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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:
Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid
The discount rate that reflects only the business risks of a project and abstracts from the
The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard
Legal document establishing a corporation and its structure and purpose.
The ratio of total assets to stockholder equity.
ratios that measure how effectively the firm is managing its assets.
A management style that de-emphasizes the significance of economic
Placing one or more limits on the amount of new investment undertaken by a firm, either
Also called financial leverage ratios, these ratios compare debt to total capitalization
The number of times that financial obligations (for interest, principal payments,
A firm's net cash inflow resulting directly from its regular operations
The proportion of a firm's assets held as cash.
Value of outstanding common shares at par, plus accumulated retained
ratios that are designed to measure the relative claims of stockholders to earnings
A single centralized account into which funds collected at regional locations
Movement of cash from different lockbox locations into a single concentration
Conflict between bondholders and stockholders
These two groups may have interests in a corporation that
Controlled foreign corporation (CFC)
A foreign corporation whose voting stock is more than 50% owned
The number of shares of common stock that the security holder will receive from
A legal "person" that is separate and distinct from its owners. A corporation is allowed to own
The net present value of an investment divided by the investment's initial cost. Also called
ratios used to test the adequacy of cash flows generated through earnings for purposes of
Indicator of short-term debt paying ability. Determined by dividing current assets by current
Customary payout ratios
A range of payout ratios that is typical based on an analysis of comparable firms.
Days' sales in inventory ratio
The average number of days' worth of sales that is held in inventory.
Indicator of financial leverage. Compares assets provided by creditors to assets provided
Ability to borrow. The amount a firm can borrow up to the point where the firm value no
The amount of borrowing that leasing displaces. Firms that do a lot of leasing will be
An asset requiring fixed dollar payments, such as a government or corporate bond.
The amplification of the return earned on equity when an investment or firm is financed
A bond covenant that restricts in some way the firm's ability to incur additional indebtedness.
The market for trading debt instruments.
Total debt divided by total assets.
Reducing the principal and/or interest payments on LDC loans.
IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
Interest payment plus repayments of principal to creditors, that is, retirement of debt.
Debt service parity approach
An analysis wherein the alternatives under consideration will provide the firm
Debt-service coverage ratio
Earnings before interest and income taxes plus one-third rental charges, divided
A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank
Debtor in possession
A firm that is continuing to operate under Chapter 11 bankruptcy process.
New debt obtained by a firm during the Chapter 11 bankruptcy process.
The date on which a firm's directors meet and announce the date and amount of the next
A common term for convertible bonds because of their equity component and the
Dividend payout ratio
Percentage of earnings paid out as dividends.
The product of modified duration and the initial price.
Domestic International Sales Corporation (DISC)
A U.S. corporation that receives a tax incentive for
Dual syndicate equity offering
An international equity placement where the offering is split into two
A common gauge of the price sensitivity of an asset or portfolio to a change in interest rates.
Earnings retention ratio
Specialized banking institutions, authorized and chartered by the Federal Reserve Board
The duration calculated using the approximate duration formula for a bond with an
Represents ownership interest in a firm. Also the residual dollar value of a futures trading account,
An agreement in which one party, for an upfront premium, agrees to compensate the other at
Also called a residual claim, a claim to a share of earnings after debt obligation have been
The simultaneous purchase of an equity floor and sale of an equity cap.
Equity contribution agreement
An agreement to contribute equity to a project under certain specified
An agreement in which one party agrees to pay the other at specific time periods if a specific
Used to refer to warrants because they are usually issued attached to privately placed bonds.
Total assets divided by total common stockholders' equity; the amount of total assets per
Securities that give the holder the right to buy or sell a specified number of shares of stock, at
A swap in which the cash flows that are exchanged are based on the total return on some stock
Related: Variable life
Those holding shares of the firm's equity.
Securities sold in the Euromarket. That is, securities initially sold to investors
The percentage of the assets that were spent to run a mutual fund (as of the last annual
The time when the option contract ceases to exist (expires).
An expiration cycle relates to the dates on which options on a particular security expire. A
The last day (in the case of American-style) or the only day (in the case of European-style)
Feasible target payout ratios
Payout ratios that are consistent with the availability of excess funds to make
Federal Deposit Insurance Corporation (FDIC)
A federal institution that insures bank deposits.
Financial leverage ratios
Related: capitalization ratios.
The result of dividing one financial statement item by another. ratios help analysts interpret
Firm's net value of debt
Total firm value minus total firm debt.
Fisher's separation theorem
The firm's choice of investments is separate from its owner's attitudes towards
Fixed asset turnover ratio
The ratio of sales to fixed assets.
Fixed-charge coverage ratio
A measure of a firm's ability to meet its fixed-charge obligations: the ratio of
Foreign equity market
That portion of the domestic equity market that represents issues floated by foreign companies.
Foreign Sales Corporation (FSC)
A special type of corporation created by the Tax Reform Act of 1984 that
Freddie Mac (Federal Home Loan Mortgage Corporation)
A Congressionally chartered corporation that
debt maturing after more than one year.
The ratio of a pension plan's assets to its liabilities.
Funds From Operations (FFO)
Used by real estate and other investment trusts to define the cash flow from
GEMs (growing-equity mortgages)
Mortgages in which annual increases in monthly payments are used to
Hard capital rationing
Capital rationing that under no circumstances can be violated.
Hedge ratio (delta)
The ratio of volatility of the portfolio to be hedged and the return of the volatility of the
Income statement (statement of operations)
A statement showing the revenues, expenses, and income (the
Interest coverage ratio
The ratio of the earnings before interest and taxes to the annual interest expense. This
Interest rate on debt
The firm's cost of debt capital.
The balance of a margin account. Related: buying on margin, initial margin requirement.
Irrational call option
The implied call imbedded in the MBS. Identified as irrational because the call is
Junior debt (subordinate debt)
debt whose holders have a claim on the firm's assets only after senior
Measures of the relative contribution of stockholders and creditors, and of the firm's ability
Stock in a firm that relies on financial leverage. Holders of leveraged equity face the
ratios that measure a firm's ability to meet its short-term financial obligations on time.
An obligation having a maturity of more than one year from the date it was issued. Also
Indicator of financial leverage. Shows long-term debt as a proportion of the
Long-term debt ratio
The ratio of long-term debt to total capitalization.
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