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Financial Terms | |
MM's proposition I (debt irrelevance proposition) |
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Definition of MM's proposition I (debt irrelevance proposition)MM's proposition I (debt irrelevance proposition)The value of a firm is unaffected by its capital structure.
Related Terms:Advance commitmentA promise to sell an asset before the seller has lined up purchase of the asset. This Allowance for bad debtsAn offset to the accounts receivable balance, against which Asymmetric informationInformation that is known to some people but not to other people. Asymmetric taxesA situation wherein participants in a transaction have different net tax rates. AsymmetryA lack of equivalence between two things, such as the unequal tax treatment of interest expense Audit CommitteeA subcommittee of a company's board of directors assigned the responsibility Bad debtAn account receivable that cannot be collected. ![]() Bad debtsThe amount of accounts receivable that is not expected to be collected. bad debtsRefers to accounts receivable from credit sales to customers Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit CommitteesA committee formed in response to SEC chairman Arthur Levitt's initiative to improve the financial BOOK VALUE OF COMMON STOCKThe theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. Book value equals: Cash commodityThe actual physical commodity, as distinguished from a futures contract. Cash flow per common shareCash flow from operations minus preferred stock dividends, divided by the Commercial BankA privately owned, profit-seeking firm that accepts deposits and makes loans. Commercial Business Loan (Credit Insurance)An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes. Commercial draftDemand for payment. ![]() Commercial MortgageA loan made on real estate collateral, other than a residential property, in which a mortgage is given to secure payment of principal and interest. Commercial paperShort-term unsecured promissory notes issued by a corporation. The maturity of commercial paperShort-term unsecured notes issued by firms. Commercial riskThe risk that a foreign debtor will be unable to pay its debts because of business events, CommissionThe fee paid to a broker to execute a trade, based on number of shares, bonds, options, and/or Commission brokerA broker on the floor of an exchange acts as agent for a particular brokerage house and Commission houseA firm which buys and sells future contracts for customer accounts. Related: futures CommitmentA trader is said to have a commitment when he assumes the obligation to accept or make Commitment feeA fee paid to a commercial bank in return for its legal commitment to lend funds that have committed costa cost related either to the long-term investment Committee, AIMR Performance Presentation Standards Implementation CommitteeThe Association for Investment Management and Research (AIMR)'s Performance Presentation Standards Implementation ![]() Commodities Exchange Center (CEC)The location of five New York futures exchanges: Commodity CommodityA commodity is food, metal, or another physical substance that investors buy or sell, usually via Common-base-year analysisThe representing of accounting information over multiple years as percentages common body of knowledge (CBK)the minimum set of knowledge needed by a person to function effectively in a particular field Common marketAn agreement between two or more countries that permits the free movement of capital Common SharesAre equity instruments that take no security against assets, have no fixed terms of repayment and pay no fixed dividends. common-size balance sheetBalance sheet that presents items as a percentage of total assets. common-size income statementIncome statement that presents items as a percentage of revenues. Common stockThese are securities that represent equity ownership in a company. Common shares let an Common stockShares of ownership sold to the public. Common StockA financial security that represents an ownership claim on the common stockOwnership shares in a publicly held corporation. Common StockThat part of the capital stock of a corporation that carries voting rights and represents Common stock equivalentA convertible security that is traded like an equity issue because the optioned Common stock marketThe market for trading equities, not including preferred stock. Common stock/other equityValue of outstanding common shares at par, plus accumulated retained Common stock ratiosRatios that are designed to measure the relative claims of stockholders to earnings compensation committeea company committee comprised mainly of members of the board of directors; is responsible Contingent immunizationAn arrangement in which the money manager pursues an active bond portfolio Cost of Common StockThe rate of return required by the investors in the common stock of Cost of DebtThe cost of debt (bonds, loans, etc.) that a company is charged for DebtMoney borrowed. DebtBorrowings from financiers. DebtFunds owed to another entity. Debt capacityAbility to borrow. The amount a firm can borrow up to the point where the firm value no Debt CapacityAn assessment of ability and willingness to repay a loan from anticipated future cash flow or other sources. Debt (Credit Insurance)Money, goods or services that someone is obligated to pay someone else in accordance with an expressed or implied agreement. debt may or may not be secured. Debt displacementThe amount of borrowing that leasing displaces. Firms that do a lot of leasing will be Debt/equity ratioIndicator of financial leverage. Compares assets provided by creditors to assets provided Debt/Equity RatioA comparison of debt to equity in a company's capital structure. Debt FinancingRaising loan capital through the creation of debt by issuing a form of paper evidencing amounts owed and payable on specified dates or on demand. Debt instrumentAn asset requiring fixed dollar payments, such as a government or corporate bond. Debt InstrumentAny financial asset corresponding to a debt, such as a bond or a treasury bill. Debt leverageThe amplification of the return earned on equity when an investment or firm is financed Debt limitationA bond covenant that restricts in some way the firm's ability to incur additional indebtedness. Debt marketThe market for trading debt instruments. Debt ratioTotal debt divided by total assets. Debt RatioThe percentage of debt that is used in the total capitalization of a Debt reliefReducing the principal and/or interest payments on LDC loans. Debt securitiesIOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and Debt SecurityA security representing a debt relationship with an enterprise, including a government Debt serviceInterest payment plus repayments of principal to creditors, that is, retirement of debt. Debt-service coverage ratioEarnings before interest and income taxes plus one-third rental charges, divided Debt service parity approachAn analysis wherein the alternatives under consideration will provide the firm Debt swapA set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank debt-to-equity ratioA widely used financial statement ratio to assess the Debtor in possessionA firm that is continuing to operate under Chapter 11 bankruptcy process. Debtor-in-possession financingNew debt obtained by a firm during the Chapter 11 bankruptcy process. DebtorsSales to customers who have bought goods or services on credit but who have not yet paid their debt. Doctrine of sovereign immunityDoctrine that says a nation may not be tried in the courts of another country e-commerce (electronic commerce)any business activity that uses the Internet and World Wide Web to engage in financial transactions Earnings per share of common stockHow much profit a company made on each share of common stock this year. Euro-commercial paperShort-term notes with maturities up to 360 days that are issued by companies in Federal Open Market Committee (FOMC)Fed committee that makes decisions about open-market operations. Firm commitment underwritingAn undewriting in which an investment banking firm commits to buy the Firm's net value of debtTotal firm value minus total firm debt. Funded debtdebt maturing after more than one year. funded debtdebt with more than 1 year remaining to maturity. Futures commission merchantA firm or person engaged in soliciting or accepting and handling orders for GammaThe ratio of a change in the option delta to a small change in the price of the asset on which the GammaThe rate of change of delta for a derivative security relative to the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA)A federal Act shielding employers from liability if they have made Immediate settlementDelivery and settlement of securities within five business days. Immigration Reform and Control Act of 1986A federal Act requiring all employers having at least four employees to verify the identity and employment ImmunizationThe construction of an asset and a liability that are subject to offsetting changes in value. Immunization strategyA bond portfolio strategy whose goal is to eliminate the portfolio's risk against a Information asymmetryA situation involving information that is known to some, but not all, participants. Integer programmingVariant of linear programming whereby the solution values must be integers. integer programminga mathematical programming technique in which all solutions for variables must be restricted to whole numbers Interest rate on debtThe firm's cost of debt capital. International Monetary Market (IMM)A division of the CME established in 1972 for trading financial Irrelevance resultThe Modigliani and Miller theorem that a firm's capital structure is irrelevant to the firm's Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |