Financial Terms
Sale and lease-back

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Definition of Sale and lease-back

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Sale and lease-back

sale of an existing asset to a financial institution that then leases it back to the user.
Related: lease.



Related Terms:

Limitation on sale-and-leaseback

A bond covenant that restricts in some way a firm's ability to enter into
sale and lease-back transactions.


Sale and Leaseback

An agreement in which the owner of a property sells that property to a person or institution and then leases it back again for an agreed period and rental.


Accounting and Auditing Enforcement Release (AAER)

Administrative proceedings or litigation releases that entail an accounting or auditing-related violation of the securities laws.


Asset-Backed Securities

Bond or note secured by assets of company.


Asset-backed security

A security that is collateralized by loans, leases, receivables, or installment contracts
on personal property, not real estate.



Available-for-Sale Security

A debt or equity security not classified as a held-to-maturity security or a trading security. Can be classified as a current or noncurrent investment depending on the intended holding period.


Back fee

The fee paid on the extension date if the buyer wishes to continue the option.


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Back flush

The subsequent subtraction from inventory records of those parts used
to assemble a product, based on the number of finished goods produced.


Back office

Brokerage house clerical operations that support, but do not include, the trading of stocks and
other securities. Includes all written confirmation and settlement of trades, record keeping and regulatory
compliance.
back-end loan fund
A mutual fund that charges investors a fee to sell (redeem) shares, often ranging from
4% to 6%. Some back-end load funds impose a full commission if the shares are redeemed within a
designated time, such as one year. The commission decreases the longer the investor holds the shares. The
formal name for the back-end load is the contingent deferred sales charge, or CDSC.


Back To Back Annuity

This term refers to the simultaneous issue of a life annuity with a non-guaranteed period and a guaranteed life insurance policy [usually whole life or term to 100]. The face value of the life insurance would be the same amount that was used to purchase the annuity. This combination of life annuity providing the highest payout of all types of annuities, along with a guaranteed life insurance policy allowed an uninsurable person to convert his/her RRSP into the best choice of annuity and guarantee that upon his/her death, the full value of the annuity would be paid tax free through the life insurance policy to his family members. However, in the early 1990's, the Federal tax authorities put a stop to the issuing of standard life rates to rated or uninsurable applicants. Insuring a life annuity in this manner is still an excellent way to provide guaranteed tax free funds to family members but the application for the annuity and the application for the life insurance are separate transactions and today, most likely conducted through two different insurance companies so that there is no suspicion of preferential treatment given to the life insurance application.


Back-to-back financing

An intercompany loan channeled through a bank.


Back-to-back loan

A loan in which two companies in separate countries borrow each other's currency for a
specific time period and repay the other's currency at an agreed upon maturity.


Back-up

1) When bond yields and prices fall, the market is said to back-up.
2) When an investor swaps out of one security into another of shorter current maturity he is said to back up.


Backdating

A procedure for making the effective date of a policy earlier than the application date. backdating is often used to make the age of the consumer at policy issue lower than it actually was in order to get a lower premium.


backflush costing

a streamlined cost accounting method that speeds up, simplifies, and reduces accounting effort in an environment that minimizes inventory balances, requires
few allocations, uses standard costs, and has minimal variances
from standard


Backwardation

A market condition in which futures prices are lower in the distant delivery months than in
the nearest delivery month. This situation may occur in when the costs of storing the product until eventual
delivery are effectively subtracted from the price today. The opposite of contango.


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Best-efforts sale

A method of securities distribution/ underwriting in which the securities firm agrees to sell
as much of the offering as possible and return any unsold shares to the issuer. As opposed to a guaranteed or
fixed price sale, where the underwriter agrees to sell a specific number of shares (with the securities firm
holding any unsold shares in its own account if necessary).


Break-even lease payment

The lease payment at which a party to a prospective lease is indifferent between
entering and not entering into the lease arrangement.



Buy-back

Another term for a repo.


Capital lease

A lease obligation that has to be capitalized on the balance sheet.


Capital lease

A lease in which the lessee obtains some ownership rights over the asset
involved in the transaction, resulting in the recording of the asset as company property
on its general ledger.


