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Financial Terms | |
Simulation |
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Definition of SimulationSimulationThe use of a mathematical model to imitate a situation many times in order to estimate the
Related Terms:Monte Carlo simulationAn analytical technique for solving a problem by performing a large number of trail Monte-Carlo simulationA mathematical modeling process. For a model that simulation analysisEstimation of the probabilities of different possible outcomes, e.g., from an investment project. materials requirements planning (MRP)a computerbased information system that simulates the ordering and 10-KAnnual report required by the SEC each year. Provides a comprehensive overview of a company's state Acceleration ClauseClause causing repayment of a debt, if specified events occur or are not met. acid test ratio (also called the quick ratio)The sum of cash, accounts receivable, and short-term marketable ![]() Acquisition of assetsA merger or consolidation in which an acquirer purchases the selling firm's assets. Agency problemConflicts of interest among stockholders, bondholders, and managers. agency problemsConflicts of interest between the firm’s owners and managers. Aggregate SupplyTotal quantity of goods and services supplied. Aggregate Supply CurveCombinations of price level and income for which the labor market is in equilibrium. The short-Run aggregate supply curve incorporates information and price/wage inflexibilities in the labor market, whereas the long-Run aggregate supply curve does not. algebraic methoda process of service department cost allocation Allowance methodA Method of adjusting accounts receivable to the amount that is expected to be collected based on company experience. Analytical ReviewThe process of attempting to infer the presence of potential problems Arbitrage-free option-pricing modelsYield curve option-pricing models. ![]() AssetAny possession that has value in an exchange. AssetA resource, recorded through a transaction, that is expected to yield a benefit to a AssetSomething that is owned; a financial claim or a piece of property that is a store of value. AssetProbable future economic benefit that is obtained or controlled by an entity as a result of assetAnything owned by, or owed to, an individual or business which has commercial or exchange value (e.g., cash, property, etc.). AssetAll things of value owned by an individual or organization. Asset activity ratiosRatios that measure how effectively the firm is managing its assets. Asset allocation decisionThe decision regarding how an institution's funds should be distributed among the Asset-Backed SecuritiesBond or note secured by assets of company. Asset-backed securityA security that is collateralized by loans, leases, receivables, or installment contracts Asset-based financingMethods of financing in which lenders and equity investors look principally to the ![]() Asset-Based FinancingLoans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender. Asset classesCategories of assets, such as stocks, bonds, real estate and foreign securities. Asset CoverageExtent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position. Asset-coverage testA bond indenture restriction that permits additional borrowing on if the ratio of assets to Asset/equity ratioThe ratio of total assets to stockholder equity. Asset for asset swapCreditors exchange the debt of one defaulting borrower for the debt of another Asset/liability managementAlso called surplus management, the task of managing funds of a financial asset mixThe weighting of assets in an investment portfolio among different asset classes (e.g. shares, bonds, property, cash, overseas investments. Asset pricing modelA model for determining the required rate of return on an asset. Asset pricing modelA model, such as the Capital Asset Pricing model (CAPM), that determines the required Asset-specific RiskThe amount of total risk that can be eliminated by diversification by Asset substitutionA firm's investing in assets that are riskier than those that the debtholders expected. Asset substitution problemArises when the stockholders substitute riskier assets for the firm's existing Asset swapAn interest rate swap used to alter the cash flow characteristics of an institution's assets so as to Asset turnoverThe ratio of net sales to total assets. asset turnovera ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets asset turnover ratioA broad-gauge ratio computed by dividing annual AssetsA firm's productive resources. ASSETSAnything of value that a company owns. AssetsThings that the business owns. AssetsItems owned by the company or expenses that have been paid for but have not been used up. Assets requirementsA common element of a financial plan that describes projected capital spending and the Automated Clearing House (ACH)A collection of 32 regional electronic interbank networks used to Automated Clearing House (ACH)A banking clearinghouse