Definition of Spectail

Spectail

A dealer that does business with retail but that concentrates more on acquiring and financing its own
speculative positions.

Asset-based financing

Methods of financing in which lenders and equity investors look principally to the
cash flow from a particular asset or set of assets for a return on, and the return of, their financing.

Back-to-back financing

An intercompany loan channeled through a bank.

Basic business strategies

Key strategies a firm intends to pursue in carrying out its business plan.

Bridge financing

Interim financing of one sort or another used to solidify a position until more permanent
financing is arranged.

Builder buydown loan

A mortgage loan on newly developed property that the builder subsidizes during the
early years of the development. The builder uses cash to buy down the mortgage rate to a lower level than the
prevailing market loan rate for some period of time. The typical buydown is 3% of the interest-rate amount
for the first year, 2% for the second year, and 1% for the third year (also referred to as a 3-2-1 buydown).

Business cycle

Repetitive cycles of economic expansion and recession.

Business failure

A business that has terminated with a loss to creditors.

Business risk

The risk that the cash flow of an issuer will be impaired because of adverse economic
conditions, making it difficult for the issuer to meet its operating expenses.

Buydowns

Mortgages in which monthly payments consist of principal and interest, with portions of these
payments during the early period of the loan being provided by a third party to reduce the borrower's monthly
payments.

Cost of lease financing

A lease's internal rate of return.

Cramdown

The ability of the bankruptcy court to confirm a plan of reorganization over the objections of
some classes of creditors.

Crown jewel

A particularly profitable or otherwise particularly valuable corporate unit or asset of a firm.

Dealer

An entity that stands ready and willing to buy a security for its own account (at its bid price) or sell
from its own account (at its ask price).

Dealer loan

Overnight, collateralized loan made to a dealer financing his position by borrowing from a
money market bank.

Dealer market

A market where traders specializing in particular commodities buy and sell assets for their
own accounts.

Dealer options

Over-the-counter options, such as those offered by government and mortgage-backed
securities dealers.

Debtor-in-possession financing

New debt obtained by a firm during the Chapter 11 bankruptcy process.

Down-and-in option

Barrier option that comes into existence if asset price hits a barrier.

Down-and-out option

Barrier option that expires if asset price hits a barrier.

Downgrade

A classic negative change in ratings for a stock, and or other rated security.

Employee stock ownership plan (ESOP)

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

Federal Financing Bank

A federal institution that lends to a wide array of federal credit agencies funds it
obtains by borrowing from the U.S. Treasury.

Financing decisions

Decisions concerning the liabilities and stockholders' equity side of the firm's balance
sheet, such as the decision to issue bonds.

Foreign exchange dealer

A firm or individual that buys foreign exchange from one party and then sells it to
another party. The dealer makes the difference between the buying and selling prices, or spread.

Limitation on asset dispositions

A bond covenant that restricts in some way a firm's ability to sell major assets.

Multi-option financing facility

A syndicated confirmed credit line with attached options.

Net financing cost

Also called the cost of carry or, simply, carry, the difference between the cost of financing
the purchase of an asset and the asset's cash yield. Positive carry means that the yield earned is greater than
the financing cost; negative carry means that the financing cost exceeds the yield earned.

Odd lot dealer

A broker who combines odd lots of securities from multiple buy or sell orders into round lots
and executes transactions in those round lots.

Off-balance-sheet financing

financing that is not shown as a liability in a company's balance sheet.

Paydown

In a Treasury refunding, the amount by which the par value of the securities maturing exceeds that
of those sold.

Planned financing program

Program of short-term and long-term financing as outlined in the corporate
financial plan.

Production payment financing

A method of nonrecourse asset-based financing in which a specified
percentage of revenue realized from the sale of the project's output is used to pay debt service.

Retail

Individual and institutional customers as opposed to dealers and brokers.

Retail credit

Credit granted by a firm to consumers for the purchase of goods or services.
See: consumer credit.

Retail investors, individual investors

Small investors who commit capital for their personal account.

Speculative demand (for money)

The need for cash to take advantage of investment opportunities that may arise.

Speculative grade bond

Bond rated Ba or lower by Moody's, or BB or lower by S&P, or an unrated bond.

Speculative motive

A desire to hold cash for the purpose of being in a position to exploit any attractive
investment opportunity requiring a cash expenditure that might arise.

Threshold for refinancing

The point when the WAC of an MBS is at a level to induce homeowners to
prepay the mortgage in order to refinance to a lower-rate mortgage, generally reached when the WAC of the
MBS is 2% or more above currently available mortgage rates.

Top-down equity management style

A management style that begins with an assessment of the overall
economic environment and makes a general asset allocation decision regarding various sectors of the financial
markets and various industries. The bottom-up manager, in contrast, selects the specific securities within the
favored sectors.

Write-down

Decreasing the book value of an asset if its book value is overstated compared to current market values.

