Financial Terms
pre-authorized direct deposit

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Definition of pre-authorized direct deposit

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pre-authorized direct deposit

A system where funds are electronically credited to your account by a financial institution or a payroll service.

Related Terms:

Accelerated depreciation

Any depreciation method that produces larger deductions for depreciation in the
early years of a project's life. Accelerated cost recovery system (ACRS), which is a depreciation schedule
allowed for tax purposes, is one such example.

accelerated depreciation

(1) The estimated useful life of the fixed asset being depreciated is
shorter than a realistic forecast of its probable actual service life;
(2) more of the total cost of the fixed asset is allocated to the first
half of its useful life than to the second half (i.e., there is a
front-end loading of depreciation expense).

Accelerated depreciation

Any of several methods that recognize an increased amount
of depreciation in the earliest years of asset usage. This results in increased tax benefits
in the first few years of asset usage.

Accumulated depreciation

A contra-fixed asset account representing the portion of the cost of a fixed asset that has been previously charged to expense. Each fixed asset account will have its own associated accumulated depreciation account.

accumulated depreciation

A contra, or offset, account that is coupled
with the property, plant, and equipment asset account in which the original
costs of the long-term operating assets of a business are recorded.
The accumulated depreciation contra account accumulates the amount of
depreciation expense that is recorded period by period. So the balance in
this account is the cumulative amount of depreciation that has been
recorded since the assets were acquired. The balance in the accumulated
depreciation account is deducted from the original cost of the assets
recorded in the property, plant, and equipment asset account. The
remainder, called the book value of the assets, is the amount included on
the asset side of a business.

Accumulated depreciation

The sum total of all deprecation expense recognized to date
on a depreciable fixed asset.

Accumulated Other Comprehensive Income

Cumulative gains or losses reported in shareholders'
equity that arise from changes in the fair value of available-for-sale securities, from the
effects of changes in foreign-currency exchange rates on consolidated foreign-currency financial
statements, certain gains and losses on financial derivatives, and from adjustments for underfunded
pension plans.

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Adjustable rate preferred stock (ARPS)

Publicly traded issues that may be collateralized by mortgages and MBSs.

Adjusted present value (APV)

The net present value analysis of an asset if financed solely by equity
(present value of un-levered cash flows), plus the present value of any financing decisions (levered cash
flows). In other words, the various tax shields provided by the deductibility of interest and the benefits of
other investment tax credits are calculated separately. This analysis is often used for highly leveraged
transactions such as a leverage buy-out.

American Depositary Receipts (ADRs)

Certificates issued by a U.S. depositary bank, representing foreign
shares held by the bank, usually by a branch or correspondent in the country of issue. One ADR may
represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If the ADR's
are "sponsored," the corporation provides financial information and other assistance to the bank and may
subsidize the administration of the ADRs. "Unsponsored" ADRs do not receive such assistance. ADRs carry
the same currency, political and economic risks as the underlying foreign share; the prices of the two, adjusted for the SDR/ordinary ratio, are kept essentially identical by arbitrage. American depositary shares(ADSs) are
a similar form of certification.

Annual Premium

Yearly amount payable by a client for a policy or component.


An increase in the perceived or actual value of an asset.


Increase in the value of a currency.

Auction rate preferred stock (ARPS)

Floating rate preferred stock, the dividend on which is adjusted every
seven weeks through a Dutch auction.

authorized share capital

Maximum number of shares that the company is permitted to issue, as specified in the firm’s articles of incorporation.

Authorized shares

Number of shares authorized for issuance by a firm's corporate charter.

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Authorized shares

The number of shares of stock that the company is legally authorized to sell.

Automatic Waiver of Premium

A benefit that automatically forfeits premium payments.

Bull spread

A spread strategy in which an investor buys an out-of-the-money put option, financing it by
selling an out-of-the money call option on the same underlying.

Canadian Deposit Insurance Corporation

Better known as CDIC, this is an organization which insures qualifying deposits and GICs at savings institutions, mainly banks and trust companys, which belong to the CDIC for amounts up to $60,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, annuities of duration of more than five years, and mutual funds.

Certificate of deposit (CD)

Also called a time deposit, this is a certificate issued by a bank or thrift that
indicates a specified sum of money has been deposited. A CD bears a maturity date and a specified interest
rate, and can be issued in any denomination. The duration can be up to five years.

Certificate of Deposit (CD)

A bank deposit that cannot be withdrawn for a specified period of time. See also term deposit.

