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Definition of Lapse
Termination when a policy has no cash value after all attempts at conservation have failed.
This refers to the termination of an insurance policy due to the owner of the policy failing to pay the premium within the grace period [Usually within 30 days after the last regular premium was required and not paid]. It is possible to re-instate the coverage with the same premium and benefits intact but the life insured will have to qualify for this coverage all over again and bring up to date all unpaid premiums.
This refers to the practice of some life insurance companies to offer policies which are lower in price because they have assumed a high probability that the policies will be cashed in by their owners for one reason or another before the death benefit becomes available. It is a bold and risky offer by the insurance company because sometimes the purchasers of these policies simply don't lapse them.
Policies which are sold but do not remain in force because the policyholder fails to pay premiums.
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.
The length of the time period (for example, a quarter in the case of quarterly
The time that elapses between receipt of payment from a customer and the
This is the restoration of a lapsed life insurance policy. The life insurance company will require evidence of continuing good health and the payment of all past due premiums plus interest.
the additional value inherent in the control interest as contrasted to a minority interest, which reflects its power of control
a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock.
Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
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.
present value of a perpetuity with growth.
the period after an announcement of a takeover bid in which stock prices typically rise until a merger or acquisition is made (or until it falls through).
regression analysis a statistical technique that minimizes the sum of the squared deviations between a dependent variable and one or more independent variables and provides the user
same as PV, but usually includes a subtraction for an initial cash outlay.
a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity.
PV (present value of cash flows)
the value in today’s dollars of cash flows that occur in different time periods.
the period before a formal announcement of a takeover bid in which one or more bidders are either preparing to make an announcement or speculating that someone else will.
The option of terminating an investment earlier than originally planned.
Part of the return that is not due to systematic influences (market wide influences). In
Accelerated cost recovery system (ACRS)
Schedule of depreciation rates allowed for tax purposes.
Any depreciation method that produces larger deductions for depreciation in the
The change in the value of a firm's foreign currency denominated accounts due to a
Money owed to suppliers.
Money owed by customers.
Accounts receivable turnover
The ratio of net credit sales to average accounts receivable, a measure of how
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
Accumulated Benefit Obligation (ABO)
An approximate measure of the liability of a plan in the event of a
A firm that is being acquired.
A firm or individual that is acquiring something.
Adjustable rate preferred stock (ARPS)
Publicly traded issues that may be collateralized by mortgages and MBSs.
Adjusted present value (APV)
The net present value analysis of an asset if financed solely by equity
After-tax profit margin
The ratio of net income to net sales.
After-tax real rate of return
Money after-tax rate of return minus the inflation rate.
Process in corporate financial planning whereby the smaller investment proposals of each of the
All equity rate
The discount rate that reflects only the business risks of a project and abstracts from the
All or none
requirement that none of an order be executed unless all of it can be executed at the specified price.
Total costs, explicit and implicit.
An arrangement whereby a security issue is canceled if the underwriter is unable
American Depositary Receipts (ADRs)
Certificates issued by a U.S. depositary bank, representing foreign
Securities certificates issued in the U.S. by a transfer agent acting on behalf of the foreign
Amortizing interest rate swap
Swap in which the principal or national amount rises (falls) as interest rates
date on which particular news concerning a given company is announced to the public.
Yearly record of a publicly held company's financial condition. It includes a description of the
Annualized holding period return
The annual rate of return that when compounded t times, would have
An annuity with n payments, wherein the first payment is made at time t = 0 and the last
Annuity in arrears
An annuity with a first payment on full period hence, rather than immediately.
Formal request for funds for capital investment project.
Arbitrage-free option-pricing models
Yield curve option-pricing models.
Arithmetic average (mean) rate of return
Arithmetic mean return.
Arithmetic mean return
An average of the subperiod returns, calculated by summing the subperiod returns
Arm's length price
The price at which a willing buyer and a willing unrelated seller would freely agree to
Asian currency units (ACUs)
Dollar deposits held in Singapore or other Asian centers.
A dealer's price to sell a security; also called the offer price.
Asset allocation decision
The decision regarding how an institution's funds should be distributed among the
A bond indenture restriction that permits additional borrowing on if the ratio of assets to
The ratio of net sales to total assets.
A common element of a financial plan that describes projected capital spending and the
An option is at-the-money if the strike price of the option is equal to the market price of the
Auction rate preferred stock (ARPS)
Floating rate preferred stock, the dividend on which is adjusted every
A section of an annual report containing the auditor's opinion about the veracity of the
Number of shares authorized for issuance by a firm's corporate charter.
The correlation of a variable with itself over successive time intervals.
Using past data to predict future data.
Average accounting return
The average project earnings after taxes and depreciation divided by the average
Average age of accounts receivable
The weighted-average age of all of the firm's outstanding invoices.
Average collection period, or days' receivables
The ratio of accounts receivables to sales, or the total
Also referred to as the weighted-average life (WAL). The average number of years that each
Average (across-day) measures
An estimation of price that uses the average or representative price of a
Average rate of return (ARR)
The ratio of the average cash inflow to the amount invested.
1) when bond yields and prices fall, the market is said to back-up.
Balance of payments
A statistical compilation formulated by a sovereign nation of all economic transactions
Balance sheet exposure
Any large principal payment due at maturity for a bond or loan with or without a a sinking
A computer message system linking major banks. It is used not for effecting payments, but as a
State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from
Bankruptcy cost view
The argument that expected indirect and direct bankruptcy costs offset the other
The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.
The argument that expected bankruptcy costs preclude firms from being financed entirely
Gives the lessee the option to purchase the asset at a price below fair market
Base interest rate
related: Benchmark interest rate.
Base probability of loss
The probability of not achieving a portfolio expected return.
price expressed in terms of yield to maturity or annual rate of return.
Bonds that are not registered on the books of the issuer. Such bonds are held in physical form by
Before-tax profit margin
The ratio of net income before taxes to net sales.
Benchmark interest rate
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
this is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
A currency that is not freely convertible to other currencies due to exchange controls.
Large and creditworthy company.
A contract for privately placed debt.
The contract that sets forth the promises of a corporate bond issuer and the rights of
With respect to convertible bonds, the value the security would have if it were not convertible
A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
Book value per share
The ratio of stockholder equity to the average number of common shares. Book value
In the mortgage pipeline, the risk that prospective borrowers of loans committed to be
Bottom-up equity management style
A management style that de-emphasizes the significance of economic
A rapid and sharp price decline.
An analysis of the level of sales at which a project would make zero profit.
Break-even lease payment
The lease payment at which a party to a prospective lease is indifferent between
Break-even payment rate
The prepayment rate of a MBS coupon that will produce the same CFY as that of
Break-even tax rate
The tax rate at which a party to a prospective transaction is indifferent between entering
related: premium payback period.
A rise in a security's price above a resistance level (commonly its previous high price) or drop
Bretton Woods Agreement
An agreement signed by the original United Nations members in 1944 that
The large clearing banks that dominate deposit taking and short-term lending in the domestic
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