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Definition of Theta
Also called time decay, the ratio of the change in an option price to the decrease in time to expiration.
The rate of change in the price of a derivative security relative to time.
Collectively, "greeks" refer to the financial measures delta, gamma,
Capital rationing that under certain circumstances can be violated or even viewed
The option of terminating an investment earlier than originally planned.
Schedule of depreciation rates allowed for tax purposes.
Any depreciation method that produces larger deductions for depreciation in the
(1) The estimated useful life of the fixed asset being depreciated is
Any of several methods that recognize an increased amount
Clause causing repayment of a debt, if specified events occur or are not met.
Belief that an effort to keep unemployment below its natural rate results in an accelerating inflation.
The sum of all the interest options in your policy, including interest.
An alteration in the accounting methodology or estimates used in
A method of investment appraisal that measures
the rate of earnings obtained on the average capital investment over the life of a capital project; computed as average annual profits divided by average investment; not based on cash flow
A ratio computed by dividing annual
An amount of money invested plus the interest earned on that money.
Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid
A ratio that shows how well a company could pay its current debts using only its most liquid or “quick” assets. It’s a more pessimistic—but Also realistic—measure of safety than the current ratio, because it ignores sluggish, hard-toliquidate current assets like inventory and notes receivable. Here’s the formula:
See quick ratio
acid test ratio (also called the quick ratio)
The sum of cash, accounts receivable, and short-term marketable
Active portfolio strategy
A strategy that uses available information and forecasting techniques to seek a
Adjustable rate preferred stock (ARPS)
Publicly traded issues that may be collateralized by mortgages and MBSs.
Adjusted Cash Flow Provided by Continuing Operations
Cash flow provided by operating
Adjusted present value (APV)
The net present value analysis of an asset if financed solely by equity
After-tax real rate of return
Money after-tax rate of return minus the inflation rate.
All equity rate
The discount rate that reflects only the business risks of a project and abstracts from the
An option that may be exercised at any time up to and including the expiration date.
An option that can be exercised any time until its
American Stock Exchange (AMEX)
The second-largest stock exchange in the United States. It trades
An option contract that can be exercised at any time between the date of purchase and
Amortizing interest rate swap
Swap in which the principal or national amount rises (falls) as interest rates
Annual percentage rate (APR)
The periodic rate times the number of periods in a year. For example, a 5%
annual percentage rate (APR)
Interest rate that is annualized using simple interest.
The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard
approximated net realizable value at split-off allocation
a method of allocating joint cost to joint products using a
Arbitrage-free option-pricing models
Yield curve option-pricing models.
Arithmetic average (mean) rate of return
Arithmetic mean return.
Arm's length price
The price at which a willing buyer and a willing unrelated seller would freely agree to
Articles of incorporation
Legal document establishing a corporation and its structure and purpose.
option based on the average price of the asset during the life of the option.
A dealer's price to sell a security; Also called the offer price.
Asset activity ratios
ratios that measure how effectively the firm is managing its assets.
A security that is collateralized by loans, leases, receivables, or installment contracts
The ratio of total assets to stockholder equity.
asset turnover ratio
A broad-gauge ratio computed by dividing annual
Auction rate preferred stock (ARPS)
Floating rate preferred stock, the dividend on which is adjusted every
A debt or equity security not classified as a held-to-maturity security or a trading security. Can be classified as a current or noncurrent investment depending on the intended holding period.
Average (across-day) measures
An estimation of price that uses the average or representative price of a
The average time to maturity of securities held by a mutual fund. changes in interest rates
Average rate of return (ARR)
The ratio of the average cash inflow to the amount invested.
Average tax rate
Taxes as a fraction of income; total taxes divided by total taxable income.
average tax rate
Total taxes owed divided by total income.
Any large principal payment due at maturity for a bond or loan with or without a a sinking
A strategy in which the maturities of the securities included in the portfolio are concentrated
Gives the lessee the option to purchase the asset at a price below fair market
Contracts with trigger points that, when crossed, automatically generate buying or selling of
Base interest rate
Related: Benchmark interest rate.
Basic business strategies
Key strategies a firm intends to pursue in carrying out its business plan.
Basic Earnings Power Ratio
Percentage of earnings relative to total assets; indication of how
price expressed in terms of yield to maturity or annual rate of return.
Packages that involve the exchange of more than two currencies against a base currency at
Benchmark interest rate
Also called the base interest rate, it is the minimum interest rate investors will
Benefit Ratio Method
The proportion of unemployment benefits paid to a company’s
The amount of cash payable on a benefit.
Benefit Wage Ratio Method
The proportion of total taxable wages for laid off
This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
Bill of exchange
General term for a document demanding payment.
Binomial option pricing model
An option pricing model in which the underlying asset can take on only two
Black-Scholes option-pricing model
A model for pricing call options based on arbitrage arguments that uses
Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees
A committee formed in response to SEC chairman Arthur Levitt's initiative to improve the financial
With respect to convertible bonds, the value the security would have if it were not convertible
book rate of return
Accounting income divided by book value.
A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
An asset’s cost basis minus accumulated depreciation.
The value of an asset as carried on the balance sheet of a
An asset’s original cost, less any depreciation that has been subsequently incurred.
Net worth of the firm’s assets or liabilities according
book value and book value per share
Generally speaking, these terms
BOOK VALUE OF COMMON STOCK
The theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. Book value equals:
Book value per share
The ratio of stockholder equity to the average number of common shares. Book value
Book Value per Share
The book value of a company divided by the number of shares
Break-even payment rate
The prepayment rate of a MBS coupon that will produce the same CFY as that of
Break-even tax rate
The tax rate at which a party to a prospective transaction is indifferent between entering
Related: Premium payback period.
Broker loan rate
Related: Call money rate.
A strategy in which a portfolio is constructed so that the maturities of its securities are highly
an activity that is necessary for the operation of the business but for which a customer would not want to pay
A passive investment strategy with no active buying and selling of stocks from the
cafeteria plan a “menu” of fringe benefit options that include
cash or nontaxable benefits
Call an option
To exercise a call option.
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
A contract that gives the holder the right to buy an asset for a
Right to buy an asset at a specified exercise price on or before the exercise date.
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.
Canadian Deposit Insurance Corporation
Better known as CDIC, this is an organization which insures qualifying deposits and GICs at savings institutions, mainly banks and trust companys, which belong to the CDIC for amounts up to $60,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, annuities of duration of more than five years, and mutual funds.
CAPITAL IN EXCESS OF PAR VALUE
What a company collected when it sold stock for more than the par value per share.
Placing one or more limits on the amount of new investment undertaken by a firm, either
a condition that exists when there is an
Limit set on the amount of funds available for investment.
refers to recouping, or regaining, invested capital over
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