|Fallacy of Composition|
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Definition of Fallacy of Composition
Fallacy of Composition
The incorrect conclusion that something that is true for an individual is necessarily true for the economy as a whole.
Voluntary arrangement to restructure a firm's debt, under which payment is reduced.
A bond covenant that specifies certain actions the firm must take.
An arrangement whereby a security issue is canceled if the underwriter is unable
An offset to the accounts receivable balance, against which
Automatic payment of moneys derived from a benefit.
An account receivable that cannot be collected.
The amount of accounts receivable that is not expected to be collected.
Refers to accounts receivable from credit sales to customers
A statistical compilation formulated by a sovereign nation of all economic transactions
The difference between the demand for and supply of a country's currency on the foreign exchange market.
A statement of a country's transactions with other countries.
The lease payment at which a party to a prospective lease is indifferent between
The prepayment rate of a MBS coupon that will produce the same CFY as that of
A computerized clearing system for sterling funds
An international wire transfer system for high-value
An economy in which imports and exports are very small relative to GDP and so are ignored in macroeconomic analysis. Contrast with open economy.
An undertaking either (1) to complete a project such that it meets certain specified
he written statement that follows any "trade" in the securities markets. Confirmation is issued
Cost company arrangement
arrangement whereby the shareholders of a project receive output free of
Cost of Debt
The cost of debt (bonds, loans, etc.) that a company is charged for
A bond's interest payments.
Current Tax Payment Act of 1943
A federal Act requiring employers to withhold income taxes from employee pay.
Date of payment
Date dividend checks are mailed.
Borrowings from financiers.
Funds owed to another entity.
Ability to borrow. The amount a firm can borrow up to the point where the firm value no
An assessment of ability and willingness to repay a loan from anticipated future cash flow or other sources.
Debt (Credit Insurance)
Money, goods or services that someone is obligated to pay someone else in accordance with an expressed or implied agreement. debt may or may not be secured.
The amount of borrowing that leasing displaces. firms that do a lot of leasing will be
Indicator of financial leverage. Compares assets provided by creditors to assets provided
A comparison of debt to equity in a company's capital structure.
Raising loan capital through the creation of debt by issuing a form of paper evidencing amounts owed and payable on specified dates or on demand.
An asset requiring fixed dollar payments, such as a government or corporate bond.
Any financial asset corresponding to a debt, such as a bond or a treasury bill.
The amplification of the return earned on equity when an investment or firm is financed
A bond covenant that restricts in some way the firm's ability to incur additional indebtedness.
The market for trading debt instruments.
Total debt divided by total assets.
The percentage of debt that is used in the total capitalization of a
Reducing the principal and/or interest payments on LDC loans.
IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
A security representing a debt relationship with an enterprise, including a government
Interest payment plus repayments of principal to creditors, that is, retirement of debt.
Debt-service coverage ratio
Earnings before interest and income taxes plus one-third rental charges, divided
Debt service parity approach
An analysis wherein the alternatives under consideration will provide the firm
A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank
A widely used financial statement ratio to assess the
Debtor in possession
A firm that is continuing to operate under Chapter 11 bankruptcy process.
New debt obtained by a firm during the Chapter 11 bankruptcy process.
Sales to customers who have bought goods or services on credit but who have not yet paid their debt.
Delivery versus payment
A transaction in which the buyer's payment for securities is due at the time of
dual pricing arrangement
a transfer pricing system that allows
Electronic Federal Tax Payment Systems (EFTPS)
An electronic funds transfer system used by businesses to remit taxes to the government.
FHA prepayment experience
The percentage of loans in a pool of mortgages outstanding at the origination
Refers to an order to buy or sell that can be executed without confirmation for some fixed period. Also,
Firm commitment underwriting
An undewriting in which an investment banking firm commits to buy the
Firm's net value of debt
Total firm value minus total firm debt.
See:diversifiable risk or unsystematic risk.
debt maturing after more than one year.
debt with more than 1 year remaining to maturity.
an economy characterized by the international
Graduated-payment mortgages (GPMs)
A type of stepped-payment loan in which the borrower's payments
Insurance that is offered to individuals rather than groups.
Individual Retirement Account
A personal savings account into which a defined
Individual Retirement Annuity
An IRA comprised of an annuity that is managed
Interac® Direct Payment
Instead of paying with cash or a credit card, Interac Direct payment allows you to pay for your purchase with a debit card, such as your bank card. The amount of the purchase is electronically debited, or withdrawn, from your bank account (see debit card).
Contractual debt payments based on the coupon rate of interest and the principal amount.
Interest rate on debt
The firm's cost of debt capital.
Intrinsic value of a firm
The present value of a firm's expected future net cash flows discounted by the
Involuntary liquidation preference
A premium that must be paid to preferred or preference stockholders if
Junior debt (subordinate debt)
debt whose holders have a claim on the firm's assets only after senior
Lag response of prepayments
There is typically a lag of about three months between the time the weighted
The consideration paid by the lessee to the lessor in exchange for the use of the leased equipment/property. payments are usually made at fixed intervals.
An obligation having a maturity of more than one year from the date it was issued. Also
A debt for which payments will be required for a period of more than
Long Term Debt
Liability due in a year or more.
Indicator of financial leverage. Shows long-term debt as a proportion of the
Long-term debt ratio
The ratio of long-term debt to total capitalization.
Long-term debt to equity ratio
A capitalization ratio comparing long-term debt to shareholders' equity.
Refers to non-conventional debt that has a greater element of risk than secured debt but has less risk than equity.
MM's proposition I (debt irrelevance proposition)
The value of a firm is unaffected by its capital structure.
Monetizing the Debt
See printing money.
This is the process by which "dirty money" generated by criminal activities is converted through legitimate businesses into assets that cannot be easily traced back to their illegal origins.
The debt owed by the government as a result of earlier borrowing to finance budget deficits. That part of the debt not held by the central bank is the publically held national debt.
Neglected firm effect
The tendency of firms that are neglected by security analysts to outperform firms that
online bill payment
The electronic payment of a bill via the Internet. The specified amount of the bill is electronically debited from your account.
An economy which engages in a significant amount of trade. Contrast with closed economy.
Original issue discount debt (OID debt)
debt that is initially offered at a price below par.
The date on which each shareholder of record will be sent a check for the declared dividend.
The date established for the payment of a declared dividend.
Company-written checks that have not yet cleared.
Checks written by a company that have not yet cleared.
bond A bond that gives the issuer an option (during an initial period) either to make
Reducing fund transfers between affiliates to only a netted amount. Netting can be done on
escribes the lagged collection pattern of receivables, for instance the probability that a
A system where funds are electronically debited from your account on a specified date by a financial institution (e.g., bill, mortgage or personal loan payments) or perhaps an insurance or an utility company.
A payment made in advance of when it is treated as an expense for profit purposes.
Also called speed, the estimated rate at which mortgagors pay off their loans ahead of
payments made in excess of scheduled mortgage principal repayments.
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