgeting that is organized along the lines of the statement of cash flows.
Balance sheet item that includes the book value of ownership in the corporation. It
The residual claims that stockholders have against a firm's assets, calculated by
Stratified equity indexing
A method of constructing a replicating portfolio in which the stocks in the index
Under this currency translation method, the choice of exchange rate depends on the
Top-down equity management style
A management style that begins with an assessment of the overall
Total debt to equity ratio
A capitalization ratio comparing current liabilities plus long-term debt to
RATE OF RETURN ON STOCKHOLDERSâ€™ EQUITY
The percentage return or profit that management made on each dollar stockholders invested in a company. Hereâ€™s how you figure it:
RATIO OF DEBT TO STOCKHOLDERSâ€™ EQUITY
A ratio that shows which groupâ€”creditors or stockholdersâ€”has the biggest stake in or the most control of a company:
STOCKHOLDERSâ€™ (OR OWNERSâ€™) EQUITY
The value of the ownersâ€™ interests in a company.
Funds raised from shareholders.
A method of adjusting accounts receivable to the amount that is expected to be collected based on company experience.
An account that reduces an equity account. An example is Treasury stock.
A method of preparing the operating section of the Statement of Cash Flows that uses the companyâ€™s actual cash inflows and cash outflows.
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.
Amounts contributed to the company by the owners (contributed capital) plus the residual earnings of the business (retained earnings).
A method of preparing the operating section of the Statement of Cash Flows that does not use the companyâ€™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.
The total amount of contributed capital and retained earnings; synonymous with stockholders' equity.
The total amount of contributed capital and retained earnings; synonymous with shareholdersâ€™ equity.
A widely used financial statement ratio to assess the
Refers to one of the two basic sources of capital for a business, the
Refers to the capital invested in a business by its shareowners
return on equity (ROE)
This key ratio, expressed as a percent, equals net
stockholders' equity, statement of changes in
Although often considered
Cost of Equity
Same as the cost of common stock. Sometimes viewed as the
Return on Common Equity Ratio
A measure of the percentage return earned on the value of the
a process of service department cost allocation
a service department cost allocation approach
dividend growth method
a method of computing the cost
FIFO method (of process costing)
the method of cost assignment that computes an average cost per equivalent
a technique used to determine the fixed
judgmental method (of risk adjustment)
an informal method of adjusting for risk that allows the decision maker
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
net present value method
a process that uses the discounted
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
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 process of service department cost allocation
strict FIFO method (of process costing)
the method of cost assignment that uses FIFO to compute a cost per equivalent unit and, in transferring units from a department, keeps the
weighted average method (of process costing)
the method of cost assignment that computes an average cost per
Bootstrapping, bootstrap method
An arithmetic method for backing an
The difference between the total of all recorded assets and liabilities on the balance
First in, first-out costing method (FIFO)
A process costing methodology that assigns the earliest
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.
The total of all capital contributions and retained earnings on a businessâ€™s
A capital budgeting analysis method that calculates the amount of
An accounting method used to combine the financial statements of
Ownership. Common stock represents equity in a corporation.
Benefit Ratio Method
The proportion of unemployment benefits paid to a companyâ€™s
Benefit Wage Ratio Method
The proportion of total taxable wages for laid off
Average-Cost Inventory Method
The inventory cost-flow assumption that assigns the average
A contract accounting method that recognizes contract revenue
A format for the operating section of the cash-flow statement that reports actual cash receipts and cash disbursements from operating activities.
An ownership interest in an enterprise, including preferred and common stock.
First-In, First-Out (FIFO) Inventory Method
The inventory cost-flow assumption that
A method of accounting for petroleum exploration and development expenditures
A format for the operating section of the cash-flow statement that
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
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