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Definition of Indemnity
A type of contract in which the amount of the benefit to be paid is based on the actual amount of financial loss determined at the time of the loss - for example, hospital expense insurance.
An approximate measure of the liability of a plan in the event of a
The physical commodity underlying a futures contract. Cash commodity, physical.
For investment companies, the management fee and "other expenses,"
Methods of financing in which lenders and equity investors look principally to the
The probability of not achieving a portfolio expected return.
Related: Premium payback period.
A guaranteed investment contract purchased with a single (one-shot) premium. Related:
The difference between the net cost of a security and the net sale price, if that security is sold at a loss.
Line depicting the operating activities and cash flows for a firm over a particular period.
Futures contracts, such as stock index futures, that settle for cash, not involving
Sources of funds internally provided from operations that alter a company's
Refers to the fact that the merger of two firms decreases the probability of default on
Similar to equipment trust certificates except that the lender is either the
A term of reference describing a unit of trading for a financial or commodity future. Also, the actual
The month in which futures contracts may be satisfied by making or accepting a delivery.
Corporate financial management
The application of financial principals within a corporation to create and
Corporate financial planning
financial planning conducted by a firm that encompasses preparation of both
The net present value of an investment divided by the investment's initial cost. Also called
Country financial risk
The ability of the national economy to generate enough foreign exchange to meet
Defined benefit plan
A pension plan in which the sponsor agrees to make specified dollar payments to
Dupont system of financial control
Highlights the fact that return on assets (ROA) can be expressed in terms
Equivalent annual benefit
The equivalent annual annuity for the net present value of an investment project.
The percentage of the assets that were spent to run a mutual fund (as of the last annual
Charged to an expense account, fully reducing reported profit of that year, as is appropriate for
Federal Deposit Insurance Corporation (FDIC)
A federal institution that insures bank deposits.
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.
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
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.
Flat benefit formula
Method used to determine a participant's benefits in a defined benefit plan by
A guaranteed investment contract where the credit rating is tied to some variable
A cash market transaction in which delivery of the commodity is deferred until after the
Forward forward contract
In Eurocurrencies, a contract under which a deposit of fixed maturity is agreed to
Agreement to buy or sell a set number of shares of a specific stock in a designated future
Futures contract multiple
A constant, set by an exchange, which when multiplied by the futures price gives
Guaranteed insurance contract
A contract promising a stated nominal interest rate over some specific time
Guaranteed investment contract (GIC)
A pure investment product in which a life company agrees, for a
A contract that obligates a purchaser of a project's output to make cash
Incremental costs and benefits
Costs and benefits that would occur if a particular course of action were
The law of averages. The average outcome for many independent trials of an experiment
Just-in-time inventory systems
Systems that schedule materials/inventory to arrive exactly as they are
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.
A money manager who assumes he or she can forecast when the stock market will go up and down.
Most distant futures contract
When several futures contracts are considered, the contract settling last.
Nearby futures contract
When several futures contracts are considered, the contract with the closest
Net benefit to leverage factor
A linear approximation of a factor, T*, that enables one to operationalize the
Net operating losses
losses that a firm can take advantage of to reduce taxes.
Next futures contract
The contract settling immediately after the nearby futures contract.
Nexus (of contracts)
A set or collection of something.
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
Notional principal amount
In an interest rate swap, the predetermined dollar principal on which the
contracts which have been bought or sold without the transaction having been completed by
The contract that balances the three types of agency costs (contracting, monitoring, and
A contract that, in exchange for the option price, gives the option buyer the right, but not
Options contract multiple
A constant, set at $100, which when multiplied by the cash index value gives the
Paper gain (loss)
Unrealized capital gain (loss) on securities held in portfolio, based on a comparison of
Pension Benefit Guaranty Corporation (PBGC)
A federal agency that insures the vested benefits of
Perfectly competitive financial markets
Markets in which no trader has the power to change the price of
A strategy using a leveraged portfolio in the underlying stock to create a synthetic put
The face amount of debt; the amount borrowed or lent. Often called principal.
Pro forma financial statements
financial statements as adjusted to reflect a projected or planned transaction.
A real time stock or bond quote is one that states a security's most recent offer to sell or bid (buy).
Lost wealth of the shareholders due to divergent behavior of the managers.
An arrangement whereby a firm leases its own equipment, such as IBM leasing its own
Set of contracts perspective
View of corporation as a set of contracting relationships, among individuals
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
An order to sell a stock when the price falls to a specified level.
A contract that obligates the purchaser to take any product that is offered to it (and pay
Term life insurance
A contract that provides a death benefit but no cash build-up or investment component.
Provides a death benefit only, no build-up of cash value.
Interest-bearing deposit at a savings institution that has a specific maturity.
Demand for payment at a stated future date.
Also called time value, the amount by which the option price exceeds its intrinsic value. The
Time until expiration
The time remaining until a financial contract expires. Also called time to maturity.
Time to maturity
The time remaining until a financial contract expires. Also called time until expiration.
Time value of an option
The portion of an option's premium that is based on the amount of time remaining
Time value of money
The idea that a dollar today is worth more than a dollar in the future, because the dollar
Time-weighted rate of return
Related: Geometric mean return.
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