CASH FLOWS FROM FINANCING ACTIVITIES

A section on the cash-flow statement that shows how much cash a company raised by selling stocks or bonds this year and how much was paid out for cash dividends and other finance-related obligations.

STOCKHOLDERS’ (OR OWNERS’) EQUITY

The value of the owners’ interests in a company.

financing activities

One of the three classes of cash flows reported in the
statement of cash flows. This class includes borrowing money and paying
debt, raising money from shareowners and the return of money to
them, and dividends paid from profit.

inventory write-down

Refers to making an entry, usually at the close of a
period, to decrease the cost value of the inventories asset account in
order to recognize the lost value of products that cannot be sold at their
normal markups or will be sold below cost. A business compares the
recorded cost of products held in inventory against the sales value of the
products. Based on the lower-of-cost-or-market rule, an entry is made to
record the inventory write-down as an expense.

owners' equity

Refers to the capital invested in a business by its shareowners
plus the profit earned by the business that has not been distributed
to its shareowners, which is called retained earnings. owners’
equity is one of the two basic sources of capital for a business, the other
being borrowed money, or debt. The book value, or value reported in a
balance sheet for owners’ equity, is not the market value of the business.
Rather, the balance sheet value reflects the historical amounts of capital
invested in the business by the owners over the years plus the accumulation
of yearly profits that were not paid out to owners.

business intelligence (BI) system

a formal process for gathering and analyzing information and producing intelligence to meet decision making needs; requires information about
internal processes as well as knowledge, technologies, and competitors

business process reengineering (BPR)

the process of combining information technology to create new and more effective
business processes to lower costs, eliminate unnecessary
work, upgrade customer service, and increase
speed to market

business-value-added activity

an activity that is necessary for the operation of the business but for which a customer would not want to pay

downsizing

any management action that reduces employment
upon restructuring operations in response to competitive
pressures

Employee Stock Ownership Plan (ESOP)

a profit-sharing compensation program in which investments are made in
the securities of the employer

financing decision

a judgment made regarding the method
of raising funds that will be used to make acquisitions; it
is based on an entity’s ability to issue and service debt and
equity securities

Internet business model

a model that involves
(1) few physical assets,
(2) little management hierarchy, and
(3) a direct pipeline to customers

Owners' equity

The total of all capital contributions and retained earnings on a business’s
balance sheet.

financing decision

Decision as to how to raise the money to pay for investments in real assets.

operating risk (business risk)

Risk in firm’s operating income.

Business Cycle

Fluctuations of GDP around its long-run trend, consisting of recession, trough, expansion, and peak.

Dealer

A person or firm in the financial asset business who buys for his or her own account and then resells to customers, in contrast to a broker, who buys only on behalf of a customer.

Political Business Cycle

A business cycle caused by policies undertaken to help a government be re-elected.

Real Business Cycle Theory

Belief that business cycles arise from real shocks to the economy, such as technology advances and natural resource discoveries, and have little to do with monetary policy.

Employee Stock Ownership Plan (ESOP)

A fund containing company stock and owned by employees, paid for by ongoing contributions by the employer.

Cash Flow Provided or Used from Financing Activities

Cash receipts and payments involving
liability and stockholders' equity items, including obtaining cash from creditors and repaying
the amounts borrowed and obtaining capital from owners and providing them with a return on,
and a return of, their investments.

Write-Down

A reduction in the balance-sheet valuation of an asset with an accompanying
expense or loss recorded in earnings.

Contingent Owner

This is the person designated to become the new owner of a life insurance policy if the original owner dies before the life insured.

Owner

This is the person who owns the insurance policy. It is usually the same person as the insured but it could be someone else who has the permission of the insured to be the owner, like a spouse, a common-law-spouse, an offspring, a parent, a corporation with insurable interest or a business partner with insurable interest. In order for someone else to be an owner of your policy, they have to have a legitimate insurable interest in you.

Asset-Based Financing

Loans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender.

Business Expansion Investment

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

Debt Financing

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.

Export Financing

A range of financing products (loans. guarantees, letters of credit, insurance etc.) in support of a variety of activities which help Canadian firms expand into new export markets.

Financing Instruments

This is a generic term that refers to the many different forms of financing a business may use. For example - loans, shares, and bonds are all considered financing instruments.

High-Risk Small Business

Firm viewed as being particularly subject to risk from an investors perspective.

Project Financing

Debt finance, usually non-recourse, provided by financial institutions for the development and construction of a new project.

Seed Financing/Capital

Generally, refers to the first contribution of capital toward the financing requirements of a start-up business.

Commercial Business Loan (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.

Policyowner

The person who owns and holds all rights under the policy, including the power to name and change beneficiaries, make a policy loan, assign the policy to a financial institution as collateral for a loan, withdraw funds or surrender the policy.

Refinancing (Credit Insurance)

Extending the maturity date or increasing the amount of existing debt or both. Also, revising a payment schedule, usually to reduce the monthly payments and often to modify interest charges.

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