Definition of Regulation M

Regulation M

Fed regulation currently requiring member banks to hold reserves against their net borrowings
from their foreign branches over a 28-day averaging period. Reg M has also required member banks to hold
reserves against Eurodollars lent by their foreign branches to domestic corporations for domestic purposes.

Regulation D

Fed regulation currently that required member banks to hold reserves against their net
borrowings from foreign offices of other banks over a 28-day averaging period. regulation D has been
merged with regulation M.

Accelerated cost recovery system (ACRS)

Schedule of depreciation rates allowed for tax purposes.

Accidental Death and Dismemberment

Coverage that provides a lump-sum payment to you or your survivors if an accident results in the loss of a limb, paralysis or your death.

Accidental Dismemberment: (Credit Insurance)

Provides additional financial security should an insured person be dismembered or lose the use of a limb as the result of an accident.

Accounting Irregularities

Intentional misstatements or omissions of amounts or disclosures in
financial statements done to deceive financial statement users. The term is used interchangeably with fraudulent financial reporting.

Accounting period

The period of time for which financial statements are produced – see also financial year.

Accounts Payable Days (A/P Days)

The number of days it would take to pay the ending balance
in accounts payable at the average rate of cost of goods sold per day. Calculated by dividing
accounts payable by cost of goods sold per day, which is cost of goods sold divided by 365.

Accounts Receivable Days (A/R Days)

The number of days it would take to collect the ending
balance in accounts receivable at the year's average rate of revenue per day. Calculated as
accounts receivable divided by revenue per day (revenue divided by 365).

Accounts receivable turnover

The ratio of net credit sales to average accounts receivable, a measure of how
quickly customers pay their bills.

accounts receivable turnover ratio

A ratio computed by dividing annual
sales revenue by the year-end balance of accounts receivable. Technically
speaking, to calculate this ratio the amount of annual credit sales should
be divided by the average accounts receivable balance, but this information
is not readily available from external financial statements. For
reporting internally to managers, this ratio should be refined and finetuned
to be as accurate as possible.

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.

acid test ratio (also called the quick ratio)

The sum of cash, accounts receivable, and short-term marketable
investments (if any) is divided by
total current liabilities to compute this ratio. Suppose that the short-term
creditors were to pounce on a business and not agree to roll over the
debts owed to them by the business. In this rather extreme scenario, the
acid test ratio reveals whether its cash and near-cash assets are enough
to pay its short-term current liabilities. This ratio is an extreme test that
is not likely to be imposed on a business unless it is in financial straits.
This ratio is quite relevant when a business is in a liquidation situation
or bankruptcy proceedings.

Aggregate Demand

Total quantity of goods and services demanded.

Aggregate Demand Curve

Combinations of the price level and income for which the goods and services market is in equilibrium, or for which both the goods and services market and the money market are in equilibrium.

Aggregate Expenditure Curve

AggRegate demand for goods and services drawn as a function of the level of national income.

Aggregate planning

A budgeting process using summary-level information to
derive various budget models, usually at the product family level.

Aggregate Production Function

An equation determining aggRegate output as a function of aggRegate inputs such as labor and capital.

Aggregate Supply

Total quantity of goods and services supplied.

Aggregate Supply Curve

Combinations of price level and income for which the labor market is in equilibrium. The short-run aggRegate supply curve incorporates information and price/wage inflexibilities in the labor market, whereas the long-run aggRegate supply curve does not.

Aggregation

Process in corporate financial planning whereby the smaller investment proposals of each of the
firm's operational units are added up and in effect treated as a big picture.

Annualized holding period return

The annual rate of return that when compounded t times, would have
given the same t-period holding return as actually occurred from period 1 to period t.

Annuity Period

The time between each payment under an annuity.

applied overhead

the amount of overhead that has been assigned to Work in Process Inventory as a result of productive activity; credits for this amount are to an overhead account

approximated net realizable value at split-off allocation

a method of allocating joint cost to joint products using a
simulated net realizable value at the split-off point; approximated
value is computed as final sales price minus
incremental separate costs

Asset Coverage

Extent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position.

Asset-coverage test

A bond indenture restriction that permits additional borrowing on if the ratio of assets to
debt does not fall below a specified minimum.

Asset turnover

The ratio of net sales to total assets.

asset turnover

a ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets

asset turnover ratio

A broad-gauge ratio computed by dividing annual
sales revenue by total assets. It is a rough measure of the sales-generating
power of assets. The idea is that assets are used to make sales, and the
sales should lead to profit. The ultimate test is not sales revenue on
assets, but the profit earned on assets as measured by the return on
assets (ROA) ratio.