that processes direct Average-Cost Inventory MethodThe inventory cost-flow assumption that assigns the average Back-up1) When bond yields and prices fall, the market is said to back-up. Bank for International Settlements (BIS)An international bank headquartered in Basel, Switzerland, which BankruptcyState of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from bankruptcyThe reorganization or liquidation of a firm that cannot pay its debts. Bankruptcy cost viewThe argument that expected indirect and direct bankruptcy costs offset the other Bankruptcy riskThe risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk. Bankruptcy viewThe argument that expected bankruptcy costs preclude firms from being financed entirely Bargain-purchase-price optionGives the lessee the option to purchase the asset at a price below fair market Base probability of lossThe probability of not achieving a portfolio expected return. Batch pickingpicking for several summarized orders at the same time, thereby Benefit Ratio MethodThe proportion of unemployment benefits paid to a company’s Benefit Wage Ratio MethodThe proportion of total taxable wages for laid off Binomial modelA Method of pricing options or other equity derivatives in Binomial option pricing modelAn option pricing model in which the underlying asset can take on only two Black-Scholes modelThe first complete mathematical model for pricing Black-Scholes option-pricing modelA model for pricing call options based on arbitrage arguments that uses Block houseBrokerage firms that help to find potential buyers or sellers of large block trades. Book runnerThe managing underwriter for a new issue. The book Runner maintains the book of securities sold. Bootstrapping, bootstrap methodAn arithmetic Method for backing an Bottom-up equity management styleA management style that de-emphasizes the significance of economic build missiona mission of increasing market share, even at Builder buydown loanA mortgage loan on newly developed property that the builder subsidizes during the BuildingThe cost of buildings owned by the company. Building a binomial treeFor a binomial option model: plotting the two business process reengineering (BPR)the process of combining information technology to create new and more effective Buy limit orderA conditional trading order that indicates a security may be purchased only at the designated BuyoutPurchase of a controlling interest (or percent of shares) of a company's stock. A leveraged buy-out is capital assetan asset used to generate revenues or cost savings Capital assetA fixed asset, something that is expected to have long-term usage within Capital asset pricing model (CAPM)An economic theory that describes the relationship between risk and Capital Asset Pricing Model (CAPM)A model for estimating equilibrium rates of return and values of capital asset pricing model (CAPM)Theory of the relationship between risk and return which states that the expected risk Capitalization methodA Method of constructing a replicating portfolio in which the manager purchases a Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized againstfuture-period revenue. Cash Flow Provided or Used from Financing ActivitiesCash receipts and payments involving Cash Flow Provided or Used from Investing ActivitiesCash receipts and payments involving Cash settlement contractsFutures contracts, such as stock index futures, that settle for cash, not involving Change in Accounting EstimateA change in accounting that occurs as the result of new information Change in Accounting EstimateA change in the implementation of an existing accounting Cherry PickingSelecting specific assets for sale so as to record desired gains or losses. Clearing House Automated Payments System (CHAPS)A computerized clearing system for sterling funds Clearing house / ClearinghouseAn adjunct to a futures exchange through which transactions executed its floor are settled by a Clearing House Interbank Payments System (CHIPS)An international wire transfer system for high-value Closing purchaseA transaction in which the purchaser's intention is to reduce or eliminate a short position in Collective wisdomThe combination of all of the individual opinions about a stock's or security's value. Commission houseA firm which buys and sells future contracts for customer accounts. Related: futures Completed-Contract MethodA contract accounting Method that recognizes contract revenue constant-growth dividend discount modelVersion of the dividend discount model in which dividends grow at a constant rate. Constant-growth modelAlso called the Gordon-Shapiro model, an application of the dividend discount Continuous random variableA random value that can take any fractional value within specified ranges, as Contra-asset accountAn offset to an asset account that reduces the balance of the asset account. Corporate processing floatThe time that elapses between receipt of payment from a customer and the Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |