Financial Terms

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Definition of Intestate

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This means dying without a will, in which case the provincial laws of the province in which the death occurred apply to the manner in which assets will be distributed. In other words, if you don't write your own will, the government will do it for you after your death and it may not be as you would have wished.

Related Terms:

Abandonment option

The option of terminating an investment earlier than originally planned.

Accidental Death and Dismemberment

Coverage that provides a lump-sum payment to you or your survivors if an accident results in the loss of a limb, paralysis or your death.

Accidental Death Benefit (ADB)

Coverage against accidental death usually payable in addition to base amount of coverage.

Accumulated Other Comprehensive Income

Cumulative gains or losses reported in shareholders'
equity that arise from changes in the fair value of available-for-sale securities, from the
effects of changes in foreign-currency exchange rates on consolidated foreign-currency financial
statements, certain gains and losses on financial derivatives, and from adjustments for underfunded
pension plans.

Acquisition of assets

A merger or consolidation in which an acquirer purchases the selling firm's assets.

Act of state doctrine

This doctrine says that a nation is sovereign within its own borders and its domestic
actions may not be questioned in the courts of another nation.

After-tax profit margin

The ratio of net income to net sales.

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After-tax real rate of return

Money after-tax rate of return minus the inflation rate.

Allowance for doubtful accounts

A contra account related to accounts receivable that represents the amounts that the company expects will not be collected.

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


A firm's productive resources.


Anything of value that a company owns.


Things that the business owns.


Items owned by the company or expenses that have been paid for but have not been used up.

Assets requirements

A common element of a financial plan that describes projected capital spending and the
proposed uses of net working capital.

Blue-sky laws

State laws covering the issue and trading of securities.

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Builder buydown loan

A mortgage loan on newly developed property that the builder subsidizes during the
early years of the development. The builder uses cash to buy down the mortgage rate to a lower level than the
prevailing market loan rate for some period of time. The typical buydown is 3% of the interest-rate amount
for the first year, 2% for the second year, and 1% for the third year (also referred to as a 3-2-1 buydown).

Bulldog bond

Foreign bond issue made in London.

Bulldog market

The foreign market in the United Kingdom.


Mortgages in which monthly payments consist of principal and interest, with portions of these
payments during the early period of the loan being provided by a third party to reduce the borrower's monthly


Purchase of a controlling interest (or percent of shares) of a company's stock. A leveraged buy-out is
done with borrowed money.

Cash flow after interest and taxes

Net income plus depreciation.

Collective wisdom

The combination of all of the individual opinions about a stock's or security's value.

Common stock/other equity

Value of outstanding common shares at par, plus accumulated retained
earnings. Also called shareholders' equity.

Constant dollar accounting

A method for restating financial statements by reducing or
increasing reported revenues and expenses by changes in the consumer price index,
thereby achieving greater comparability between accounting periods.

Constant dollars

See real dollars.

Contingent Owner

This is the person designated to become the new owner of a life insurance policy if the original owner dies before the life insured.

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Continuous random variable

A random value that can take any fractional value within specified ranges, as
contrasted with a discrete variable.

contract vendor

an external party that has been granted an
outsourcing contract to provide a service activity for an entity


The ability of the bankruptcy court to confirm a plan of reorganization over the objections of
some classes of creditors.

Crown jewel

A particularly profitable or otherwise particularly valuable corporate unit or asset of a firm.

Current assets

Value of cash, accounts receivable, inventories, marketable securities and other assets that
could be converted to cash in less than 1 year.

Current assets

Cash, things that will be converted into cash within a year (such as accounts receivable), and inventory.

Current assets

Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.

current assets

Current refers to cash and those assets that will be turned
into cash in the short run. Five types of assets are classified as current:
cash, short-term marketable investments, accounts receivable, inventories,
and prepaid expenses—and they are generally listed in This order in
the balance sheet.

Current Assets

Cash and other company assets that can be readily turned into cash within one year.

