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Definition of Investment
The commitment of funds (capital) in anticipation of an increased
Automatic reinvestment of shareholder dividends in more shares of a
The return one can expect to earn on an investment. See: capital asset
The acquisition abroad of physical assets such as plant and equipment, with
The options to identify additional, more valuable investment opportunities
A pure investment product in which a life company agrees, for a
Related: financial analysts
Financial intermediaries who perform a variety of services, including aiding in the sale of
Decisions concerning the asset side of a firm's balance sheet, such as the decision to
A bond that is assigned a rating in the top four categories by commercial credit
The revenue from a portfolio of invested assets.
Also called a portfolio manager and money manager, the individual who manages a
The line of required returns for investment projects as a function of beta
Proportion of new capital investment that can be used to reduce a company's tax bill
A closed-end fund regulated by the investment Company Act of 1940. These funds have a
As a discipline, the study of financial securities, such as stocks and bonds, from the investor's
investments that a regulated entity is permitted to make under the rules and regulations
Mutually exclusive investment decisions
investment decisions in which the acceptance of a project
Gross, or total, investment minus depreciation.
Net present value of future investments
The present value of the total sum of NPVs expected to result from
Passive investment strategy
See: passive management.
Passive investment management
Buying a well-diversified portfolio to represent a broad-based market
The rate at which an investor assumes interest payments made on a debt security can be
The 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 investment (ROI)
Generally, book income as a proportion of net book value.
Short-term investment services
Services that assist firms in making short-term investments.
The mirror image of the asset substitution problem, wherein stockholders refuse
Unit investment trust
Money invested in a portfolio whose composition is fixed for the life of the fund.
A portfolio of zero net value established by buying and shorting component
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.
A division or unit of an organization that is responsible for achieving an adequate return on
Return on investment (ROI)
The net profit after tax as a percentage of the shareholders’ investment in the business.
capital investment analysis
Refers to various techniques and procedures
return on investment (ROI)
A very general concept that refers to some
a responsibility center in which the manager
a judgment about which assets will be
the process of gathering information
an 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
return on investment
a ratio that relates income generated
Bonds rated Baa or above by Moody’s or BBB or above by Standard & Poor’s.
Middleman 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.
Expenditures on capital goods including new housing. Financial ''investments" and sales of existing assets are not included.
Investment Tax Credit
A reduction in taxes offered to firms to induce them to increase investment spending.
investment spending minus depreciation.
Business Expansion Investment
The use of capital to create more money through the addition of fixed assets or through income producing vehicles.
Money 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.
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.
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.
Through equity investment, investors gain part ownership of the corporation. The primary type of equity investment is corporate stock.
the rate of return on investment that would be required by a prudent investor to invest in an asset with a specific level risk. Also, a rate of return used to convert a monetary sum, payable or receivable in the future, into present value.
The option of terminating an investment earlier than originally planned.
Adjusted present value (APV)
The net present value analysis of an asset if financed solely by equity
Process in corporate financial planning whereby the smaller investment proposals of each of the
Annual fund operating expenses
For investment companies, the management fee and "other expenses,"
Formal request for funds for capital investment project.
Average accounting return
The average project earnings after taxes and depreciation divided by the average
An investment company that invests in stocks and bonds. The same as a balanced mutual fund.
A short-term credit investment created by a non-financial firm and guaranteed by a
The performance of a predetermined set of securities, for comparison purposes. Such sets may be
The return an investment manager is compared to for performance evaluation.
A guaranteed investment contract purchased with a single (one-shot) premium. Related:
A passive investment strategy with no active buying and selling of stocks from the
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.
Net result of public and private international investment and lending activities.
Placing one or more limits on the amount of new investment undertaken by a firm, either
Costs that increase with increases in the level of investment in current assets.
In investments, it represents earnings before depreciation , amortization and non-cash charges.
Temporary investments of currently excess cash in short-term, high-quality
Communication barrier between financiers (investment bankers) and traders. This barrier is
An investment company that sells shares like any other corporation and usually does not
Committee, AIMR Performance Presentation Standards Implementation Committee
The Association for investment Management and Research (AIMR)'s Performance Presentation Standards Implementation
The collection of money managers of similar investment style used for assessing
Movement of cash from different lockbox locations into a single concentration
Conflict between bondholders and stockholders
These two groups may have interests in a corporation that
An arrangement in which the money manager pursues an active bond portfolio
One of the three areas of the discipline of finance. It deals with the operation of the firm
The net present value of an investment divided by the investment's initial cost. Also called
Country risk General
Level of political and economic uncertainty in a country affecting the value of loans or
Covered interest arbitrage
A portfolio manager invests dollars in an instrument denominated in a foreign
The interest rate offered on an investment type insurance policy.
Refers to the volatility of returns on international investments caused by events associated
Asset allocation in which the investor chooses among investments denominated in
The amplification of the return earned on equity when an investment or firm is financed
Performance over time, rated on a scale of 1-10.1 indicates that a mutual fund's return was in the
Discounted payback period rule
An investment decision rule in which the cash flows are discounted at an
Discretionary cash flow
Cash flow that is available after the funding of all positive NPV capital investment
Payments from fund or corporate cash flow. May include dividends from earnings, capital
Dividing investment funds among a variety of securities with different risk, reward, and
Dow Jones industrial average
This is the best known U.S.index of stocks. It contains 30 stocks that trade on
Economies of scope
Scope economies exist whenever the same investment can support multiple profitable
investment funds established for the support of institutions such as colleges, private
Equivalent annual benefit
The equivalent annual annuity for the net present value of an investment project.
Equivalent annual cash flow
Annuity with the same net present value as the company's proposed investment.
A bond portfolio management strategy that involves finding the lowest cost portfolio
Exchange rate risk
Also called currency risk, the risk of an investment's value changing because of currency
An investment prospect that has a zero risk premium.
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