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Financial Terms | |
Investment |
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Definition of InvestmentInvestmentThe commitment of funds (capital) in anticipation of an increased
Related Terms:Business Expansion InvestmentThe use of capital to create more money through the addition of fixed assets or through income producing vehicles. capital investment analysisRefers to various techniques and procedures Capital InvestmentsMoney used to purchase fixed assets for a business, such as land, buildings, or machinery. Also, money invested in a business on the understanding that it will be used to purchase permanent assets rather than to cover day-to-day operating expenses. Dividend reinvestment plan (DRP)Automatic reinvestment of shareholder dividends in more shares of a Equity investmentThrough equity investment, investors gain part ownership of the corporation. The primary type of equity investment is corporate stock. Expected return on investmentThe return one can expect to earn on an investment. See: capital asset Foreign direct investment (FDI)The acquisition abroad of physical assets such as plant and equipment, with ![]() Future investment opportunitiesThe options to identify additional, more valuable investment opportunities guaranteed investment certificate (GIC)A GIC is an investment that gives you a guaranteed rate of return over a fixed period of time, usually between 30 days and 5 years. GICs are available from banks, trust companies, and other financial institutions. Guaranteed investment contract (GIC)A pure investment product in which a life company agrees, for a Investment analystsRelated: financial analysts Investment bankFinancial intermediaries who perform a variety of services, including aiding in the sale of Investment BankerMiddleman between a corporation issuing new securities and the public. The middleman buys the securities issue outright and then resells it to customers. Also called an underwriter. investment centera responsibility center in which the manager Investment centreA division or unit of an organization that is responsible for achieving an adequate return on investment decisiona judgment about which assets will be ![]() Investment decisionsDecisions concerning the asset side of a firm's balance sheet, such as the decision to investment gradeBonds rated Baa or above by Moody’s or BBB or above by Standard & Poor’s. Investment grade bondsA bond that is assigned a rating in the top four categories by commercial credit Investment incomeThe revenue from a portfolio of invested assets. Investment managerAlso called a portfolio manager and money manager, the individual who manages a Investment product line (IPML)The line of required returns for investment projects as a function of beta Investment SpendingExpenditures on capital goods including new housing. Financial ''investments" and sales of existing assets are not included. Investment tax creditProportion of new capital investment that can be used to reduce a company's tax bill Investment Tax CreditA reduction in taxes offered to firms to induce them to increase investment spending. Investment trustA closed-end fund regulated by the investment Company Act of 1940. These funds have a Investment valueRelated:straight value. InvestmentsAs a discipline, the study of financial securities, such as stocks and bonds, from the investor's Legal investmentsinvestments that a regulated entity is permitted to make under the rules and regulations Mutually exclusive investment decisionsinvestment decisions in which the acceptance of a project Net investmentGross, or total, investment minus depreciation. Net Investmentinvestment spending minus depreciation. Net present value of future investmentsThe present value of the total sum of NPVs expected to result from Passive investment managementBuying a well-diversified portfolio to represent a broad-based market Passive investment strategySee: passive management. postinvestment auditthe process of gathering information qualified investments (Canada)Qualified investments is the term used for investments that can be held in an RSP. These investments generally include: Regular Investment Plan (RIP)A plan under which you may make regular deposits of the same amount to your Mutual Funds account once a month, once every 2 weeks, or once a week. You can also make regular deposits up to four times a month on any dates you choose. reinvestment assumptionan assumption made about the rates of return that will be earned by intermediate cash flows from a capital project; NPV and PI assume reinvestment at the discount rate; IRR assumes reinvestment at the IRR Reinvestment rateThe rate at which an investor assumes interest payments made on a debt security can be Reinvestment riskThe risk that proceeds received in the future will have to be reinvested at a lower potential REIT (real estate investment trust)Real estate investment trust, which is similar to a closed-end mutual REMIC (real estate mortgage investment conduit)A pass-through tax entity that can hold mortgages return on investmenta ratio that relates income generated Return on investment (ROI)Generally, book income as a proportion of net book value. RETURN ON INVESTMENT (ROI)In its most basic form, the rate of return equals net income divided by the amount of money invested. It can be applied to a particular product or piece of equipment, or to a business as a whole. Return on investment (ROI)The net profit after tax as a percentage of the shareholders’ investment in the business. return on investment (ROI)A very general concept that refers to some Short-term investment servicesServices that assist firms in making short-term investments. Underinvestment problemThe mirror image of the asset substitution problem, wherein stockholders refuse Unit investment trustMoney invested in a portfolio whose composition is fixed for the life of the fund. Zero-investment