Definition of Old-line factoring

Old-line factoring

factoring arrangement that provides collection, insurance, and finance for accounts receivable.

Annualized holding period return

The annual rate of return that when compounded t times, would have
given the same t-period holding return as actually occurred from period 1 to period t.

Bank line

line of credit granted by a bank to a customer.

Buy-and-hold strategy

A passive investment strategy with no active buying and selling of stocks from the
time the portfolio is created until the end of the investment horizon.

Capital market line (CML)

The line defined by every combination of the risk-free asset and the market portfolio.

Cash flow time-line

line depicting the operating activities and cash flows for a firm over a particular period.

Characteristic line

The market model applied to a single security. The slope of the line is a security's beta.

Conflict between bondholders and stockholders

These two groups may have interests in a corporation that
conflict. Sources of conflict include dividends, distortion of investment, and underinvestment. Protective
covenants work to resolve these conflicts.

Cross holdings

One corporation holds shares in another firm.

Demand line of credit

A bank line of credit that enables a customer to borrow on a daily or on-demand basis.

Equityholders

Those holding shares of the firm's equity.

Euro lines

lines of credit granted by banks (foreign or foreign branches of U.S. banks) for Eurocurrencies.

Factoring

Sale of a firm's accounts receivable to a financial institution known as a factor.

Gold exchange standard

A system of fixing exchange rates adopted in the Bretton Woods agreement. It
involved the U.S. pegging the dollar to gold and other countries pegging their currencies to the dollar.

Gold standard

An international monetary system in which currencies are defined in terms of their gold
content and payment imbalances between countries are settled in gold. It was in effect from about 1870-1914.

Golden parachute

Compensation paid to top-level management by a target firm if a takeover occurs.

Holder-of-record date

The date on which holders of record in a firm's stock ledger are designated as the
recipients of either dividends or stock rights. Also called date of record.

Holding company

A corporation that owns enough voting stock in another firm to control management and
operations by influencing or electing its board of directors.

Holding period

Length of time that an individual holds a security.

Holding period return

The rate of return over a given period.

Investment product line (IPML)

The line of required returns for investment projects as a function of beta
(nondiversifiable risk).

Line of credit

An informal arrangement between a bank and a customer establishing a maximum loan
balance that the bank will permit the borrower to maintain.

Linear programming

Technique for finding the maximum value of some equation subject to stated linear constraints.

Linear regression

A statistical technique for fitting a straight line to a set of data points.

Log-linear least-squares method

A statistical technique for fitting a curve to a set of data points. One of the
variables is transformed by taking its logarithm, and then a straight line is fitted to the transformed set of data
points.

Line of credit

An informal arrangement between a bank and a customer establishing a maximum loan
balance that the bank will permit the borrower to maintain.

Maturity factoring

factoring arrangement that provides collection and insurance of accounts receivable.

Monetary gold

Gold held by governmental authorities as a financial asset.

Mortgage pipeline

The period from the taking of applications from prospective mortgage borrowers to the
marketing of the loans.

Mortgage-pipeline risk

The risk associated with taking applications from prospective mortgage borrowers
who may opt to decline to accept a quoted mortgage rate within a certain grace period.

Overbought/oversold indicator

An indicator that attempts to define when prices have moved too far and too
fast in either direction and thus are vulnerable to reaction.

Presold issue An issue

that is sold out before the coupon announcement.

Revolving line of credit

A bank line of credit on which the customer pays a commitment fee and can take
down and repay funds according to his needs. Normally the line involves a firm commitment from the bank
for a period of several years.

Security characteristic line

A plot of the excess return on a security over the risk-free rate as a function of
the excess return on the market.

Security market line

line representing the relationship between expected return and market risk.
Security market plane A plane that shows the equilibrium between expected return and the beta coefficient
of more than one factor.
Security selection
See: security selection decision.

Shareholders' equity

This is a company's total assets minus total liabilities. A company's net worth is the
same thing.

Shareholders' letter

A section of an annual report where one can find jargon-free discussions by
management of successful and failed strategies which provides guidance for the probing of the rest of the
report.

Simple linear regression

A regression analysis between only two variables, one dependent and the other explanatory.

Simple linear trend model

An extrapolative statistical model that asserts that earnings have a base level and
grow at a constant amount each period.