Capital Lease

One where substantially all of the benefits and risks of ownership are transferred to the lessee. It must be reflected on the company's balance sheet as an asset and corresponding liability.


charge-back system

a system using transfer prices; see transfer
price


Closing sale

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


Conditional Sale

A type of agreement to sell whereby a seller retains title to goods sold and delivered to a purchaser until full payment has been made.


Conditional Sale Agreement

An agreement entered into between a conditional buyer and a conditional seller setting out the terms under which goods change hands.


Conditional sales contracts

Similar to equipment trust certificates except that the lender is either the
equipment manufacturer or a bank or finance company to whom the manufacturer has sold the conditional
sales contract.


Contingent deferred sales charge (CDSC)

The formal name for the load of a back-end load fund.



Cost of lease financing

A lease's internal rate of return.


Cost of sales

The manufacture or purchase price of goods sold in a period or the cost of providing a service.


Days' sales in inventory ratio

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


Days' sales outstanding

Average collection period.


Direct lease

lease in which the lessor purchases new equipment from the manufacturer and leases it to the
lessee.


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.


Dividend clawback

With respect to a project financing, an arrangement under which the sponsors of a project
agree to contribute as equity any prior dividends received from the project to the extent necessary to cover
any cash deficiencies.


Domestic International Sales Corporation (DISC)

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


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.


Equity Buy-Back

Refers to the investors percentage ownership of a company that can be re-acquired by the company, usually at a pre-determined amount.


Feedback

The retrospective process of measuring performance, comparing it with plan and taking corrective action.


Financial lease

Long-term, non-cancelable lease.


Financial Lease

lease in which the service provided by the lessor to the lessee is limited to financing equipment. All other responsibilities related to the possession of equipment, such as maintenance, insurance, and taxes, are borne by the lessee. A financial lease is usually noncancellable and is fully paid out amortized over its term.


Foreign Sales Corporation (FSC)

A special type of corporation created by the Tax Reform Act of 1984 that
is designed to provide a tax incentive for exporting U.S.-produced goods.


Forward sale

A method for hedging price risk which involves an agreement between a lender and an investor
to sell particular kinds of loans at a specified price and future time.


Full-payout lease

See: financial lease.


Full-service lease

Also called rental lease. lease in which the lessor promises to maintain and insure the
equipment leased.


Gain-on-Sale Accounting

Up-front gain recognized from the securitization and sale of a pool
of loans. Profit is recorded for the excess of the sales price and the present value of the estimated
interest income that is expected to be received on the loans above the amounts funded on the loans
and the present value of the interest agreed to be paid to the buyers of the loan-backed securities.


Gross sales

The total sales recorded prior to sales discounts and returns.


Installment sale

The sale of an asset in exchange for a specified series of payments (the installments).


Lease

A long-term rental agreement, and a form of secured long-term debt.


lease

Long-term rental agreement.


Lease (Credit Insurance)

Contract granting use of real estate, equipment or other fixed assets for a specified period of time in exchange for payment. The owner or a leased property is the lessor and the user the lessee.


Lease Payment

The consideration paid by the lessee to the lessor in exchange for the use of the leased equipment/property. Payments are usually made at fixed intervals.


Lease Rate

The payment per period stated in a lease contract.


Lease Rate

The payment per period stated in a lease contract.


Leasehold improvement

This is any upgrade to leased property by a lessee that will be
usable for more than one year, and which exceeds the lessee’s capitalization limit.
It is recorded as a fixed asset and depreciated over a period no longer than the life
of the underlying lease.


Leasehold improvements

The cost of improvements made to property that the company leases.


Leveraged lease

A lease arrangement under which the lessor borrows a large proportion of the funds needed
to purchase the asset and grants the lender a lien on the assets and a pledge of the lease payments to secure the
borrowing.


Limitation on merger, consolidation, or sale

A bond covenant that restricts in some way a firm's ability to
merge or consolidate with another firm.


Litigation Release

Official SEC record of a settlement or a hearing scheduled before a civil
court judge of an alleged violation of one or more sections or rules of the securities laws. Typically,
a litigation release entails a more serious violation of the securities laws than an administrative
proceeding.


Lookback option

An option that allows the buyer to choose as the option strike price any price of the
underlying asset that has occurred during the life of the option. If a call, the buyer will choose the minimal
price, whereas if a put, the buyer will choose the maximum price. This option will always be in the money.


Loss carryback

The offsetting of a current year loss against the reported taxable
income of previous years.


