Definition of High-low-close chart
A financial chart usually used to plot the high, low,
open, and close price of a security over time. Plots are vertical lines whose top
is the high, bottom is the low, open is a short horizontal tick to the left, and
close is a short horizontal tick to the right.
Same as PV, but usually includes a subtraction for an initial cash outlay.
the value in todayâ€™s dollars of cash flows that occur in different time periods.
present value factor equal to the formula 1/(1 - r)n, where n is the number of years from the valuation date to the cash flow and r is the discount rate.
For business valuation, n should usually be midyear, i.e., n = 0.5, 1.5, . . .
A steep and rapid increase in price followed by a steep and rapid drop. This is an indicator seen
in charts and used in technical analysis of stock price and market trends.
To buy at the end of the trading session at a price within the closing range.
In investments, it represents earnings before depreciation , amortization and non-cash charges.
Sometimes called cash earnings. Cash flow from operations (called funds from operations ) by real estate and
other investment trusts is important because it indicates the ability to pay dividends.
Net income plus depreciation.
The number of times that financial obligations (for interest, principal payments,
preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental
payments, and depreciation.
A firm's net cash inflow resulting directly from its regular operations
(disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing
securities), calculated as the sum of net income plus non-cash expenses that were deducted in calculating net
Also called dedicating a portfolio, this is an alternative to multiperiod immunization in
which the manager matches the maturity of each element in the liability stream, working backward from the
last liability to assure all required cash flows.
Cash flow from operations minus preferred stock dividends, divided by the
number of common shares outstanding.
Line depicting the operating activities and cash flows for a firm over a particular period.
The point below which the firm will need either to obtain additional financing
or to liquidate some of its assets to meet its fixed costs.
Related: technical analysts.
The period at the end of the trading session. Sometimes used to refer to closing price. Related:
An investment company that sells shares like any other corporation and usually does not
redeem its shares. A publicly traded fund sold on stock exchanges or over the counter that may trade above or
below its net asset value. Related: Open-end fund.
Mortgage against which no additional debt may be issued.
A legal document creating a corporation.
Discounted cash flow (DCF)
Future cash flows multiplied by discount factors to obtain present values.
Discretionary cash flow
Cash flow that is available after the funding of all positive NPV capital investment
projects; it is available for paying cash dividends, repurchasing common stock, retiring debt, and so on.
Equivalent annual cash flow
Annuity with the same net present value as the company's proposed investment.
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
the decedent at the time of death.
An account for the investment credit to show all income statement benefits of the credit
in the year of acquisition, rather than spreading them over the life of the asset acquired.
The practice of reporting to shareholders using straight-line depreciation and
accelerated depreciation for tax purposes and "flowing through" the lower income taxes actually paid to the
financial statement prepared for shareholders.
Free cash flows
Cash not required for operations or for reinvestment. Often defined as earnings before
interest (often obtained from operating income line on the income statement) less capital expenditures less the
change in working capital.
A contract that obligates a purchaser of a project's output to make cash
payments to the project in all events, even if no product is offered for sale.
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.
Incremental cash flows
Difference between the firm's cash flows with and without a project.
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
outperform portfolios consisting of stocks with a high price-earnings ratio.
Management/closely held shares
Percentage of shares held by persons closely related to a company, as
defined by the Securities and exchange commission. Part of these percentages often is included in
Institutional Holdings -- making the combined total of these percentages over 100. There is overlap as
institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company.
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
operations, not counting capital spending or working capital requirements.
Related: retention rate.
Point and figure chart
A price-only chart that takes into account only whole integer changes in price, i.e., a
2-point change. Point and figure charting disregards the element of time and is solely used to record changes
Adjustment mechanism under the classical gold standard whereby
disturbances in the price level in one country would be wholly or partly offset by a countervailing flow of
specie (gold coins) that would act to equalize prices across countries and automatically bring international
payments back in balance.
An agreement by the loan purchaser to allow the monthly loan quota to be
delivered in batches.
Real cash flow
A cash flow is expressed in real terms if the current, or date 0, purchasing power of the cash
flow is given.
Scheduled cash flows
The mortgage principal and interest payments due to be paid under the terms of the
mortgage not including possible prepayments.
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.
Stock that has fallen out of favor with investors; tends to have a low P/E (price to earnings ratio).
A statement that shows where a companyâ€™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 Stockholdersâ€™ equity statement that shows how much cash came into a company and how much went out during the normal course of business.
Cash Flow statement
A financial report that shows the movement in cash for a business during an accounting period.