Stakeholders

All parties that have an interest, financial or otherwise, in a firm - stockholders, creditors,
bondholders, employees, customers, management, the community, and the government.

Stockholder equity

Balance sheet item that includes the book value of ownership in the corporation. It
includes capital stock, paid in surplus, and retained earnings.

Stockholder

Holder of equity shares in a firm.

Stockholder's books

Set of books kept by firm management for its annual report that follows Financial
Accounting Standards Board rules. The tax books follow IRS tax rules.

Stockholder's equity

The residual claims that stockholders have against a firm's assets, calculated by
subtracting total liabilities from total assets.

Straight line depreciation

An equal dollar amount of depreciation in each accounting period.

Swingline facility

Bank borrowing facility to provide finance while the firm replaces U.S. commercial paper
with eurocommercial paper.

T-period holding-period return

The percentage return over the T-year period an investment lasts.

Threshold for refinancing

The point when the WAC of an MBS is at a level to induce homeowners to
prepay the mortgage in order to refinance to a lower-rate mortgage, generally reached when the WAC of the
MBS is 2% or more above currently available mortgage rates.

Withholding tax

A tax levied by a country of source on income paid, usually on dividends remitted to the
home country of the firm operating in a foreign country. Tax levied on dividends paid abroad.

Cost of goods sold

The cost of merchandise that a company sold this year. For manufacturing companies, the cost of raw
materials, components, labor and other things that went into producing an item.

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:
(Net income) / (Stockholders’ equity)

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:
(Total liabilities) / (Stockholders’ equity)

STOCKHOLDERS’ (OR OWNERS’) EQUITY

The value of the owners’ interests in a company.

STRAIGHT-LINE DEPRECIATION

A depreciation method that depreciates an asset the same amount for each year of its estimated
life.

Cost of goods sold

See cost of sales.

Line item

Generic types of assets, liabilities, income or expense that are common to all businesses and
used as the basis of financial reporting, e.g. rent, salaries, advertising etc.

Shareholders’ funds

The capital invested in a business by the shareholders, including retained profits.

Shareholder value

Increasing the value of the business to its shareholders, achieved through a combination of
dividend and capital growth in the value of the shares.

Cost of goods sold

The cost of the items that were sold during the current period.

Leasehold improvements

The cost of improvements made to property that the company leases.

Shareholders' equity

The total amount of contributed capital and retained earnings; synonymous with stockholders' equity.

Stockholders' equity

The total amount of contributed capital and retained earnings; synonymous with shareholders’ equity.

Straight-line

A method of depreciation.

bottom line

A commonly used term that refers to the net income (profit)
reported by a business, which is the last, or bottom line, in its income
statement. As you undoubtedly know, the term has taken on a much
broader meaning in everyday use, referring to the ultimate or most important
effect or result of something. Not many accounting-based terms have
found their way into everyday language, but this is one that has.

net income (also called the bottom line, earnings, net earnings, and net

operating earnings)
This key figure equals sales revenue for a period
less all expenses for the period; also, any extraordinary gains and losses
for the period are included in this final profit figure. Everything is taken
into account to arrive at net income, which is popularly called the bottom
line. Net income is clearly the single most important number in business
financial reports.

stockholders' equity, statement of changes in

Although often considered
a financial statement, this is more in the nature of a supporting schedule
that summarizes in one place various changes in the owners’ equity
accounts of a business during the period—including the issuance and
retirement of capital stock shares, cash dividends, and other transactions
affecting owners’ equity. This statement (schedule) is very helpful
when a business has more than one class of stock shares outstanding
and when a variety of events occurred during the year that changed its
owners’ equity accounts.

straight-line depreciation

This depreciation method allocates a uniform
amount of the cost of long-lived operating assets (fixed assets) to each
year of use. It is the basic alternative to the accelerated depreciation
method. When using the straight-line method, a business may estimate a
longer life for a fixed asset than when using the accelerated method
(though not necessarily in every case). Both methods are allowed for
income tax and under generally accepted accounting principles (GAAP).

