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Definition of Institutionalization
The gradual domination of financial markets by institutional investors, as opposed to
markets in which the prevailing price is determined through the free interaction of
Gives the lessee the option to purchase the asset at a price below fair market
the process of combining information technology to create new and more effective
markets for long-term financing.
Also called spot markets, these are markets that involve the immediate delivery of a security
Sources of funds internally provided from operations that alter a company's
Officer who oversees the treasurer and controller and sets overall financial strategy.
A transaction in which the purchaser's intention is to reduce or eliminate a short position in
The application of financial principals within a corporation to create and
financial planning conducted by a firm that encompasses preparation of both
The time that elapses between receipt of payment from a customer and the
relative costs and benefits that result from a specific course
Costs arising from bankruptcy or distorted business decisions before bankruptcy.
The ability of the national economy to generate enough foreign exchange to meet
markets for derivative instruments.
A conception of the way a stock's price changes that assumes that the price takes on all
Direct stock-purchase programs
The purchase by investors of securities directly from the issuer.
Dupont system of financial control
Highlights the fact that return on assets (ROA) can be expressed in terms
efficient capital markets
financial markets in which security prices rapidly reflect all relevant information about asset values.
Efficient Markets Hypothesis
The hypothesis that securities are typically in equilibrium--that they are fairly priced in the sense that the price reflects all publicly available information on the security.
The financial markets of developing economies.
External Financial Statements
Corporate financial statements that have been reported on by an external independent accountant.
FIFO method (of process costing)
the method of cost assignment that computes an average cost per equivalent
The production of financial statements, primarily for those interested parties who are external to the business.
a discipline in which historical, monetary
Also called securities analysts and investment analysts, professionals who analyze
Claims on real assets.
Claims to the income generated by real assets. Also called securities.
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 plan that aggregates monetary details
The management of a firm's costs and expenses in order to control them in relation to
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.
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.
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
a monetary reward provided for performance
An expression of economic benefit that motivates behavior that might otherwise not take place.
Institutions that provide the market function of matching borrowers and lenders or
Firm that raises money from many small investors and provides financing to businesses or other
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.
Long-term, non-cancelable lease.
Lease in which the service provided by the lessor to the lessee is limited to financing equipment. All other responsibilities related to the possession of equipment, such as maintenance, insurance, and taxes, are borne by the lessee. A financial lease is usually noncancellable and is fully paid out amortized over its term.
Use of debt to increase the expected return on equity. financial leverage is measured by
The equity (ownership) capital of a business can serve
Debt financing amplifies the effects of changes in operating income on the returns to stockholders.
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.
markets in which financial assets are traded.
Financial Numbers Game
The use of creative accounting practices to alter a financial statement
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
Status of a firm's assets, liabilities, and equity accounts as of a certain time, as shown in its financial statement.
That portion of the media devoted to reporting financial news.
The result of dividing one financial statement item by another. Ratios help analysts interpret
financial reports and statements
financial means having to do with
Financial reports or statements
The Profit and Loss account, Balance Sheet and Cash Flow statement of a business.
The risk that the cash flow of an issuer will not be adequate to meet its financial obligations.
Risk to shareholders resulting from the use of debt.
Ready access to cash or debt financing.
Financial Trend Analysis
process of analyzing financial statements of a company for any continuing relationship.
The accounting period adopted by a business for the production of its financial statements.
Fraudulent Financial Reporting
Intentional misstatements or omissions of amounts or disclosures
Future-Oriented Financial Information
Information about prospective results of operations, financial position and/or changes in financial position, based on assumptions about future economic conditions and courses of action. Future-oriented financial information is presented as either a forecast or a projection.
A policy of decreasing the rate of growth of the money supply gradually over an extended period of time, so that inflation can adjust with smaller unemployment cost. Contrast with cold-turkey policy.
A phase of development in which a company experiences rapid earnings growth as it produces
In-house processing float
Refers to the time it takes the receiver of a check to process the payment and
Insurance that is offered to individuals rather than groups.
Individual Retirement Account
A personal savings account into which a defined
Individual Retirement Annuity
An IRA comprised of an annuity that is managed
Organizations that invest, including insurance companies, depository institutions,
Institutionally Induced Unemployment
Unemployment due to institutional phenomena such as the degree of labor force unionization, the level of discrimination, and government policies such as unemployment insurance programs, minimum wages, or regulations on business.
International Bank for Reconstruction and Development - IBRD or World Bank
International Bank for Reconstruction and Development makes loans at nearly conventional terms to countries for projects of high
Statistical assumptions about the behavior of security prices. For
a manufacturing process that simultaneously
London International Financial Futures Exchange (LIFFE)
A London exchange where Eurodollar futures
London International Financial Futures Exchange (LIFFE)
London exchange where Eurodollar futures as well as futures-style options are traded.
Long-term financial plan
financial plan covering two or more years of future operations.
A phase of company development in which earnings continue to grow at the rate of the
For mutual funds, the amount required to open a new account (Minimum Initial
modified FIFO method (of process costing)
the method of cost assignment that uses FIFO to compute a cost per
Money purchase plan
A defined benefit contribution plan in which the participant contributes some part and
the ability of a worker to monitor
markets in which each transaction is separately negotiated between buyer and seller (i.e.
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
Open-market purchase operation
A systematic program of repurchasing shares of stock in market
open purchase ordering
a process by which a single purchase
A transaction in which the purchaser's intention is to create or increase a long position in
Perfectly competitive financial markets
markets in which no trader has the power to change the price of
Preferred Stock Stock that has a claim on assets and dividends of a corporation that are prior
to that of common stock. Preferred stock typically does not carry the right to vote.
Price discovery process
The process of determining the prices of the assets in the marketplace through the
Pro forma financial statements
financial statements as adjusted to reflect a projected or planned transaction.
A series of linked activities that result in a specific objective. For example, the
benchmarking that focuses on practices and how the best-in-class companies achieved their results
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