Definition of Take-out

Take-out

A cash surplus generated by the sale of one block of securities and the purchase of another, e.g.
selling a block of bonds at 99 and buying another block at 95. Also, a bid made to a seller of a security that is
designed (and generally agreed) to take him out of the market.

12b-1 funds

Mutual funds that do not charge an upfront or back-end commission, but instead take out up to
1.25% of average daily fund assets each year to cover the costs of selling and marketing shares, an
arrangement allowed by the SEC's Rule 12b-I (passed in 1980).

Borrower fallout

In the mortgage pipeline, the risk that prospective borrowers of loans committed to be
closed will elect to withdraw from the contract.

Breakout

A rise in a security's price above a resistance level (commonly its previous high price) or drop
below a level of support (commonly the former lowest price.) A breakout is taken to signify a continuing
move in the same direction. Can be used by technical analysts as a buy or sell indicator.

Buyout

Purchase of a controlling interest (or percent of shares) of a company's stock. A leveraged buy-out is
done with borrowed money.

Cashout

Refers to a situation where a firm runs out of cash and cannot readily sell marketable securities.

Customary payout ratios

A range of payout ratios that is typical based on an analysis of comparable firms.

Days' sales outstanding

Average collection period.

Dividend payout ratio

Percentage of earnings paid out as dividends.

Down-and-out option

Barrier option that expires if asset price hits a barrier.

Fallout risk

A type of mortgage pipeline risk that is generally created when the terms of the loan to be
originated are set at the same time as the sale terms are set. The risk is that either of the two parties, borrower
or investor, fails to close and the loan "falls out" of the pipeline.

Feasible target payout ratios

Payout ratios that are consistent with the availability of excess funds to make
cash dividend payments.

First-In-First-Out (FIFO)

A method of valuing the cost of goods sold that uses the cost of the oldest item in
inventory first.

Full-payout lease

See: financial lease.

Input-output tables

Tables that indicate how much each industry requires of the production of each other
industry in order to produce each dollar of its own output.

Investor fallout

In the mortgage pipeline, risk that occurs when the originator commits loan terms to the
borrowers and gets commitments from investors at the time of application, or if both sets of terms are made at closing.

Last-In-First-Out (LIFO)

A method of valuing inventory that uses the cost of the most recent item in
inventory first.

Leveraged buyout (LBO)

A transaction used for taking a public corporation private financed through the use
of debt funds: bank loans and bonds. Because of the large amount of debt relative to equity in the new
corporation, the bonds are typically rated below investment grade, properly referred to as high-yield bonds or
junk bonds. Investors can participate in an LBO through either the purchase of the debt (i.e., purchase of the
bonds or participation in the bank loan) or the purchase of equity through an LBO fund that specializes in
such investments.

LIFO (Last-in-first-out)

The last-in-first-out inventory valuation methodology. A method of valuing
inventory that uses the cost of the most recent item in inventory first.

Lock-out

With PAC bond CMO classes, the period before the PAC sinking fund becomes effective. With
multifamily loans, the period of time during which prepayment is prohibited.

Management buyout (MBO)

Leveraged buyout whereby the acquiring group is led by the firm's management.

Netting out

To get or bring in as a net; to clear as profit.

Open-outcry

The method of trading used at futures exchanges, typically involving calling out the specific
details of a buy or sell order, so that the information is available to all traders.

Out-of-the-money option

A call option is out-of-the-money if the strike price is greater than the market price
of the underlying security. A put option is out-of-the-money if the strike price is less than the market price of
the underlying security.

Outright rate

Actual forward rate expressed in dollars per currency unit, or vice versa.
outsourcing
he practice of purchasing a significant percentage of intermediate components from outside suppliers.

Outstanding share capital

Issued share capital less the par value of shares that are held in the company's treasury.

Outstanding shares

Shares that are currently owned by investors.

Payout ratio

Generally, the proportion of earnings paid out to the common stockholders as cash dividends.
More specifically, the firm's cash dividend divided by the firm's earnings in the same reporting period.

Price takers

Individuals who respond to rates and prices by acting as though they have no influence on them.

Priced out

The market has already incorporated information, such as a low dividend, into the price of a stock.