Committee, AIMR Performance Presentation Standards Implementation Committee

The Association for Investment Management and Research (AIMR)'s Performance presentation Standards Implementation
Committee is charged with the responsibility to interpret, revise and update the AIMR Performance
presentation Standards (AIMR-PPS(TM)) for portfolio performance presentations.

Comprehensive due diligence investigation

The investigation of a firm's business in conjunction with a
securities offering to determine whether the firm's business and financial situation and its prospects are
adequately disclosed in the prospectus for the offering.

control premium

the additional value inherent in the control interest as contrasted to a minority interest, which reflects its power of control

Conversion premium

The percentage by which the conversion price in a convertible security exceeds the
prevailing common stock price at the time the convertible security is issued.

Convertible exchangeable preferred stock

Convertible preferred stock that may be exchanged, at the
issuer's option, into convertible bonds that have the same conversion features as the convertible preferred

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Convertible preferred stock

preferred stock that can be converted into common stock at the option of the holder.

Cost of Preferred Stock

The rate of return required by the investors in the preferred stock of
a company. A component of the cost of capital.

cost presentation

the approach to product costing that determines
how costs are shown on external financial statements
or internal management reports

Credit spread

Related:Quality spread

Cumulative preferred stock

preferred stock whose dividends accrue, should the issuer not make timely
dividend payments. Related: non-cumulative preferred stock.

Default premium

A differential in promised yield that compensates the investor for the risk inherent in
purchasing a corporate bond that entails some risk of default.

default premium

Difference in promised yields between a default-free bond and a riskier bond.

Demand Deposit

A bank deposit that can be withdrawn on demand, such as a deposit in a checking account.

Demand deposits

Checking accounts that pay no interest and can be withdrawn upon demand.

Deposit Creation

The process whereby the banking system transforms a dollar of reserves into several dollars of money supply.

Deposit Switching

Central bank switching of government deposits between the central bank and commercial banks.

Depository transfer check (DTC)

Check made out directly by a local bank to a particular firm or person.

Depository Trust Company (DTC)

DTC is a user-owned securities depository which accepts deposits of
eligible securities for custody, executes book-entry deliveries and records book-entry pledges of securities in
its custody, and provides for withdrawals of securities from its custody.


To allocate the purchase cost of an asset over its life.


A non-cash expense that provides a source of free cash flow. Amount allocated during the
period to amortize the cost of acquiring Long term assets over the useful life of the assets.


A technique by which a company recovers the high cost of its plant-and-equipment assets gradually during the number of years they’ll be used in the business. Depreciation can be physical, technological, or both.


An expense that spreads the cost of an asset over its useful life.


Refers to the generally accepted accounting principle of allocating
the cost of a long-term operating asset over the estimated useful
life of the asset. Each year of use is allocated a part of the original cost of
the asset. Generally speaking, either the accelerated method or the
straight-line method of depreciation is used. (There are other methods,
but they are relatively rare.) Useful life estimates are heavily influenced
by the schedules allowed in the federal income tax law. Depreciation is
not a cash outlay in the period in which the expense is recorded—just
the opposite. The cash inflow from sales revenue during the period
includes an amount to reimburse the business for the use of its fixed
assets. In this respect, depreciation is a source of cash. So depreciation is
added back to net income in the statement of cash flows to arrive at cash
flow from operating activities.


Reduction in value of fixed or tangible assets over some period
for accounting purposes. See Amortization.


Both the decline in value of an asset over time, as well as the gradual
expensing of an asset over time, roughly in accordance with its level of usage or
decline in value through that period.


a) Of capital stock: decline in the value of capital due to its wearing out or becoming obsolete.
b) Of currency: decline in the exchange rate.


The systematic and rational allocation of the cost of property, plant, and equipment
over their useful lives. Refer also to amortization and depletion.


Amortization of fixed assets, such as plant and equipment, so as to allocate the cost over their depreciable life.

Depreciation Allowances

Tax deductions that businesses can claim when they spend money on investment goods.

Depreciation expense

An expense account that represents the portion of the cost of an asset that is being charged to expense during the current period.

Depreciation tax shield

The value of the tax write-off on depreciation of plant and equipment.

depreciation tax shield

Reduction in taxes attributable to the depreciation allowance.


A prolonged period of very low economic activity with large-scale unemployment.

direct cost

a cost that is distinctly traceable to a particular cost object

Direct cost

A cost that can be clearly associated with specific activities or products.

direct costing

see variable costing

Direct costing

A costing methodology that only assigns direct labor and material costs
to a product, and which does not include any allocated indirect costs (which are all
charged off to the current period).

