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Pro forma capital structure analysis |
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Definition of Pro forma capital structure analysisPro forma capital structure analysisA method of analyzing the impact of alternative capital structure
Related Terms:"Soft" Capital Rationingcapital rationing that under certain circumstances can be violated or even viewed activity analysisthe process of detailing the various repetitive actions that are performed in making a product or Additional paid-in capitalAmounts in excess of the par value or stated value that have been paid by the public to acquire stock in the company; synonymous with capital in excess of par. Additional paid-in capitalAny payment received from investors for stock that exceeds additional paid-in capitalDifference between issue price and par value of stock. Also called capital surplus. Adjusted Cash Flow Provided by Continuing OperationsCash flow provided by operating After-tax profit marginThe ratio of net income to net sales. ![]() Agency problemConflicts of interest among stockholders, bondholders, and managers. agency problemsConflicts of interest between the firm’s owners and managers. Aggregate Production FunctionAn equation determining aggregate output as a function of aggregate inputs such as labor and capital. Aggressive Capitalization Policiescapitalizing and reporting as assets significant portions of Aggressive Cost CapitalizationCost capitalization that stretches the flexibility within generally Antidilution ProvisionsA clause in a shareholders agreement preventing a company from issuing additional shares, without allowing the current shareholders the opportunity to participate in the offering to avoid dilution of their percentage ownership. Antifraud ProvisionsSpecific sections and rules of the 1933 Act and 1934 Act that are appropriationa budgeted maximum allowable expenditure Appropriation requestformal request for funds for capital investment project. ![]() approximated net realizable value at split-off allocationa method of allocating joint cost to joint products using a Asset substitution problemArises when the stockholders substitute riskier assets for the firm's existing Asymmetric informationInformation that is known to some people but not to other people. authorized share capitalMaximum number of shares that the company is permitted to issue, as specified in the firm’s articles of incorporation. Average cost of capitalA firm's required payout to the bondholders and to the stockholders expressed as a Average Propensity to ConsumeRatio of consumption to disposable income. See also marginal propensity to consume. Average Propensity to SaveRatio of saving to disposable income. See also marginal propensity to save. BARRA's performance analysis (PERFAN)A method developed by BARRA, a consulting firm in Base probability of lossThe probability of not achieving a portfolio expected return. Before-tax profit marginThe ratio of net income before taxes to net sales. benefits-provided rankinga listing of service departments in an order that begins with the one providing the most service ![]() Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit CommitteesA committee formed in response to SEC chairman Arthur Levitt's initiative to improve the financial Book profitThe cumulative book income plus any gain or loss on disposition of the assets on termination of the SAT. Break-even analysisAn analysis of the level of sales at which a project would make zero profit. break-even analysisanalysis of the level of sales at which the company breaks even. Break-Even AnalysisAn analytical technique for studying the relationships between fixed cost, variable cost, and profits. A breakeven chart graphically depicts the nature of breakeven analysis. The breakeven point represents the volume of sales at which total costs equal total revenues (that is, profits equal zero). business process reengineering (BPR)the process of combining information technology to create new and more effective by-productan incidental output of a joint process; it is salable, By-productA product that is an ancillary part of the primary production process, having By-productA material created incidental to a production process, which can be Call protectionA feature of some callable bonds that establishes an initial period when the bonds may not be Call provisionAn embedded option granting a bond issuer the right to buy back all or part of the issue prior CapitalMoney invested in a firm. CAPITALThe money, raised by selling stock or bonds or taking out loans, that you use to start, operate, and grow a business. CapitalThe shareholders’ investment in the business; the difference between the assets and liabilities capitalA very broad term rooted in economic theory and referring to CapitalThe investment by a company’s owners in a business, plus the impact of any Capitala) Physical capital: buildings, equipment, and any materials used to produce other goods and services in the future rather than being consumed today. CapitalExpenditures Purchases of productive long-lived assets, in particular, items of property, CapitalAny asset or stock of assets, financial or physical, capable of producing income. Capital accountNet result of public and private international investment