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Definition of Novation
Defeasance whereby the firm's debt is canceled.
A system of non-financial performance measurement that links innovation, customer and process measures to financial performance.
an approach to performance
An innovation that has a positive impact on one or more of a firm's existing products.
An innovation that has a negative impact on one or more of a firm's existing assets.
The term for several manufacturing innovations that
The multiplier associated with a change in government spending financed by an equal change in taxes.
An investment company that invests in stocks and bonds. The same as a balanced mutual fund.
This is a fund that buys common stock, preferred stock and bonds. The same as a
Investors are not able to buy all of the shares or bonds they want, so underwriters must
In a rights issue, arrangement by which shareholders are given the right to apply
Price that the existing shareholders are allowed to pay for a share of stock in a rights offering.
Schedule of depreciation rates allowed for tax purposes.
A set of accounts that summarize the transactions of a business that have been recorded on source documents.
a valuation method that uses actual direct
A bond covenant that specifies certain actions the firm must take.
All or none
Requirement that none of an order be executed unless all of it can be executed at the specified price.
An arrangement whereby a security issue is canceled if the underwriter is unable
Allowance for bad debts
An offset to the accounts receivable balance, against which
Automated storage/retrieval system
A racking system using automated systems
Average (across-day) measures
An estimation of price that uses the average or representative price of a
An account receivable that cannot be collected.
The amount of accounts receivable that is not expected to be collected.
Refers to accounts receivable from credit sales to customers
BARRA's performance analysis (PERFAN)
A method developed by BARRA, a consulting firm in
Basic business strategies
Key strategies a firm intends to pursue in carrying out its business plan.
Repetitive cycles of economic expansion and recession.
Fluctuations of GDP around its long-run trend, consisting of recession, trough, expansion, and peak.
Business Expansion Investment
The use of capital to create more money through the addition of fixed assets or through income producing vehicles.
A business that has terminated with a loss to creditors.
business intelligence (BI) system
a formal process for gathering and analyzing information and producing intelligence to meet decision making needs; requires information about
business process reengineering (BPR)
the process of combining information technology to create new and more effective
The risk that the cash flow of an issuer will be impaired because of adverse economic
an activity that is necessary for the operation of the business but for which a customer would not want to pay
Changes in Financial Position
Sources of funds internally provided from operations that alter a company's
a system using transfer prices; see transfer
chief financial officer (CFO)
Officer who oversees the treasurer and controller and sets overall financial strategy.
Clearing House Automated Payments System (CHAPS)
A computerized clearing system for sterling funds
Clearing House Interbank Payments System (CHIPS)
An international wire transfer system for high-value
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.
Committee, AIMR Performance Presentation Standards Implementation Committee
The Association for Investment Management and Research (AIMR)'s performance Presentation Standards Implementation
he written statement that follows any "trade" in the securities markets. Confirmation is issued
Corporate financial management
The application of financial principals within a corporation to create and
Corporate financial planning
financial planning conducted by a firm that encompasses preparation of both
Corporate processing float
The time that elapses between receipt of payment from a customer and the
cost-benefit analysis the analytical process of comparing the
relative costs and benefits that result from a specific course
cost control system
a logical structure of formal and/or informal
cost management system (CMS)
a set of formal methods
Cost of Debt
The cost of debt (bonds, loans, etc.) that a company is charged for
costs of financial distress
Costs arising from bankruptcy or distorted business decisions before bankruptcy.
Country financial risk
The ability of the national economy to generate enough foreign exchange to meet
A statistical methodology applied to a set of firms at a particular point in time.
Borrowings from financiers.
Funds owed to another entity.
Ability to borrow. The amount a firm can borrow up to the point where the firm value no
An 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.
The amount of borrowing that leasing displaces. firms that do a lot of leasing will be
Indicator of financial leverage. Compares assets provided by creditors to assets provided
A comparison of debt to equity in a company's capital structure.
Raising loan capital through the creation of debt by issuing a form of paper evidencing amounts owed and payable on specified dates or on demand.
An asset requiring fixed dollar payments, such as a government or corporate bond.
Any financial asset corresponding to a debt, such as a bond or a treasury bill.
The amplification of the return earned on equity when an investment or firm is financed
A bond covenant that restricts in some way the firm's ability to incur additional indebtedness.
The market for trading debt instruments.
Total debt divided by total assets.
The percentage of debt that is used in the total capitalization of a
Reducing the principal and/or interest payments on LDC loans.
IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
A security representing a debt relationship with an enterprise, including a government
Interest payment plus repayments of principal to creditors, that is, retirement of debt.
Debt-service coverage ratio
Earnings before interest and income taxes plus one-third rental charges, divided
Debt service parity approach
An analysis wherein the alternatives under consideration will provide the firm
A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank
A widely used financial statement ratio to assess the
Debtor in possession
A firm that is continuing to operate under Chapter 11 bankruptcy process.
New debt obtained by a firm during the Chapter 11 bankruptcy process.
Sales to customers who have bought goods or services on credit but who have not yet paid their debt.
Practice whereby the borrower sets aside cash or bonds sufficient to service the borrower's debt.
A conception of the way a stock's price changes that assumes that the price takes on all
Du Pont system
A breakdown of ROE and ROA into component ratios.
Dupont system of financial control
Highlights the fact that return on assets (ROA) can be expressed in terms
See: in-substance Defeasance.
Electronic Federal Tax Payment Systems (EFTPS)
An electronic funds transfer system used by businesses to remit taxes to the government.
enterprise resource planning (ERP) system
a packaged software program that allows a company to
Enterprise resource planning system
A computer system used to manage all company
European Monetary System (EMS)
An exchange arrangement formed in 1979 that involves the currencies
External Financial Statements
Corporate financial statements that have been reported on by an external independent accountant.
Federal Reserve System
The central bank of the U.S., established in 1913, and governed by the Federal
Federal Reserve System
The central banking authority responsible for monetary policy in the United States.
FIFO method (of process costing)
the method of cost assignment that computes an average cost per equivalent
The production of financial statements, primarily for those interested parties who are external to the business.
a discipline in which historical, monetary
Also called securities analysts and investment analysts, professionals who analyze
Claims on real assets.
Claims to the income generated by real assets. Also called securities.
Economic assistance provided by unrelated third parties, typically government agencies. They may take the form of loans, loan guarantees, subsidies, tax allowances, contributions, or cost-sharing arrangements.
a plan that aggregates monetary details
The management of a firm's costs and expenses in order to control them in relation to
A feature of a debt or credit agreement that is designed to protect the lender or creditor. It is common to characterize covenants as either positive or negative covenants.
A promise made related to financial conditions or events. Often a promise not to allow certain balance sheet items or ratios to fall below an agreed level. Usually found in loan documents, as a protection mechanism.
Events preceding and including bankruptcy, such as violation of loan contracts.
Financial distress costs
Legal and administrative costs of liquidation or reorganization. Also includes
Combining or dividing existing instruments to create new financial products.
A contract entered into now that provides for the delivery of a specified asset in exchange
a monetary reward provided for performance
An expression of economic benefit that motivates behavior that might otherwise not take place.
Institutions that provide the market function of matching borrowers and lenders or
firm that raises money from many small investors and provides financing to businesses or other
Any institution, such as a bank, that takes deposits from savers and loans them to borrowers.
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