Definition of SKU

SKU

Acronym for Stock Keeping Unit, which is an item used at a single location.

Stackability

The ability to safely stack multiple layers of the same sku on top of
each other.

DLOM (discount for lack of marketability)

an amount or percentage deducted from an equity interest to reflect lack of marketability.

QMDM (quantitative marketability discount model)

model for calculating DLOM for minority interests r the discount rate

Acquisition of stock

A merger or consolidation in which an acquirer purchases the acquiree's Stock.

Adjustable rate preferred stock (ARPS)

Publicly traded issues that may be collateralized by mortgages and MBSs.

American Stock Exchange (AMEX)

The second-largest Stock exchange in the United States. It trades
mostly in small-to medium-sized companies.

Asian currency units (ACUs)

Dollar deposits held in Singapore or other Asian centers.

Asset/liability management

Also called surplus management, the task of managing funds of a financial
institution to accomplish the two goals of a financial institution:
1) to earn an adequate return on funds invested, and
2) to maintain a comfortable surplus of assets beyond liabilities.

Asset allocation decision

The decision regarding how an institution's funds should be distributed among the
major classes of assets in which it may invest.

Auction rate preferred stock (ARPS)

Floating rate preferred Stock, the dividend on which is adjusted every
seven weeks through a Dutch auction.

Availability float

Checks deposited by a company that have not yet been cleared.

Base probability of loss

The probability of not achieving a portfolio expected return.

Beta equation (Stocks)

The beta of a Stock is determined as follows:
[(n) (sum of (xy)) ]-[(sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[(sum of x) (sum of x)]
where: n = # of observations (24-60 months)
x = rate of return for the S&P 500 Index
y = rate of return for the Stock

Blow-off top

A steep and rapid increase in price followed by a steep and rapid drop. This is an indicator seen
in charts and used in technical analysis of Stock price and market trends.

Capital allocation

decision Allocation of invested funds between risk-free assets versus the risky portfolio.

Cash-equivalent items

Temporary investments of currently excess cash in short-term, high-quality
investment media such as treasury bills and Banker's Acceptances.

Common stock

These are securities that represent equity ownership in a company. Common shares let an
investor vote on such matters as the election of directors. They also give the holder a share in a company's
profits via dividend payments or the capital appreciation of the security.

Common stock/other equity

Value of outstanding common shares at par, plus accumulated retained
earnings. Also called shareholders' equity.

Common stock equivalent

A convertible security that is traded like an equity issue because the optioned
common Stock is trading high.

Common stock market

The market for trading equities, not including preferred Stock.

Common stock ratios

Ratios that are designed to measure the relative claims of Stockholders to earnings
(cash flow per share), and equity (book value per share) of a firm.

Conflict between bondholders and stockholders

These two groups may have interests in a corporation that
conflict. Sources of conflict include dividends, distortion of investment, and underinvestment. Protective
covenants work to resolve these conflicts.

Contingent pension liability

Under ERISA, the firm is liable to the plan participants for up to 39% of the net
worth of the firm.

Convertible exchangeable preferred stock

Convertible preferred Stock that may be exchanged, at the
issuer's option, into convertible bonds that have the same conversion features as the convertible preferred
Stock.

Convertible preferred stock

Preferred Stock that can be converted into common Stock at the option of the holder.

Counterpart items

In the balance of payments, counterpart items are analogous to unrequited transfers in the
current account. They arise because the double-entry system in balance of payments accounting and refer to
adjustments in reserves owing to monetization or demonetization of gold, allocation or cancellation of SDRs,
and revaluation of the various components of total reserves.

Cumulative preferred stock

Preferred Stock whose dividends accrue, should the issuer not make timely
dividend payments. Related: non-cumulative preferred Stock.

Cumulative probability distribution

A function that shows the probability that the random variable will
attain a value less than or equal to each value that the random variable can take on.

Direct stock-purchase programs

The purchase by investors of securities directly from the issuer.

Dividend yield (Stocks)

Indicated yield represents annual dividends divided by current Stock price.

Doctrine of sovereign immunity

Doctrine that says a nation may not be tried in the courts of another country
without its consent.

Dynamic asset allocation

An asset allocation strategy in which the asset mix is mechanistically shifted in
response to -changing market conditions, as in a portfolio insurance strategy, for example.

Employee stock fund

A firm-sponsored program that enables employees to purchase shares of the firm's
common Stock on a preferential basis.

Employee stock ownership plan (ESOP)

A company contributes to a trust fund that buys Stock on behalf of
employees.