Stakeholders

All parties that have an interest, financial or otherwise, in a firm - stockholders, creditors,
bondholders, employees, customers, management, the community, and the government.

Stockout

Running out of inventory.

Take

1) A dealer or customer who agrees to buy at another dealer's offered price is said to take that offer.
2) Also, Euro bankers speak of taking deposits rather than buying money.

Take a position

To buy or sell short; that is, to have some amount that is owned or owed on an asset or
derivative security.

Take-or-pay contract

A contract that obligates the purchaser to take any product that is offered to it (and pay
the cash purchase price) or pay a specified amount if it refuses to take the product.

Take-up fee

A fee paid to an underwriter in connection with an underwritten rights offering or an
underwritten forced conversion as compensation for each share of common stock he underwriter obtains and
must resell upon the exercise of rights or conversion of bonds.

Takeover

General term referring to transfer of control of a firm from one group of shareholder's to another
group of shareholders.

Target payout ratio

A firm's long-run dividend-to-earnings ratio. The firm's policy is to attempt to pay out a
certain percentage of earnings, but it pays a stated dollar dividend and adjusts it to the target as base-line
increases in earnings occur.

Without

If 70 were bid in the market and there was no offer, the quote would be "70 bid without." The
expression "without" indicates a one-way market.

Without recourse

Without the lender having any right to seek payment or seize assets in the event of
nonpayment from anyone other than the party (such as a special-purpose entity) specified in the debt contract.

Workout

Informal arrangement between a borrower and creditors.

Workout period

Realignment period of a temporary misaligned yield relationship that sometimes occurs in
fixed income markets.

FIFO (First In, First Out)

An inventory valuation method that presumes that the first units received were the first ones
sold.

LIFO (Last In, First Out)

An inventory valuation method that presumes that the last units received were the first ones
sold.

Routing

A list of all the labour or machining processes and times required to convert raw materials into finished goods or to deliver a service.

First-in, first-out (FIFO)

A method of accounting for inventory.

Last-in, first-out (LILO)

A method of accounting for inventory.

Outstanding shares

The number of shares that are in the hands of the public. The difference between issued shares and outstanding shares is the shares held as treasury stock.

dividend payout ratio

Computed by dividing cash dividends for the year
by the net income for the year. It’s simply the percent of net income distributed
as cash dividends for the year.

input-output coefficient

a number (prefaced as a multiplier
to an unknown variable) that indicates the rate at which each
decision variable uses up (or depletes) the scarce resource

outlier

an abnormal or nonrepresentative point within a data set

out-of-pocket cost

a cost that is a current or near-current cash expenditure

outsourcing

the use, by one company, of an external
provider of a service or manufacturer of a component

outsourcing decision

see make-or-buy decision

routing document

see operations flow document

stockout

the condition of not having inventory available
upon need or request

takeover

the acquisition of managerial control of the corporation
by an outside or inside investor; control is achieved
by acquiring enough stock and stockholder votes to control
the board of directors and management

First in, first-out costing method (FIFO)

A process costing methodology that assigns the earliest
cost of production and materials to those units being sold, while the latest costs
of production and materials are assigned to those units still retained in inventory.

Freight out

The transportation cost associated with the delivery of goods from a company
to its customers.

Last-in, first-out (LIFO)

An inventory costing methodology that bases the recognized cost of
sales on the most recent costs incurred, while the cost of ending inventory is based
on the earliest costs incurred. The underlying reasoning for this costing system is
the assumption that goods are sold in the reverse order of their manufacture.

Leveraged buyout

The purchase of one business entity by another, largely using borrowed
funds. The borrowings are typically paid off through the future cash flow of
the purchased entity.

dividend payout ratio

Percentage of earnings paid out as dividends.

leveraged buyout (LBO)

Acquisition of the firm by a private group using substantial borrowed funds.

management buyout (MBO)

Acquisition of the firm by its own management in a leveraged buyout.

outstanding shares

Shares that have been issued by the company and are held by investors.

payout ratio

Fraction of earnings paid out as dividends.

stakeholder

Anyone with a financial interest in the firm.

workout

Agreement between a company and its creditors establishing the steps the company must take to avoid bankruptcy.

Crowding Out

Decreases in aggregate demand which accompany an expansionary fiscal policy, dampening the impact of that policy.

