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Definition of Safety-net return
The minimum available return that will trigger an immunization strategy in a contingent
a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock.
Same as PV, but usually includes a subtraction for an initial cash outlay.
Part of the return that is not due to systematic influences (market wide influences). In
Money after-tax rate of return minus the inflation rate.
The annual rate of return that when compounded t times, would have
Arithmetic mean return.
An average of the subperiod returns, calculated by summing the subperiod returns
The average project earnings after taxes and depreciation divided by the average
The ratio of the average cash inflow to the amount invested.
Sum of the differences between the expected return on a stock and the
The return realized on a portfolio for any evaluation period, including (1) the change in market
The dollar equivalent of the safety cushion for a portfolio in a contingent immunization
Also called the internal rate of return, the interest rate that will make the
An exchange arrangement formed in 1979 that involves the currencies
Related: Holding period return
The expected return of a portfolio based on the expected returns of its component assets and
Excess return on the market portfolio
The difference between the return on the market portfolio and the
Also called abnormal returns, returns in excess of those required by some asset pricing model.
Expected future return
The return that is expected to be earned on an asset in the future. Also called the
The return expected on a risky asset based on a probability distribution for the possible rates
Expected return on investment
The return one can expect to earn on an investment. See: capital asset
Expected return-beta relationship
Implication of the CAPM that security risk premiums will be
Offsetting exposures in one currency with exposures in the same or another currency,
Firm's net value of debt
Total firm value minus total firm debt.
Geometric mean return
Also called the time weighted rate of return, a measure of the compounded rate of
Holding period return
The rate of return over a given period.
Total return over a given horizon.
Incremental internal rate of return
IRR on the incremental investment from choosing a large project
Internal rate of return
Dollar-weighted rate of return. Discount rate at which net present value (NPV)
International Monetary Fund
An organization founded in 1944 to oversee exchange arrangements of
International Monetary Market (IMM)
A division of the CME established in 1972 for trading financial
Leveraged required return
The required return on an investment when the investment is financed partially by debt.
The return on the market portfolio.
Gold held by governmental authorities as a financial asset.
Actions taken by the Board of Governors of the Federal Reserve System to influence the
Monetary / non-monetary method
Under this translation method, monetary items (e.g. cash, accounts
Money rate of return
Annual money return as a percentage of asset value.
Multiple rates of return
More than one rate of return from the same project that make the net present value
Net adjusted present value
The adjusted present value minus the initial cost of an investment.
Net advantage of refunding
The net present value of the savings from a refunding.
Net advantage to leasing
The net present value of entering into a lease financing arrangement rather than
Net advantage to merging
The difference in total post- and pre-merger market value minus the cost of the merger.
Net asset value (NAV)
The value of a fund's investments. For a mutual fund, the net asset value per share
The difference between total assets on the one hand and current liabilities and noncapitalized longterm
Net benefit to leverage factor
A linear approximation of a factor, T*, that enables one to operationalize the
Net book value
The current book value of an asset or liability; that is, its original book value net of any
Net cash balance
Beginning cash balance plus cash receipts minus cash disbursements.
This is the difference between a day's last trade and the previous day's last trade.
Net errors and omissions
In balance of payments accounting, net errors and omissions record the statistical
Net financing cost
Also called the cost of carry or, simply, carry, the difference between the cost of financing
Sum of disbursement float and collection float.
The company's total earnings, reflecting revenues adjusted for costs of doing business,
Gross, or total, investment minus depreciation.
A lease arrangement under which the lessee is responsible for all property taxes, maintenance
Net operating losses
Losses that a firm can take advantage of to reduce taxes.
Net operating margin
The ratio of net operating income to net sales.
The period of time between the end of the discount period and the date payment is due.
Net present value (NPV)
The present value of the expected future cash flows minus the cost.
Net present value of growth opportunities
A model valuing a firm in which net present value of new
Net present value of future investments
The present value of the total sum of NPVs expected to result from
Net present value rule
An investment is worth making if it has a positive NPV. Projects with negative NPVs
Net profit margin
net income divided by sales; the amount of each sales dollar left over after all expenses
Net salvage value
The after-tax net cash flow for terminating the project.
Net working capital
Current assets minus current liabilities. Often simply referred to as working capital.
Common stockholders' equity which consists of common stock, surplus, and retained earnings.
Reducing transfers of funds between subsidiaries or separate companies to a net amount.
To get or bring in as a net; to clear as profit.
Reducing fund transfers between affiliates to only a netted amount. netting can be done on
Portfolio internal rate of return
The rate of return computed by first determining the cash flows for all the
Rate of return ratios
Ratios that are designed to measure the profitability of the firm in relation to various
The return that is actually earned over a given time period.
The minimum expected return you would require to be willing to purchase the asset, that is,
The change in the value of a portfolio over an evaluation period, including any distributions made
Return on assets (ROA)
Indicator of profitability. Determined by dividing net income for the past 12 months
Return on equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12
Return on investment (ROI)
Generally, book income as a proportion of net book value.
Return on total assets
The ratio of earnings available to common stockholders to total assets.
A variant of pure expectations theory which suggests that the return that an
Riskless rate of return
The rate earned on a riskless asset.
In a contingent immunization strategy, the difference between the initially available
SIMEX (Singapore International Monetary Exchange)
A leading futures and options exchange in Singapore.
The return of a portfolio over a shorter period of time than the evaluation period.
T-period holding-period return
The percentage return over the T-year period an investment lasts.
Time-weighted rate of return
Related: Geometric mean return.
Total dollar return
The dollar return on a nondollar investment, which includes the sum of any
In performance measurement, the actual rate of return realized over some evaluation period. In
Unleveraged required return
The required return on an investment when the investment is financed entirely
The profit a company makes after cost of goods sold, expenses, and taxes are subtracted from net sales.
NET SALES (revenue)
The amount sold after customers’ returns, sales discounts, and other allowances are taken away from
RATE OF RETURN ON STOCKHOLDERS’ EQUITY
The percentage return or profit that management made on each dollar stockholders invested in a company. Here’s how you figure it:
RATE OF RETURN ON TOTAL ASSETS
The percentage return or profit that management made on each dollar of assets. The formula is:
RATIO OF NET INCOME TO NET SALES
A ratio that shows how much net income (profit) a company made on each dollar of net sales. Here’s the formula:
RATIO OF NET SALES TO NET INCOME
A ratio that shows how much a company had to collect in net sales to make a dollar of profit. Figure it this way:
RETURN ON INVESTMENT (ROI)
In its most basic form, the rate of return equals net income divided by the amount of money invested. It can be applied to a particular product or piece of equipment, or to a business as a whole.
Accounting rate of return (ARR)
A method of investment appraisal that measures
Internal rate of return (IRR)
A discounted cash flow technique used for investment appraisal that calculates the effective cost of capital that produces a net present value of zero from a series of future cash flows and an
Margin of safety
A measure of the difference between the anticipated and breakeven levels of activity.
Net present value (NPV)
A discounted cash flow technique used for investment appraisal that calculates the present value of future cash flows and deducts the initial capital investment.
See operating profit.
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