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Revaluation

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Definition of Revaluation

Revaluation Image 1

Revaluation

An increase in the foreign exchange value of a currency that is pegged to other currencies or gold.



Related Terms:

Counterpart items

In the balance of payments, counterpart items are analogous to unrequited transfers in the
current account. They arise because the double-entry system in balance of payments accounting and refer to
adjustments in reserves owing to monetization or demonetization of gold, allocation or cancellation of SDRs,
and revaluation of the various components of total reserves.


Cash-equivalent items

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


Counterparties

The parties to an interest rate swap.


Counterparty Party

on the other side of a trade or transaction.


Counterparty risk

The risk that the other party to an agreement will default. In an options contract, the risk
to the option buyer that the option writer will not buy or sell the underlying as agreed.
Country economic risk Developments in a national economy that can affect the outcome of an international
financial transaction.



Nonrecurring Items

Revenues or gains and expenses or losses that are not expected to recur
on a regular basis. This term is often used interchangeably with special items.


Special Items

Significant credits or charges resulting from transactions or events that, in the
view of management, are not representative of normal business activities of the period and that
affect comparability of earnings. This term is often used interchangeably with nonrecurring
items.


Revaluation Image 1

economic components model

Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
This model consists of four components: the measure of the economic impact of the delay-to-sale, monopsony power to buyers, and incremental transactions costs to both buyers and sellers.


NPV (net present value of cash flows)

Same as PV, but usually includes a subtraction for an initial cash outlay.


PV (present value of cash flows)

the value in today’s dollars of cash flows that occur in different time periods.
present value factor equal to the formula 1/(1 - r)n, where n is the number of years from the valuation date to the cash flow and r is the discount rate.
For business valuation, n should usually be midyear, i.e., n = 0.5, 1.5, . . .


Accelerated cost recovery system (ACRS)

Schedule of depreciation rates allowed for tax purposes.


Accounting exposure

The change in the value of a firm's foreign currency denominated accounts due to a
change in exchange rates.


Accounting earnings

Earnings of a firm as reported on its income statement.


Accounting insolvency

total liabilities exceed total assets. A firm with a negative net worth is insolvent on
the books.


Accounting liquidity

The ease and quickness with which assets can be converted to cash.


Accounts payable

Money owed to suppliers.


Revaluation Image 2

Accounts receivable

Money owed by customers.


Accounts receivable turnover

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



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 Stock Exchange (AMEX)

The second-largest stock exchange in the United States. It trades
mostly in small-to medium-sized companies.


Asian currency units (ACUs)

Dollar deposits held in Singapore or other Asian centers.


Asset allocation decision

The decision regarding how an institution's funds should be distributed among the
major classes of assets in which it may invest.


Auction rate preferred stock (ARPS)

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


Average accounting return

The average project earnings after taxes and depreciation divided by the average
book value of the investment during its life.


Average age of accounts receivable

The weighted-average age of all of the firm's outstanding invoices.


Balance of payments

A statistical compilation formulated by a sovereign nation of all economic transactions
between residents of that nation and residents of all other nations during a stipulated period of time, usually a
calendar year.


Balance of trade

Net flow of goods (exports minus imports) between countries.



Balance sheet

Also called the statement of financial condition, it is a summary of the assets, liabilities, and
owners' equity.


Balance sheet exposure

See:accounting exposure.


Balance sheet identity

total Assets = total Liabilities + total Stockholders' Equity


Balanced fund

An investment company that invests in stocks and bonds. The same as a balanced mutual fund.


Balanced mutual fund

This is a fund that buys common stock, preferred stock and bonds. The same as a
balanced fund.


Basic balance

In a balance of payments, the basic balance is the net balance of the combination of the current
account and the capital account.


Bill of exchange

General term for a document demanding payment.


Blocked currency

A currency that is not freely convertible to other currencies due to exchange controls.


Bond value

With respect to convertible bonds, the value the security would have if it were not convertible
apart from the conversion option.