Full-Employment Output

The level of output produced by the economy when operating at the natural rate of unemployment.

National Output

GDP.

Output Gap

The difference between full employment output and current output.

Potential Output or Potential GDP

output produced when the economy is operating at its natural rate of unemployment.

Outsourcing

The process of shifting a function previously performed internally
to a supplier who is responsible to the company for its ongoing operations and
results.

First-In, First-Out (FIFO) Inventory Method

The inventory cost-flow assumption that
assigns the earliest inventory acquisition costs to cost of goods sold. The most recent inventory
acquisition costs are assumed to remain in ending inventory.

Last-In, First-Out (LIFO) Inventory Method

The inventory cost-flow assumption that assigns the most recent inventory acquisition costs to cost of goods sold. The earliest inventory
acquisition costs are assumed to remain in ending inventory.

First-in, first-out (FIFO)

An inventory valuation method under which one assumes that the
first inventory item to be stored in a bin is the first one to be used, irrespective of
actual usage.

Last-in, first-out (LIFO)

An inventory valuation method under which one assumes that the
last inventory item to be stored in a bin is the first one to be used, irrespective of
actual usage.

Outbound stock point

A designated inventory location on the shop floor between
operations where inventory is stockpiled until needed by the next operation.

Stockout

The absence of any form of inventory when needed.

basic earnings per share (EPS)

This important ratio equals the net
income for a period (usually one year) divided by the number capital
stock shares issued by a business corporation. This ratio is so important
for publicly owned business corporations that it is included in the daily
stock trading tables published by the Wall Street Journal, the New York
Times, and other major newspapers. Despite being a rather straightforward
concept, there are several technical problems in calculating
earnings per share. Actually, two EPS ratios are needed for many businesses—
basic EPS, which uses the actual number of capital shares outstanding,
and diluted EPS, which takes into account additional shares of
stock that may be issued for stock options granted by a business and
other stock shares that a business is obligated to issue in the future.
Also, many businesses report not one but two net income figures—one
before extraordinary gains and losses were recorded in the period and a
second after deducting these nonrecurring gains and losses. Many business
corporations issue more than one class of capital stock, which
makes the calculation of their earnings per share even more complicated.

CARs (cumulative abnormal returns)

a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock.
This is typically used in control and takeover studies, where stockholders are paid a premium for being taken over. Starting some time period before the takeover (often five days before the first announced bid, but sometimes a longer period), the researchers calculate the actual daily stock returns for the target firm and subtract out the expected market returns (usually calculated using the firm’s beta and applying it to overall market movements during the time period under observation).
The excess actual return over the capital asset pricing model-determined expected return market is called an ‘‘abnormal return.’’ The cumulation of the daily abnormal returns over the time period under observation is the CAR. The term CAR(-5, 0) means the CAR calculated from five days before the
announcement to the day of announcement. The CAR(-1, 0) is a control premium, although Mergerstat generally uses the stock price five days before announcement rather than one day before announcement as the denominator in its control premium calculation. However, the CAR for any period other than (-1, 0) is not mathematically equivalent to a control premium.

internal accounting controls

Refers to forms used and procedures
established by a business—beyond what would be required for the
record-keeping function of accounting—that are designed to prevent
errors and fraud. Two examples of internal controls are (1) requiring a
second signature by someone higher in the organization to approve a
transaction in excess of a certain dollar amount and (2) giving customers
printed receipts as proof of sale. Other examples of internal
control procedures are restricting entry and exit routes of employees,
requiring all employees to take their vacations and assigning another
person to do their jobs while they are away, surveillance cameras, surprise
counts of cash and inventory, and rotation of duties. Internal controls
should be cost-effective; the cost of a control should be less than
the potential loss that is prevented. The guiding principle for designing
internal accounting controls is to deter and detect errors and dishonesty.
The best internal controls in the world cannot prevent most fraud
by high-level managers who take advantage of their positions of trust
and authority.

Last trading day

The final day under an exchange's rules during which trading may take place in a particular
futures or options contract. Contracts outstanding at the end of the last trading day must be settled by delivery
of underlying physical commodities or financial instruments, or by agreement for monetary settlement
depending upon futures contract specifications.