European Currency Unit (ECU)

An index of foreign exchange consisting of about 10 European currencies,
originally devised in 1979.

Exchange of stock

Acquisition of another company by purchase of its Stock in exchange for cash or shares.

Forward looking multiple

A truncated expression for a P/E ratio that is based on forward (expected)
earnings rather than on trailing earnings.

Future investment opportunities

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

Futures contract multiple

A constant, set by an exchange, which when multiplied by the futures price gives
the dollar value of a Stock index futures contract.

Growth opportunity

OpportUnity to invest in profitable projects.

Growth stock

Common Stock of a company that has an opportUnity to invest money and earn more than the
opportUnity cost of capital.

Income stock

Common Stock with a high dividend yield and few profitable investment opportUnities.

Letter stock

Privately placed common Stock, so-called because the SEC requires a letter from the purchaser
stating that the Stock is not intended for resale.

Liability

A financial obligation, or the cash outlay that must be made at a specific time to satisfy the
contractual terms of such an obligation.

Liability funding strategies

Investment strategies that select assets so that cash flows will equal or exceed
the client's obligations.

Liability swap

An interest rate swap used to alter the cash flow characteristics of an institution's liabilities so
as to provide a better match with its assets.

Limited liability

Limitation of possible loss to what has already been invested.

Limited-liability instrument

A security, such as a call option, in which the owner can only lose his initial
investment.

Listed stocks

Stocks that are traded on an exchange.

Limited-liability instrument

A security, such as a call option, in which the owner can only lose his initial investment.

Listed stocks

Stocks that are traded on an exchange.

Margin account (Stocks)

A leverageable account in which Stocks can be purchased for a combination of
cash and a loan. The loan in the margin account is collateralized by the Stock and, if the value of the Stock
drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the Stock. Margin
rules are federally regulated, but margin requirements and interest may vary among broker/dealers.

Marketability

A negotiable security is said to have good marketability if there is an active secondary market
in which it can easily be resold.

Multiple rates of return

More than one rate of return from the same project that make the net present value
of the project equal to zero. This situation arises when the IRR method is used for a project in which negative
cash flows follow positive cash flows. For each sign change in the cash flows, there is a rate of return.

Multiple regression

The estimated relationship between a dependent variable and more than one explanatory variable.

Multiples

Another name for price/earnings ratios.

Multiple-discriminant analysis (MDA)

Statistical technique for distinguishing between two groups on the
basis of their observed characteristics.

Multiple-issuer pools

Under the GNMA-II program, pools formed through the aggregation of individual
issuers' loan packages.

Net present value of growth opportunities

A model valuing a firm in which net present value of new
investment opportUnities is explicitly examined.

New York Stock Exchange (NYSE)

Also known as the Big Board or The Exhange. More than 2,00 common
and preferred Stocks are traded. The exchange is the older in the United States, founded in 1792, and the
largest. It is lcoated on Wall Street in New York City

Non-cumulative preferred stock

Preferred Stock whose holders must forgo dividend payments when the
company misses a dividend payment.
Related: Cumulative preferred Stock

Nondiversifiability of human capital

The difficulty of diversifying one's human capital (the unique
capabilities and expertise of individuals) and employment effort.

Normal probability distribution

A probability distribution for a continuous random variable that is forms a
symmetrical bell-shaped curve around the mean.

Opportunity cost of capital

Expected return that is foregone by investing in a project rather than in
comparable financial securities.

Opportunity costs

The difference in the performance of an actual investment and a desired investment
adjusted for fixed costs and execution costs. The performance differential is a consequence of not being able
to implement all desired trades. Most valuable alternative that is given up.

Opportunity set

The possible expected return and standard deviation pairs of all portfolios that can be
constructed from a given set of assets.

Options contract multiple

A constant, set at $100, which when multiplied by the cash index value gives the
dollar value of the Stock index underlying an option. That is, dollar value of the underlying Stock index = cash
index value x $100 (the options contract multiple).

Other capital

In the balance of payments, other capital is a residual category that groups all the capital
transactions that have not been included in direct investment, portfolio investment, and reserves categories. It
is divided into long-term capital and short-term capital and, because of its residual status, can differ from
country to country. Generally speaking, other long-term capital includes most non-negotiable instruments of a
year or more like bank loans and mortgages. other short-term capital includes financial assets of less than a
year such as currency, deposits, and bills.

Other current assets

Value of non-cash assets, including prepaid expenses and accounts receivable, due
within 1 year.

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.

Other sources

Amount of funds generated during the period from operations by sources other than
depreciation or deferred taxes. Part of Free cash flow calculation.

