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Definition of Subordinated Debenture
A bond having a claim on assets only after the senior debt has been paid off in the event of liquidation.
An unsecured bond that ranks after secured debt, after debenture bonds, and
An unsecured bond whose holder has the claim of a general creditor on all assets of the
Debt over which senior debt takes priority. In the event of bankruptcy, subordinated
Debt that may be repaid in bankruptcy only after senior debt is paid.
Are debt instruments that are convertible into common or preferred shares, take secondary or no security against assets, have flexible terms of repayment and charge fixed or floating interest rates.
A written acknowledgment of debt, usually secured by a lien on assets.
Debt instruments that provide financing for acquisitions, expansion and restructuring, take secondary security against assets, have fixed or flexible terms of repayment and charge fixed or floating interest rates.
Ownership interests in specified mortgages purchased
earnings of a firm as reported on its income statement.
A bond on which interest accrues, but is not paid to the investor during the time of accrual.
A merger or consolidation in which an acquirer purchases the selling firm's assets.
The ratio of net income to net sales.
Money after-tax rate of return minus the inflation rate.
The discount rate that reflects only the business risks of a project and abstracts from the
Requirement that none of an order be executed unless all of it can be executed at the specified price.
Total costs, explicit and implicit.
An arrangement whereby a security issue is canceled if the underwriter is unable
Alternative mortgage instruments
Variations of mortgage instruments such as adjustable-rate and variablerate
Asset allocation decision
The decision regarding how an institution's funds should be distributed among the
A firm's productive resources.
A common element of a financial plan that describes projected capital spending and the
Any large principal payment due at maturity for a bond or loan with or without a a sinking
Gives the lessee the option to purchase the asset at a price below fair market
bonds that are not registered on the books of the issuer. Such bonds are held in physical form by
The requirement that a claim holder voting against a plan of reorganization
bonds are debt and are issued for a period of more than one year. The U.S. government, local
A contract for privately placed debt.
A contractual provision in a bond indenture. A positive covenant requires certain actions, and
Bond equivalent yield
bond yield calculated on an annual percentage rate method. Differs from annual
The contract that sets forth the promises of a corporate bond issuer and the rights of
Designing a portfolio so that its performance will match the performance of some bond index.
A conventional unit of measure for bond prices set at $10 and equivalent to 1% of the $100 face
With respect to convertible bonds, the value the security would have if it were not convertible
The method used for computing the bond-equivalent yield.
The annualized yield to maturity computed by doubling the semiannual yield.
A system that monitors and evaluates the performance of a fixed-income portfolio , as well as the
In the mortgage pipeline, the risk that prospective borrowers of loans committed to be
bonds issued by emerging countries under a debt reduction plan.
bond whose principal repayment is linked to the price of another security. The bonds are
Foreign bond issue made in London.
An option that gives the right to buy the underlying futures contract.
Call an option
To exercise a call option.
A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond
Call money rate
Also called the broker loan rate , the interest rate that banks charge brokers to finance
An option contract that gives its holder the right (but not the obligation) to purchase a specified
The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a
The price for which a bond can be repaid before maturity under a call provision.
A feature of some callable bonds that establishes an initial period when the bonds may not be
An embedded option granting a bond issuer the right to buy back all or part of the issue prior
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.
A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The
A financial security such as a bond with a call option attached to it, i.e., the issuer has the right to
decision allocation of invested funds between risk-free assets versus the risky portfolio.
Cash flow after interest and taxes
Net income plus depreciation.
Communication barrier between financiers (investment bankers) and traders. This barrier is
A reduction in the likelihood one or more of the firm's claimants will be fully repaid,
A party to an explicit or implicit contract.
mortgage against which no additional debt may be issued.
A transaction in which the purchaser's intention is to reduce or eliminate a short position in
assets than can be repossessed if a borrower defaults.
Collateral trust bonds
A bond in which the issuer (often a holding company) grants investors a lien on
Collateralized mortgage obligation (CMO)
A security backed by a pool of pass-throughs , structured so that
Common stock/other equity
Value of outstanding common shares at par, plus accumulated retained
Insurance that a construction contract will be successfully completed.
Conflict between bondholders and stockholders
These two groups may have interests in a corporation that
A claim that can be made only if one or more specified outcomes occur.
A loan based on the credit of the borrower and on the collateral for the mortgage.
bonds that can be converted into common stock at the option of the holder.
A eurobond that can be converted into another asset, often through exercise of
debt obligations issued by corporations.
Country risk General
Level of political and economic uncertainty in a country affecting the value of loans or
A short call option position in which the writer owns the number of shares of the underlying
Covered call writing strategy
A strategy that involves writing a call option on securities that the investor
Lender of money.
Value of cash, accounts receivable, inventories, marketable securities and other assets that
High-coupon bonds that sell at only at a moderate premium because they are callable at a
Indicator of financial leverage. Compares assets provided by creditors to assets provided
Ability to borrow. The amount a firm can borrow up to the point where the firm value no
The amount of borrowing that leasing displaces. Firms that do a lot of leasing will be
An asset requiring fixed dollar payments, such as a government or corporate bond.
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.
Reducing the principal and/or interest payments on LDC loans.
IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
Interest payment plus repayments of principal to creditors, that is, retirement of debt.
Debt service parity approach
An analysis wherein the alternatives under consideration will provide the firm
Debt-service coverage ratio
earnings before interest and income taxes plus one-third rental charges, divided
A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank
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.
Deed of trust
A bond issued with a very low coupon or no coupon and selling at a price far below par
A provision that prohibits the company from calling the bond before a certain date. During this
Depository Trust Company (DTC)
DTC is a user-owned securities depository which accepts deposits of
Direct stock-purchase programs
The purchase by investors of securities directly from the issuer.
Disclaimer of opinion
An auditor's statement disclaiming any opinion regarding the company's financial
debt sold for less than its principal value. If a discount bond pays no interest, it is called a
Municipal revenue bonds for which quotes are given in dollar prices. Not to be confused with
Dollar price of a bond
Percentage of face value at which a bond is quoted.
Dynamic asset allocation
An asset allocation strategy in which the asset mix is mechanistically shifted in
Net income for the company during the period.
Earnings before interest and taxes (EBIT)
A financial measure defined as revenues less cost of goods sold
Earnings per share (EPS)
EPS, as it is called, is a company's profit divided by its number of outstanding
Earnings retention ratio
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