|Interest-only strip (IO)|
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Definition of Interest-only strip (IO)
Interest-only strip (IO)
A security based solely on the interest payments form a pool of mortgages, Treasury
Capital rationing that under certain circumstances can be violated or even viewed
The option of terminating an investment earlier than originally planned.
A method for dividing inventory into classifications,
Rule in bankruptcy proceedings whereby senior creditors are required to be paid in full
A method of costing in which all fixed and variable production costs are charged to products or services using an allocation base.
a cost accumulation and reporting
A methodology under which all manufacturing costs are assigned
Any depreciation method that produces larger deductions for depreciation in the
(1) The estimated useful life of the fixed asset being depreciated is
Any of several methods that recognize an increased amount
Clause causing repayment of a debt, if specified events occur or are not met.
Belief that an effort to keep unemployment below its natural rate results in an accelerating inflation.
The representation of the double-entry system of accounting such that assets are equal to liabilities plus capital.
The formula Assets = Liabilities + Equity.
An equation that reflects the two-sided nature of a
The period of time for which financial statements are produced – see also financial year.
accounts receivable turnover ratio
A ratio computed by dividing annual
an increase in units or volume caused by the addition
Accretion (of a discount)
In portfolio accounting, a straight-line accumulation of capital gains on discount
The accumulated coupon interest earned but not yet paid to the seller of a bond by the
The amount of interest accumulated on a debt security between
The amount of interest owing but not paid.
Accumulated Benefit Obligation (ABO)
An approximate measure of the liability of a plan in the event of a
A contra-fixed asset account representing the portion of the cost of a fixed asset that has been previously charged to expense. Each fixed asset account will have its own associated accumulated depreciation account.
A contra, or offset, account that is coupled
The sum total of all deprecation expense recognized to date
A location in which components destined for the shop floor are
Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid
A ratio that shows how well a company could pay its current debts using only its most liquid or “quick” assets. It’s a more pessimistic—but also realistic—measure of safety than the current ratio, because it ignores sluggish, hard-toliquidate current assets like inventory and notes receivable. Here’s the formula:
See quick ratio
acid test ratio (also called the quick ratio)
The sum of cash, accounts receivable, and short-term marketable
Takeover of a firm by purchase of that firm’s common
Acquisition of assets
A merger or consolidation in which an acquirer purchases the selling firm's assets.
Acquisition of stock
A merger or consolidation in which an acquirer purchases the acquiree's stock.
Active portfolio strategy
A strategy that uses available information and forecasting techniques to seek a
A protection against borrower fallout risk in the mortgage pipeline.
Additional paid-in capital
Amounts in excess of the par value or stated value that have been paid by the public to acquire stock in the company; synonymous with capital in excess of par.
Additional paid-in capital
Any payment received from investors for stock that exceeds
additional paid-in capital
Difference between issue price and par value of stock. Also called capital surplus.
Adjusted Cash Flow Provided by Continuing Operations
Cash flow provided by operating
A situation in which market participation is a negative signal.
Aggregate Production Function
An equation determining aggregate output as a function of aggregate inputs such as labor and capital.
Process in corporate financial planning whereby the smaller investment proposals of each of the
Aggressive Capitalization Policies
Capitalizing and reporting as assets significant portions of
Aggressive Cost Capitalization
Cost capitalization that stretches the flexibility within generally
the systematic assignment of an amount to a recipient
The process of storing costs in one account and shifting them to other
Allocation base A measure of activity or volume such as labour
hours, machine hours or volume of production
The alpha of a fund is determined as follows:
An option that may be exercised at any time up to and including the expiration date.
An option that can be exercised any time until its
An option contract that can be exercised at any time between the date of purchase and
The repayment of a loan by installments.
See depreciation, but usually in relation to assets attached to leased property.
This term has two quite different meanings. First, it may
Reduction in value of an asset over some period for accounting
The write-off of an asset over the period when the asset is used. This term
The systematic and rational allocation of capitalized costs over their useful lives.
The reduction of debt by regular payments of interest and principal sufficient to pay off a loan by maturity.
The repayment of a loan by installments.
Amortization (Credit Insurance)
Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity.
The pool factor implied by the scheduled amortization assuming no prepayemts.
A schedule that shows precisely how a loan will be repaid. The schedule gives the required payment on each specific date and shows how much of it constitutes interest and how much constitutes repayments of principal.
Amortizing interest rate swap
Swap in which the principal or national amount rises (falls) as interest rates
Annualized holding period return
The annual rate of return that when compounded t times, would have
The time between each payment under an annuity.
Arrangements whereby customers who pay before the final date may be entitled to deduct a
A clause in a shareholders agreement preventing a company from issuing additional shares, without allowing the current shareholders the opportunity to participate in the offering to avoid dilution of their percentage ownership.
Specific sections and rules of the 1933 Act and 1934 Act that are
A signed statement of facts made by a person applying for life insurance and then used by the insurance company to decide whether or not to issue a policy. The application becomes part of the insurance contract when the policy is issued.
The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard
An increase in the perceived or actual value of an asset.
Increase in the value of a currency.
a budgeted maximum allowable expenditure
Formal request for funds for capital investment project.
approximated net realizable value at split-off allocation
a method of allocating joint cost to joint products using a
Arbitrage-free option-pricing models
Yield curve option-pricing models.
Articles of incorporation
Legal document establishing a corporation and its structure and purpose.
When numbers from different financial statements relate to one another.
Option based on the average price of the asset during the life of the option.
Asset activity ratios
Ratios that measure how effectively the firm is managing its assets.
Asset allocation decision
The decision regarding how an institution's funds should be distributed among the
The ratio of total assets to stockholder equity.
A firm's investing in assets that are riskier than those that the debtholders expected.
Asset substitution problem
Arises when the stockholders substitute riskier assets for the firm's existing
asset turnover ratio
A broad-gauge ratio computed by dividing annual
Information that is known to some people but not to other people.
Legislation under which interest, dividends, or capital gains earned on assets you transfer to your spouse will be treated as your own for tax purposes. interest or dividends relating to property transferred to children under 18 also will be attributed back to you. The exception to this rule is that capital gains relating to property transferred to children under 18 will not be attributed back to you.
Markets in which the prevailing price is determined through the free interaction of
Auction rate preferred stock (ARPS)
Floating rate preferred stock, the dividend on which is adjusted every
The correlation of a variable with itself over successive time intervals.
the use of equipment that has been programmed to sense certain conditions
Average Amortization Period
The average useful life of a company's collective amortizable asset base.
Average Collection Period
Average number of days necessary to receive cash for the sale of
Average collection period, or days' receivables
The ratio of accounts receivables to sales, or the total
A market condition in which futures prices are lower in the distant delivery months than in
BAN (Bank anticipation notes)
Notes issued by states and municipalities to obtain interim financing for
Bank collection float
The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank.
Bank for International Settlements (BIS)
An international bank headquartered in Basel, Switzerland, which
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