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Factor analysis |
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Definition of Factor analysisFactor analysisA statistical procedure that seeks to explain a certain phenomenon, such as the return on a
Related Terms:ADF (annuity discount factor)the present value of a finite stream of cash flows for every beginning $1 of cash flow. PPF (periodic perpetuity factor)a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity. Amortization factorThe pool factor implied by the scheduled amortization assuming no prepayemts. Annuity factorPresent value of $1 paid for each of t periods. BARRA's performance analysis (PERFAN)A method developed by BARRA, a consulting firm in Break-even analysisAn analysis of the level of sales at which a project would make zero profit. Cluster analysisA statistical technique that identifies clusters of stocks whose returns are highly correlated Common-base-year analysisThe representing of accounting information over multiple years as percentages Comparative credit analysisA method of analysis in which a firm is compared to others that have a desired Conversion factorsRules set by the Chicago Board of Trade for determining the invoice price of each Credit analysisThe process of analyzing information on companies and bond issues in order to estimate the Discount factorPresent value of $1 received at a stated future date. Discriminant analysisA statistical process that links the probability of default to a specified set of financial ratios. FactorA financial institution that buys a firm's accounts receivables and collects the debt. Factor modelA way of decomposing the factors that influence a security's rate of return into common and Factor portfolioA well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of FactoringSale of a firm's accounts receivable to a financial institution known as a factor. Fundamental analysisSecurity analysis that seeks to detect misvalued securities by an analysis of the firm's Horizon analysisAn analysis of returns using total return to assess performance over some investment horizon. Horizontal analysisThe process of dividing each expense item of a given year by the same expense item in Maturity factoringfactoring arrangement that provides collection and insurance of accounts receivable. Mean-variance analysisEvaluation of risky prospects based on the expected value and variance of possible outcomes. Multifactor CAPMA version of the capital asset pricing model derived by Merton that includes extramarket Multiple-discriminant analysis (MDA)Statistical technique for distinguishing between two groups on the Net benefit to leverage factorA linear approximation of a factor, T*, that enables one to operationalize the Old-line factoringfactoring arrangement that provides collection, insurance, and finance for accounts receivable. One-factor APTA special case of the arbitrage pricing theory that is derived from the one-factor model by Performance attribution analysisThe decomposition of a money manager's performance results to explain Pool factorThe outstanding principal balance divided by the original principal balance with the result Present value factorfactor used to calculate an estimate of the present value of an amount to be received in Pro forma capital structure analysisA method of analyzing the impact of alternative capital structure Regression analysisA statistical technique that can be used to estimate relationships between variables. Reported factorThe pool factor as reported by the bond buyer for a given amortization period. Scenario analysisThe use of horizon analysis to project bond total returns under different reinvestment rates Sensitivity analysisanalysis of the effect on a project's profitability due to changes in sales, cost, and so on. Single factor modelA model of security returns that acknowledges only one common factor. Technical analysisSecurity analysis that seeks to detect and interpret patterns in past security prices. Two-factor modelBlack's zero-beta version of the capital asset pricing model. Vertical analysisThe process of dividing each expense item in the income statement of a given year by net VERTICAL ANALYSISA financial analysis technique that relates key amounts on the income statement and balance sheet to a 100 percent or base figure for the present and previous year. Costâ€“volumeâ€“profit analysis (CVP)A method for understanding the relationship between revenue, cost and sales volume. Limiting factorThe production resource that, as a result of scarce resources, limits the production of goods Ratio analysisA method of analysing financial reports to interpret trends and make comparisons by using ratios â€“ two numbers, with one generally expressed as a percentage of the other. Sensitivity analysisAn approach to understanding how changes in one variable of costâ€“volumeâ€“profit analysis are affected by changes in the other variables. Variance analysisA method of budgetary control that compares actual performance against plan, investigates the causes of the variance and takes corrective action to ensure that targets are achieved. Ratio analysisA method of relating numbers from the various financial statements to one another in order to get meaningful information for comparison. capital investment analysisRefers to various techniques and procedures Ratio AnalysisThe process of using financial ratios, calculated from key accounts activity analysisthe process of detailing the various repetitive actions that are performed in making a product or correlation analysisan analytical technique that uses statistical cost-benefit analysis the analytical process of comparing therelative costs and benefits that result from a specific course cost driver analysisthe process of investigating, quantifying, critical success factors (CSF)any item (such as quality, customer incremental analysisa process of evaluating changes that least squares regression analysisa statistical technique that investigates the association between dependent and independent variables; it determines the line of "best fit" for a set of observations by minimizing the sum of the squares Pareto analysisa method of ranking the causes of variation sensitivity analysisa process of determining the amount of change that must occur in a variable before a different decision would be made variance analysisthe process of categorizing the nature (favorable or unfavorable) of the differences between standard and actual costs and determining the reasons for those differences Regression analysisStatistical analysis techniques that quantify the FactoringThe sale of accounts receivable to a third party, with the third party bearing Factory overheadAll the costs incurred during the manufacturing process, minus the Pareto analysisThe 80:20 ratio that states that 20% of the variables included in an annuity factorPresent value of an annuity of $1 per period. break-even analysisanalysis of the level of sales at which the company breaks even. credit analysisProcedure to determine the likelihood a customer will pay its bills. discount factorPresent value of a $1 future payment. scenario analysisProject analysis given a particular combination of assumptions. sensitivity analysisanalysis of the effects of changes in sales, costs, and so on, on project profitability. simulation analysisEstimation of the probabilities of different possible outcomes, e.g., from an investment project. Cost-Benefit AnalysisThe calculation and comparison of the costs and benefits of a policy or project. Factor of ProductionA resource used to produce a good or service. The main macroeconomic factors of production are capital and labor. FactoringThe discounting, or sale at a discount, of receivables on a nonrecourse, notification Failure analysisThe examination of failure incidents to identify components Scrap factorAn anticipated loss percentage included in the bill of material and Shrinkage factorThe expected loss of some proportion of an item during the Break-Even AnalysisAn analytical technique for studying the relationships between fixed cost, variable cost, and profits. A breakeven chart graphically depicts the nature of breakeven analysis. The breakeven point represents the volume of sales at which total costs equal total revenues (that is, profits equal zero). FactorAn agent who buys and sells goods on behalf of others for a commission. FactoringType of financial service whereby a firm sells or transfers title to its accounts receivable to a factoring company, which then acts as principal, not as agent. Financial Trend AnalysisProcess of analyzing financial statements of a company for any continuing relationship. Interest FactorNumbers found in compound interest and annuity tables. Usually called the FVIF or PVIF. Sales forecastA key input to a firm's financial planning process. External sales forecasts are based on extraordinary gains and lossesNo pun intended, but these types of gains unit-driven expensesExpenses that vary in close proportion to changes
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