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Definition of Tax swap
swapping two similar bonds to receive a tax benefit.
The ratio of net income to net sales.
Money after-tax rate of return minus the inflation rate.
swap in which the principal or national amount rises (falls) as interest rates
Creditors exchange the debt of one defaulting borrower for the debt of another
An interest rate swap used to alter the cash flow characteristics of an institution's assets so as to
A situation wherein participants in a transaction have different net tax rates.
taxes as a fraction of income; total taxes divided by total taxable income.
Total taxes owed divided by total income.
The ratio of net income before taxes to net sales.
The tax rate at which a party to a prospective transaction is indifferent between entering
A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The
Net income plus depreciation.
A fixed rate currency swap against floating U.S. dollar LIBOR payments.
The argument that double (corporate and individual) taxation of equity returns makes
Rate of return required on a par bond to produce the same after-tax yield to
An agreement to swap a series of specified payment obligations denominated in one currency
Current Income Tax Expense
That portion of the total income tax provision that is based on
Current Tax Payment Act of 1943
A federal Act requiring employers to withhold income taxes from employee pay.
A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank
Deferred Income Tax Expense
That portion of the total income tax provision that is the result
Deferred Tax Asset
Future tax benefit that results from (1) the origination of a temporary difference
Deferred Tax Liability
Future tax obligation that results from the origination of a temporary
A non-cash expense that provides a source of free cash flow. Amount allocated during the
Depreciation tax shield
The value of the tax write-off on depreciation of plant and equipment.
depreciation tax shield
Reduction in taxes attributable to the depreciation allowance.
swap between two LIBO rates of interest, e.g. yen LIBOR for dollar LIBOR. Payments are
Agreement between two countries that taxes paid abroad can be offset against
earnings before interest and income tax (EBIT)
A measure of profit that
Earnings before interest and taxes (EBIT)
A financial measure defined as revenues less cost of goods sold
Earnings before interest and taxes (EBIT)
The operating profit before deducting interest and tax.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
The operating profit before deducting interest, tax, depreciation and amortization.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working
EBDDT - Earnings before depreciation and deferred taxes
This measure is used principally by
Effective Tax Rate
The total tax provision divided by pretax book income from continuing
Electronic Federal Tax Payment Systems (EFTPS)
An electronic funds transfer system used by businesses to remit taxes to the government.
A swap in which the cash flows that are exchanged are based on the total return on some stock
Equivalent taxable yield
The yield that must be offered on a taxable bond issue to give the same after-tax
Extending maturity through a swap, e.g. selling a 2-year note and buying one with a slightly
Federal Unemployment Tax Act (FUTA)
A federal Act requiring employers to pay a tax on the wages paid to their employees, which is then used to create a
Foreign exchange swap
An agreement to exchange stipulated amounts of one currency for another currency
Foreign tax credit
Home country credit against domestic income tax for foreign taxes paid on foreign
Imputation tax system
Arrangement by which investors who receive a dividend also receive a tax credit for
What the business paid to the IRS.
A government tax on the income earned by an individual or corporation.
Income Tax Expense
See income tax provision.
Income Tax Provision
The expense deduction from pretax book income reported on the
taxes paid by consumers when they buy goods and services. A sales tax is an example.
The loss in purchasing power due to inflation eroding the real value of financial assets such as cash.
Interest equalization tax
tax on foreign investment by residents of the U.S. which was abolished in 1974.
Interest rate swap
A binding agreement between counterparties to exchange periodic interest payments on
Interest tax shield
The reduction in income taxes that results from the tax-deductibility of interest payments.
interest tax shield
tax savings resulting from deductibility of interest payments.
Intermarket spread swaps
An exchange of one bond for another based on the manager's projection of a
Investment tax credit
Proportion of new capital investment that can be used to reduce a company's tax bill
Investment Tax Credit
A reduction in taxes offered to firms to induce them to increase investment spending.
An interest rate swap used to alter the cash flow characteristics of an institution's liabilities so
Limited-tax general obligation bond
A general obligation bond that is limited as to revenue sources.
Margin Tax Rate
The tax rate applicable to the last unit of income.
Marginal tax rate
The tax rate that would have to be paid on any additional dollars of taxable income earned.
marginal tax rate
Additional taxes owed per dollar of additional income.
Marginal Tax Rate
Percent of an increase in income paid in tax.
Payroll tax expense
The amount of tax associated with salaries that an employer pays to governments (federal, state, and local).
Payroll taxes payable
The amount of payroll taxes owed to the various governments at the end of a period.
Personal tax view (of capital structure)
The argument that the difference in personal tax rates between
Profit before interest and taxes (PBIT)
A tax in which the rich pay a larger percentage of income than the poor. Contrast with regressive tax.
Progressive tax system
A tax system wherein the average tax rate increases for some increases in income but
A tax taking the same percentage of income regardless of the level of income.
Pure yield pickup swap
Moving to higher yield bonds.
A financial tool in which the buyer has the right, or option, to enter into a swap as a floatingrate
See: differential swap.
Rate anticipation swaps
An exchange of bonds in a portfolio for new bonds that will achieve the target
A tax in which the poor pay a larger percentage of income than the rich. Contrast with progressive tax.
Roth IRA. An IRA account whose earnings are not taxable at all under certain
A tax levied as a percentage of retail sales.
Short-term tax exempts
Short-term securities issued by states, municipalities, local housing agencies, and
Split-rate tax system
A tax system that taxes retained earnings at a higher rate than earnings that are
State Disability Tax
A tax charged by selected states to maintain a disability insurance
Statutory Tax Rate
The income tax rate that is stated in income tax law. It is applied to taxable
A swap in which a money manager exchanges one bond for another bond that is similar in
An arrangement whereby two companies lend to each other on different terms, e.g. in different
An exchange of cash flows between two counterparties. The
A contract between two parties to exchange cash flows in the future
Arrangement by two counterparties to exchange one stream of cash flows for another.
Related: swap sale.
The sale of an interest rate swap by one counterparty to the other, effectively ending the swap.
The difference between spot and forward rates expressed in points, e.g., $0.0001 per pound sterling.
An interest rate swap designed to end a counterparty's role in another interest rate swap,
Also called a swap assignment, a transaction that ends one counterparty's role in an interest rate
Options on interest rate swaps. The buyer of a swaption has the right to enter into an interest rate
A swap option; an option on an interest-rate swap. The option gives
TANs (tax anticipation notes)
tax anticipation notes issued by states or municipalities to finance current
Tax anticipation bills (TABs)
Special bills that the Treasury occasionally issues that mature on corporate
tax benefit (of depreciation)
the amount of depreciation deductible for tax purposes multiplied by the tax rate;
Set of books kept by a firm's management for the IRS that follows IRS rules. The stockholder's
Tax clawback agreement
An agreement to contribute as equity to a project the value of all previously
postponing taxation of an amount until a future date
Tax deferral option
The feature of the U.S. Internal Revenue Code that the capital gains tax on an asset is
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