Mortgage Insurance

Commonly sold in the form of reducing term life insurance by lending institutions, this is life insurance with a death benefit reducing to zero over a specific period of time, usually 20 to 25 years. In most instances, the cost of coverage remains level, while the death benefit continues to decline. Re-stated, the cost of this kind of insurance is actually increasing since less death benefit is paid as the outstanding mortgage balance decreases while the cost remains the same. Lending institutions are the most popular sources for this kind of coverage because it is usually sold during the purchase of a new mortgage. The untrained institution mortgage sales person often gives the impression that this is the only place mortgage insurance can be purchased but it is more efficiently purchased at a lower cost and with more flexibility, directly from traditional life insurance companies. No matter where it is purchased, the reducing term insurance death benefit reduces over a set period of years. Most consumers are up-sizing their residences, not down-sizing, so it is likely that more coverage is required as years pass, rather than less coverage.
The cost of mortgage lender's insurance group coverage is based on a blended non-smoker/smoker rate, not having any advantage to either male or female. Mortgage lender's group insurance certificate specifies that it [the lender] is the sole beneficiary entitled to receive the death benefit. Mortgage lender's group insurance is not portable and is not guaranteed. Generally speaking, your coverage is void if you do not occupy the house for a period of time, rent the home, fall into arrears on the mortgage, and there are a few others which vary by institution. If, for example, you sell your home and buy another, your current mortgage insurance coverage ends and you will have to qualify for new coverage when you purchase your next home. Maybe you won't be able to qualify. Not being guaranteed means that it is possible for the lending institution's group insurance carrier to cancel all policy holder's coverages if they are experiencing too many death benefit claims.
Mortgage insurance purchased from a life insurance company, is priced, based on gender, smoking status, health and lifestyle of the purchaser. Once obtained, it is a unilateral contract in your favour, which cannot be cancelled by the insurance company unless you say so or unless you stop paying for it. It pays upon the death of the life insured to any "named beneficiary" you choose, tax free. If, instead of reducing term life insurance, you have purchased enough level or increasing life insurance coverage based on your projection of future need, you can buy as many new homes in the future as you want and you won't have to worry about coverage you might loose by renewing or increasing your mortgage.
It is worth mentioning mortgage creditor protection insurance since it is many times mistakenly referred to simply as mortgage insurance. If a home buyer has a limited amount of down payment towards a substantial home purchase price, he/she may qualify for a high ratio mortgage on a home purchase if a lump sum fee is paid for mortgage creditor protection insurance. The only Canadian mortgage lenders currently known to offer this option through the distribution system of banks and trust companies, are General Electric Capital [GE Capital] and Central Mortgage and Housing Corporation [CMHC]. The lump sum fee is mandatory when the mortgage is more than 75% of the value of the property being purchased. The lump sum fee is usually added onto the mortgage. It's important to realize that the only beneficiary of this type of coverage is the morgage lender, which is the bank or trust company through which the buyer arranged their mortgage. If the buyer for some reason defaults on this kind of high ratio mortgage and the value of the property has dropped since being purchased, the mortgage creditor protection insurance makes certain that the bank or trust company gets paid. However, this is not the end of the story, because whatever the difference is, between the disposition value of the property and whatever sum of unpaid mortgage money is outstanding to either GE Capital or CMHC will be the subject of collection procedures against the defaulting home buyer. Therefore, one should conclude that this kind of insurance offers protection only to the bank or trust company and absolutely no protection to the home buyer.

Overnight delivery risk

A risk brought about because differences in time zones between settlement centers
require that payment or delivery on one side of a transaction be made without knowing until the next day
whether the funds have been received in an account on the other side. Particularly apparent where delivery
takes place in Europe for payment in dollars in New York.

Payback

The length of time it takes to recover the initial cost of a project, without regard to the time value of money.

Payback

A method of investment appraisal that calculates the number of years taken for the cash flows from an investment to cover the initial capital outlay.

proxy contest

takeover attempt in which outsiders compete with management for shareholders’ votes. Also called proxy fight.