Direct costs

Costs that are readily traceable to particular products or services.

Direct Deposit

The direct transfer of payroll funds from the company bank account
directly into that of the employee, avoiding the use of a paycheck.

direct deposit

A system where funds are electronically credited to your account by a financial institution or a payroll service. For example, you can arrange with your employer to have your pay cheques automatically deposited into your no fee bank account.

Direct estimate method

A method of cash budgeting based on detailed estimates of cash receipts and cash
disbursements category by category.

direct labor

the time spent by individuals who work specifically
on manufacturing a product or performing a service;
the cost of such time

Direct labor

Labor that is specifically incurred to create a product.

Direct lease

Lease in which the lessor purchases new equipment from the manufacturer and leases it to the

direct material

a readily identifiable part of a product; the cost of such a part

Direct materials cost

The cost of all materials used in a cost object, such as finished goods.

Direct materials mix variance

The variance between the budgeted and actual mixes of
direct materials costs, both using the actual total quantity used. This variance isolates
the unit cost of each item, excluding all other variables.

Direct method

A method of preparing the operating section of the Statement of Cash Flows that uses the company’s actual cash inflows and cash outflows.

direct method

a service department cost allocation approach
that assigns service department costs directly to revenueproducing
areas with only one set of intermediate cost
pools or allocations

Direct-Method Format

A format for the operating section of the cash-flow statement that reports actual cash receipts and cash disbursements from operating activities.

Direct paper

Commercial paper sold directly by the issuer to investors.

Direct placement

Selling a new issue not by offering it for sale publicly, but by placing it with one of several
institutional investors.

Direct quote

For foreign exchange, the number of U.S. dollars needed to buy one unit of a foreign currency.

Direct-Response Advertising

Advertising designed to elicit sales to customers who can be
shown to have responded specifically to the advertising in the past. Such costs can be capitalized
when persuasive historical evidence permits formulation of a reliable estimate of the future revenue
that can be obtained from incremental advertising expenditures.

Direct search market

Buyers and sellers seek each other directly and transact directly.

Direct stock-purchase programs

The purchase by investors of securities directly from the issuer.

Direct write-off method

A method of adjusting accounts receivable to the amount that is expected to be collected by eliminating the account balances of specific nonpaying customers.


A member of a company’s Board of directors.

Double-declining-balance depreciation

Method of accelerated depreciation.

Earnings before interest, taxes, depreciation and amortization (EBITDA)

The operating profit before deducting interest, tax, depreciation and amortization.

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working
capital provided by operations before interest and taxes.

EBDDT - Earnings before depreciation and deferred taxes

This measure is used principally by
firms in the real estate industry, with the exception of real estate investment trusts, which typically
do not pay taxes.

Effective spread

The gross underwriting spread adjusted for the impact of the announcement of the common
stock offering on the firm's share price.

Electronic depository transfers

The transfer of funds between bank accounts through the Automated
Clearing House (ACH) system.

Eurocurrency deposit

A short-term fixed rate time deposit denominated in a currency other than the local
currency (i.e. US$ deposited in a London bank).

Federal Deposit Insurance Corporation (FDIC)

A federal institution that insures bank deposits.

FHA prepayment experience

The percentage of loans in a pool of mortgages outstanding at the origination
anniversary, based on annual statistical historic survival rates for FHA-insured mortgages.

Financial press

That portion of the media devoted to reporting financial news.

Floating-rate preferred

preferred stock paying dividends that vary with short-term interest rates.

Foreign direct investment (FDI)

The acquisition abroad of physical assets such as plant and equipment, with
operating control residing in the parent corporation.

Forward premium

A currency trades at a forward premium when its forward price is higher than its spot price.

Great Depression

The period of very high unemployment during the early 1930s.

Gross spread

The fraction of the gross proceeds of an underwritten securities offering that is paid as
compensation to the underwriters of the offering.

Horizontal spread

The simultaneous purchase and sale of two options that differ only in their exercise date.

indirect cost

a cost that cannot be traced explicitly to a particular
cost object; a common cost

Indirect cost

A cost that is not directly associated with a single activity or event. Such
costs are frequently clumped into an overhead pool and allocated to various activities,
based on an allocation method that has a perceived or actual linkage between
the indirect cost and the activity.

Indirect costs

Costs that are necessary to produce a product/service but are not readily traceable to particular products or services – see overhead.







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