|MM's proposition II|
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Definition of MM's proposition II
MM's proposition II
The required rate of return on equity increases as the firm’s debt-equity ratio increases.
A promise to sell an asset before the seller has lined up purchase of the asset. This
Information that is known to some people but not to other people.
A situation wherein participants in a transaction have different net tax rates.
A lack of equivalence between two things, such as the unequal tax treatment of interest expense
an extension of activitybased costing using cost-benefit analysis (based on increased customer utility) to choose the product attribute
A subcommittee of a company's board of directors assigned the responsibility
A committee formed in response to SEC chairman Arthur Levitt's initiative to improve the financial
The 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:
The actual physical commodity, as distinguished from a futures contract.
Cash flow from operations minus preferred stock dividends, divided by the
A privately owned, profit-seeking firm that accepts deposits and makes loans.
An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.
Demand for payment.
A loan made on real estate collateral, other than a residential property, in which a mortgage is given to secure payment of principal and interest.
Short-term unsecured promissory notes issued by a corporation. The maturity of
Short-term unsecured notes issued by firms.
The risk that a foreign debtor will be unable to pay its debts because of business events,
The fee paid to a broker to execute a trade, based on number of shares, bonds, options, and/or
A broker on the floor of an exchange acts as agent for a particular brokerage house and
A firm which buys and sells future contracts for customer accounts. Related: futures
A trader is said to have a commitment when he assumes the obligation to accept or make
A fee paid to a commercial bank in return for its legal commitment to lend funds that have
a cost related either to the long-term investment
Committee, AIMR Performance Presentation Standards Implementation Committee
The 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
A commodity is food, metal, or another physical substance that investors buy or sell, usually via
The 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
An agreement between two or more countries that permits the free movement of capital
Are equity instruments that take no security against assets, have no fixed terms of repayment and pay no fixed dividends.
common-size balance sheet
Balance sheet that presents items as a percentage of total assets.
common-size income statement
Income statement that presents items as a percentage of revenues.
These are securities that represent equity ownership in a company. Common shares let an
Shares of ownership sold to the public.
A financial security that represents an ownership claim on the
Ownership shares in a publicly held corporation.
That part of the capital stock of a corporation that carries voting rights and represents
Common stock equivalent
A convertible security that is traded like an equity issue because the optioned
Common stock market
The market for trading equities, not including preferred stock.
Common stock/other equity
Value of outstanding common shares at par, plus accumulated retained
Common stock ratios
Ratios that are designed to measure the relative claims of stockholders to earnings
a company committee comprised mainly of members of the board of directors; is responsible
An arrangement in which the money manager pursues an active bond portfolio
Cost of Common Stock
The rate of return required by the investors in the common stock of
Doctrine of sovereign immunity
Doctrine 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 stock
How much profit a company made on each share of common stock this year.
Short-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 underwriting
An undewriting in which an investment banking firm commits to buy the
Futures commission merchant
A firm or person engaged in soliciting or accepting and handling orders for
The ratio of a change in the option delta to a small change in the price of the asset on which the
The rate of change of delta for a derivative security relative to the
Mortgage-backed securities (MBS) on which registered holders receive an aggregate principal and
Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA)
A federal Act shielding employers from liability if they have made
Delivery and settlement of securities within five business days.
Immigration Reform and Control Act of 1986
A federal Act requiring all employers having at least four employees to verify the identity and employment
The construction of an asset and a liability that are subject to offsetting changes in value.
A bond portfolio strategy whose goal is to eliminate the portfolio's risk against a
A situation involving information that is known to some, but not all, participants.
Variant of linear programming whereby the solution values must be integers.
a mathematical programming technique in which all solutions for variables must be restricted to whole numbers
International Monetary Market (IMM)
A division of the CME established in 1972 for trading financial
Letter of comment
A communication to the firm from the SEC that suggests changes to its registration
Technique for finding the maximum value of some equation subject to stated linear constraints.
a method of mathematical programming used to solve a problem that involves an objective function and multiple limiting factors or constraints long-term variable cost a cost that was traditionally viewed as a fixed cost
manufacturing resource planning (MRP II)
a fully integrated materials requirement planning system that involves
Manufacturing resource planning (MRP II)
An expansion of the material requirements planning concept, with additional computer-based capabilities in the areas of
An operations research technique that solves problems in which an optimal
a variety of techniques used
MM dividend-irrelevance proposition
Theory that under ideal conditions, the value of the firm is unaffected by dividend policy.
MM's proposition I (debt irrelevance proposition)
The value of a firm is unaffected by its capital structure.
Modigliani and Miller Proposition I
A proposition by Modigliani and Miller which states that a firm cannot
Modigliani and Miller Proposition II
A proposition by Modigliani and Miller which states that the cost of
see manufacturing resource planning
A portfolio strategy in which a portfolio is created that will be capable of
Planning, programming and budgeting system (PPBS)
A method of budgeting in which budgets are allocated to projects or programmes rather than to responsibility centres.
Theory that anticipated policy has no effect on output.
An agreement by the loan purchaser to allow the monthly loan quota to be
Return on Common Equity Ratio
A measure of the percentage return earned on the value of the
Securities and Exchange Commission (SEC)
The federal agency that
Securities and Exchange Commission (SEC)
Federal agency responsible for regulation of securities markets in the United
Securities and Exchange Commission (SEC)
A federal agency that administers securities legislation,
Securities & Exchange Commission
The SEC is a federal agency that regulates the U.S.financial markets.
Society for Worldwide Interbank Financial Telecommunications (SWIFT)
A dedicated computer network to support funds transfer messages internationally between over 900 member banks worldwide.
Summarized bill of materials
A bill of materials format showing the grand total
Symmetric cash matching
An extension of cash flow matching that allows for the short-term borrowing of
Also known as the National Commission on Fraudulent Financial
Zero-one integer programming
An analytical method that can be used to determine the solution to a capital
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