Registered Pension Plan

Commonly referred to as an RPP this is a tax sheltered employee group plan approved by Federal and Provincial governments allowing employees to have deductions made directly from their wages by their employer with a resulting reduction of income taxes at source. These plans are easy to implement but difficult to dissolve should the group have a change of heart. Employer contributions are usually a percentage of the employee's salary, typically from 3% to 5%, with a maximum of the lessor of 20% or $3,500 per annum. The employee has the same right of contribution. Vesting is generally set at 2 years, which means that the employee has right of ownership of both his/her and his/her employers contributions to the plan after 2 years. It also means that all contributions are locked in after 2 years and cannot be cashed in for use by the employee in a low income year. Should the employee change jobs, these funds can only be transferred to the RPP of a new employer or the funds can be transferred to an individual RRSP (or any number of RRSPs) but in either scenario, the funds are locked in and cannot be accessed until at least age 60. The only choices available to access locked in RPP funds after age 60 are the conversion to a Life Income Fund or a Unisex Annuity.
To further define an RPP, Registered Pension Plans take two forms; Defined Benefit or Defined Contribution (also known as money purchase plans). The Defined Benefit plan establishes the amount of money in advance that is to be paid out at retirement based usually on number of years of employee service and various formulae involving percentages of average employee earnings. The Defined Benefit plan is subject to constant government scrutiny to make certain that sufficient contributions are being made to provide for the predetermined pension payout. On the other hand, the Defined Contribution plan is considerably easier to manage. The employer simply determines the percentage to be contributed within the prescribed limits. Whatever amount has grown in the employee's reserve by retirement determines how much the pension payout will be by virtue of the amount of LIF or Annuity payout it will purchase.
The most simple group RRSP plan is a group billed RRSP. This means that each employee has his own RRSP plan and the employer deducts the contributions directly from the employee's wages and sends them directly to the RRSP plan administrator. Regular RRSP rules apply in that maximum contribution in the current year is the lessor of 18% or $13,500. Generally, to encourage this kind of plan, the employer also agrees to make a regular contribution to the employee's plans, knowing full well that any contributions made immediately belong to the employee. Should the employee change jobs, he/she can take their plan with them and continue making contributions or cash it in and pay tax in the year in which the money is taken into income.

Rules-versus-Discretion Debate

Argument about whether policy authorities should be allowed to undertake discretionary policy action as they see fit or should be replaced by robots programmed to set policy by following specific formulas. See discretionary policy, policy rule.

sunk cost

A cost that has been paid and cannot be undone or reversed.
Once the cost has been paid, it is irretrievable, like water over the dam
or spilled milk. Usually, the term refers to the recorded value of an asset
that has lost its value in the operating activities of a business. Examples
are the costs of products in inventory that cannot be sold and fixed
assets that are no longer usable. The book value of these assets should
be written off to expense. These costs should be disregarded in making
decisions about what to do with the assets (except that the income tax
effects of disposing of the assets should be taken into account).

tender offer

takeover attempt in which outsiders directly offer to buy the stock of the firm’s shareholders.

Viatical Settlement

A dictionary meaning for the word viatica is "the eucharist as given to a dying person or to one in danger of death". In the context of Viatical Settlement it means the selling of one's own life insurance policy to another in exchange for an immediate percentage of the death benefit. The person or in many cases, group of persons buying the rights to the policy have high expectation of the imminent death of the previous owner. The sooner the death of the previous owner, the higher the profit. Consumer knowledge about this subject is poor and little is known about the entities that fund the companies that purchase policies. People should be very careful when considering the sale of their policy, and they should remember a sale of their life insurance means some group of strangers now owns a contract on their life. If a senior finds it difficult to pay for an insurance policy it might be a better choice to request that current beneficiaries take over the burden of paying the premium. The practice selling personal life insurance policies common in the United States and is spilling over into Canada. It would appear to have a definite conflict with Canada's historical view of 'insurable interest'.

Will

This is a legal document detailing how you want your assets to be distributed upon your death. You may also stipulate how you wish to be buried or who you would like to take care of any surviving dependent family members. In my opinion, it is very important to be quite specific about your wishes for the distribution of special assets such as the antique grandfather clock, the classic silver tea set or the antique piano. If you think that your beneficiaries may dispute how your things are to be distributed, consider stipulating that an auction be held in which all beneficiaries may bid on the item which they value and all moneys collected are then shared in the same manner in which you distributed your other liquid assets. Your might want to remember that a will is automatically revoked upon marriage unless the will specifically states that the will is made in contemplation of marriage.

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