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Definition of Turnaround

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Securities bought and sold for settlement on the same day. Also, when a firm that has been
performing poorly changes its financial course and improves its performance.

Related Terms:

Turnaround time

Time available or needed to effect a turnaround.

Break-even time

Related: Premium payback period.

Cash flow time-line

Line depicting the operating activities and cash flows for a firm over a particular period.

cycle time

the time between the placement of an order to
the time the goods arrive for usage or are produced by
the company; it is equal to value-added time plus nonvalue-
added time

employee time sheet

a source document that indicates, for each employee, what jobs were worked on during the day and for what amount of time

idle time

the amount of time spent in storing inventory or
waiting at a production operation for processing

inspection time

the time taken to perform quality control activities

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Just-in-time inventory systems

Systems that schedule materials/inventory to arrive exactly as they are
needed in the production process.

just-in-time (JIT)

a philosophy about when to do something;
the when is “as needed” and the something is a production,
purchasing, or delivery activity

Just-in-time (JIT)

A cluster of manufacturing, design, and delivery practices designed to
continually reduce all types of waste, thereby improving production efficiency.

Just-in-time manufacturing

The term for several manufacturing innovations that
result in a “pull” method of production, in which each manufacturing workstation
creates just enough product for the immediate needs of the next workstation in the
production process.

just-in-time manufacturing system

a production system that attempts to acquire components and produce inventory only as needed, to minimize product defects, and to
reduce lead/setup times for acquisition and production

just-in-time training

a system that maps the skill sets employees
need and delivers the training they need just as they need it

lead time

see cycle time

Market timer

A money manager who assumes he or she can forecast when the stock market will go up and down.


A pay premium of 50 percent of the regular rate of pay that is earned
by employees on all hours worked beyond 40 hours in a standard work week

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processing time

the actual time consumed performing the
functions necessary to manufacture a product

Real time

A real time stock or bond quote is one that states a security's most recent offer to sell or bid (buy).
A delayed quote shows the same bid and ask prices 15 minutes and sometimes 20 minutes after a trade takes place.

service time

the actual time consumed performing the functions
necessary to provide a service

Time Clock

A device used to stamp an employee’s incoming or outgoing time
on either a paper document or an electronic record.

Time decay

Related: theta.

Time deposit

Interest-bearing deposit at a savings institution that has a specific maturity.
Related: certificate of deposit.

Time Deposit

See term deposit.

Time draft

Demand for payment at a stated future date.

Time premium

Also called time value, the amount by which the option price exceeds its intrinsic value. The
value of an option beyond its current exercise value representing the optionholder's control until expiration,
the risk of the underlying asset, and the riskless return.

Time to maturity

The time remaining until a financial contract expires. Also called time until expiration.

Time until expiration

The time remaining until a financial contract expires. Also called time to maturity.

Time value of an option

The portion of an option's premium that is based on the amount of time remaining
until the expiration date of the option contract, and that the underlying components that determine the value of
the option may change during that time. time value is generally equal to the difference between the premium
and the intrinsic value. Related: in-the-money.

Time value of money

The idea that a dollar today is worth more than a dollar in the future, because the dollar
received today can earn interest up until the time the future dollar is received.

Time-weighted rate of return

Related: Geometric mean return.


A document or electronic record on which an employee records his or
her hours worked during a payroll period.


representation of the amounts and timing of all
cash inflows and outflows; it is used in analyzing cash flow
from a capital project

times interest earned

A ratio that tests the ability of a business to make
interest payments on its debt, which is calculated by dividing annual
earnings before interest and income tax by the interest expense for the
year. There is no particular rule for this ratio, such as 3 or 4 times, but
obviously the ratio should be higher than 1.

Times-interest-earned ratio

Earnings before interest and tax, divided by interest payments.

Times Interest Earned Ratio

A measure of how well a company is able to meet its interest
payments based on the cash generated by its operations. It is
calculated by dividing the earnings before interest and taxes by the
total interest charges incurred by the firm.

transfer time

the time consumed by moving products or
components from one place to another

401k Plan

A retirement plan set up by an employer, into which employees can
contribute the lesser of $13,000 or 15 percent of their pay (as of 2004), which
is excluded from taxation until such time as they remove the funds from the account.

ABM (automated banking machine)

A bank machine, sometimes referred to as an automated teller machine (ATM).

Accounting period

The period of time for which financial statements are produced – see also financial year.

