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Definition of Seniority
The order of repayment. In the event of bankruptcy, senior debt must be repaid before subordinated
An offset to the accounts receivable balance, against which
An account receivable that cannot be collected.
The amount of accounts receivable that is not expected to be collected.
Refers to accounts receivable from credit sales to customers
State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from
The reorganization or liquidation of a firm that cannot pay its debts.
The argument that expected indirect and direct bankruptcy costs offset the other
The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.
The argument that expected bankruptcy costs preclude firms from being financed entirely
The ratio of net income before taxes to net sales.
A conditional trading order that indicates a security may be purchased only at the designated
The cost of debt (bonds, loans, etc.) that a company is charged for
Refers to the volatility of returns on international investments caused by events associated
An order to buy or sell stock that automatically expires if it can't be executed on the day it is entered.
Borrowings from financiers.
Funds owed to another entity.
Ability to borrow. The amount a firm can borrow up to the point where the firm value no
An assessment of ability and willingness to repay a loan from anticipated future cash flow or other sources.
Debt (Credit Insurance)
Money, goods or services that someone is obligated to pay someone else in accordance with an expressed or implied agreement. debt may or may not be secured.
The amount of borrowing that leasing displaces. Firms that do a lot of leasing will be
Indicator of financial leverage. Compares assets provided by creditors to assets provided
A comparison of debt to equity in a company's capital structure.
Raising loan capital through the creation of debt by issuing a form of paper evidencing amounts owed and payable on specified dates or on demand.
An asset requiring fixed dollar payments, such as a government or corporate bond.
Any financial asset corresponding to a debt, such as a bond or a treasury bill.
The amplification of the return earned on equity when an investment or firm is financed
A bond covenant that restricts in some way the firm's ability to incur additional indebtedness.
The market for trading debt instruments.
Total debt divided by total assets.
The percentage of debt that is used in the total capitalization of a
Reducing the principal and/or interest payments on LDC loans.
IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
A security representing a debt relationship with an enterprise, including a government
Interest payment plus repayments of principal to creditors, that is, retirement of debt.
Debt-service coverage ratio
Earnings before interest and income taxes plus one-third rental charges, divided
Debt service parity approach
An analysis wherein the alternatives under consideration will provide the firm
A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank
A widely used financial statement ratio to assess the
Debtor in possession
A firm that is continuing to operate under Chapter 11 bankruptcy process.
New debt obtained by a firm during the Chapter 11 bankruptcy process.
Sales to customers who have bought goods or services on credit but who have not yet paid their debt.
Discrete order picking
A picking method requiring the sequential completion of
earnings before interest and income tax (EBIT)
A measure of profit that
Earnings before interest and taxes (EBIT)
A financial measure defined as revenues less cost of goods sold
Earnings before interest and taxes (EBIT)
The operating profit before deducting interest and tax.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
The operating profit before deducting interest, tax, depreciation and amortization.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working
EBBS - Earnings before the bad stuff
An acronym attributed to a member of the Securities and
EBDDT - Earnings before depreciation and deferred taxes
This measure is used principally by
economic order quantity
order size that minimizes total inventory costs.
Economic order quantity (EOQ)
The order quantity that minimizes total inventory costs.
economic order quantity (EOQ)
an estimate of the number
engineering change order (ECO)
a business mandate that changes the way in which a product is manufactured or a
The risk that the ability of an issuer to make interest and principal payments will change because
A statistical study that examines how the release of information affects prices at a particular time.
Events of default
Contractually specified events that allow lenders to demand immediate repayment of a debt.
FHA prepayment experience
The percentage of loans in a pool of mortgages outstanding at the origination
Fill or kill order
A trading order that is canceled unless executed within a designated time period.
Firm's net value of debt
Total firm value minus total firm debt.
debt maturing after more than one year.
debt with more than 1 year remaining to maturity.
Interest rate on debt
The firm's cost of debt capital.
job order cost sheet
a source document that provides virtually
job order costing system
a system of product costing used
Junior debt (subordinate debt)
debt whose holders have a claim on the firm's assets only after senior
Lag response of prepayments
There is typically a lag of about three months between the time the weighted
A legal proceeding for liquidating or reorganizing a business.
An order to buy a stock at or below a specified price or to sell a stock at or above a specified
Limit order book
A record of unexecuted limit orders that is maintained by the specialist. These orders are
An obligation having a maturity of more than one year from the date it was issued. Also
A debt for which payments will be required for a period of more than
Long Term Debt
Liability due in a year or more.
Indicator of financial leverage. Shows long-term debt as a proportion of the
Long-term debt ratio
The ratio of long-term debt to total capitalization.
Long-term debt to equity ratio
A capitalization ratio comparing long-term debt to shareholders' equity.
A production scheduling system under which products are only
This is an order to immediately buy or sell a security at the current trading price.
Refers to non-conventional debt that has a greater element of risk than secured debt but has less risk than equity.
MM's proposition I (debt irrelevance proposition)
The value of a firm is unaffected by its capital structure.
Monetizing the Debt
See printing money.
A guaranteed form of payment in amounts up to and including $5,000. You might request a money order in order to pay for tuition fees at a university or a college, or for a magazine subscription.
The debt owed by the government as a result of earlier borrowing to finance budget deficits. That part of the debt not held by the central bank is the publically held national debt.
Negotiable order of withdrawal (NOW)
Demand deposits that pay interest.
Open (good-til-cancelled) order
An individual investor can place an order to buy or sell a security. That
open purchase ordering
a process by which a single purchase
Order penetration point
The point in the production process when a product is
The process of moving items from stock for shipment to customers.
the level of inventory that triggers the placement
the variable cost associated with preparing,
Original issue discount debt (OID debt)
debt that is initially offered at a price below par.
pecking order theory
Firms prefer to issue debt rather than equity if internal finance is insufficient.
Pecking-order view (of capital structure)
The argument that external financing transaction costs, especially
A bankruptcy in which a debtor and its creditors pre-negotiate a plan or
An expenditure that is paid for in one accounting period, but which
Expenses that have been paid for but have not yet been used up; examples are prepaid insurance and prepaid rent.
A payment made in advance of when it is treated as an expense for profit purposes.
Also called speed, the estimated rate at which mortgagors pay off their loans ahead of
Payments made in excess of scheduled mortgage principal repayments.
a cost incurred to improve quality by preventing
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