Current Dollars

A variable like GDP is measured in current dollars if each year's value is measured in prices prevailing during that year. In contrast, when measured in real or constant dollars, each year's value is measured in a base year's prices.

Customary payout ratios

A range of payout ratios that is typical based on an analysis of comparable firms.

Death Benefit

Amount paid on death of an insured.

degree of operating leverage (DOL)

Percentage change in profits given a 1 percent change in sales.

Direct write-off method

A method of adjusting accounts receivable to the amount that is expected to be collected by eliminating the account balances of specific nonpaying customers.

Discount window

Facility provided by the Fed enabling member banks to borrow reserves against collateral
in the form of governments or other acceptable paper.

Discount Window

The Federal Reserve facility at which reserves are loaned to banks at the discount rate.

Discrete random variable

A random variable that can take only a certain specified set of discrete possible
values - for example, the positive integers 1, 2, 3, . . .


after a Treasury auction, there will be many new issues in dealer's hands. As those issues are
sold, it is said that they are distributed.

Dividend payout ratio

Percentage of earnings paid out as dividends.

dividend payout ratio

Computed by dividing cash dividends for the year
by the net income for the year. It’s simply the percent of net income distributed
as cash dividends for the year.

dividend payout ratio

Percentage of earnings paid out as dividends.

Doctrine of sovereign immunity

doctrine that says a nation may not be tried in the courts of another country
without its consent.

Documented discount notes

Commercial paper backed by normal bank lines plus a letter of credit from a
bank stating that it will pay off the paper at maturity if the borrower does not. Such paper is also referred to as
LOC (letter of credit) paper.

Dollar bonds

Municipal revenue bonds for which quotes are given in dollar prices. Not to be confused with
"U.S. dollar" bonds, a common term of reference in the Eurobond market.

Dollar Cost Averaging

A way of smoothing out your investment deposits by investing regularly. Instead of making one large deposit a year into your RRSP, you make smaller regular monthly deposits. If you are buying units in a mutual fund or segregated equity fund, you would end up buying more units in the month that values were low and less units in the month that values were higher. By spreading out your purchases, you don't have to worry about buying at the right time.

dollar days (of inventory)

a measurement of the value of inventory for the time that inventory is held

Dollar duration

The product of modified duration and the initial price.

Dollar price of a bond

Percentage of face value at which a bond is quoted.

Dollar return

The return realized on a portfolio for any evaluation period, including (1) the change in market
value of the portfolio and (2) any distributions made from the portfolio during that period.

Dollar roll

Similar to the reverse repurchase agreement - a simultaneous agreement to sell a security held in a
portfolio with purchase of a similar security at a future date at an agreed-upon price.

Dollar safety margin

The dollar equivalent of the safety cushion for a portfolio in a contingent immunization

Dollar-weighted rate of return

Also called the internal rate of return, the interest rate that will make the
present value of the cash flows from all the subperiods in the evaluation period plus the terminal market value
of the portfolio equal to the initial market value of the portfolio.

Domestic International Sales Corporation (DISC)

A U.S. corporation that receives a tax incentive for
export activities.

Domestic market

Part of a nation's internal market representing the mechanisms for issuing and trading
securities of entities domiciled within that nation. Compare external market and foreign market.

Don't know (DK, Dked)

"don't know the trade." A Street expression used whenever one party lacks
knowledge of a trade or receives conflicting instructions from the other party.

Double-declining-balance depreciation

Method of accelerated depreciation.

Double-dip lease

A cross-border lease in which the disparate rules of the lessor's and lessee's countries let
both parties be treated as the owner of the leased equipment for tax purposes.

Double entry

The system of recording business transactions in two accounts.

double-entry accounting

See accrual-basis accounting.

Double-tax agreement

Agreement between two countries that taxes paid abroad can be offset against
domestic taxes levied on foreign dividends.

Doubling option

A sinking fund provision that may allow repurchase of twice the required number of bonds
at the sinking fund call price.