Autoregressive

Using past data to predict future data.

Average (across-day) measures

An estimation of price that uses the average or representative price of a
large number of trades.

Average Amortization Period

The average useful life of a company's collective amortizable asset base.

Average Collection Period

Average number of days necessary to receive cash for the sale of
a company's products. It is calculated by dividing the value of the
accounts receivable by the average daily sales for the period.

Average collection period, or days' receivables

The ratio of accounts receivables to sales, or the total
amount of credit extended per dollar of daily sales (average AR/sales * 365).

Bank overdraft

Money owed to the bank in a cheque account where payments exceed receipts.

Bargain-purchase-price option

Gives the lessee the option to purchase the asset at a price below fair market
value when the lease expires.

Bill and Hold Practices

Products that have been sold with an explicit agreement that delivery
will occur at a later, often yet-to-be-determined, date.
Capitalize To report an expenditure or accrual as an asset as opposed to expensing it and charging it against earnings currently.

Bond-equivalent basis

The method used for computing the bond-equivalent yield.

Bond equivalent yield

Bond yield calculated on an annual percentage rate method. Differs from annual
effective yield.

Bond-equivalent yield

The annualized yield to maturity computed by doubling the semiannual yield.

Bond Equivalent Yield

Bond yield calculated on an annual percentage rate method

Buy-and-hold strategy

A passive investment strategy with no active buying and selling of stocks from the
time the portfolio is created until the end of the investment horizon.

capital recovery

Refers to recouping, or Regaining, invested capital over
the life of an investment. The pattern of period-by-period capital recovery
is very important. In brief, capital recovery is the return of capital—
not the return on capital, which refers to the rate of earnings on the
amount of capital invested during the period. The returns from an
investment have to be sufficient to provide for both recovery of capital
and an adequate rate of earnings on unrecovered capital period by
period. Sorting out how much capital is recovered each period is relatively
easy if you use a spreadsheet model for capital investment analysis.
In contrast, using a mathematical method of analysis does not
provide this period-by-period capital recovery information, which is a
major disadvantage.

Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized against

future-period revenue.

CASH AND CASH EQUIVALENTS

The balance in a company’s checking account(s) plus short-term or temporary investments (sometimes called “marketable securities”), which are highly liquid.

Cash and equivalents

The value of assets that can be converted into cash immediately, as reported by a
company. Usually includes bank accounts and marketable securities, such as government bonds and Banker's
Acceptances. Cash equivalents on balance sheets include securities (e.g., notes) that mature within 90 days.

Cash equivalent

A short-term security that is sufficiently liquid that it may be considered the financial
equivalent of cash.

Cash-equivalent items

Temporary investments of currently excess cash in short-term, high-quality
investment media such as treasury bills and Banker's Acceptances.

Cash Equivalents

Highly liquid, fixed-income investments with original maturities of three months or less.

Cash Equivalents

Instruments or investments of such high liquidity and safety that they are virtually equal to cash.

Cash flow coverage ratio

The number of times that financial obligations (for interest, principal payments,
preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental
payments, and depreciation.

Cash Turnover

The number of cash cycles completed in one year.

Certainty equivalent

An amount that would be accepted in lieu of a chance at a possible higher, but
uncertain, amount.

Clearing member

A member firm of a clearing house. Each clearing member must also be a member of the
exchange. Not all members of the exchange, however, are members of the clearing organization. All trades of
a non-clearing member must be Registered with, and eventually settled through, a clearing member.

Closing purchase

A transaction in which the purchaser's intention is to reduce or eliminate a short position in
a stock, or in a given series of options.

Common stock equivalent

A convertible security that is traded like an equity issue because the optioned
common stock is trading high.

Common stock/other equity

Value of outstanding common shares at par, plus accumulated retained
earnings. also called shareholders' equity.

Compounding period

The length of the time period (for example, a quarter in the case of quarterly
compounding) that elapses before interest compounds.

compounding period

the time between each interest computation

Conflict between bondholders and stockholders

These two groups may have interests in a corporation that
conflict. Sources of conflict include dividends, distortion of investment, and underinvestment. Protective
covenants work to resolve these conflicts.

Consortium banks

A merchant banking subsidiary set up by several banks that may or may not be of the
same nationality. Consortium banks are common in the Euromarket and are active in loan syndication.

Controlled foreign corporation (CFC)

A foreign corporation whose voting stock is more than 50% owned
by U.S. stockholders, each of whom owns at least 10% of the voting power.

Cookie Jar Reserves

An overly aggressive accrual of operating expenses and the creation of
liability accounts done in an effort to reduce future-year operating expenses.

