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Definition of Financial assets

Financial Assets Image 1

Financial assets

Claims on real assets.


financial assets

Claims to the income generated by real assets. Also called securities.



Related Terms:

Broker

An agent who handles public orders to buy or sell financial assets.


Financial market

An organized institutional structure or mechanism for creating and exchanging financial assets.


financial markets

Markets in which financial assets are traded.


Inflation Tax

The loss in purchasing power due to inflation eroding the real value of financial assets such as cash.



Interest Rate Differential

The interest rate on our financial assets minus the interest rate on a foreign country's financial assets.


money market

Market for short-term financial assets.


Financial Assets Image 2

Other capital

In the balance of payments, other capital is a residual category that groups all the capital
transactions that have not been included in direct investment, portfolio investment, and reserves categories. It
is divided into long-term capital and short-term capital and, because of its residual status, can differ from
country to country. Generally speaking, other long-term capital includes most non-negotiable instruments of a
year or more like bank loans and mortgages. Other short-term capital includes financial assets of less than a
year such as currency, deposits, and bills.


Securities

A general term for stock, bonds, or other other financial assets.


Valuation

The process of estimating the value of financial assets or
securities


Acquisition of assets

A merger or consolidation in which an acquirer purchases the selling firm's assets.


Assets

A firm's productive resources.


ASSETS

Anything of value that a company owns.


Assets

Things that the business owns.


Assets

Items owned by the company or expenses that have been paid for but have not been used up.


Assets requirements

A common element of a financial plan that describes projected capital spending and the
proposed uses of net working capital.


Financial Assets Image 3

Changes in Financial Position

Sources of funds internally provided from operations that alter a company's
cash flow position: depreciation, deferred taxes, other sources, and capital expenditures.


chief financial officer (CFO)

Officer who oversees the treasurer and controller and sets overall financial strategy.



Corporate financial management

The application of financial principals within a corporation to create and
maintain value through decision making and proper resource management.


Corporate financial planning

financial planning conducted by a firm that encompasses preparation of both
long- and short-term financial plans.


costs of financial distress

Costs arising from bankruptcy or distorted business decisions before bankruptcy.


Country financial risk

The ability of the national economy to generate enough foreign exchange to meet
payments of interest and principal on its foreign debt.


Current assets

Value of cash, accounts receivable, inventories, marketable securities and other assets that
could be converted to cash in less than 1 year.


Current assets

Cash, things that will be converted into cash within a year (such as accounts receivable), and inventory.


Current assets

Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.


current assets

Current refers to cash and those assets that will be turned
into cash in the short run. Five types of assets are classified as current:
cash, short-term marketable investments, accounts receivable, inventories,
and prepaid expenses—and they are generally listed in this order in
the balance sheet.


Current Assets

Cash and other company assets that can be readily turned into cash within one year.


Financial Assets Image 4

Dupont system of financial control

Highlights the fact that return on assets (ROA) can be expressed in terms
of the profit margin and asset turnover.



Exchange of assets

Acquisition of another company by purchase of its assets in exchange for cash or stock.


External Financial Statements

Corporate financial statements that have been reported on by an external independent accountant.


Financial accounting

The production of financial statements, primarily for those interested parties who are external to the business.


financial accounting

a discipline in which historical, monetary
transactions are analyzed and recorded for use in the
preparation of the financial statements (balance sheet, income
statement, statement of owners’/stockholders’ equity,
and statement of cash flows); it focuses primarily on the
needs of external users (stockholders, creditors, and regulatory
agencies)


Financial analysts

Also called securities analysts and investment analysts, professionals who analyze
financial statements, interview corporate executives, and attend trade shows, in order to write reports
recommending either purchasing, selling, or holding various stocks.


Financial Assistance

Economic assistance provided by unrelated third parties, typically government agencies. They may take the form of loans, loan guarantees, subsidies, tax allowances, contributions, or cost-sharing arrangements.


financial budget

a plan that aggregates monetary details
from the operating budgets; includes the cash and capital
budgets of a company as well as the pro forma financial
statements


Financial control

The management of a firm's costs and expenses in order to control them in relation to
budgeted amounts.


Financial Covenant

A feature of a debt or credit agreement that is designed to protect the lender or creditor. It is common to characterize covenants as either positive or negative covenants.
A positive covenant might require that the debtor maintain a minimum amount of working capital.
A negative covenant might limit dividend payments that may be made.


Financial Covenants

A promise made related to financial conditions or events. Often a promise not to allow certain balance sheet items or ratios to fall below an agreed level. Usually found in loan documents, as a protection mechanism.


