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Definition of Factoring
Sale of a firm's accounts receivable to a financial institution known as a factor.
The discounting, or sale at a discount, of receivables on a nonrecourse, notification
The sale of accounts receivable to a third party, with the third party bearing
Type 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.
factoring arrangement that provides collection and insurance of accounts receivable.
factoring arrangement that provides collection, insurance, and finance for accounts receivable.
Provides additional financial security should an insured person be dismembered or lose the use of a limb as the result of an accident.
‘Buckets’ within the ledger, part of the accounting system. Each account contains similar transactions (line items) that are used for the production of financial statements. Or commonly used as an abbreviation for financial statements.
Money owed to suppliers.
Amounts a company owes to creditors.
Amounts owed by the company for goods and services that have been received, but have not yet been paid for. Usually accounts payable involves the receipt of an invoice from the company providing the services or goods.
Short-term, non-interest-bearing liabilities of a business
Acurrent liability on the balance sheet, representing short-term obligations
Amounts due to vendors for purchases on open account, that is, not evidenced
The number of days it would take to pay the ending balance
Money owed by Customers.
Amounts owed to a company by Customers that it sold to on credit. Total accounts receivable are usually reduced by an allowance for doubtful accounts.
Amounts owed to the company, generally for sales that it has made.
Short-term, non-interest-bearing debts owed to a
A current asset on the balance sheet, representing short-term
Amounts due from Customers for sales on open account, not evidenced
Money owed to a business for merchandise or services sold on open account.
Accounts Receivable Days (A/R Days)
The number of days it would take to collect the ending
Accounts receivable turnover
The ratio of net credit sales to average accounts receivable, a measure of how
accounts receivable turnover ratio
A ratio computed by dividing annual
Accretion (of a discount)
In portfolio accounting, a straight-line accumulation of capital gains on discount
Well, frankly, accrual is not a good descriptive
ad hoc discount
a price concession made under competitive pressure (real or imagined) that does not relate to quantity purchased
ADF (annuity discount factor)
the present value of a finite stream of cash flows for every beginning $1 of cash flow.
A bond covenant that specifies certain actions the firm must take.
A means of compensating the broker of a program trade solely on the basis of commission
Allowance for doubtful accounts
A contra account related to accounts receivable that represents the amounts that the company expects will not be collected.
Allowance for Doubtful Accounts
An estimate of the uncollectible portion of accounts receivable
Amortization (Credit Insurance)
Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity.
The pool factor implied by the scheduled amortization assuming no prepayemts.
Present value of $1 paid for each of t periods.
Present value of an annuity of $1 per period.
The amount of total risk that can be eliminated by diversification by
A debt or equity security not classified as a held-to-maturity security or a trading security. Can be classified as a current or noncurrent investment depending on the intended holding period.
Average age of accounts receivable
The weighted-average age of all of the firm's outstanding invoices.
Average Collection Period
Average number of days necessary to receive cash for the sale of
Average collection period, or days' receivables
The ratio of accounts receivables to sales, or the total
Balance of Payments Accounts
A statement of a country's transactions with other countries.
Bank collection float
The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank.
Bank discount basis
A convention used for quoting bids and offers for treasury bills in terms of annualized
The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.
Base probability of loss
The probability of not achieving a portfolio expected return.
Regarding a futures contract, the difference between the cash price and the futures price observed in the
In the bond market, the smallest measure used for quoting yields is a basis point. Each percentage
One one-hundredth of one percent
One hundredth of one percentage point, or 0.0001.
One one-hundredth of a percentage point, used to express variations in yields. For example, the difference between 5.36 percent and 5.38 percent is 2 basis points.
Price expressed in terms of yield to maturity or annual rate of return.
The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for
Beneficiary (Credit Insurance)
The person or party designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event. In the case of credit insurance, the beneficiary will always be the creditor.
A method of securities distribution/ underwriting in which the securities firm agrees to sell
The requirement that a claim holder voting against a plan of reorganization
risk of a firm measured from the standpoint of an investor who holds a highly diversified portfolio.
The method used for computing the bond-equivalent yield.
Borrower (Credit Insurance)
A consumer who borrows money from a lender.
The risk that the cash flow of an issuer will be impaired because of adverse economic
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.
The difference between the net cost of a security and the net sale price, if that security is sold at a loss.
The negative difference between the adjusted cost base of an investment held as a capital property and the proceeds of disposition you receive when you sell it. When you sell such an investment for less than you paid, you incur a capital loss.
An incentive offered to purchasers of a firm's product for payment within a specified time
Changes in Financial Position
Sources of funds internally provided from operations that alter a company's
Chart of accounts
A listing of all accounts used in the general ledger, usually sorted in
chief financial officer (CFO)
Officer who oversees the treasurer and controller and sets overall financial strategy.
A transaction in which the seller's intention is to reduce or eliminate a long position in a stock,
An internal department within a company staffed by specialists in collecting past due accounts or accounts receivable.
The negative float that is created between the time when you deposit a check in your account
The percentage of a given month's sales collected during the month of sale and each
Procedures followed by a firm in attempting to collect accounts receivables.
Procedures to collect and monitor receivables.
Commercial Business Loan (Credit Insurance)
An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.
The risk that a foreign debtor will be unable to pay its debts because of business events,
Related: Unsystematic risk
See asset-specific risk
Comparative credit analysis
A method of analysis in which a firm is compared to others that have a desired
The risk that a project will not be brought into operation successfully.
A type of agreement to sell whereby a seller retains title to goods sold and delivered to a purchaser until full payment has been made.
Conditional Sale Agreement
An agreement entered into between a conditional buyer and a conditional seller setting out the terms under which goods change hands.
Conditional sales contracts
Similar to equipment trust certificates except that the lender is either the
he written statement that follows any "trade" in the securities markets. Confirmation is issued
constant-growth dividend discount model
Version of the dividend discount model in which dividends grow at a constant rate.
credit granted by a firm to consumers for the purchase of goods or services. Also called
Consumer Credit Protection Act
A federal Act specifying the proportion of
Contingent deferred sales charge (CDSC)
The formal name for the load of a back-end load fund.
The process of calculating the present value of a stream of future
any reduction in units that occurs uniformly
Rules set by the Chicago Board of Trade for determining the invoice price of each
Corporate financial management
The application of financial principals within a corporation to create and
Corporate financial planning
financial planning conducted by a firm that encompasses preparation of both
An asset’s purchase price, plus costs associated with the purchase, like installation fees, taxes, etc.
Cost of sales
The manufacture or purchase price of goods sold in a period or the cost of providing a service.
costs of financial distress
Costs arising from bankruptcy or distorted business decisions before bankruptcy.
on the other side of a trade or transaction.
The risk that the other party to an agreement will default. In an options contract, the risk
Country financial risk
The ability of the national economy to generate enough foreign exchange to meet
Country risk General
Level of political and economic uncertainty in a country affecting the value of loans or
Buying or selling goods or services now with the intention of payment following at some time in
One side of a journal entry, usually depicted as the right side.
A rating of a company's credit (ability to payback debt), usually by a third party credit agency.
On your bank statement, 'credit' represents funds that you have deposited into your account. The opposite of a credit is a debit.
The process of analyzing information on companies and bond issues in order to estimate the
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