and lending activities. Capital AccountThat part of the balance of payments accounts that records demands for and supplies of a currency arising from purchases or sales of assets. Capital allocationdecision Allocation of invested funds between risk-free assets versus the risky portfolio. capital assetan asset used to generate revenues or cost savings Capital assetA fixed asset, something that is expected to have long-term usage within Capital asset pricing model (CAPM)An economic theory that describes the relationship between risk and Capital Asset Pricing Model (CAPM)A model for estimating equilibrium rates of return and values of capital asset pricing model (CAPM)Theory of the relationship between risk and return which states that the expected risk Capital budgetA firm's set of planned capital expenditures. capital budgetmanagement’s plan for investments in longterm capital budgetList of planned investment projects. Capital budgetingThe process of choosing the firm's long-term capital assets. capital budgetingRefers generally to analysis procedures for ranking Capital BudgetingThe process of ranking and selecting investment alternatives and capital budgetinga process of evaluating an entity’s proposed Capital budgetingThe series of steps one follows when justifying the decision to purchase capital budgeting decisionDecision as to which real assets the firm should acquire. Capital Consumption AllowanceSee depreciation. Capital Cost Allowance (CCA)The annual depreciation expense allowed by the Canadian Income Tax Act. Capital employedThe total of debt and equity, i.e. the total funds in the business. Capital expendituresAmount used during a particular period to acquire or improve long-term assets such as capital expendituresRefers to investments by a business in long-term Capital flightThe transfer of capital abroad in response to fears of political risk. Capital FlowsPurchase by foreigners of our assets (capital inflows) or our purchase of foreign assets (capital outflows). Capital gainWhen a stock is sold for a profit, it's the difference between the net sales price of securities and Capital gainThe gain recognized on the sale of a capital item (fixed asset), calculated Capital GainAn increase in the value of an asset. capital gainThe positive difference between the adjusted cost base of an investment held as a capital property and the proceeds of disposition you receive when you sell it. When you sell such an investment for more than you paid, you realize a capital gain. Capital gains yieldThe price change portion of a stock's return. CAPITAL IN EXCESS OF PAR VALUEWhat a company collected when it sold stock for more than the par value per share. Capital in excess parAmounts in excess of the par value or stated value that have been paid by the public to acquire stock in the company; synonymous with additional paid-in capital. capital investment analysisRefers to various techniques and procedures Capital InvestmentsMoney used to purchase fixed assets for a business, such as land, buildings, or machinery. Also, money invested in a business on the understanding that it will be used to purchase permanent assets rather than to cover day-to-day operating expenses. Capital leaseA lease obligation that has to be capitalized on the balance sheet. Capital leaseA lease in which the lessee obtains some ownership rights over the asset Capital LeaseOne where substantially all of the benefits and risks of ownership are transferred to the lessee. It must be reflected on the company's balance sheet as an asset and corresponding liability. Capital lossThe difference between the net cost of a security and the net sale price, if that security is sold at a loss. capital lossThe negative difference between the adjusted cost base of an investment held as a capital property and the proceeds of disposition you receive when you sell it. When you sell such an investment for less than you paid, you incur a capital loss. Capital marketThe market for trading long-term debt instruments (those that mature in more than one year). Capital marketThe market in which investors buy and sell shares of companies, normally associated with a Stock Exchange. Capital MarketA market that specializes in trading long-term, relatively high risk Capital MarketThe market in which savings are made available to those needing funds to undertake investment projects. A financial market in which longer-term (maturity greater than one year) bonds and stocks are traded. Capital market efficiencyReflects the relative amount of wealth wasted in making transactions. An efficient Capital market imperfections viewThe 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. capital marketsMarkets for long-term financing. Capital MobilityA situation in which assets can easily be purchased by foreigners. Capital rationingPlacing one or more limits on the amount of new investment undertaken by a firm, either capital rationinga condition that exists when there is an capital rationingLimit set on the amount of funds available for investment. capital recoveryRefers to recouping, or regaining, invested capital over capital stockOwnership shares issued by a business corporation. A business Capital StockThe total amount of plant, equipment, and other physical capital. 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