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Definition of Seasonal Adjustment
adjustment to correct measures for changes that happen for seasonal reasons.
An entry in a translated balance sheet in which gains
an informal method of adjusting for risk that allows the decision maker
The cumulative, after-tax, prior-year effect of a change in accounting
A transaction used to adjust the book balance of an inventory
Very high inventory levels built up in anticipation of large
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.
The change in the value of a firm's foreign currency denominated accounts due to a
Earnings of a firm as reported on its income statement.
Total liabilities exceed total assets. A firm with a negative net worth is insolvent on
The ease and quickness with which assets can be converted to cash.
Money owed to suppliers.
Money owed by customers.
The ratio of net credit sales to average accounts receivable, a measure of how
The average project earnings after taxes and depreciation divided by the average
The weighted-average age of all of the firm's outstanding invoices.
The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.
The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for
Biased expectations theories
Related: pure expectations theory.
The risk that the cash flow of an issuer will be impaired because of adverse economic
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.
Net result of public and private international investment and lending activities.
A method of constructing a replicating portfolio in which the manager purchases a
The risk that a foreign debtor will be unable to pay its debts because of business events,
Related: Unsystematic risk
The risk that a project will not be brought into operation successfully.
A single centralized account into which funds collected at regional locations
The risk that the other party to an agreement will default. In an options contract, the risk
Country financial risk
The ability of the national economy to generate enough foreign exchange to meet
Country risk General
Level of political and economic uncertainty in a country affecting the value of loans or
The risk that an issuer of debt securities or a borrower may default on his obligations, or that the
Refers to the volatility of returns on international investments caused by events associated
Cumulative abnormal return (CAR)
Sum of the differences between the expected return on a stock and the
Cumulative dividend feature
A requirement that any missed preferred or preference stock dividends be paid
Cumulative preferred stock
Preferred stock whose dividends accrue, should the issuer not make timely
Cumulative probability distribution
A function that shows the probability that the random variable will
A system of voting for directors of a corporation in which shareholder's total number of
Related: Exchange rate risk
Currency risk sharing
An agreement by the parties to a transaction to share the currency risk associated with
Net flow of goods, services, and unilateral transactions (gifts) between countries.
Current rate method
Under this currency translation method, all foreign currency balance-sheet and income
Also referred to as credit risk (as gauged by commercial rating companies), the risk that an
Direct estimate method
A method of cash budgeting based on detailed estimates of cash receipts and cash
accounts over which an individual or organization, other than the person in whose
Related: unsystematic risk.
In project financing, the risk that the project's output will not be salable at a price that will
Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the
The risk that the ability of an issuer to make interest and principal payments will change because
Exchange rate risk
Also called currency risk, the risk of an investment's value changing because of currency
The variability of a firm's value that results from unexpected exchange rate changes or the
Expectations hypothesis theories
Theories of the term structure of interest rates which include the pure
A type of mortgage pipeline risk that is generally created when the terms of the loan to be
The risk that the cash flow of an issuer will not be adequate to meet its financial obligations.
See:diversifiable risk or unsystematic risk.
Flat price risk
Taking a position either long or short that does not involve spreading.
The practice of reporting to shareholders using straight-line depreciation and
Force majeure risk
The risk that there will be an interruption of operations for a prolonged period after a
Foreign currency translation
The process of restating foreign currency accounts of subsidiaries into the
Foreign exchange risk
The risk that a long or short position in a foreign currency might have to be closed out
Related: interest rate risk
Generally Accepted Accounting Principals (GAAP)
A technical accounting term that encompasses the
risk that arises when an issuer has policies concentrated within certain geographic areas,
The risk of loss in foreign exchange trading that one party will deliver foreign exchange but the counterparty financial institution will fail to deliver its end of the contract. It is also referred to as settlement risk.
Homogenous expectations assumption
An assumption of Markowitz portfolio construction that investors
Unsystematic risk or risk that is uncorrelated to the overall market risk. In other words,
Also called purchasing-power risk, the risk that changes in the real return the investor will
The risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk.
Interest rate risk
The risk that a security's value changes due to a change in interest rates. For example, a
Special accounts where you can save and invest, and the taxes are deferred until money
An agreement between two or more firms to share risk and financing responsibility in
The risk that arises from the difficulty of selling an asset. It can be thought of as the difference
Local expectations theory
A form of the pure expectations theory which suggests that the returns on bonds
Log-linear least-squares method
A statistical technique for fitting a curve to a set of data points. One of the
Margin account (Stocks)
A leverageable account in which stocks can be purchased for a combination of
Market price of risk
A measure of the extra return, or risk premium, that investors demand to bear risk. The
risk that cannot be diversified away. Related: systematic risk
Monetary / non-monetary method
Under this translation method, monetary items (e.g. cash, accounts
Money market demand account
An account that pays interest based on short-term interest rates.
The risk associated with taking applications from prospective mortgage borrowers
Non-cumulative preferred stock
Preferred stock whose holders must forgo dividend payments when the
risk that cannot be eliminated by diversification.
Nonmarket or firm-specific risk factors that can be eliminated by diversification. Also
The practice of making a charge in the income account equivalent to the tax savings
An account carried by one futures commission merchant with another futures commission
Arrangement whereby sales are made with no formal debt contract. The buyer signs a receipt,
The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is
Overnight delivery risk
A risk brought about because differences in time zones between settlement centers
Possibility of the expropriation of assets, changes in tax policy, restrictions on the exchange of
The risk that the value of a security (or a portfolio) will decline in the future. Or, a type of
A type of mortgage-pipeline risk that occurs when a lender has an unusual loan in production or
method of accounting for a merger in which the acquirer is treated as having purchased
accounting for an acquisition using market value for the consolidation of the two entities'
Related: inflation risk
Pure expectations theory
A theory that asserts that the forward rates exclusively represent the expected
In banking, the risk that profits may decline or losses occur because a rise in interest rates forces up
The idea that people rationally anticipate the future and respond to what they see ahead.
Regulatory accounting procedures
accounting principals required by the FHLB that allow S&Ls to elect
Regulatory pricing risk
risk that arises when regulators restrict the premium rates that insurance companies
The risk that proceeds received in the future will have to be reinvested at a lower potential
A method of allocating the purchase price for the acquisition of another firm among the
Related: unsystematic risk
A variant of pure expectations theory which suggests that the return that an
Reverse price risk
A type of mortgage-pipeline risk that occurs when a lender commits to sell loans to an
Typically defined as the standard deviation of the return on total investment. Degree of uncertainty of
A probability used to determine a "sure" expected value (sometimes called a
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