Dow Jones industrial average

This is the best known U.S.index of stocks. It contains 30 stocks that trade on
the New York Stock Exchange. The dow, as it is called, is a barometer of how shares of the largest
U.S.companies are performing. There are thousands of investment indexes around the world for stocks,
bonds, currencies and commodities.

Dow Jones Industrial Average

Index of the investment performance of a portfolio of 30 “blue-chip” stocks.

Down-and-in option

Barrier option that comes into existence if asset price hits a barrier.

Down-and-out option

Barrier option that expires if asset price hits a barrier.


A classic negative change in ratings for a stock, and or other rated security.


any management action that reduces employment
upon restructuring operations in response to competitive

Employee stock ownership plan (ESOP)

A company contributes to a trust fund that buys stock on behalf of

Employee Stock Ownership Plan (ESOP)

a profit-sharing compensation program in which investments are made in
the securities of the employer

Employee Stock Ownership Plan (ESOP)

A fund containing company stock and owned by employees, paid for by ongoing contributions by the employer.


Determined from within the system. Opposite of exogenous.

Endogenous variable

A value determined within the context of a model.


Life insurance payable to the policyholder, if living on the maturity date stated in the policy, or to a beneficiary if the insured dies before that date. For example, some Term to age 100 policies offer the option of taking the face amount of the policy as a cash payout at age 100 if the policyholder is still alive and paying all required income taxes on the amount received or leaving the policy to pay out upon death whereupon the payout is tax free.

Endowment funds

Investment funds established for the support of institutions such as colleges, private
schools, museums, hospitals, and foundations. The investment income may be used for the operation of the
institution and for capital expenditures.


This is an American dollar that has been deposited in a European bank or an U.S. bank branch
located in Europe. It got there as a result of payments made to overseas companies for merchandise.

Eurodollar bonds

Eurobonds denominated in U.S.dollars.


dollars held on deposit in a bank outside the United States.


Deposits denominated in U.S. dollars but held in banks located outside the United States, such as in Canada or France.

Exchange of assets

Acquisition of another company by purchase of its assets in exchange for cash or stock.

Feasible target payout ratios

Payout ratios that are consistent with the availability of excess funds to make
cash dividend payments.

Financial assets

Claims on real assets.

financial assets

Claims to the income generated by real assets. Also called securities.

Fixed assets

Things that the business owns and are part of the business infrastructure – fixed assets may be
tangible or intangible.

fixed assets

An informal term that refers to the variety of long-term operating
resources used by a business in its operations—including real
estate, machinery, equipment, tools, vehicles, office furniture, computers,
and so on. In balance sheets, these assets are typically labeled property,
plant, and equipment. The term fixed assets captures the idea that the
assets are relatively fixed in place and are not held for sale in the normal
course of business. The cost of fixed assets, except land, is depreciated,
which means the cost is allocated over the estimated useful lives of the

Fixed Assets

Land, buildings, plant, equipment, and other assets acquired for carrying on the business of a company with a life exceeding one year. Normally expressed in financial accounts at cost, less accumulated depreciation.

Fixed Assets Turnover Ratio

A measure of the utilization of a company's fixed assets to
generate sales. It is calculated by dividing the sales for the period
by the book value of the net fixed assets.

Fixed-dollar obligations

Conventional bonds for which the coupon rate is set as a fixed percentage of the par value.

Fixed-dollar security

A nonnegotiable debt security that can be redeemed at some fixed price or according to
some schedule of fixed values, e.g., bank deposits and government savings bonds.

Full-payout lease

See: financial lease.


Excess of the purchase price over the fair market value of the net assets acquired under purchase


The excess of the price paid to buy another company over the book value of
its assets and the increase in cost of its fixed assets to fair market value.


Intangible assets of a firm established by the excess of the price paid for the going concern over the value of its assets.

Gordon model

present value of a perpetuity with growth.
The end-ofyear Gordon model formula is: 1/(r - g)
and the midyear formula is: SQRT(1 + r)/(r - g).







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