P/E ratio (PE ratio / multiple)

Assume XYZ Co. sells for $25.50 per share and has earned $2.55 per share this year; $25. 50 = 10
times $2. 55
XYZ Stock sells for 10 times earnings. P/E = Current Stock price divided by trailing annual earnings per
share or expected annual earnings per share.

Philadelphia Stock Exchange (PHLX)

A securities exchange where American and European foreign
currency options on spot exchange rates are traded.

Policy asset allocation

A long-term asset allocation method, in which the investor seeks to assess an
appropriate long-term "normal" asset mix that represents an ideal blend of controlled risk and enhanced
return.

Portfolio opportunity set

The expected return/standard deviation pairs of all portfolios that can be
constructed from a given set of assets.

Preferred equity redemption stock (PERC)

Preferred Stock that converts automatically into equity at a
stated date. A limit is placed on the value of the shares the investor receives.

Preference stock

A security that ranks junior to preferred Stock but senior to common Stock in the right to
receive payments from the firm; essentially junior preferred Stock.

Preferred stock

A security that shows ownership in a corporation and gives the holder a claim, prior to the
claim of common Stockholders, on earnings and also generally on assets in the event of liquidation. Most
preferred Stock pays a fixed dividend that is paid prior to the common Stock dividend, stated in a dollar
amount or as a percentage of par value. This Stock does not usually carry voting rights. The Stock shares
characteristics of both common Stock and debt.

Preferred stock agreement

A contract for preferred Stock.

Present value of growth opportunities (NPV)

Net present value of investments the firm is expected to make
in the future.

Probability

The relative likelihood of a particular outcome among all possible outcomes.

Probability density function

The probability function for a continuous random variable.

Probability distribution

Also called a probability function, a function that describes all the values that the random variable can
take and the probability associated with each.

Probability function

A function that assigns a probability to each and every possible outcome.

Profitability index

The present value of the future cash flows divided by the initial investment. Also called
the benefit-cost ratio.

Profitability ratios

Ratios that focus on the profitability of the firm. Profit margins measure performance
with relation to sales. Rate of return ratios measure performance relative to some measure of size of the
investment.

Repurchase of stock

Device to pay cash to firm's shareholders that provides more preferable tax treatment
for shareholders than dividends. Treasury Stock is the name given to previously issued Stock that has been
repurchased by the firm. A repurchase is achieved through either a dutch auction, open market, or tender offer.

Reverse stock split

A proportionate decrease in the number of shares, but not the value of shares of Stock
held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a
1-for-3 split would result in Stockholders owning 1 share for every 3 shares owned before the split. After the
reverse split, the firm's Stock price is, in this example, worth three times the pre-reverse split price. A firm
generally institutes a reverse split to boost its Stock's market price and attract investors.

Risk-adjusted profitability

A probability used to determine a "sure" expected value (sometimes called a
certainty equivalent) that would be equivalent to the actual risky expected value.

Single country fund

A mutual fund that invests in individual countries outside the United States.

Single factor model

A model of security returns that acknowledges only one common factor.
See: factor model.

Single index model

A model of Stock returns that decomposes influences on returns into a systematic factor,
as measured by the return on the broad market index, and firm specific factors.

Single-index model

Related: market model

Single-payment bond

A bond that will make only one payment of principal and interest.

Single-premium deferred annuity

An insurance policy bought by the sponsor of a pension plan for a single
premium. In return, the insurance company agrees to make lifelong payments to the employee (the
policyholder) when that employee retires.

Stock

Ownership of a corporation which is represented by shares which represent a piece of the corporation's
assets and earnings.

Stock dividend

Payment of a corporate dividend in the form of Stock rather than cash. The Stock dividend
may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders.
Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, Stock
dividends are not taxed until sold.

Stock exchanges

Formal organizations, approved and regulated by the Securities and Exchange Commission
(SEC), that are made up of members that use the facilities to exchange certain common Stocks. The two major
national Stock exchanges are the New York Stock Exchange (NYSE) and the American Stock Exchange (ASE
or AMEX). Five regional Stock exchanges include the Midwest, Pacific, Philadelphia, Boston, and Cincinnati.
The Arizona Stock exchange is an after hours electronic marketplace where anonymous participants trade
Stocks via personal computers.

Stock repurchase

A firm's repurchase of outstanding shares of its common Stock.

Stock selection

An active portfolio management technique that focuses on advantageous selection of
particular Stocks rather than on broad asset allocation choices.

Stockholder equity

Balance sheet item that includes the book value of ownership in the corporation. It
includes capital Stock, paid in surplus, and retained earnings.

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