Discounted cash flow (DCF)
A method of investment appraisal that discounts future cash flows to present value using a discount rate, which is the risk-adjusted cost of capital.
Allowance for doubtful accounts
A contra account related to accounts receivable that represents the amounts that the company expects will not be collected.
A method of adjusting accounts receivable to the amount that is expected to be collected based on company experience.
Statement of Cash Flows
One of the basic financial statements; it lists the cash inflows and cash outflows of the company, grouped into the categories of operating activities, financing activities, and investing activities. The Statement of Cash Flows is prepared for a specified period of time.
An obvious but at the same time elusive term that refers to cash
inflows and outflows during a period. But the specific sources and uses
of cash flows are not clear in this general term. The statement of cash
flows, which is one of the three primary financial statements of a business,
classifies cash flows into three types: those from operating activities
(sales and expenses, or profit-making operations), those from
investing activities, and those from financing activities. Sometimes the
term cash flow is used as shorthand for cash flow from profit (i.e., cash
flow from operating activities).
cash flow from operating activities, or cash flow from profit
This equals the cash inflow from sales during the period minus the cash
outflow for expenses during the period. Keep in mind that to measure
net income, generally accepted accounting principles require the use of
accrual-basis accounting. Starting with the amount of accrual-basis net
income, adjustments are made for changes in accounts receivable,
inventories, prepaid expenses, and operating liabilitiesâ€”and depreciation
expense is added back (as well as any other noncash outlay
expense)â€”to arrive at cash flow from profit, which is formally labeled
cash flow from operating activities in the externally reported statement
of cash flows.
statement of cash flows
One of the three primary financial statements
that a business includes in the periodic financial reports to its outside
shareowners and lenders. This financial statement summarizes the businessâ€™s
cash inflows and outflows for the period according to a threefold
classification: (1) cash flow from operating activities (cash flow from
profit), (2) cash flow from investing activities, and (3) cash flow from
financing activities. Frankly, the typical statement of cash flows is difficult
to read and decipher; it includes too many lines of information and
is fairly technical compared with the typical balance sheet and income
discounted cash flow (DCF)
Refers to a capital investment analysis technique
that discounts, or scales down, the future cash returns from an
investment based on the cost-of-capital rate for the business. In essence,
each future return is downsized to take into account the cost of capital
from the start of the investment until the future point in time when the
return is received. Present value (PV) is the amount resulting from discounting
the future returns. Present value is subtracted from the entry
cost of the investment to determine net present value (NPV). The net
present value is positive if the present value is more than the entry cost,
which signals that the investment would earn more than the cost-ofcapital
rate. If the entry cost is more than the present value, the net
present value is negative, which means that the investment would earn
less than the businessâ€™s cost-of-capital rate.
free cash flow
Generally speaking, this term refers to cash flow from
profit (cash flow from operating activities, to use the more formal term).
The underlying idea is that a business is free to do what it wants with its
cash flow from profit. However, a business usually has many ongoing
commitments and demands on this cash flow, so it may not actually be
free to decide what do with this source of cash. Warning: This term is
not officially defined anywhere and different persons use the term to
mean different things. Pay particular attention to how an author or
speaker is using the term.
negative cash flow
The cash flow from the operating activities of a business
can be negative, which means that its cash balance decreased from
its sales and expense activities during the period. When a business is
operating at a loss instead of making a profit, its cash outflows for
expenses very likely may be more than its cash inflow from sales. Even
when a business makes a profit for the period, its cash inflow from sales
could be considerably less than the sales revenue recorded for the
period, thus causing a negative cash flow for the period. Caution: This
term also is used for certain types of investments in which the net cash
flow from all sources and uses is negative. For example, investors in
rental real estate properties often use the term to mean that the cash
inflow from rental income is less than all cash outflows during the
period, including payments on the mortgage loan on the property.
operating cash flow
See cash flow from operating activities.
