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Definition of 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 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.
A bond covenant that specifies certain actions the firm must take.
A contractual provision in a bond indenture. A positive covenant requires certain actions, and
Sources of funds internally provided from operations that alter a company's
Officer who oversees the treasurer and controller and sets overall financial strategy.
The application of financial principals within a corporation to create and
financial planning conducted by a firm that encompasses preparation of both
Costs arising from bankruptcy or distorted business decisions before bankruptcy.
The ability of the national economy to generate enough foreign exchange to meet
Provisions in a bond indenture or preferred stock agreement that require the bond or preferred
Promise usually made in a contract whereby a party to the contract promises to do or not to do specified things.
Highlights the fact that return on assets (ROA) can be expressed in terms
Corporate financial statements that have been reported on by an external independent accountant.
The production of financial statements, primarily for those interested parties who are external to the business.
a discipline in which historical, monetary
Also called securities analysts and investment analysts, professionals who analyze
Claims on real assets.
Claims to the income generated by real assets. Also called securities.
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.
a plan that aggregates monetary details
The management of a firm's costs and expenses in order to control them in relation to
Events preceding and including bankruptcy, such as violation of loan contracts.
Financial distress costs
Legal and administrative costs of liquidation or reorganization. Also includes
Combining or dividing existing instruments to create new financial products.
A contract entered into now that provides for the delivery of a specified asset in exchange
a monetary reward provided for performance
An expression of economic benefit that motivates behavior that might otherwise not take place.
Institutions that provide the market function of matching borrowers and lenders or
Firm that raises money from many small investors and provides financing to businesses or other
Any institution, such as a bank, that takes deposits from savers and loans them to borrowers.
The process whereby financial intermediaries channel funds from lender/savers to borrower/spenders.
Long-term, non-cancelable 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.
Use of debt to increase the expected return on equity. financial leverage is measured by
The equity (ownership) capital of a business can serve
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
Financial leverage ratios
Related: capitalization ratios.
An organized institutional structure or mechanism for creating and exchanging financial assets.
Markets in which financial assets are traded.
Financial Numbers Game
The use of creative accounting practices to alter a financial statement
Objectives of a financial nature that the firm will strive to accomplish during the period
A financial blueprint for the financial future of a firm.
The process of evaluating the investing and financing options available to a firm. It
Status of a firm's assets, liabilities, and equity accounts as of a certain time, as shown in its financial statement.
That portion of the media devoted to reporting financial news.
The result of dividing one financial statement item by another. Ratios help analysts interpret
financial reports and statements
financial means having to do with
Financial reports or statements
The Profit and Loss account, Balance Sheet and Cash Flow statement of a business.
The risk that the cash flow of an issuer will not be adequate to meet its financial obligations.
Risk to shareholders resulting from the use of debt.
Ready access to cash or debt financing.
Financial Trend Analysis
Process of analyzing financial statements of a company for any continuing relationship.
The accounting period adopted by a business for the production of its financial statements.
Fraudulent Financial Reporting
Intentional misstatements or omissions of amounts or disclosures
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.
Express stipulations included in loan agreements that are designed to monitor
London International Financial Futures Exchange (LIFFE)
A London exchange where Eurodollar futures
London International Financial Futures Exchange (LIFFE)
London exchange where Eurodollar futures as well as futures-style options are traded.
Long-term financial plan
financial plan covering two or more years of future operations.
A bond covenant that limits or prohibits altogether certain actions unless the bondholders agree.
Negative Loan Covenants
Loan covenants designed to limit a corporate borrower's behavior
Include such things as freight, insurance, passenger services, and travel.
Notes to the financial statements
A detailed set of notes immediately following the financial statements in
Perfectly competitive financial markets
Markets in which no trader has the power to change the price of
Positive covenant (of a bond)
A bond covenant that specifies certain actions the firm must take. Also called
Positive Loan Covenants
Loan covenants expressing minimum and maximum financial measures
Pro forma financial statements
financial statements as adjusted to reflect a projected or planned transaction.
A part of the indenture or loan agreement that limits certain actions a company takes
Restriction on a firm to protect bondholders.
financial statements and financial information made public.
Restatement of Prior-Year Financial Statements
A recasting of prior-year financial statements to remove the effects of an error or other adjustment and report them on a new basis.
Provisions that place constraints on the operations of borrowers, such as restrictions on
Short-term financial plan
A financial plan that covers the coming fiscal year.
Society for Worldwide Interbank Financial Telecommunications (SWIFT)
A dedicated computer network to support funds transfer messages internationally between over 900 member banks worldwide.
Statement of Financial Accounting Standards No. 52
This is the currency translation standard currently
Statement of Financial Accounting Standards No. 8
This is a currency translation standard previously in
statement of financial condition
See balance sheet.
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