Book value

A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
company's book value might be more or less than its market value.


Book value per share

The ratio of stockholder equity to the average number of common shares. Book value
per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation
(and not necessarily market valuation).


Book-entry securities

The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the
Fed in the names of member banks, which in turn keep records of the securities They own as well as those They
are holding for customers. In the case of other securities where a book-entry has developed, engraved
securities do exist somewhere in quite a few cases. These securities do not move from holder to holder but are
usually kept in a central clearinghouse or by another agent.


Capital account

Net result of public and private international investment and lending activities.


Capital allocation

decision allocation of invested funds between risk-free assets versus the risky portfolio.


Carrying value

Book value.


Cash-surrender value

An amount the insurance company will pay if the policyholder ends a whole life
insurance policy.


Chicago Mercantile Exchange (CME)

A not-for-profit corporation owned by its members. Its primary
functions are to provide a location for trading futures and options, collect and disseminate market information,
maintain a clearing mechanism and enforce trading rules.


Clearing House Automated Payments System (CHAPS)

A computerized clearing system for sterling funds
that began operations in 1984. It includes 14 member banks, nearly 450 participating banks, and is one of the
clearing companies within the structure of the Association for Payment Clearing Services (APACS).


Clearing House Interbank Payments System (CHIPS)

An international wire transfer system for high-value
payments operated by a group of major banks.


Commodities Exchange Center (CEC)

The location of five New York futures exchanges: Commodity
exchange, Inc. (COMEX), the New York Mercantile exchange (NYMEX), the New York Cotton exchange,
the Coffee, Sugar and Cocoa exchange (CSC), and the New York futures exchange (NYFE). common size
statement A statement in which all items are expressed as a percentage of a base figure, useful for purposes of
analyzing trends and the changing relationship between financial statement items. For example, all items in
each year's income statement could be presented as a percentage of net sales.


Common stock/other equity

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


Compensating balance

An excess balance that is left in a bank to provide indirect compensation for loans
extended or services provided.


Concentration account

A single centralized account into which funds collected at regional locations
(lockboxes) are transferred.


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.


Conversion value

Also called parity value, the value of a convertible security if it is converted immediately.


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
stock.


Convertible preferred stock

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


Coupon payments

A bond's interest payments.


Cumulative preferred stock

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


Cumulative Translation Adjustment (CTA) account

An entry in a translated balance sheet in which gains
and/or losses from translation have been accumulated over a period of years. The CTA account is required
under the FASB No. 52 rule.


Currency

Money.


Currency arbitrage

Taking advantage of divergences in exchange rates in different money markets by
buying a currency in one market and selling it in another market.


Currency basket

The value of a portfolio of specific amounts of individual currencies, used as the basis for
setting the market value of another currency. It is also referred to as a currency cocktail.


Currency future

A financial future contract for the delivery of a specified foreign currency.


Currency option

An option to buy or sell a foreign currency.


Currency risk

Related: exchange rate risk


Currency risk sharing

An agreement by the parties to a transaction to share the currency risk associated with
the transaction. The arrangement involves a customized hedge contract embedded in the underlying
transaction.


Currency selection

Asset allocation in which the investor chooses among investments denominated in
different currencies.


Currency swap

An agreement to swap a series of specified payment obligations denominated in one currency
for a series of specified payment obligations denominated in a different currency.


Current account

Net flow of goods, services, and unilateral transactions (gifts) between countries.


Current assets

value of cash, accounts receivable, inventories, marketable securities and other assets that
could be converted to cash in less than 1 year.


Current coupon

A bond selling at or close to par, that is, a bond with a coupon close to the yields currently
offered on new bonds of a similar maturity and credit risk.


Current liabilities

Amount owed for salaries, interest, accounts payable and other debts due within 1 year.


Current issue

In Treasury securities, the most recently auctioned issue. Trading is more active in current
issues than in off-the-run issues.