Security Market Line

A graph illustrating the equilibrium relationship between the
expected rate of return on securities and their risk as measured by
the beta coefficient

golden parachute

a benefits package that is triggered by the
termination of a manager’s employment

hold mission

a mission that attempts to protect the business
unit’s market share and competitive position; typically pursued
by a business unit with a large market share in a
high-growth industry

line employee

an employee who is directly responsible for
achieving the organization’s goals and objectives

linear programming

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

Management Accounting Guidelines (MAGs)

pronouncements of the Society of Management Accountants of
Canada that advocate appropriate practices for specific
management accounting situations

product line margin

see segment margin

red-line system

an inventory ordering system in which a red
line is painted on the inventory container at a point deemed
to be the reorder point

regression line

any line that goes through the means (or averages) of the set of observations for an independent variable and its dependent variables; mathematically, there is a line of “best fit,” which is the least squares regression line

timeline

representation of the amounts and timing of all
cash inflows and outflows; it is used in analyzing cash flow
from a capital project

Cost of goods sold

The accumulated total of all costs used to create a product or service,
which is then sold. These costs fall into the general sub-categories of direct
labor, materials, and overhead.

Factoring

The sale of accounts receivable to a third party, with the third party bearing
the risk of loss if the accounts receivable cannot be collected.

Leasehold improvement

This is any upgrade to leased property by a lessee that will be
usable for more than one year, and which exceeds the lessee’s capitalization limit.
It is recorded as a fixed asset and depreciated over a period no longer than the life
of the underlying lease.

Stockholder

A person or entity that owns shares in a corporation.

line of credit

Agreement by a bank that a company may borrow at any time up to an established limit.

security market line

Relationship between expected return and beta.

stakeholder

Anyone with a financial interest in the firm.

straight-line depreciation

Constant depreciation for each year of the asset’s accounting life.

Cold-Turkey Policy

Decreasing inflation by immediately decreasing the money growth rate to a new, low rate. Contrast with gradualism.

45-Degree Line

A line representing equilibrium in the goods and services market, on a diagram with aggregate demand on the vertical axis and aggregate supply on the horizontal axis.

Gold Standard

A fixed exchange rate system in which a currency is directly convertible into gold.

Bill and Hold Practices

Products that have been sold with an explicit agreement that delivery
will occur at a later, often yet-to-be-determined, date.
Capitalize To report an expenditure or accrual as an asset as opposed to expensing it and charging it against earnings currently.

Factoring

The discounting, or sale at a discount, of receivables on a nonrecourse, notification
basis. The purchaser of the accounts receivable, the factor, assumes full risk of collection and
credit losses, without recourse to the firms discounting the receivables. Customers are notified to
remit directly to the factor.

Other-than-Temporary Decline in Market Value

The standard used to describe a decline in market value that is not expected to recover. The use of the other-than-temporary description as
opposed to describing a loss as permanent stresses the fact that the burden of proof is on the
investor who believes a decline is only temporary. That investor must have the intent and financial
ability to hold the investment until its market value recovers. In the absence of an ability to
demonstrate that a decline is temporary, the conclusion must be that a decline in value is other
than temporary, in which case the decline in value must be recognized in income.

Shareholders' Equity

The residual interest or owners' claims on the assets of a corporation
that remain after deducting its liabilities.

Cost of goods sold

The charge to expense of the direct materials, direct labor, and
allocated overhead costs associated with products sold during a defined accounting
period.

Policyholder

This is the person who owns a life insurance policy. This is usually the insured person, but it may also be a relative of the insured, a partnership or a corporation. There are instances in marriage breakup (or relationship breakup with dependent children) where appropriate life insurance on the support provider, owned and paid for by the ex-spouse receiving the support is an acceptable method of ensuring future security.

Factoring

Type of financial service whereby a firm sells or transfers title to its accounts receivable to a factoring company, which then acts as principal, not as agent.

Formalized Line of Credit

A contractual commitment to make loans to a particular borrower up to a specified maximum during a specified period, usually one year.

Line of Credit

An agreement negotiated between a borrower and a lender which establishes the maximum amount against which a borrower may draw. The agreement also sets out other conditions, such as how and when money borrowed against the line of credit is to be repaid.

Operating Line of Credit

A bank's commitment to make loans to a particular borrower up to a specified maximum for a specified period, usually one year.

Shareholder

Owner of one or more shares of stock in a corporation.

Shareholder's Equity

Represents the total assets of a corporation less liabilities.

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