Financial Terms Short-term investment services

# Definition of Short-term investment services

## Short-term investment services

services that assist firms in making short-term investments.

# Related Terms:

The use of capital to create more money through the addition of fixed assets or through income producing vehicles.

## capital investment analysis

Refers to various techniques and procedures
used to determine or to analyze future returns from an investment
of capital in order to evaluate the capital recovery pattern and the
periodic earnings from the investment. The two basic tools for capital
investment analysis are (1) spreadsheet models (which I strongly prefer)
and (2) mathematical equations for calculating the present value or
internal rate of return of an investment. Mathematical methods suffer
from a lack of information that the decision maker ought to consider. A
spreadsheet model supplies all the needed information and has other

## Capital Investments

Money used to purchase fixed assets for a business, such as land, buildings, or machinery. Also, money invested in a business on the understanding that it will be used to purchase permanent assets rather than to cover day-to-day operating expenses.

## Coefficient of determination

A measure of the goodness of fit of the relationship between the dependent and
independent variables in a regression analysis; for instance, the percentage of variation in the return of an
asset explained by the market portfolio return.

## coefficient of determination

a measure of dispersion that
indicates the “goodness of fit” of the actual observations
to the least squares regression line; indicates what proportion
of the total variation in y is explained by the regression model

## Concentration services

Movement of cash from different lockbox locations into a single concentration
account from which disbursements and investments are made.

## Credit Terms

Conditions under which credit is extended by a lender to a borrower.

## Deterministic models

Liability-matching models that assume that the liability payments and the asset cash
flows are known with certainty. Related: Compare stochastic models

## Disintermediation

Withdrawal of funds from a financial institution in order to invest them directly.

## Dividend reinvestment plan (DRP)

Automatic reinvestment of shareholder dividends in more shares of a
company's stock, often without commissions. Some plans provide for the purchase of additional shares at a
discount to market price. Dividend reinvestment plans allow shareholders to accumulate stock over the Long
term using dollar cost averaging. The DRP is usually administered by the company without charges to the
holder.

## Equity investment

Through equity investment, investors gain part ownership of the corporation. The primary type of equity investment is corporate stock.

## Euro-medium term note (Euro-MTN)

A non-underwritten Euronote issued directly to the market. Euro-
MTNs are offered continuously rather than all at once as a bond issue is. Most Euro-MTN maturities are
under five years.

## Expected return on investment

The return one can expect to earn on an investment. See: capital asset
pricing model.

## Financial intermediaries

Institutions that provide the market function of matching borrowers and lenders or

## financial intermediary

Firm that raises money from many small investors and provides financing to businesses or other
organizations by investing in their securities.

## Financial Intermediary

Any institution, such as a bank, that takes deposits from savers and loans them to borrowers.

## Financial Intermediation

The process whereby financial intermediaries channel funds from lender/savers to borrower/spenders.

## Flexible Term

Optional periods of time which the conditions of a contract will be carried out.

## Foreign direct investment (FDI)

The acquisition abroad of physical assets such as plant and equipment, with
operating control residing in the parent corporation.

## Future investment opportunities

The options to identify additional, more valuable investment opportunities
in the future that result from a current opportunity or operation.

## guaranteed investment certificate (GIC)

A GIC is an investment that gives you a guaranteed rate of return over a fixed period of time, usually between 30 days and 5 years. GICs are available from banks, trust companies, and other financial institutions.

## Guaranteed investment contract (GIC)

A pure investment product in which a life company agrees, for a
single premium, to pay the principal amount of a predetermined annual crediting (interest) rate over the life of
the investment, all of which is paid at the maturity date.

## Information services

Organizations that furnish investment and other types of information, such as
information that helps a firm monitor its cash position.

## Intermarket sector

spread The spread between the interest rate offered in two sectors of the bond market for
issues of the same maturity.

An exchange of one bond for another based on the manager's projection of a
realignment of spreads between sectors of the bond market.

## Intermediary

An independent third party that may act as a mediator during negotiations.

## Intermediate Good

A good used in producing another good.

## Intermediate-term

Typically 1-10 years.

## Intermediation

investment through a financial institution. Related: disintermediation.

## Investment

The commitment of funds (capital) in anticipation of an increased
return of funds at some point in the future

## Investment analysts

Related: financial analysts

## Investment bank

Financial intermediaries who perform a variety of services, including aiding in the sale of
securities, facilitating mergers and other corporate reorganizations, acting as brokers to both individual and
institutional clients, and trading for their own accounts. Underwriters.

