Financial Terms order point

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# Definition of order point

## order point

the level of inventory that triggers the placement
of an order for additional units; it is determined based
on usage, lead time, and safety stock

# Related Terms:

## Order penetration point

The point in the production process when a product is
reserved for a specific customer.

## 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

## Basis point

In the bond market, the smallest measure used for quoting yields is a basis point. Each percentage
point of yield in bonds equals 100 basis points. Basis points also are used for interest rates. An interest rate of
5% is 50 basis points greater than an interest rate of 4.5%.

## Basis Point

One one-hundredth of one percent

## Basis point

One hundredth of one percentage point, or 0.0001.

## Basis Point

One one-hundredth of a percentage point, used to express variations in yields. For example, the difference between 5.36 percent and 5.38 percent is 2 basis points.

## Bond points

A conventional unit of measure for bond prices set at \$10 and equivalent to 1% of the \$100 face
value of the bond. A price of 80 means that the bond is selling at 80% of its face, or par value.

## break-even point (BEP)

the level of activity, in units or dollars, at which total revenues equal total costs

## Breakeven point

The point at which total costs equal total revenue, i.e. where there is neither a profit nor a loss.

## breakeven point

The annual sales volume level at which total contribution
margin equals total annual fixed expenses. The breakeven point is only a
point of reference, not the goal of a business, of course. It is computed by
dividing total fixed expenses by unit margin. The breakeven point is
quite useful in analyzing profit behavior and operating leverage. Also, it
gives manager a good point of reference for setting sales goals and
understanding the consequences of incurring fixed costs for a period.

## Breakeven point

The sales level at which a company, division, or product line makes a
profit of exactly zero, and is computed by dividing all fixed costs by the average
gross margin percentage.

## Buy limit order

A conditional trading order that indicates a security may be purchased only at the designated
price or lower.
Related: Sell limit order.

## Cash-flow break-even point

The point below which the firm will need either to obtain additional financing
or to liquidate some of its assets to meet its fixed costs.

## Cross-border risk

Refers to the volatility of returns on international investments caused by events associated
with a particular country as opposed to events associated solely with a particular economic or financial agent.

## Day order

An order to buy or sell stock that automatically expires if it can't be executed on the day it is entered.

## Delivery points

Those points designated by futures exchanges at which the financial instrument or
commodity covered by a futures contract may be delivered in fulfillment of such contract.

## Discrete order picking

A picking method requiring the sequential completion of
each order before one begins picking the next order.

## economic order quantity

order size that minimizes total inventory costs.

## Economic order quantity (EOQ)

The order quantity that minimizes total inventory costs.

## economic order quantity (EOQ)

an estimate of the number
of units per order that will be the least costly and provide
the optimal balance between the costs of ordering
and the costs of carrying inventory

## engineering change order (ECO)

a business mandate that changes the way in which a product is manufactured or a
service is performed by modifying the design, parts,
process, or even quality of the product or service

## Fill or kill order

A trading order that is canceled unless executed within a designated time period.
Related: open order.

## Free-on-Board (FOB) Shipping Point

A shipping arrangement agreed to between buyer and
seller where title to the goods sold passes when the goods in question are delivered to a common
carrier. When goods are shipped FOB shipping point, revenue is properly recognized when the
goods are delivered to the common carrier.

## job order cost sheet

a source document that provides virtually
all the financial information about a particular job;
the set of all job order cost sheets for uncompleted jobs
composes the Work in Process Inventory subsidiary ledger

## job order costing system

a system of product costing used
by an entity that provides limited quantities of products or
services unique to a customer’s needs; focus of recordkeeping
is on individual jobs

## Limit order

An order to buy a stock at or below a specified price or to sell a stock at or above a specified
price. For instance, you could tell a broker "Buy me 100 shares of XYZ Corp at \$8 or less" or to "sell 100
shares of XYZ at \$10 or better." The customer specifies a price and the order can be executed only if the
market reaches or betters that price. A conditional trading order designed to avoid the danger of adverse
unexpected price changes.

## Limit order book

A record of unexecuted limit orders that is maintained by the specialist. These orders are
treated equally with other orders in terms of priority of execution.

## Make-to-order

A production scheduling system under which products are only
manufactured once a customer order has been received.

## Market order

This is an order to immediately buy or sell a security at the current trading price.

## money order

A guaranteed form of payment in amounts up to and including \$5,000. You might request a money order in order to pay for tuition fees at a university or a college, or for a magazine subscription.

## Negotiable order of withdrawal (NOW)

Demand deposits that pay interest.

## Open (good-til-cancelled) order

An individual investor can place an order to buy or sell a security. That
open order stays active until it is completed or the investor cancels it.

## open purchase ordering

a process by which a single purchase
order that expires at a set or determinable future
date is prepared to authorize a supplier to provide a large
quantity of one or more specified items on an as-requested
basis by the customer

## Order picking

The process of moving items from stock for shipment to customers.

## ordering cost

the variable cost associated with preparing,
receiving, and paying for an order

## Outbound stock point

A designated inventory location on the shop floor between
operations where inventory is stockpiled until needed by the next operation.

## pecking order theory

Firms prefer to issue debt rather than equity if internal finance is insufficient.