Corporate taxable equivalent

Rate of return required on a par bond to produce the same after-tax yield to
maturity that the premium or discount bond quoted would.

Coupon equivalent yield

True interest cost expressed on the basis of a 365-day year.

Cover

The purchase of a contract to offset a previously established short position.

Coverage ratios

Ratios used to test the adequacy of cash flows generated through earnings for purposes of
meeting debt and lease obligations, including the interest coverage ratio and the fixed charge coverage ratio.

Coverdell Education IRA

A form of individual retirement account whose earnings
during the period when funds are stored in the IRA will be tax free at the
time when they are used to pay for the cost of advanced education.

Covered call

A short call option position in which the writer owns the number of shares of the underlying
stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the
stock does not have to be bought at the market price, if the holder of that option decides to exercise it.

Covered call writing strategy

A strategy that involves writing a call option on securities that the investor
owns in his or her portfolio. See covered or hedge option strategies.

Covered interest arbitrage

A portfolio manager invests dollars in an instrument denominated in a foreign
currency and hedges his resulting foreign exchange risk by selling the proceeds of the investment forward for
dollars.

Covered or hedge option strategies

Strategies that involve a position in an option as well as a position in the
underlying stock, designed so that one position will help offset any unfavorable price movement in the other,
including covered call writing and protective put buying. Related: naked strategies

Covered Put

A put option position in which the option writer also is short the corresponding stock or has
deposited, in a cash account, cash or cash equivalents equal to the exercise of the option. This limits the
option writer's risk because money or stock is already set aside. In the event that the holder of the put option
decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put
option.

Credit period

The length of time for which the customer is granted credit.

Critical Growth Periods

Times in a company's history when growth is essential and without which survival of the business might be in jeopardy.

Cross holdings

One corporation holds shares in another firm.

Crossover rate

The return at which two alternative projects have the same net present value.

Day order

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

Day trading

Refers to establishing and liquidating the same position or positions within one day's trading.

Days in receivables

Average collection period.

Days' sales in inventory ratio

The average number of days' worth of sales that is held in inventory.

Days' sales outstanding

Average collection period.

Days Statistics

Measures the number days' worth of sales in accounts receivable (accounts receivable
days) or days' worth of sales at cost in inventory (inventory days). Sharp increases in these measures
might indicate that the receivables are not collectible and that the inventory is not salable.

Debt-service coverage ratio

Earnings before interest and income taxes plus one-third rental charges, divided
by interest expense plus one-third rental charges plus the quantity of principal repayments divided by one
minus the tax rate.

Direct stock-purchase programs

The purchase by investors of securities directly from the issuer.

Discount period

The period during which a customer can deduct the discount from the net amount of the bill
when making payment.

Discounted payback period rule

An investment decision rule in which the cash flows are discounted at an
interest rate and the payback rule is applied on these discounted cash flows.

Doctrine of sovereign immunity

Doctrine that says a nation may not be tried in the courts of another country
without its consent.

Dollar Cost Averaging

A way of smoothing out your investment deposits by investing Regularly. Instead of making one large deposit a year into your RRSP, you make smaller Regular monthly deposits. If you are buying units in a mutual fund or segRegated equity fund, you would end up buying more units in the month that values were low and less units in the month that values were higher. By spreading out your purchases, you don't have to worry about buying at the right time.

dollar days (of inventory)

a measurement of the value of inventory for the time that inventory is held

Domestic International Sales Corporation (DISC)

A U.S. corporation that receives a tax incentive for
export activities.

Domestic market

Part of a nation's internal market representing the mechanisms for issuing and trading
securities of entities domiciled within that nation. Compare external market and foreign market.

Edge corporations

Specialized banking institutions, authorized and chartered by the Federal Reserve Board
in the U.S., which are allowed to engage in transactions that have a foreign or international character. They
are not subject to any restrictions on interstate banking. foreign banks operating in the U.S. are permitted to
organize and own and Edge corporation.

Electronic Federal Tax Payment Systems (EFTPS)

An electronic funds transfer system used by businesses to remit taxes to the government.

Equityholders

Those holding shares of the firm's equity.

Equivalent annual annuity

The equivalent amount per year for some number of years that has a present
value equal to a given amount.

Equivalent annual benefit

The equivalent annual annuity for the net present value of an investment project.

Equivalent annual cash flow

Annuity with the same net present value as the company's proposed investment.

Equivalent annual cost

The equivalent cost per year of owning an asset over its entire life.

equivalent annual cost

The cost per period with the same present value as the cost of buying and operating a machine.

Equivalent bond yield

Annual yield on a short-term, non-interest bearing security calculated so as to be
comparable to yields quoted on coupon securities.

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