## Investment Banker

Middleman between a corporation issuing new securities and the public. The middleman buys the securities issue outright and then resells it to customers. Also called an underwriter.

## investment center

a responsibility center in which the manager
is responsible for generating revenues and planning
and controlling expenses and has the authority to acquire,
dispose of, and use plant assets to earn the highest rate
of return feasible on those assets within the confines and
to the support of the organization’s goals

## Investment centre

A division or unit of an organization that is responsible for achieving an adequate return on
the capital invested in the division or unit.

## investment decision

a judgment about which assets will be
acquired by an entity to achieve its stated objectives

## Investment decisions

Decisions concerning the asset side of a firm's balance sheet, such as the decision to
offer a new product.

Bonds rated Baa or above by Moody’s or BBB or above by Standard & Poor’s.

A bond that is assigned a rating in the top four categories by commercial credit
rating companies. For example, S&P classifies investment grade bonds as BBB or higher, and Moodys'
classifies investment grade bonds as Ba or higher. Related: High-yield bond.

## Investment income

The revenue from a portfolio of invested assets.
investment management Also called portfolio management and money management, the process of
managing money.

## Investment manager

Also called a portfolio manager and money manager, the individual who manages a
portfolio of investments.

## Investment product line (IPML)

The line of required returns for investment projects as a function of beta
(nondiversifiable risk).

## Investment Spending

Expenditures on capital goods including new housing. Financial ''investments" and sales of existing assets are not included.

## Investment tax credit

Proportion of new capital investment that can be used to reduce a company's tax bill
(abolished in 1986).

## Investment Tax Credit

A reduction in taxes offered to firms to induce them to increase investment spending.

## Investment trust

A closed-end fund regulated by the investment Company Act of 1940. These funds have a
fixed number of shares which are traded on the secondary markets similarly to corporate stocks. The market
price may exceed the net asset value per share, in which case it is considered at a "premium." When the
market price falls below the NAV/share, it is at a "discount." Many closed-end funds are of a specialized
nature, with the portfolio representing a particular industry, country, etc. These funds are usually listed on US
and foreign exchanges.

## Investment value

Related:straight value.

## Investments

As a discipline, the study of financial securities, such as stocks and bonds, from the investor's
viewpoint. This area deals with the firm's financing decision, but from the other side of the transaction.

## Legal investments

investments that a regulated entity is permitted to make under the rules and regulations
that govern its investing.

## Liquidity theory of the term structure

A biased expectations theory that asserts that the implied forward
rates will not be a pure estimate of the market's expectations of future interest rates because they embody a

## Long-term

In accounting information, one year or greater.

## Long-term assets

Value of property, equipment and other capital assets minus the depreciation. This is an
entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect
the market value of the assets.

## Long-term debt

An obligation having a maturity of more than one year from the date it was issued. Also
called funded debt.

## Long-term debt

A debt for which payments will be required for a period of more than
one year into the future.

## Long Term Debt

Liability due in a year or more.

## Long-term debt/capitalization

Indicator of financial leverage. Shows long-term debt as a proportion of the
capital available. Determined by dividing long-term debt by the sum of long-term debt, preferred stock and
common stockholder equity.

## 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.

## Long-term financial plan

Financial plan covering two or more years of future operations.

## Long-term liabilities

Amount owed for leases, bond repayment and other items due after 1 year.

## LONG-TERM LIABILITIES

Bills that are payable in more than one year, such as a mortgage or bonds.

## Long-term liabilities

Amounts owing after more than one year.

## Longer-Term Fixed Assets

Assets having a useful life greater than one year but the duration of the 'long term' will vary with the context in which the term is applied.

## Medium-term note

A corporate debt instrument that is continuously offered to investors over a period of
time by an agent of the issuer. Investors can select from the following maturity bands: 9 months to 1 year,
more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years.

## Mutually exclusive investment decisions

investment decisions in which the acceptance of a project
precludes the acceptance of one or more alternative projects.

## Net investment

Gross, or total, investment minus depreciation.

## Net Investment

investment spending minus depreciation.

## Net present value of future investments

The present value of the total sum of NPVs expected to result from
all of the firm's future investments.

## Non-financial services

Include such things as freight, insurance, passenger services, and travel.

## Other long term liabilities

Value of leases, future employee benefits, deferred taxes and other obligations
not requiring interest payments that must be paid over a period of more than 1 year.

## Passive investment management

index without attempting to search out mispriced securities.

## Passive investment strategy

See: passive management.