## Pecking-order view (of capital structure)

The argument that external financing transaction costs, especially
those associated with the problem of adverse selection, create a dynamic environment in which firms have a
preference, or pecking-order of preferred sources of financing, when all else is equal. Internally generated
funds are the most preferred, new debt is next, debt-equity hybrids are next, and new equity is the least
preferred source.

## Point

The smallest unit of price change quoted or, one one-hundredth of a percent. Related: minimum price
fluctuation and tick.

## Point and figure chart

A price-only chart that takes into account only whole integer changes in price, i.e., a
2-point change. point and figure charting disregards the element of time and is solely used to record changes
in price.

## Point and figure chart

A financial chart usually used to plot asset price data.
Upward price movements are plotted as X’s and downward price movements
are plotted as O’s.

## point of sale (POS)

The terminal at which a customer uses his/her debit card to make a direct payment transaction. See also Interac Direct Payment.

## Point-of-use delivery

A delivery of stock to a location in or near the shop floor
adjacent to its area of use.

## Point-of-use storage

The storage of stock in a location in or near the shop floor
adjacent to its area of use.

## Price value of a basis point (PVBP)

Also called the dollar value of a basis point, a measure of the change in
the price of the bond if the required yield changes by one basis point.

## Sell limit order

Conditional trading order that indicates that a, security may be sold at the designated price or
higher. Related: buy limit order.

## special order decision

a situation in which management must determine a sales price to charge for manufacturing or service jobs outside the company’s normal production/service market

## split-off point

the point at which the outputs of a joint process are first identifiable or can be separated as individual products

## Split-off point

The point in a production process when clearly identifiable joint costs
can be identified within the process.

## Stockpoint

An inventory storage area used for short-term inventory staging.

## Stop-limit order

A stop order that designates a price limit. In contrast to the stop order, which becomes a
market order once the stop is reached, the stop-limit order becomes a limit order once the stop is reached.

## Stop-loss order

An order to sell a stock when the price falls to a specified level.

## Stop order (or stop)

An order to buy or sell at the market when a definite price is reached, either above (on a
buy) or below (on a sell) the price that prevailed when the order was given.

## Turning Point

The trough or peak of a business cycle.

## Beneficiary

This is the person who benefits from the terms of a trust, a will, an RRSP, a RRIF, a LIF, an annuity or a life insurance policy. In relation to RRSP's, RRIF's, LIF's, Annuities and of course life insurance, if the beneficiary is a spouse, parent, offspring or grand-child, they are considered to be a preferred beneficiary. If the insured has named a preferred beneficiary, the death benefit is invariably protected from creditors. There have been some court challenges of this right of protection but so far they have been unsuccessful. See "Creditor Protection" below. A beneficiary under the age of 18 must be represented by an individual guardian over the age of 18 or a public official who represents minors generally. A policy owner may, in the designation of a beneficiary, appoint someone to act as trustee for a minor. Death benefits are not subject to income taxes. If you make your beneficiary your estate, the death benefit will be included in your assets for probate. Probate filing fees are currently \$14 per thousand of estate value in British Columbia and \$15 per thousand of estate value in Ontario.
Another way to avoid probate fees or creditor claims against life insurance proceeds is for the insured person to designate and register with his/her insurance company's head office an irrevocable beneficiary. By making such a designation, the insured gives up the right to make any changes to his/her policy without the consent of the irrevocable beneficiary. Because of the seriousness of the implications, an irrevocable designation should only be made for good reason and where the insured fully understands the consequences.
NoteA successful challenge of the rules relating to beneficiaries was concluded in an Ontario court in 1996. The Insurance Act says its provisions relating to beneficiaries are made "notwithstanding the Succession Law Reform Act." There are two relevent provisions of the Succession Law Reform Act. One section of the act gives a judge the power to make any order concerning an estate if the deceased person has failed to provide for a dependant. Another section says money from a life insurance policy can be considered part of the estate if an order is made to support a dependant. In the case in question, the deceased had attempted to deceive his lawful dependents by making his common-law-spouse the beneficiary of an insurance policy which by court order was supposed to name his ex-spouse and children as beneficiaries.

## Insured Retirement Plan

This is a recently coined phrase describing the concept of using Universal Life Insurance to tax shelter earnings which can be used to generate tax-free income in retirement. The concept has been described by some as "the most effective tax-neutralization strategy that exists in Canada today."
In addition to life insurance, a Universal Life Policy includes a tax-sheltered cash value fund that cannot exceed the policy's face value. Deposits made into the policy are partially used to fund the life insurance and partially grow tax sheltered inside the policy. It should be pointed out that in order for this to work, you must make deposits into this kind of policy well in excess of the cost of the underlying insurance. Investment of the cash value inside the policy are commonly mutual fund type investments. Upon retirement, the policy owner can draw on the accumulated capital in his/her policy by using the policy as collateral for a series of demand loans at the bank. The loans are structured so the sum of money borrowed plus interest never exceeds 75% of the accumulated investment account. The loans are only repaid with the tax free death benefit at the death of the policy holder. Any remaining funds are paid out tax free to named beneficiaries.
Recognizing the value to policy holders of this use of Universal Life Insurance, insurance companies are reworking features of their products to allow the policy holder to ask to have the relationship of insurance to investment growth tracked so that investment growth inside the policy may be maximized. The only potential downside of this strategy is the possibility of the government changing the tax rules to prohibit using a life insurance product in this manner.

## 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.

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