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Definition of Growing perpetuity
A constant stream of cash flows without end that is expected to rise indefinitely.
a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity.
Mortgages in which annual increases in monthly payments are used to
A constant stream of identical cash flows without end, such as a British consol.
A special case of an annuity with no set maturity. Payments are
Stream of level cash payments that never ends.
the present value of a finite stream of cash flows for every beginning $1 of cash flow.
The discount rate that reflects only the business risks of a project and abstracts from the
The pool factor implied by the scheduled amortization assuming no prepayemts.
Present value of $1 paid for each of t periods.
The ratio of total assets to stockholder equity.
A management style that de-emphasizes the significance of economic
Value of outstanding common shares at par, plus accumulated retained
Rules set by the Chicago Board of Trade for determining the invoice price of each
Indicator of financial leverage. Compares assets provided by creditors to assets provided
A common term for convertible bonds because of their equity component and the
Present value of $1 received at a stated future date.
Dual syndicate equity offering
An international equity placement where the offering is split into two
Represents ownership interest in a firm. Also the residual dollar value of a futures trading account,
An agreement in which one party, for an upfront premium, agrees to compensate the other at
Also called a residual claim, a claim to a share of earnings after debt obligation have been
The simultaneous purchase of an equity floor and sale of an equity cap.
Equity contribution agreement
An agreement to contribute equity to a project under certain specified
An agreement in which one party agrees to pay the other at specific time periods if a specific
Used to refer to warrants because they are usually issued attached to privately placed bonds.
Total assets divided by total common stockholders' equity; the amount of total assets per
Securities that give the holder the right to buy or sell a specified number of shares of stock, at
A swap in which the cash flows that are exchanged are based on the total return on some stock
Related: Variable life
Those holding shares of the firm's equity.
Securities sold in the Euromarket. That is, securities initially sold to investors
A financial institution that buys a firm's accounts receivables and collects the debt.
A statistical procedure that seeks to explain a certain phenomenon, such as the return on a
A way of decomposing the factors that influence a security's rate of return into common and
A well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of
Sale of a firm's accounts receivable to a financial institution known as a factor.
Foreign equity market
That portion of the domestic equity market that represents issues floated by foreign companies.
Graduated-payment mortgages (GPMs)
A type of stepped-payment loan in which the borrower's payments
The balance of a margin account. Related: buying on margin, initial margin requirement.
Stock in a firm that relies on financial leverage. Holders of leveraged equity face the
Long-term debt to equity ratio
A capitalization ratio comparing long-term debt to shareholders' equity.
factoring arrangement that provides collection and insurance of accounts receivable.
A version of the capital asset pricing model derived by Merton that includes extramarket
Net benefit to leverage factor
A linear approximation of a factor, T*, that enables one to operationalize the
factoring arrangement that provides collection, insurance, and finance for accounts receivable.
A special case of the arbitrage pricing theory that is derived from the one-factor model by
The outstanding principal balance divided by the original principal balance with the result
Preferred equity redemption stock (PERC)
Preferred stock that converts automatically into equity at a
Present value factor
factor used to calculate an estimate of the present value of an amount to be received in
RAMs (Reverse-annuity mortgages)
mortgages in which the bank makes a loan for an amount equal to a
The pool factor as reported by the bond buyer for a given amortization period.
Return on equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12
This is a company's total assets minus total liabilities. A company's net worth is the
Single factor model
A model of security returns that acknowledges only one common factor.
Balance sheet item that includes the book value of ownership in the corporation. It
The residual claims that stockholders have against a firm's assets, calculated by
Stratified equity indexing
A method of constructing a replicating portfolio in which the stocks in the index
Top-down equity management style
A management style that begins with an assessment of the overall
Total debt to equity ratio
A capitalization ratio comparing current liabilities plus long-term debt to
Black's zero-beta version of the capital asset pricing model.
RATE OF RETURN ON STOCKHOLDERS’ EQUITY
The percentage return or profit that management made on each dollar stockholders invested in a company. Here’s how you figure it:
RATIO OF DEBT TO STOCKHOLDERS’ EQUITY
A ratio that shows which group—creditors or stockholders—has the biggest stake in or the most control of a company:
STOCKHOLDERS’ (OR OWNERS’) EQUITY
The value of the owners’ interests in a company.
Funds raised from shareholders.
The production resource that, as a result of scarce resources, limits the production of goods
An account that reduces an equity account. An example is Treasury stock.
Amounts contributed to the company by the owners (contributed capital) plus the residual earnings of the business (retained earnings).
Periodic inventory system
An inventory system in which the balance in the Inventory account is adjusted for the units sold only at the end of the period.
The total amount of contributed capital and retained earnings; synonymous with stockholders' equity.
The total amount of contributed capital and retained earnings; synonymous with shareholders’ equity.
A widely used financial statement ratio to assess the
Refers to one of the two basic sources of capital for a business, the
Refers to the capital invested in a business by its shareowners
return on equity (ROE)
This key ratio, expressed as a percent, equals net
stockholders' equity, statement of changes in
Although often considered
Cost of Equity
Same as the cost of common stock. Sometimes viewed as the
Return on Common Equity Ratio
A measure of the percentage return earned on the value of the
critical success factors (CSF)
any item (such as quality, customer
a pay plan based on the time spent on the task rather than the work accomplished
The difference between the total of all recorded assets and liabilities on the balance
The sale of accounts receivable to a third party, with the third party bearing
All the costs incurred during the manufacturing process, minus the
The total of all capital contributions and retained earnings on a business’s
Present value of an annuity of $1 per period.
Present value of a $1 future payment.
Ownership. Common stock represents equity in a corporation.
Factor of Production
A resource used to produce a good or service. The main macroeconomic factors of production are capital and labor.
Accounting method for an equity security in cases where the investor has sufficient
An ownership interest in an enterprise, including preferred and common stock.
The discounting, or sale at a discount, of receivables on a nonrecourse, notification
The residual interest or owners' claims on the assets of a corporation
A physical inventory count taken on a repetitive basis.
An anticipated loss percentage included in the bill of material and
The expected loss of some proportion of an item during the
A comparison of debt to equity in a company's capital structure.
The net worth of a business, consisting of capital stock, capital (or paid-in) surplus (or retained earnings), and, occasionally, certain net worth reserves. Common equity is that part of the total net worth belonging to the common shareholders. Total equity includes preferred shareholders. The terms common stock, net worth, and common equity are frequently used interchangeably.
Refers to the investors percentage ownership of a company that can be re-acquired by the company, usually at a pre-determined amount.
An agent who buys and sells goods on behalf of others for a commission.
Type of financial service whereby a firm sells or transfers title to its accounts receivable to a factoring company, which then acts as principal, not as agent.
Numbers found in compound interest and annuity tables. Usually called the FVIF or PVIF.
Funds, other than paid-up capital and retained earnings, employed in a business and which will remain in a business as permanent capital.
Represents the total assets of a corporation less liabilities.
The net worth of a company. This represents the ownership interest of the shareholders (common and preferred) of a company. For this reason, shares or stocks are often known as equities.
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