Current maturity

current time to maturity on an outstanding debt instrument.
current / noncurrent method
Under this currency translation method, all of a foreign subsidiary's current
assets and liabilities are translated into home currency at the current exchange rate while noncurrent assets
and liabilities are translated at the historical exchange rate, that is, the rate in effect at the time the asset was
acquired or the liability incurred.


Current rate method

Under this currency translation method, all foreign currency balance-sheet and income
statement items are translated at the current exchange rate.


Current ratio

Indicator of short-term debt paying ability. Determined by dividing current assets by current
liabilities. The higher the ratio, the more liquid the company.


Current yield

For bonds or notes, the coupon rate divided by the market price of the bond.


Current-coupon issues

Related: Benchmark issues


Devaluation A decrease in the spot price of the currency



Discretionary account

accounts over which an individual or organization, other than the person in whose
name the account is carried, exercises trading authority or control.


Double-declining-balance depreciation

Method of accelerated depreciation.


Double-dip lease

A cross-border lease in which the disparate rules of the lessor's and lessee's countries let
both parties be treated as the owner of the leased equipment for tax purposes.


Double-tax agreement

Agreement between two countries that taxes paid abroad can be offset against
domestic taxes levied on foreign dividends.


Dual-currency issues

Eurobonds that pay coupon interest in one currency but pay the principal in a different
currency.


Dupont system of financial control

Highlights the fact that return on assets (ROA) can be expressed in terms
of the profit margin and asset turnover.


Dynamic asset allocation

An asset allocation strategy in which the asset mix is mechanistically shifted in
response to -changing market conditions, as in a portfolio insurance strategy, for example.


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).


Eurocurrency market

The money market for borrowing and lending currencies that are held in the form of
deposits in banks located outside the countries of the currencies issued as legal tender.


European Currency Unit (ECU)

An index of foreign exchange consisting of about 10 European currencies,
originally devised in 1979.


European Monetary System (EMS)

An exchange arrangement formed in 1979 that involves the currencies
of European Union member countries.


Excess reserves

Any excess of actual reserves above required reserves.


Exchange

The marketplace in which shares, options and futures on stocks, bonds, commodities and indices
are traded. Principal US stock exchanges are: New York Stock exchange (NYSE), American Stock exchange
(AMEX) and the National Association of Securities Dealers (NASDAQ)


The Exchange

A nickname for the New York stock exchange. Also known as the Big Board. More than
2,000 common and preferred stocks are traded. The exchange is the oldest in the United States, founded in
1792, and the largest. It is located on Wall Street in New York City.


Exchange controls

Governmental restrictions on the purchase of foreign currencies by domestic citizens or
on the purchase of the local domestic currency by foreigners.


Exchange of assets

Acquisition of another company by purchase of its assets in exchange for cash or stock.


Exchange of stock

Acquisition of another company by purchase of its stock in exchange for cash or shares.


Exchange offer

An offer by the firm to give one security, such as a bond or preferred stock, in exchange for
another security, such as shares of common stock.


Exchange rate

The price of one country's currency expressed in another country's currency.


Exchange Rate Mechanism (ERM)

The methodology by which members of the EMS maintain their
currency exchange rates within an agreed upon range with respect to other member countries.


Exchange rate risk

Also called currency risk, the risk of an investment's value changing because of currency
exchange rates.


Exchange risk

The variability of a firm's value that results from unexpected exchange rate changes or the
extent to which the present value of a firm is expected to change as a result of a given currency's appreciation
or depreciation.


Exchangeable Security

Security that grants the security holder the right to exchange the security for the
common stock of a firm other than the issuer of the security.


Exercise value

The amount of advantage over a current market transaction provided by an in-the-money
option.


Expected value

The weighted average of a probability distribution.


Expected value of perfect information

The expected value if the future uncertain outcomes could be known
minus the expected value with no additional information.


Extraordinary positive value

A positive net present value.


Face value

See: Par value.



 

 

 

 

 

 

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