portfolioA portfolio of zero net value established by buying and shorting component Abandonment optionThe option of terminating an investment earlier than originally planned. Accounting rate of return (ARR)A method of investment appraisal that measures accounting rate of return (ARR)the rate of earnings obtained on the average capital investment over the life of a capital project; computed as average annual profits divided by average investment; not based on cash flow accounts receivableShort-term, non-interest-bearing debts owed to a Accrued IncomeIncome that has been earned but not yet received. For instance, if you have a non-registered Guaranteed investment Certificate (GIC), Mutual Fund or Segregated Equity Fund, growth accrues annually or semi-annually and is taxable annually even though the gain is only paid at maturity of your investment. acid test ratio (also called the quick ratio)The sum of cash, accounts receivable, and short-term marketable Adjusted present value (APV)The net present value analysis of an asset if financed solely by equity AggregationProcess in corporate financial planning whereby the smaller investment proposals of each of the Annual fund operating expensesFor investment companies, the management fee and "other expenses," annual returnThe fund return, for any 12-month period, including changes in unit value and the reinvestment of distributions, but not taking into account sales, redemption, distribution or other optional charges or income taxes payable by any unitholder that would reduce returns. Appropriation requestFormal request for funds for capital investment project. asset mixThe weighting of assets in an investment portfolio among different asset classes (e.g. shares, bonds, property, cash, overseas investments. Available-for-Sale SecurityA debt or equity security not classified as a held-to-maturity security or a trading security. Can be classified as a current or noncurrent investment depending on the intended holding period. Average accounting returnThe average project earnings after taxes and depreciation divided by the average Balanced fundAn investment company that invests in stocks and bonds. The same as a balanced mutual fund. Banker's acceptanceA short-term credit investment created by a non-financial firm and guaranteed by a BenchmarkThe performance of a predetermined set of securities, for comparison purposes. Such sets may be BogeyThe return an investment manager is compared to for performance evaluation. Book ReturnsBook yield is the investment income earned in a year on a portfolio of assets purchased over a number of years and at different interest rates, divided by the book value of those assets. Bullet contractA guaranteed investment contract purchased with a single (one-shot) premium. Related: Buy-and-hold strategyA passive investment strategy with no active buying and selling of stocks from the Call riskThe combination of cash flow uncertainty and reinvestment risk introduced by a call provision. CapitalThe shareholders’ investment in the business; the difference between the assets and liabilities capitalA very broad term rooted in economic theory and referring to CapitalThe investment by a company’s owners in a business, plus the impact of any Capital accountNet result of public and private international investment and lending activities. capital budgetmanagement’s plan for investments in longterm capital budgetList of planned investment projects. capital budgetingRefers generally to analysis procedures for ranking Capital BudgetingThe process of ranking and selecting investment alternatives and capital expendituresRefers to investments by a business in long-term capital gainThe positive difference between the adjusted cost base of an investment held as a capital property and the proceeds of disposition you receive when you sell it. When you sell such an investment for more than you paid, you realize a capital gain. capital lossThe negative difference between the adjusted cost base of an investment held as a capital property and the proceeds of disposition you receive when you sell it. When you sell such an investment for less than you paid, you incur a capital loss. Capital MarketThe market in which savings are made available to those needing funds to undertake investment projects. A financial market in which longer-term (maturity greater than one year) bonds and stocks are traded. Capital rationingPlacing one or more limits on the amount of new investment undertaken by a firm, either capital rationingLimit set on the amount of funds available for investment. capital recoveryRefers to recouping, or regaining, invested capital over Carring costsCosts that increase with increases in the level of investment in current assets. CASH AND CASH EQUIVALENTSThe balance in a company’s checking account(s) plus short-term or temporary investments (sometimes called “marketable securities”), which are highly liquid. Cash-equivalent itemsTemporary investments of currently excess cash in short-term, high-quality Cash EquivalentsHighly liquid, fixed-income investments with original maturities of three months or less. Cash EquivalentsInstruments or investments of such high liquidity and safety that they are virtually equal to cash. Cash flowIn investments, it represents earnings before depreciation , amortization and non-cash charges. Cash FlowIn investments, NET INCOME plus DEPRECIATION and other noncash charges. In this sense, it is synonymous with CASH EARNINGS. Investors focus on cash flow from operations because of their concern with a firm's ability to pay dividends. Cash Flow Provided or Used from Financing ActivitiesCash receipts and payments involving Cash Flow Provided or Used from Investing ActivitiesCash receipts and payments involving Cash value added (CVA)A method of investment appraisal that calculates the ratio of the net present value of an Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |