|Personal tax view (of capital structure)
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Definition of Personal tax view (of capital structure)
Personal tax view (of capital structure)
The argument that the difference in personal tax rates between
The ratio of net income to net sales.
Money after-tax rate of return minus the inflation rate.
The argument that specifies that the various agency costs create a complex environment in
A situation wherein participants in a transaction have different net tax rates.
A firm's required payout to the bondholders and to the stockholders expressed as a
taxes as a fraction of income; total taxes divided by total taxable income.
The argument that expected indirect and direct bankruptcy costs offset the other
The argument that expected bankruptcy costs preclude firms from being financed entirely
The ratio of net income before taxes to net sales.
The tax rate at which a party to a prospective transaction is indifferent between entering
Money invested in a firm.
Net result of public and private international investment and lending activities.
decision Allocation of invested funds between risk-free assets versus the risky portfolio.
An economic theory that describes the relationship between risk and
A firm's set of planned capital expenditures.
The process of choosing the firm's long-term capital assets.
Amount used during a particular period to acquire or improve long-term assets such as
The transfer of capital abroad in response to fears of political risk.
When a stock is sold for a profit, it's the difference between the net sales price of securities and
Capital gains yield
The price change portion of a stock's return.
A lease obligation that has to be capitalized on the balance sheet.
The difference between the net cost of a security and the net sale price, if that security is sold at a loss.
The market for trading long-term debt instruments (those that mature in more than one year).
Capital market efficiency
Reflects the relative amount of wealth wasted in making transactions. An efficient
Capital market imperfections view
The view that issuing debt is generally valuable but that the firm's
Capital market line (CML)
The line defined by every combination of the risk-free asset and the market portfolio.
Placing one or more limits on the amount of new investment undertaken by a firm, either
The makeup of the liabilities and stockholders' equity side of the balance sheet, especially
Amounts of directly contributed equity capital in excess of the par value.
The debt and/or equity mix that fund a firm's assets.
A method of constructing a replicating portfolio in which the manager purchases a
Also called financial leverage ratios, these ratios compare debt to total capitalization
A table showing the capitalization of a firm, which typically includes the amount of
Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures
Interest that is not immediately expensed, but rather is considered as an asset and is then
Cash flow after interest and taxes
Net income plus depreciation.
Complete capital market
A market in which there is a distinct marketable security for each and every
Corporate tax view
The argument that double (corporate and individual) taxation of equity returns makes
Corporate taxable equivalent
Rate of return required on a par bond to produce the same after-tax yield to
Cost of capital
The required return for a capital budgeting project.
Cost of limited partner capital
The discount rate that equates the after-tax inflows with outflows for capital
Total par value (number of shares issued, multiplied by the par value of each share). Also
A non-cash expense that provides a source of free cash flow. Amount allocated during the
Depreciation tax shield
The value of the tax write-off on depreciation of plant and equipment.
Agreement between two countries that taxes paid abroad can be offset against
Earnings before interest and taxes (EBIT)
A financial measure defined as revenues less cost of goods sold
Efficient capital market
A market in which new information is very quickly reflected accurately in share
Equivalent taxable yield
The yield that must be offered on a taxable bond issue to give the same after-tax
Foreign tax credit
Home country credit against domestic income tax for foreign taxes paid on foreign
Hard capital rationing
capital rationing that under no circumstances can be violated.
The unique capabilities and expertise of individuals.
Imputation tax system
Arrangement by which investors who receive a dividend also receive a tax credit for
Interest equalization tax
tax on foreign investment by residents of the U.S. which was abolished in 1974.
Interest tax shield
The reduction in income taxes that results from the tax-deductibility of interest payments.
Investment tax credit
Proportion of new capital investment that can be used to reduce a company's tax bill
Issued share capital
Total amount of shares that are in issue. Related: outstanding shares.
Value at which a company's shares are recorded in its books.
Limited-tax general obligation bond
A general obligation bond that is limited as to revenue sources.
Liquidity theory of the term structure
A biased expectations theory that asserts that the implied forward
Indicator of financial leverage. Shows long-term debt as a proportion of the
Marginal tax rate
The tax rate that would have to be paid on any additional dollars of taxable income earned.
The total dollar value of all outstanding shares. Computed as shares times current
Market capitalization rate
Expected return on a security. The market-consensus estimate of the appropriate
Net working capital
Current assets minus current liabilities. Often simply referred to as working capital.
Nondiversifiability of human capital
The difficulty of diversifying one's human capital (the unique
Opportunity cost of capital
Expected return that is foregone by investing in a project rather than in
In the balance of payments, other capital is a residual category that groups all the capital
Outstanding share capital
Issued share capital less the par value of shares that are held in the company's treasury.
Pecking-order view (of capital structure)
The argument that external financing transaction costs, especially
Perfect capital market
A market in which there are never any arbitrage opportunities.
Perfect market view (of capital structure)
Analysis of a firm's capital structure decision, which shows the
Perfect market view (of dividend policy)
Analysis of a decision on dividend policy, in a perfect capital
An interest in an asset held by a trustee for the benefit of another person.
Pie model of capital structure
A model of the debt/equity ratio of the firms, graphically depicted in slices of
Planned capital expenditure program
capital expenditure program as outlined in the corporate financial plan.
Pro forma capital structure analysis
A method of analyzing the impact of alternative capital structure
A periodic review of a capital investment project to evaluate its continued economic viability.
Progressive tax system
A tax system wherein the average tax rate increases for some increases in income but
Wealth that can be represented in financial terms, such as savings account balances, financial
Short-term tax exempts
Short-term securities issued by states, municipalities, local housing agencies, and
Signaling view (on dividend policy)
The argument that dividend changes are important signals to investors
"Soft" Capital Rationing
capital rationing that under certain circumstances can be violated or even viewed
Split-rate tax system
A tax system that taxes retained earnings at a higher rate than earnings that are
Static theory of capital structure
Theory that the firm's capital structure is determined by a trade-off of the
Structured arbitrage transaction
A self-funding, self-hedged series of transactions that usually utilize
Debt that has been customized for the buyer, often by incorporating unusual options.
Structured portfolio strategy
A strategy in which a portfolio is designed to achieve the performance of some
An agreement in settlement of a lawsuit involving specific payments made over a
Taking a view
A London expression for forming an opinion as to where market prices are headed and acting on it.
TANs (tax anticipation notes)
tax anticipation notes issued by states or municipalities to finance current
Tax anticipation bills (TABs)
Special bills that the Treasury occasionally issues that mature on corporate
Set of books kept by a firm's management for the IRS that follows IRS rules. The stockholder's
Tax clawback agreement
An agreement to contribute as equity to a project the value of all previously
Tax differential view ( of dividend policy)
The view that shareholders prefer capital gains over dividends,
The municipal bond market where state and local governments raise funds. Bonds issued
Tax free acquisition
A merger or consolidation in which 1) the acquirer's tax basis in each asset whose
A nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific
Tax Reform Act of 1986
A 1986 law involving a major overhaul of the U.S. tax code.
The reduction in income taxes that results from taking an allowable deduction from taxable income.
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