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Definition of Leveraged equity
Stock in a firm that relies on financial leverage. Holders of leveraged equity face the
The discount rate that reflects only the business risks of a project and abstracts from the
The ratio of total assets to stockholder equity.
A management style that de-emphasizes the significance of economic
Value of outstanding common shares at par, plus accumulated retained
An account that reduces an equity account. An example is Treasury stock.
Same as the cost of common stock. Sometimes viewed as the
Indicator of financial leverage. Compares assets provided by creditors to assets provided
A comparison of debt to equity in a company's capital structure.
A widely used financial statement ratio to assess the
A common term for convertible bonds because of their equity component and the
An international equity placement where the offering is split into two
Represents ownership interest in a firm. Also the residual dollar value of a futures trading account,
Funds raised from shareholders.
Amounts contributed to the company by the owners (contributed capital) plus the residual earnings of the business (retained earnings).
Refers to one of the two basic sources of capital for a business, the
The difference between the total of all recorded assets and liabilities on the balance
Ownership. Common stock represents equity in a corporation.
The net worth of a business, consisting of capital stock, capital (or paid-in) surplus (or retained earnings), and, occasionally, certain net worth reserves. Common equity is that part of the total net worth belonging to the common shareholders. Total equity includes preferred shareholders. The terms common stock, net worth, and common equity are frequently used interchangeably.
The net worth of a company. This represents the ownership interest of the shareholders (common and preferred) of a company. For this reason, shares or stocks are often known as equities.
Life insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of an equity portfolio.
Refers to the investors percentage ownership of a company that can be re-acquired by the company, usually at a pre-determined amount.
An agreement in which one party, for an upfront premium, agrees to compensate the other at
Also called a residual claim, a claim to a share of earnings after debt obligation have been
The simultaneous purchase of an equity floor and sale of an equity cap.
Equity contribution agreement
An agreement to contribute equity to a project under certain specified
An agreement in which one party agrees to pay the other at specific time periods if a specific
Through equity investment, investors gain part ownership of the corporation. The primary type of equity investment is corporate stock.
Used to refer to warrants because they are usually issued attached to privately placed bonds.
Related: Variable life
Accounting method for an equity security in cases where the investor has sufficient
Total assets divided by total common stockholders' equity; the amount of total assets per
Securities that give the holder the right to buy or sell a specified number of shares of stock, at
An ownership interest in an enterprise, including preferred and common stock.
A swap in which the cash flows that are exchanged are based on the total return on some stock
Those holding shares of the firm's equity.
Securities sold in the Euromarket. That is, securities initially sold to investors
Foreign equity market
That portion of the domestic equity market that represents issues floated by foreign companies.
GEMs (growing-equity mortgages)
Mortgages in which annual increases in monthly payments are used to
Highly leveraged transaction (HLT)
Bank loan to a highly leveraged firm.
The balance of a margin account. Related: buying on margin, initial margin requirement.
The beta of a leveraged required return; that is, the beta as adjusted for the degree of
The purchase of one business entity by another, largely using borrowed
Leveraged buyout (LBO)
A transaction used for taking a public corporation private financed through the use
leveraged buyout (LBO)
Acquisition of the firm by a private group using substantial borrowed funds.
A lease arrangement under which the lessor borrows a large proportion of the funds needed
A portfolio that includes risky assets purchased with funds borrowed.
A portfolio that includes risky assets purchased with funds borrowed.
Leveraged required return
The required return on an investment when the investment is financed partially by debt.
Long-term debt to equity ratio
A capitalization ratio comparing long-term debt to shareholders' equity.
Refers to the capital invested in a business by its shareowners
The total of all capital contributions and retained earnings on a business’s
Preferred equity redemption stock (PERC)
Preferred stock that converts automatically into equity at a
Funds, other than paid-up capital and retained earnings, employed in a business and which will remain in a business as permanent capital.
RATE OF RETURN ON STOCKHOLDERS’ EQUITY
The percentage return or profit that management made on each dollar stockholders invested in a company. Here’s how you figure it:
RATIO OF DEBT TO STOCKHOLDERS’ EQUITY
A ratio that shows which group—creditors or stockholders—has the biggest stake in or the most control of a company:
Return on Common Equity Ratio
A measure of the percentage return earned on the value of the
Return on equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12
return on equity (ROE)
This key ratio, expressed as a percent, equals net
Represents the total assets of a corporation less liabilities.
This is a company's total assets minus total liabilities. A company's net worth is the
The total amount of contributed capital and retained earnings; synonymous with stockholders' equity.
The residual interest or owners' claims on the assets of a corporation
Balance sheet item that includes the book value of ownership in the corporation. It
The residual claims that stockholders have against a firm's assets, calculated by
The total amount of contributed capital and retained earnings; synonymous with shareholders’ equity.
stockholders' equity, statement of changes in
Although often considered
STOCKHOLDERS’ (OR OWNERS’) EQUITY
The value of the owners’ interests in a company.
Stratified equity indexing
A method of constructing a replicating portfolio in which the stocks in the index
Top-down equity management style
A management style that begins with an assessment of the overall
Total debt to equity ratio
A capitalization ratio comparing current liabilities plus long-term debt to
The beta of an unleveraged required return (i.e. no debt) on an investment when the
Unleveraged required return
The required return on an investment when the investment is financed entirely
Adjusted present value (APV)
The net present value analysis of an asset if financed solely by equity
The mix of the various types of debt and equity capital maintained by a firm. The more debt capital a firm has in its capital structure, the more highly leveraged the firm is considered to be.
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