## postinvestment audit

the process of gathering information
on the actual results of a capital project and comparing
them to the expected results

an estimated constant charge per unit of activity used to assign overhead cost to production or services of the period; it is calculated by dividing total budgeted annual overhead at a selected level of volume or activity by that selected measure of volume or activity; it is also the standard overhead application rate

Qualified investments is the term used for investments that can be held in an RSP. These investments generally include:
Canadian dollar savings accounts, guaranteed investment certificates, term deposits
shares of Canadian and foreign companies listed on a prescribed stock exchange
shares of some over-the-counter U.S. and Canadian companies
certain types of bonds and money-market investments such as treasury bills, Canada Savings Bonds, Government of Canada bonds, provincial government bonds, Crown Corporation bonds, bonds issued by Canadian corporations listed on a prescribed stock exchange, and certain strip bonds
certain types of mortgages, including your own
certain covered call options, warrants and rights
certain mutual funds

## Regular Investment Plan (RIP)

A plan under which you may make regular deposits of the same amount to your Mutual Funds account once a month, once every 2 weeks, or once a week. You can also make regular deposits up to four times a month on any dates you choose.

## reinvestment assumption

an assumption made about the rates of return that will be earned by intermediate cash flows from a capital project; NPV and PI assume reinvestment at the discount rate; IRR assumes reinvestment at the IRR

## Reinvestment rate

The rate at which an investor assumes interest payments made on a debt security can be
reinvested over the life of that security.

## Reinvestment risk

The risk that proceeds received in the future will have to be reinvested at a lower potential
interest rate.

## REIT (real estate investment trust)

Real estate investment trust, which is similar to a closed-end mutual
fund. REITs invest in real estate or loans secured by real estate and issue shares in such investments.

## REMIC (real estate mortgage investment conduit)

A pass-through tax entity that can hold mortgages
secured by any type of real property and issue multiple classes of ownership interests to investors in the form
of pass-through certificates, bonds, or other legal forms. A financing vehicle created under the Tax Reform
Act of 1986.

## Repayment Terms

The length of time given a borrower by a lender to repay a debt and the frequency of principal payments which the borrower has to meet.

## return on investment

a ratio that relates income generated
by an investment center to the resources (or asset base)
used to produce that income

## Return on investment (ROI)

Generally, book income as a proportion of net book value.

## 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.

## Return on investment (ROI)

The net profit after tax as a percentage of the shareholders’ investment in the business.

## return on investment (ROI)

A very general concept that refers to some
measure of income, earnings, profit, or gain over a period of time
divided by the amount of capital invested during the period. It is almost
always expressed as a percent. For a business, an important ROI measure
is its return on equity (ROE), which is computed by dividing its net
income for the period by its owners’ equity during the period.

## Selling short

If an investor thinks the price of a stock is going down, the investor could borrow the stock from
a broker and sell it. Eventually, the investor must buy the stock back on the open market. For instance, you
borrow 1000 shares of XYZ on July 1 and sell it for \$8 per share. Then, on Aug 1, you purchase 1000 shares
of XYZ at \$7 per share. You've made \$1000 (less commissions and other fees) by selling short.

## Short

One who has sold a contract to establish a market position and who has not yet closed out this position
through an offsetting purchase; the opposite of a long position. Related: Long.

## Short bonds

Bonds with short current maturities.

## Short book

See: unmatched book.

## Short hedge

The sale of a futures contract(s) to eliminate or lessen the possible decline in value ownership of
an approximately equal amount of the actual financial instrument or physical commodity.
Related: Long hedge.

## Short interest

This is the total number of shares of a security that investors have borrowed, then sold in the
hope that the security will fall in value. An investor then buys back the shares and pockets the difference as profit.

## Short position

Occurs when a person sells stocks he or she does not yet own. Shares must be borrowed,
before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought to close out the
transaction. This technique is used when an investor believes the stock price will go down.

## short position

The sale of an investment, particularly by someone who does not yet own it.

## Short rate

The annualized one-period interest rate.

## Short-run operating activities

Events and decisions concerning the short-term finance of a firm, such as
how much inventory to order and whether to offer cash terms or credit terms to customers.

## Short sale

Selling a security that the seller does not own but is committed to repurchasing eventually. It is
used to capitalize on an expected decline in the security's price.

## Short sale, short position

The sale of a security or financial instrument not
owned, in anticipation of a price decline and making a profit by purchasing the
instrument later at a lower price, and then delivering the instrument to
complete the sale. See Long position.