Free Cash Flow
The funds available for distribution to the capital providers of the
company after investments inside the company have been made
Operating Cash Flow
Income available after the payment of taxes, plus the value of the
a graph that depicts the relationships among revenues, variable costs, fixed costs, and profits (or losses)
the receipt or disbursement of cash; when related
to capital budgeting, cash flows arise from the purchase,
operation, and disposition of a capital asset
a graphical presentation of the results of a
specified activity; it indicates the upper and lower control
limits and those results that are out of control
a technique used to determine the fixed
and variable portions of a mixed cost; it uses only the highest
and lowest levels of activity within the relevant range
operations flow document
a document listing all operations
necessary to produce one unit of product (or perform
a specific service) and the corresponding time allowed
for each operation
a depiction of the functions, divisions,
and positions of the people/jobs in a company and how
they are related; it also indicates the lines of authority and
standard quantity allowed
the quantity of input (in hours or some other cost driver measurement) required at standard for the output actually achieved for the period
a visual representation indicating the valueadded
and non-value-added activities and time spent in
those activities from the beginning to the end of a process
Bollinger band chart
A financial chart that plots actual asset data along
with three other bands of data: the upper band is two standard deviations
above a user-specified moving average; the lower band is two standard
deviations below that moving average; and the middle band is the moving
A financial chart usually used to plot the high, low, open,
and close price of a security over time. The body of the â€ścandleâ€ť is the region
between the open and close price of the security. Thin vertical lines extend up
to the high and down to the low, respectively. If the open price is greater than
the close price, the body is empty. If the close price is greater than the open
price, the body is filled. See also high-low-close chart.
Cash received and paid over time.
A financial chart that plots leading and lagging
moving averages for prices or values of an asset.
Point and figure chart
A financial chart usually used to plot asset price data.
Upward price movements are plotted as Xâ€™s and downward price movements
are plotted as Oâ€™s.
Allowance for bad debts
An offset to the accounts receivable balance, against which
bad debts are charged. The presence of this allowance allows one to avoid severe
changes in the period-to-period bad debt expense by expensing a steady amount to
the allowance account in every period, rather than writing off large bad debts to
expense on an infrequent basis.
Chart of accounts
A listing of all accounts used in the general ledger, usually sorted in
order of account number.
Discounted cash flow
A technique that determines the present value of future cash
flows by applying a rate to each periodic cash flow that is derived from the cost of
capital. Multiplying this discount by each future cash flow results in an amount that
is the present value of all the future cash flows.
Lower of cost or market
An accounting valuation rule that is used to reduce the
reported cost of inventory to its current resale value, if that cost is lower than its
original cost of acquisition or manufacture.
A reduction in a price that is allowed by the seller, due to a problem
with the sold product or service.
Statement of cash flows
Part of the financial statements; it summarizes an entityâ€™s cash
inflows and outflows in relation to financing, operating, and investing activities.
Fraction of earnings retained by the firm.
statement of cash flows
Financial statement that shows the firmâ€™s cash receipts and cash payments over a period of time.
Capital Consumption Allowance
Purchase by foreigners of our assets (capital inflows) or our purchase of foreign assets (capital outflows).
Income payments to factors of production are spent to buy output. The receipts from these sales are used to pay factors of production, creating a circular flow of income.
An economy in which imports and exports are very small relative to GDP and so are ignored in macroeconomic analysis. Contrast with open economy.
Tax deductions that businesses can claim when they spend money on investment goods.
See money base.
Adjusted Cash Flow Provided by Continuing Operations
Cash flow provided by operating
activities adjusted to provide a more recurring, sustainable measure. Adjustments to reported cash
provided by operating activities are made to remove such nonrecurring cash items as: the operating
component of discontinued operations, income taxes on items classified as investing or financing activities, income tax benefits from nonqualified employee stock options, the cash effects of purchases and sales of trading securities for nonfinancial firms, capitalized expenditures, and other nonrecurring cash inflows and outflows.
Allowance for Doubtful Accounts
An estimate of the uncollectible portion of accounts receivable
that is subtracted from the gross amount of accounts receivable to arrive at the estimated collectible
Cash Flow Provided by Operating Activities
With some exceptions, the cash effects of transactions
that enter into the determination of net income, such as cash receipts from sales of goods
and services and cash payments to suppliers and employees for acquisitions of inventory and
Cash Flow Provided or Used from Financing Activities
Cash receipts and payments involving
liability and stockholders' equity items, including obtaining cash from creditors and repaying
the amounts borrowed and obtaining capital from owners and providing them with a return on,
and a return of, their investments.
Cash Flow Provided or Used from Investing Activities
Cash receipts and payments involving
long-term assets, including making and collecting loans and acquiring and disposing of
investments and productive long-lived assets.
Cash Flowâ€“toâ€“Income Ratio (CFI)
Adjusted cash flow provided by continuing operations
divided by adjusted income from continuing operations.
A contra- or reduction account to deferred tax assets.
The valuation allowance represents that portion of total deferred tax assets that the firm judges is unlikely to be realized. The probability threshold applied in evaluating realization is 50%. That is, if it is more than 50% likely that some or all of a deferred tax asset will not be realized, then a valuation allowance must be set off against part or all of the deferred tax asset.
Process flow production
A production configuration in which products are continually
manufactured with minimal pauses or queuing.
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