|Interest equalization tax|
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Definition of Interest equalization tax
Interest equalization tax
tax on foreign investment by residents of the U.S. which was abolished in 1974.
the combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the ADF, Gordon model, or present value factor.
The accumulated coupon interest earned but not yet paid to the seller of a bond by the
The ratio of net income to net sales.
Money after-tax rate of return minus the inflation rate.
Swap in which the principal or national amount rises (falls) as interest rates
A situation wherein participants in a transaction have different net tax rates.
taxes as a fraction of income; total taxes divided by total taxable income.
Related: Benchmark interest rate.
The ratio of net income before taxes to net sales.
Also called the base interest rate, it is the minimum interest rate investors will
The requirement that a claim holder voting against a plan of reorganization
The tax rate at which a party to a prospective transaction is indifferent between entering
interest that is not immediately expensed, but rather is considered as an asset and is then
Net income plus depreciation.
interest paid on previously earned interest as well as on the principal.
Corporate tax view
The argument that double (corporate and individual) taxation of equity returns makes
Corporate taxable equivalent
Rate of return required on a par bond to produce the same after-tax yield to
Covered interest arbitrage
A portfolio manager invests dollars in an instrument denominated in a foreign
A non-cash expense that provides a source of free cash flow. Amount allocated during the
Depreciation tax shield
The value of the tax write-off on depreciation of plant and equipment.
Agreement between two countries that taxes paid abroad can be offset against
Earnings before interest and taxes (EBIT)
A financial measure defined as revenues less cost of goods sold
Effective annual interest rate
An annual measure of the time value of money that fully reflects the effects of
Equilibrium rate of interest
The interest rate that clears the market. Also called the market-clearing interest
Equivalent taxable yield
The yield that must be offered on a taxable bond issue to give the same after-tax
Foreign tax credit
Home country credit against domestic income tax for foreign taxes paid on foreign
Forward interest rate
interest rate fixed today on a loan to be made at some future date.
interest earned before taxes are deducted.
Imputation tax system
Arrangement by which investors who receive a dividend also receive a tax credit for
The price paid for borrowing money. It is expressed as a percentage rate over a period of time and
Interest coverage ratio
The ratio of the earnings before interest and taxes to the annual interest expense. This
Interest coverage test
A debt limitation that prohibits the issuance of additional long-term debt if the issuer's
Contractual debt payments based on the coupon rate of interest and the principal amount.
Interest on interest
interest earned on reinvestment of each interest payment on money invested.
Interest-only strip (IO)
A security based solely on the interest payments form a pool of mortgages, Treasury
Interest rate agreement
An agreement whereby one party, for an upfront premium, agrees to compensate the
Interest rate cap
Also called an interest rate ceiling, an interest rate agreement in which payments are made
Interest rate ceiling
Related: interest rate cap.
Interest rate floor
An interest rate agreement in which payments are made when the reference rate falls
Interest rate on debt
The firm's cost of debt capital.
Interest rate parity theorem
interest rate differential between two countries is equal to the difference
Interest rate risk
The risk that a security's value changes due to a change in interest rates. For example, a
Interest rate swap
A binding agreement between counterparties to exchange periodic interest payments on
A firm's deduction of the interest payments on its debt from its earnings before it calculates
Interest tax shield
The reduction in income taxes that results from the tax-deductibility of interest payments.
Investment tax credit
Proportion of new capital investment that can be used to reduce a company's tax bill
Limited-tax general obligation bond
A general obligation bond that is limited as to revenue sources.
Marginal tax rate
The tax rate that would have to be paid on any additional dollars of taxable income earned.
Nominal interest rate
The interest rate unadjusted for inflation.
The total number of derivative contracts traded that not yet been liquidated either by an
Personal tax view (of capital structure)
The argument that the difference in personal tax rates between
Pooling of interests
An accounting method for reporting acquisitions accomplished through the use of equity.
Progressive tax system
A tax system wherein the average tax rate increases for some increases in income but
Rate of interest
The rate, as a proportion of the principal, at which interest is computed.
Real interest rate
The rate of interest excluding the effect of inflation; that is, the rate that is earned in terms
This is the total number of shares of a security that investors have borrowed, then sold in the
Short-term tax exempts
Short-term securities issued by states, municipalities, local housing agencies, and
interest calculated only on the initial investment. Related:compound interest.
Split-rate tax system
A tax system that taxes retained earnings at a higher rate than earnings that are
Spot interest rate
interest rate fixed today on a loan that is made today. Related: forward interest rates.
Stated annual interest rate
The interest rate expressed as a per annum percentage, by which interest
TANs (tax anticipation notes)
tax anticipation notes issued by states or municipalities to finance current
Tax anticipation bills (TABs)
Special bills that the Treasury occasionally issues that mature on corporate
Set of books kept by a firm's management for the IRS that follows IRS rules. The stockholder's
Tax clawback agreement
An agreement to contribute as equity to a project the value of all previously
Tax differential view ( of dividend policy)
The view that shareholders prefer capital gains over dividends,
The municipal bond market where state and local governments raise funds. Bonds issued
Tax free acquisition
A merger or consolidation in which 1) the acquirer's tax basis in each asset whose
A nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific
Tax Reform Act of 1986
A 1986 law involving a major overhaul of the U.S. tax code.
The reduction in income taxes that results from taking an allowable deduction from taxable income.
Swapping two similar bonds to receive a tax benefit.
Tax deferral option
The feature of the U.S. Internal Revenue Code that the capital gains tax on an asset is
Tax-deferred retirement plans
Employer-sponsored and other plans that allow contributions and earnings to
The option to sell an asset and claim a loss for tax purposes or not to sell the asset and
A merger or consolidation that is not a tax-fee acquisition. The selling shareholders are
Gross income less a set of deductions.
Any transaction that is not tax-free to the parties involved, such as a taxable acquisition.
Earnings before interest and tax, divided by interest payments.
True interest cost
For a security such as commercial paper that is sold on a discount basis, the coupon rate
Two-tier tax system
A method of taxation in which the income going to shareholders is taxed twice.
Method of indirect taxation whereby a tax is levied at each stage of production on the value
A tax levied by a country of source on income paid, usually on dividends remitted to the
What the business paid to the IRS.
Earnings before interest and taxes (EBIT)
The operating profit before deducting interest and tax.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
The operating profit before deducting interest, tax, depreciation and amortization.
The cost of money, received on investments or paid on borrowings.
Profit before interest and taxes (PBIT)
Income that a company receives in the form of interest, usually as the result of keeping money in interest-bearing accounts at financial institutions and the lending of money to other companies.
The amount of interest that is owed but has not been paid at the end of a period.
Payroll tax expense
The amount of tax associated with salaries that an employer pays to governments (federal, state, and local).
Payroll taxes payable
The amount of payroll taxes owed to the various governments at the end of a period.
earnings before interest and income tax (EBIT)
A measure of profit that
times interest earned
A ratio that tests the ability of a business to make
The amount of interest accumulated on a debt security between
interest paid on principal and on interest earned in previous
Effective Interest Rate
The rate of interest actually earned on an investment. It is
Nominal Interest Rate
The rate of interest quoted, or stated, to be paid on a security
Real Interest Rate
The rate of interest paid on an investment adjusted for inflation
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