Mortgage-backed securities

Securities backed by a pool of mortgage loans.


Mortgage-Backed Securities Clearing Corporation

A wholly owned subsidiary of the Midwest Stock
Exchange that operates a clearing service for the comparison, netting, and margining of agency-guaranteed
MBSs transacted for forward delivery.


Negotiated sale

Situation in which the terms of an offering are determined by negotiation between the issuer
and the underwriter rather than through competitive bidding by underwriting groups.


Net lease

A lease arrangement under which the lessee is responsible for all property taxes, maintenance
expenses, insurance, and other costs associated with keeping the asset in good working condition.


Net sales

Total revenue, less the cost of sales returns, allowances, and discounts.


NET SALES (revenue)

The amount sold after customers’ returns, sales discounts, and other allowances are taken away from
gross sales. (Companies usually just show the net sales amount on their income statements, omitting returns, allowances, and the like.)


Normal backwardation theory

Holds that the futures price will be bid down to a level below the expected
spot price.


NUMBER OF DAYS SALES IN RECEIVABLES

(also called average collection period). The number of days of net sales that are tied up in credit sales (accounts receivable) that haven’t been collected yet.


Opening sale

A transaction in which the seller's intention is to create or increase a short position in a given
series of options.


Operating lease

Short-term, cancelable lease. A type of lease in which the period of contract is less than the
life of the equipment and the lessor pays all maintenance and servicing costs.


Operating lease

The rental of an asset from a lessor, but not under terms that would
qualify it as a capital lease.


Operating Lease

One where the risks and benefits, as well as ownership, stays with the lessor.


Payback

The length of time it takes to recover the initial cost of a project, without regard to the time value of money.


Payback

A method of investment appraisal that calculates the number of years taken for the cash flows from an investment to cover the initial capital outlay.


Payback

The length of time required for the net revenues of an investment for the net revenues of an investment to return the cost of the investment.


Payback method

A capital budgeting analysis method that calculates the amount of
time it will take to recoup the investment in a capital asset, with no regard for the
time cost of money.


Payback Period

The number of years necessary for the net cash flows of an
investment to equal the initial cash outlay


payback period

the time it takes an investor to recoup an
original investment through cash flows from a project


payback period

Time until cash flows recover the initial investment of the project.


percentage of sales models

Planning model in which sales forecasts are the driving variables and most other variables are
proportional to sales.


Plowback rate

Related: retention rate.


plowback ratio

Fraction of earnings retained by the firm.


point of sale (POS)

The terminal at which a customer uses his/her debit card to make a direct payment transaction. See also Interac Direct Payment.


Price/sales ratio (PS Ratio)

Determined by dividing current stock price by revenue per share (adjusted for stock splits).
Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares
outstanding.


Purchase and sale

A method of securities distribution in which the securities firm purchases the securities
from the issuer for its own account at a stated price and then resells them, as contrasted with a best-efforts sale.


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:
(Net income) / (Net sales)


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:
(Net sales) / (Net income)


Rental lease

See:full-service lease.


return on sales

This ratio equals net income divided by sales revenue.


Safe harbor lease

A lease to transfer tax benefits of ownership (depreciation and debt tax shield) from the
lessee, if the lessee could not use them, to a lessor that could use them.


Sales

Amounts earned by the company from the sale of merchandise or services; often used interchangeably with the term revenue.


Sales allowance

A reduction in a price that is allowed by the seller, due to a problem
with the sold product or service.


Sales charge

The fee charged by a mutual fund when purchasing shares, usually payable as a commission to
marketing agent, such as a financial advisor, who is thus compensated for his assistance to a purchaser. It
represents the difference, if any, between the share purchase price and the share net asset value.


Sales discount

A reduction in the price of a product or service that is offered by the
seller in exchange for early payment by the buyer.


Sales discounts

A contra account that offsets revenue. It represents the amount of the discounts for early payment allowed on sales.


Sales forecast

A key input to a firm's financial planning process. External sales forecasts are based on
historical experience, statistical analysis, and consideration of various macroeconomic factors.


Sales journal

A journal used to record the transactions that result in a credit to sales.


Sales mix

The mix of product/services offered by the business, each of which may be aimed at different customers, with each product/service having different prices and costs.



 

 

 

 

 

 

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