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Definition of Great Depression
The period of very high unemployment during the early 1930s.
A prolonged period of very low economic activity with large-scale unemployment.
Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
Same as PV, but usually includes a subtraction for an initial cash outlay.
a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity.
the value in today’s dollars of cash flows that occur in different time periods.
Schedule of depreciation rates allowed for tax purposes.
The annual rate of return that when compounded t times, would have
Ratios that measure how effectively the firm is managing its assets.
The ratio of accounts receivables to sales, or the total
A steep and rapid increase in price followed by a steep and rapid drop. This is an indicator seen
The provision of some futures contracts that requires not delivery of underlying assets but
In investments, it represents earnings before depreciation , amortization and non-cash charges.
Net income plus depreciation.
The number of times that financial obligations (for interest, principal payments,
A firm's net cash inflow resulting directly from its regular operations
Cash flow matching
Also called dedicating a portfolio, this is an alternative to multiperiod immunization in
Cash flow per common share
Cash flow from operations minus preferred stock dividends, divided by the
Cash flow time-line
Line depicting the operating activities and cash flows for a firm over a particular period.
Cash-flow break-even point
The point below which the firm will need either to obtain additional financing
The length of the time period (for example, a quarter in the case of quarterly
The length of time for which the customer is granted credit.
The tender and receipt of an actual commodity or financial instrument in settlement of a futures contract.
The written notice given by the seller of his intention to make delivery against an open, short
The options available to the seller of an interest rate futures contract, including the quality
Those points designated by futures exchanges at which the financial instrument or
The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the
Delivery versus payment
A transaction in which the buyer's payment for securities is due at the time of
The period during which a customer can deduct the discount from the net amount of the bill
Discounted cash flow (DCF)
Future cash flows multiplied by discount factors to obtain present values.
Discounted payback period rule
An investment decision rule in which the cash flows are discounted at an
Discretionary cash flow
Cash flow that is available after the funding of all positive NPV capital investment
economic environment in which the firm expects to reside over the life of the
See: in-substance defeasance.
Exists when the costs and/or revenues of one project depend on those of another.
The real flow of cash that a firm could pay out forever in the absence of any change in
The extent to which the value of the firm will change because of an exchange rate change.
Cash flow plus change in present value.
Economic order quantity (EOQ)
The order quantity that minimizes total inventory costs.
Profits in excess of the competitive level.
In project financing, the risk that the project's output will not be salable at a price that will
For any entity, the difference between the market value of all its assets and the market
An agreement between two or more countries that allows the free movement of capital,
Economies of scale
The decrease in the marginal cost of production as a plant's scale of operations increases.
Equivalent annual cash flow
Annuity with the same net present value as the company's proposed investment.
The time interval over which a money manager's performance is evaluated.
Expected future cash flows
Projected future cash flows associated with an asset of decision.
Government bonds that are acceptable at par in payment of federal estate taxes when owned by
An account for the investment credit to show all income statement benefits of the credit
The practice of reporting to shareholders using straight-line depreciation and
A transaction in which the settlement will occur on a specified date in the future at a price
Free cash flows
Cash not required for operations or for reinvestment. Often defined as earnings before
A delivery in which everything - endorsement, any necessary attached legal papers, etc. - is in
Good delivery and settlement procedures
Refers to PSA Uniform Practices such as cutoff times on delivery
A contract that obligates a purchaser of a project's output to make cash
High-coupon bond refunding
Refunding of a high-coupon bond with a new, lower coupon bond.
The highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits.
Highly leveraged transaction (HLT)
Bank loan to a highly leveraged firm.
Length of time that an individual holds a security.
Holding period return
The rate of return over a given period.
Incremental cash flows
Difference between the firm's cash flows with and without a project.
Law of large numbers
The mean of a random sample approaches the mean (expected value) of the
Leading economic indicators
economic series that tend to rise or fall in advance of the rest of the economy.
Low-coupon bond refunding
Refunding of a low coupon bond with a new, higher coupon bond.
This is the day's lowest price of a security that has changed hands between a buyer and a seller.
Low price-earnings ratio effect
The tendency of portfolios of stocks with a low price-earnings ratio to
Refers to the seller's actually turning over to the buyer the asset agreed upon in a forward contract.
A portfolio strategy in which a portfolio is created that will be capable of
The period of time between the end of the discount period and the date payment is due.
In the Euromarket, a period over which Eurodollars are sold is said to be neutral if it does not
Nominal cash flow
A cash flow expressed in nominal terms if the actual dollars to be received or paid out are given.
Operating cash flow
Earnings before depreciation minus taxes. It measures the cash generated from
Overnight delivery risk
A risk brought about because differences in time zones between settlement centers
Related: retention rate.
Price discovery process
The process of determining the prices of the assets in the marketplace through the
Adjustment mechanism under the classical gold standard whereby
An agreement by the loan purchaser to allow the monthly loan quota to be
An upward movement of prices. Opposite of reaction.
Real cash flow
A cash flow is expressed in real terms if the current, or date 0, purchasing power of the cash
A bank that offers to pay different rates of interest on CDs of varying rates is said to "post a scale."
Describes a project that is in the same risk class as the whole firm.
When a trader or investor gradually takes a position in a security or market over time.
Scheduled cash flows
The mortgage principal and interest payments due to be paid under the terms of the
Statement of cash flows
A financial statement showing a firm's cash receipts and cash payments during a
A method of cash budgeting that is organized along the lines of the statement of cash flows.
The return of a portfolio over a shorter period of time than the evaluation period.
T-period holding-period return
The percentage return over the T-year period an investment lasts.
Refers to the buyer's actually assuming possession from the seller of the asset agreed upon
The ratio of the number of people classified as unemployed to the total labor force.
Time during which the SEC studies a firm's registration statement. during this time the firm
Stock that has fallen out of favor with investors; tends to have a low P/E (price to earnings ratio).
Realignment period of a temporary misaligned yield relationship that sometimes occurs in
A statement that shows where a company’s cash came from and where it went for a period of time, such as a year.
CASH FLOWS FROM FINANCING ACTIVITIES
A section on the cash-flow statement that shows how much cash a company raised by selling stocks or bonds this year and how much was paid out for cash dividends and other finance-related obligations.
CASH FLOWS FROM INVESTING ACTIVITIES
A section on the cashflow statement that shows how much cash came in and went out because of various investing activities like purchasing machinery.
CASH FLOWS FROM OPERATIONS
A section on the cash-flow Stockholders’ equity statement that shows how much cash came into a company and how much went out during the normal course of business.
MACRS (Modified Accelerated Cost Recovery System)
A depreciation method created by the IRS under the Tax Reform Act of 1986. Companies must use it to depreciate all plant and equipment assets installed after December 31, 1986 (for tax purposes).
The period of time for which financial statements are produced – see also financial year.
A method of budgeting that develops budgets based on expected activities and cost drivers – see also activity-based costing.
A method of costing that uses cost pools to accumulate the cost of significant business activities and then assigns the costs from the cost pools to products or services based on cost drivers.
Allocation base A measure of activity or volume such as labour
hours, machine hours or volume of production
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