Financial distress

Events preceding and including bankruptcy, such as violation of loan contracts.


Financial distress costs

Legal and administrative costs of liquidation or reorganization. Also includes
implied costs associated with impaired ability to do business (indirect costs).


Financial engineering

Combining or dividing existing instruments to create new financial products.


Financial future

A contract entered into now that provides for the delivery of a specified asset in exchange
for the selling price at some specified future date.


financial incentive

a monetary reward provided for performance
above targeted objectives


Financial Incentive

An expression of economic benefit that motivates behavior that might otherwise not take place.


Financial intermediaries

Institutions that provide the market function of matching borrowers and lenders or
traders.


financial intermediary

Firm that raises money from many small investors and provides financing to businesses or other
organizations by investing in their securities.


Financial Intermediary

Any institution, such as a bank, that takes deposits from savers and loans them to borrowers.


Financial Intermediation

The process whereby financial intermediaries channel funds from lender/savers to borrower/spenders.


Financial lease

Long-term, non-cancelable lease.


Financial Lease

Lease in which the service provided by the lessor to the lessee is limited to financing equipment. All other responsibilities related to the possession of equipment, such as maintenance, insurance, and taxes, are borne by the lessee. A financial lease is usually noncancellable and is fully paid out amortized over its term.


Financial leverage

Use of debt to increase the expected return on equity. financial leverage is measured by
the ratio of debt to debt plus equity.


financial leverage

The equity (ownership) capital of a business can serve
as the basis for securing debt capital (borrowing money). In this way, a
business increases the total capital available to invest in its assets and
can make more sales and more profit. The strategy is to earn operating
profit, or earnings before interest and income tax (EBIT), on the capital
supplied from debt that is more than the interest paid on the debt capital.
A financial leverage gain equals the EBIT earned on debt capital
minus the interest on the debt. A financial leverage gain augments earnings
on equity capital. A business must earn a rate of return on its assets
(ROA) that is greater than the interest rate on its debt to make a financial
leverage gain. If the spread between its ROA and interest rate is unfavorable,
a business suffers a financial leverage loss.


financial leverage

Debt financing amplifies the effects of changes in operating income on the returns to stockholders.


Financial leverage clientele

A group of investors who have a preference for investing in firms that adhere to
a particular financial leverage policy.


Financial leverage ratios

Related: capitalization ratios.


Financial Numbers Game

The use of creative accounting practices to alter a financial statement
reader's impression of a firm's business performance.


Financial objectives

Objectives of a financial nature that the firm will strive to accomplish during the period
covered by its financial plan.


Financial plan

A financial blueprint for the financial future of a firm.


Financial planning

The process of evaluating the investing and financing options available to a firm. It
includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in
the form of a financial plan, and then comparing future performance against that plan.


Financial Position

Status of a firm's assets, liabilities, and equity accounts as of a certain time, as shown in its financial statement.


Financial press

That portion of the media devoted to reporting financial news.


Financial ratio

The result of dividing one financial statement item by another. Ratios help analysts interpret
financial statements by focussing on specific relationships.


financial reports and statements

financial means having to do with
money and economic wealth. Statement means a formal presentation.
financial reports are printed and a copy is sent to each owner and each
major lender of the business. Most public corporations make their financial
reports available on a web site, so all or part of the financial report
can be downloaded by anyone. Businesses prepare three primary financial
statements: the statement of financial condition, or balance sheet;
the statement of cash flows; and the income statement. These three key
financial statements constitute the core of the periodic financial reports
that are distributed outside a business to its shareowners and lenders.
financial reports also include footnotes to the financial statements and
much other information. financial statements are prepared according to
generally accepted accounting principles (GAAP), which are the authoritative
rules that govern the measurement of net income and the reporting
of profit-making activities, financial condition, and cash flows.
Internal financial statements, although based on the same profit
accounting methods, report more information to managers for decision
making and control. Sometimes, financial statements are called simply
financials.


Financial reports or statements

The Profit and Loss account, Balance Sheet and Cash Flow statement of a business.


Financial risk

The risk that the cash flow of an issuer will not be adequate to meet its financial obligations.
Also referred to as the additional risk that a firm's stockholder bears when the firm utilizes debt and equity.


financial risk

Risk to shareholders resulting from the use of debt.


financial slack

Ready access to cash or debt financing.


Financial Trend Analysis

Process of analyzing financial statements of a company for any continuing relationship.


