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Financial Terms | |
Restrictive covenants |
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Definition of Restrictive covenantsRestrictive covenantsProvisions that place constraints on the operations of borrowers, such as restrictions on
Related Terms:CovenantsProvisions in a bond indenture or preferred stock agreement that require the bond or preferred CovenantsPromise usually made in a contract whereby a party to the contract promises to do or not to do specified things. Financial CovenantsA promise made related to financial conditions or events. Often a promise not to allow certain balance sheet items or ratios to fall below an agreed level. Usually found in loan documents, as a protection mechanism. Loan CovenantsExpress stipulations included in loan agreements that are designed to monitor Negative Loan CovenantsLoan covenants designed to limit a corporate borrower's behavior Positive Loan CovenantsLoan covenants expressing minimum and maximum financial measures "Soft" Capital Rationingcapital rationing that under certain circumstances can be violated or even viewed ![]() Abandonment optionThe option of terminating an investment earlier than originally planned. Accrual bondA bond on which interest accrues, but is not paid to the investor during the time of accrual. Acquisition of assetsA merger or consolidation in which an acquirer purchases the selling firm's assets. Acquisition of stockA merger or consolidation in which an acquirer purchases the acquiree's stock. Act of state doctrineThis doctrine says that a nation is sovereign within its own borders and its domestic 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. Adjustable rate preferred stock (ARPS)Publicly traded issues that may be collateralized by mortgages and MBSs. ![]() Adjusted Cash Flow Provided by Continuing OperationsCash flow provided by operating Affirmative covenantA bond covenant that specifies certain actions the firm must take. Aggressive Capitalization Policiescapitalizing and reporting as assets significant portions of Aggressive Cost CapitalizationCost capitalization that stretches the flexibility within generally Allocation base A measure of activity or volume such as labourhours, machine hours or volume of production Allowance for doubtful accountsA contra account related to accounts receivable that represents the amounts that the company expects will not be collected. Allowance for Doubtful AccountsAn estimate of the uncollectible portion of accounts receivable American Stock Exchange (AMEX)The second-largest stock exchange in the United States. It trades 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 AssetsA firm's productive resources. ![]() ASSETSAnything of value that a company owns. Assetsthings that the business owns. AssetsItems owned by the company or expenses that have been paid for but have not been used up. Assets requirementsA common element of a financial plan that describes projected capital spending and the Auction rate preferred stock (ARPS)Floating rate preferred stock, the dividend on which is adjusted every authorized share capitalMaximum number of shares that the company is permitted to issue, as specified in the firm’s articles of incorporation. Automatic Benefits PaymentAutomatic payment of moneys derived from a benefit. Average cost of capitalA firm's required payout to the bondholders and to the stockholders expressed as a Balance of paymentsA statistical compilation formulated by a sovereign nation of all economic transactions Balance of PaymentsThe difference between the demand for and supply of a country's currency on the foreign exchange market. Balance of Payments AccountsA statement of a country's transactions with other countries. Bearer bondbonds that are not registered on the books of the issuer. such bonds are held in physical form by Beta equation (Stocks)The beta of a stock is determined as follows: Bondbonds are debt and are issued for a period of more than one year. The U.S. government, local BONDA long-term, interest-bearing promissory note that companies may use to borrow money for periods of time such as five, ten, or twenty years. BondA long-term debt instrument in which the issuer (borrower) is bondSecurity that obligates the issuer to make specified payments BondA financial asset taking the form of a Promise by a borrower to repay a specified amount (the bond's face value) on a maturity date and to make fixed periodic interest payments. Bondusually a fixed interest security under which the issuer contracts to pay the lender a fixed principal amount at a stated date in the future, and a series of interest payments, either semi-annually or annually. Interest payments may vary through the life of bond. bondA debt security issued by a government or company. You receive regular interest payments at specified rates while you hold the bond and you receive the face value when it matures. Short-term bonds mature in less than five years; medium-term bonds mature in six to ten years; and long-term bonds mature in eleven years or greater. Bondfixed interest security issued by a corporation or government, having a specific maturity date. Bond agreementA contract for privately placed debt. Bond covenantA contractual provision in a bond indenture. A positive covenant requires certain actions, and Bond-equivalent basisThe method used for computing the bond-equivalent yield. Bond equivalent yieldbond yield calculated on an annual percentage rate method. Differs from annual Bond-equivalent yieldThe annualized yield to maturity computed by doubling the semiannual yield. Bond Equivalent Yieldbond yield calculated on an annual percentage rate method Bond indentureThe contract that sets forth the Promises of a corporate bond issuer and the rights of Bond indexingDesigning a portfolio so that its performance will match the performance of some bond index. Bond pointsA conventional unit of measure for bond prices set at $10 and equivalent to 1% of the $100 face Bond valueWith respect to convertible bonds, the value the security would have if it were not convertible BONDPARA system that monitors and evaluates the performance of a fixed-income portfolio , as well as the Bonds payableAmounts owed by the company that have been formalized by a legal document called a bond. BOOK VALUE OF COMMON STOCKThe theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. Book value equals: Brady bondsbonds issued by emerging countries under a debt reduction plan. Break-even lease paymentThe lease payment at which a party to a prospective lease is indifferent between Break-even payment rateThe prepayment rate of a MBS coupon that will produce the same CFY as that of Bretton Woods AgreementAn agreement signed by the original United Nations members in 1944 that Builder buydown loanA mortgage loan on newly developed property that the builder subsidizes during the Bull-bear bondbond whose principal repayment is linked to the price of another security. The bonds are Bulldog bondForeign bond issue made in London. Bulldog marketThe foreign market in the United Kingdom. Bullet contractA guaranteed investment contract purchased with a single (one-shot) premium. Related: Buy/Sell AgreementThis is an agreement entered into by the owners of a business to define the conditions under which the interests of each shareholder will be bought and sold. The agreement sets the value of each shareholders interest and stipulates what happens when one of the owners wishes to dispose of his/her interest during his/her lifetime as well as disposal of interest upon death or disability. Life insurance, critical illness coverage and disability insurance are major considerations to help fund this type of agreement. BuydownsMortgages in which monthly payments consist of principal and interest, with portions of these Callable bondA bond that allows the issuer to buy back the bond at a callable bondbond that may be repurchased by the issuer before maturity at specified call price. Canada Savings BondsA bond issued each year by the federal government. These bonds can be cashed in at any time for their full face value. 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. 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