|Financial distress costs
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Definition of Financial distress costs
Financial distress costs
Legal and administrative costs of liquidation or reorganization. Also includes
costs arising from bankruptcy or distorted business decisions before bankruptcy.
The incremental costs of having an agent make decisions for a principal.
costs that increase with increases in the level of investment in current assets.
Sources of funds internally provided from operations that alter a company's
The application of financial principals within a corporation to create and
financial planning conducted by a firm that encompasses preparation of both
The ability of the national economy to generate enough foreign exchange to meet
Highlights the fact that return on assets (ROA) can be expressed in terms
The difference between the execution price of a security and the price that would have
Also called securities analysts and investment analysts, professionals who analyze
Claims on real assets.
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.
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
Institutions that provide the market function of matching borrowers and lenders or
Long-term, non-cancelable lease.
Use of debt to increase the expected return on equity. financial leverage is measured by
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.
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
That portion of the media devoted to reporting financial news.
The result of dividing one financial statement item by another. Ratios help analysts interpret
The risk that the cash flow of an issuer will not be adequate to meet its financial obligations.
costs, both implied and direct, associated with a transaction. Such costs include time, effort,
Incremental costs and benefits
costs and benefits that would occur if a particular course of action were
Transaction costs that include the assessment of the investment merits of a financial asset.
London International Financial Futures Exchange (LIFFE)
A London exchange where Eurodollar futures
Long-term financial plan
financial plan covering two or more years of future operations.
London International Financial Futures Exchange (LIFFE)
London exchange where Eurodollar futures as well as futures-style options are traded.
Market impact costs
Also called price impact costs, the result of a bid/ask spread and a dealer's price concession.
Market timing costs
costs that arise from price movement of the stock during the time of the transaction
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
The difference in the performance of an actual investment and a desired investment
Perfectly competitive financial markets
Markets in which no trader has the power to change the price of
Price impact costs
Related: market impact costs
Pro forma financial statements
financial statements as adjusted to reflect a projected or planned transaction.
Round-trip transactions costs
costs of completing a transaction, including commissions, market impact
costs associated with locating a counterparty to a trade, including explicit costs (such as
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. 8
This is a currency translation standard previously in
Statement of Financial Accounting Standards No. 52
This is the currency translation standard currently
costs that have been incurred and cannot be reversed.
costs of buying and selling marketable securities and borrowing. Trading costs include
The time, effort, and money necessary, including such things as commission fees and the
costs that are identifiable with and able to be influenced by decisions made at the business
costs that are readily traceable to particular products or services.
The production of financial statements, primarily for those interested parties who are external to the business.
Financial reports or statements
The Profit and Loss account, Balance Sheet and Cash Flow statement of a business.
The accounting period adopted by a business for the production of its financial statements.
costs that do not change with increases or decreases in the volume of goods or services
costs that are necessary to produce a product/service but are not readily traceable to particular products or services â€“ see overhead.
The costs that relate to a period of time.
costs that are constant within a defined level of activity but that can increase or decrease when
costs that have both fixed and variable components.
A budget cost for materials and labour used for decision-making, usually expressed as a per unit cost that is applied to standard quantities from a bill of materials and to standard times from a
costs that have been incurred in the past.
capitalization of costs
When a cost is recorded originally as an increase
statement of financial condition
See balance sheet.
The equity (ownership) capital of a business can serve
financial reports and statements
financial means having to do with
fixed expenses (costs)
Expenses or costs that remain the same in amount,
Overhead generally refers to indirect, in contrast to direct,
a discipline in which historical, monetary
a plan that aggregates monetary details
a monetary reward provided for performance
costs of maintaining current assets, including opportunity cost of capital.
chief financial officer (CFO)
Officer who oversees the treasurer and controller and sets overall financial strategy.
Claims to the income generated by real assets. Also called securities.
Firm that raises money from many small investors and provides financing to businesses or other
Debt financing amplifies the effects of changes in operating income on the returns to stockholders.
Markets in which financial assets are traded.
Risk to shareholders resulting from the use of debt.
Ready access to cash or debt financing.
costs that do not depend on the level of output.
costs incurred from shortages in current assets.
costs that have been incurred and cannot be recovered.
costs that change as the level of output changes.
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.
The costs to firms of changing their prices.
Costs Capitalized in Stealth
A particularly egregious form of aggressive cost capitalization
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.
Financial Numbers Game
The use of creative accounting practices to alter a financial statement
Fraudulent Financial Reporting
Intentional misstatements or omissions of amounts or disclosures
Policy Acquisition Costs
costs incurred by insurance companies in signing new policies, including expenditures on commissions and other selling expenses, promotion expenses, premium
The costs of additional regulation, including higher taxes, borne by large and
A form of start-up cost incurred in preparing for the opening of a new store or facility.
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.
costs related to such onetime activities as opening a new facility, introducing
External Financial Statements
Corporate financial statements that have been reported on by an external independent accountant.
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 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.
An expression of economic benefit that motivates behavior that might otherwise not take place.
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