Financial year

The accounting period adopted by a business for the production of its financial statements.
Finished goods Inventory that is ready for sale, either having been purchased as such or the result of a conversion from raw materials through a manufacturing process.


Fixed assets

Things that the business owns and are part of the business infrastructure – fixed assets may be
tangible or intangible.


fixed assets

An informal term that refers to the variety of long-term operating
resources used by a business in its operations—including real
estate, machinery, equipment, tools, vehicles, office furniture, computers,
and so on. In balance sheets, these assets are typically labeled property,
plant, and equipment. The term fixed assets captures the idea that the
assets are relatively fixed in place and are not held for sale in the normal
course of business. The cost of fixed assets, except land, is depreciated,
which means the cost is allocated over the estimated useful lives of the
assets.


Fixed Assets

Land, buildings, plant, equipment, and other assets acquired for carrying on the business of a company with a life exceeding one year. Normally expressed in financial accounts at cost, less accumulated depreciation.


Fixed Assets Turnover Ratio

A measure of the utilization of a company's fixed assets to
generate sales. It is calculated by dividing the sales for the period
by the book value of the net fixed assets.


Fraudulent Financial Reporting

Intentional misstatements or omissions of amounts or disclosures
in financial statements done to deceive financial statement users. The term is used interchangeably
with accounting irregularities. A technical difference exists in that with fraud, it
must be shown that a reader of financial statements that contain intentional and material misstatements
must have used those financial statements to his or her detriment. In this book, accounting
practices are not alleged to be fraudulent until done so by an administrative, civil, or
criminal proceeding, such as that of the Securities and Exchange Commission, or a court.


Future-Oriented Financial Information

Information about prospective results of operations, financial position and/or changes in financial position, based on assumptions about future economic conditions and courses of action. Future-oriented financial information is presented as either a forecast or a projection.


Intangible assets

assets owned by the company that do not possess physical substance; they usually take the form of rights and privileges such as patents, copyrights, and franchises.


Intangible fixed assets

Non-physical assets, e.g. customer goodwill or intellectual property (patents and trademarks).


London International Financial Futures Exchange (LIFFE)

A London exchange where Eurodollar futures
as well as futures-style options are traded.


London International Financial Futures Exchange (LIFFE)

London exchange where Eurodollar futures as well as futures-style options are traded.


Long-term assets

Value of property, equipment and other capital assets minus the depreciation. This is an
entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect
the market value of the assets.


Long-term financial plan

financial plan covering two or more years of future operations.


Longer-Term Fixed Assets

assets having a useful life greater than one year but the duration of the 'long term' will vary with the context in which the term is applied.


Net assets

The difference between total assets on the one hand and current liabilities and noncapitalized longterm
liabilities on the other hand.


Non-financial services

Include such things as freight, insurance, passenger services, and travel.


Non-reproducible assets

A tangible asset with unique physical properties, like a parcel of land, a mine, or a
work of art.


Notes to the financial statements

A detailed set of notes immediately following the financial statements in
an annual report that explain and expand on the information in the financial statements.


Other assets

A cluster of accounts that are listed after fixed assets on the balance sheet,
and which contain minor assets that cannot be reasonably fit into any of the other
main asset categories.


Other current assets

Value of non-cash assets, including prepaid expenses and accounts receivable, due
within 1 year.


Perfectly competitive financial markets

Markets in which no trader has the power to change the price of
goods or services. Perfect capital markets are characterized by the following conditions: 1) trading is costless,
and access to the financial markets is free, 2) information about borrowing and lending opportunities is freely
available, 3) there are many traders, and no single trader can have a significant impact on market prices.


Personal Assets

assets, the title of which are held personally rather than in the name of some other legal entity.


Preferred Stock Stock that has a claim on assets and dividends of a corporation that are prior

to that of common stock. Preferred stock typically does not carry the right to vote.


Pro forma financial statements

financial statements as adjusted to reflect a projected or planned transaction.


Publicly traded assets

assets that can be traded in a public market, such as the stock market.


Published Financial

financial statements and financial information made public.


Quick assets

Current assets minus inventories.


RATE OF RETURN ON TOTAL ASSETS

The percentage return or profit that management made on each dollar of assets. The formula is:
(Net income) / (Total assets)


Real assets

Identifiable assets, such as buildings, equipment, patents, and trademarks, as distinguished from a
financial obligation.


real assets

assets used to produce goods and services.


Realizable Revenue A revenue transaction where assets received in exchange for goods and

services are readily convertible into known amounts of cash or claims to cash.



 

 

 

 

 

 

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