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Definition of Leasehold improvements
The cost of improvements made to property that the company leases.
The cost of improvements to land owned by the company, such as fencing and outdoor lighting.
This is any upgrade to leased property by a lessee that will be
The cost of land owned by the company.
an ongoing process of enhancing employee task performance, level of product quality, and level of company service through eliminating nonvalue-added activities to reduce lead time, making products
Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity.
Schedule of depreciation rates allowed for tax purposes.
The ratio of net credit sales to average accounts receivable, a measure of how
A merger or consolidation in which an acquirer purchases the selling firm's assets.
The argument that specifies that the various agency costs create a complex environment in
The incremental costs of having an agent make decisions for a principal.
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
Annualized holding period return
The annual rate of return that when compounded t times, would have
any possession that has value in an exchange.
The ratio of total assets to stockholder equity.
Also called surplus management, the task of managing funds of a financial
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
A security that is collateralized by loans, leases, receivables, or installment contracts
Methods of financing in which lenders and equity investors look principally to the
Categories of assets, such as stocks, bonds, real estate and foreign securities.
A bond indenture restriction that permits additional borrowing on if the ratio of assets to
Asset for asset swap
Creditors exchange the debt of one defaulting borrower for the debt of another
Asset pricing model
A model for determining the required rate of return on an asset.
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
An interest rate swap used to alter the cash flow characteristics of an institution's assets so as to
The ratio of net sales to total assets.
Asset pricing model
A model, such as the Capital asset Pricing Model (CAPM), that determines the required
A firm's productive resources.
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
Average collection period, or days' receivables
The ratio of accounts receivables to sales, or the total
Average cost of capital
A firm's required payout to the bondholders and to the stockholders expressed as a
Also referred to as the weighted-average life (WAL). The average number of years that each
Bankruptcy cost view
The argument that expected indirect and direct bankruptcy costs offset the other
Large and creditworthy company.
Break-even lease payment
The lease payment at which a party to a prospective lease is indifferent between
Buy limit order
A conditional trading order that indicates a security may be purchased only at the designated
Call money rate
Also called the broker loan rate , the interest rate that banks charge brokers to finance
Capital asset pricing model (CAPM)
An economic theory that describes the relationship between risk and
A lease obligation that has to be capitalized on the balance sheet.
The debt and/or equity mix that fund a firm's assets.
A method of constructing a replicating portfolio in which the manager purchases a
Also called financial leverage ratios, these ratios compare debt to total capitalization
A table showing the capitalization of a firm, which typically includes the amount of
costs that increase with increases in the level of investment in current assets.
Cash flow coverage ratio
The number of times that financial obligations (for interest, principal payments,
The representing of accounting information over multiple years as percentages
Related: Unsystematic risk
The length of the time period (for example, a quarter in the case of quarterly
Cost company arrangement
Arrangement whereby the shareholders of a project receive output free of
Cost of capital
The required return for a capital budgeting project.
Cost of carry
Related: Net financing cost
Cost of funds
Interest rate associated with borrowing money.
Cost of lease financing
A lease's internal rate of return.
Cost of limited partner capital
The discount rate that equates the after-tax inflows with outflows for capital
The net present value of an investment divided by the investment's initial cost. Also called
The purchase of a contract to offset a previously established short position.
Ratios used to test the adequacy of cash flows generated through earnings for purposes of
A short call option position in which the writer owns the number of shares of the underlying
Covered call writing strategy
A strategy that involves writing a call option on securities that the investor
Covered interest arbitrage
A portfolio manager invests dollars in an instrument denominated in a foreign
Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the
A put option position in which the option writer also is short the corresponding stock or has
The length of time for which the customer is granted credit.
The return at which two alternative projects have the same net present value.
Value of cash, accounts receivable, inventories, marketable securities and other assets that
A bond covenant that restricts in some way the firm's ability to incur additional indebtedness.
Debt-service coverage ratio
Earnings before interest and income taxes plus one-third rental charges, divided
Deferred nominal life annuity
A monthly fixed-dollar payment beginning at retirement age. It is nominal
Depository Trust Company (DTC)
DTC is a user-owned securities depository which accepts deposits of
lease in which the lessor purchases new equipment from the manufacturer and leases it to the
The period during which a customer can deduct the discount from the net amount of the bill
Discounted payback period rule
An investment decision rule in which the cash flows are discounted at an
A bond covenant that restricts in some way the firm's ability to pay cash dividends.
Doctrine of sovereign immunity
Doctrine that says a nation may not be tried in the courts of another country
A cross-border lease in which the disparate rules of the lessor's and lessee's countries let
Dow Jones industrial average
This is the best known U.S.index of stocks. It contains 30 stocks that trade on
Dynamic asset allocation
An asset allocation strategy in which the asset mix is mechanistically shifted in
Treating cash flows as if they occur at the end of a year as opposed to the date
Equivalent annual cost
The equivalent cost per year of owning an asset over its entire life.
European Monetary System (EMS)
An exchange arrangement formed in 1979 that involves the currencies
The time interval over which a money manager's performance is evaluated.
Exchange of assets
Acquisition of another company by purchase of its assets in exchange for cash or stock.
The difference between the execution price of a security and the price that would have
Claims on real assets.
Financial distress costs
Legal and administrative costs of liquidation or reorganization. Also includes
Long-term, non-cancelable lease.
Long-lived property owned by a firm that is used by a firm in the production of its income.
Fixed asset turnover ratio
The ratio of sales to fixed assets.
A cost that is fixed in total for a given period of time and for given production levels.
Annuity contracts in which the insurance company or issuing financial institution pays a
Fixed-charge coverage ratio
A measure of a firm's ability to meet its fixed-charge obligations: the ratio of
In the Euromarket the standard periods for which Euros are traded (1 month out to a year out) are
Conventional bonds for which the coupon rate is set as a fixed percentage of the par value.
A nonnegotiable debt security that can be redeemed at some fixed price or according to
A country's decision to tie the value of its currency to another country's currency, gold
Also called a busted convertible, a convertible security that is trading like a straight
assets that pay a fixed-dollar amount, such as bonds and preferred stock.
The market for trading bonds and preferred stock.
Fixed price basis
An offering of securities at a fixed price.
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