Accrual bond

A bond on which interest accrues, but is not paid to the investor during the time of accrual.
The amount of accrued interest is added to the remaining principal of the bond and is paid at maturity.

accrued expenses payable

The account that records the short-term, noninterest-
bearing liabilities of a business that accumulate over time, such
as vacation pay owed to employees. This liability is different than
accounts payable, which is the liability account for bills that have been
received by a business from purchases on credit.

activity based costing (ABC)

A relatively new method advocated for the
allocation of indirect costs. The key idea is to classify indirect costs,
many of which are fixed in amount for a period of time, into separate
activities and to develop a measure for each activity called a cost driver.
The products or other functions in the business that benefit from the
activity are allocated shares of the total indirect cost for the period based
on their usage as measured by the cost driver.

Advance material request

Very early orders for materials before the completion
of a product design, given the long lead times required to supply some items.

aging schedule

Classification of accounts receivable by time outstanding.

American option

An option that may be exercised at any time up to and including the expiration date.
Related: European option

American option

An option that can be exercised any time until its
expiration date. Contrast with European option.

American-style option

An option contract that can be exercised at any time between the date of purchase and
the expiration date. Most exchange-traded options are American style.

Analytical Review

The process of attempting to infer the presence of potential problems
through the analysis of ratios and other relationships, often over time.

Annual percentage rate (APR)

The periodic rate times the number of periods in a year. For example, a 5%
quarterly return has an APR of 20%.

Annualized holding period return

The annual rate of return that when compounded t times, would have
given the same t-period holding return as actually occurred from period 1 to period t.


A regular periodic payment made by an insurance company to a policyholder for a specified period
of time.


A series of payments or deposits of equal size spaced evenly over
a specified period of time


A series of payments over a period of time. The payments are usually
in equal amounts and usually at regular intervals such as quarterly,
semi-annually, or annually.


A contract which provides an income for a specified period of time, such as a certain number of years or for life. An annuity is like a life insurance policy in reverse. The purchaser gives the life insurance company a lump sum of money and the life insurance company pays the purchaser a regular income, usually monthly.

Annuity due

An annuity with n payments, wherein the first payment is made at time t = 0 and the last
payment is made at time t = n - 1.

Annuity Period

The time between each payment under an annuity.


The correlation of a variable with itself over successive time intervals.

Average life

Also referred to as the weighted-average life (WAL). The average number of years that each
dollar of unpaid principal due on the mortgage remains outstanding. Average life is computed as the weighted average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal

Average maturity

The average time to maturity of securities held by a mutual fund. Changes in interest rates
have greater impact on funds with longer average life.

Back office

Brokerage house clerical operations that support, but do not include, the trading of stocks and
other securities. Includes all written confirmation and settlement of trades, record keeping and regulatory
Back-end loan fund
A mutual fund that charges investors a fee to sell (redeem) shares, often ranging from
4% to 6%. Some back-end load funds impose a full commission if the shares are redeemed within a
designated time, such as one year. The commission decreases the longer the investor holds the shares. The
formal name for the back-end load is the contingent deferred sales charge, or CDSC.

Back-to-back loan

A loan in which two companies in separate countries borrow each other's currency for a
specific time period and repay the other's currency at an agreed upon maturity.

Balance of payments

A statistical compilation formulated by a sovereign nation of all economic transactions
between residents of that nation and residents of all other nations during a stipulated period of time, usually a
calendar year.

balance sheet

A term often used instead of the more formal and correct
term—statement of financial condition. This financial statement summarizes
the assets, liabilities, and owners’ equity sources of a business at a
given moment in time. It is prepared at the end of each profit period and
whenever else it is needed. It is one of the three primary financial statements
of a business, the other two being the income statement and the
statement of cash flows. The values reported in the balance sheet are the
amounts used to determine book value per share of capital stock. Also,
the book value of an asset is the amount reported in a business’s most
recent balance sheet.

Balance sheet

A report that summarizes all assets, liabilities, and equity for a company
for a given point in time.

balance sheet

Financial statement that shows the value of the
firm’s assets and liabilities at a particular time.

Bank collection float

The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank.

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.

Basis risk

The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for
price risk.

batch-level cost

a cost that is caused by a group of things
being made, handled, or processed at a single time

Batch picking

Picking for several summarized orders at the same time, thereby
reducing the total number of required picks. The combined picks must still be
separated into their constituent orders, typically at some central location.

Binomial model

A method of pricing options or other equity derivatives in
which the probability over time of each possible price follows a binomial
distribution. The basic assumption is that prices can move to only two values
(one higher and one lower) over any short time period.

Binomial option pricing model

An option pricing model in which the underlying asset can take on only two
possible, discrete values in the next time period for each value that it can take on in the preceding time period.

Black-Scholes model

The first complete mathematical model for pricing
options, developed by Fischer Black and Myron Scholes. It examines market
price, strike price, volatility, time to expiration, and interest rates. It is limited
to only certain kinds of options.

Black-Scholes option-pricing model

A model for pricing call options based on arbitrage arguments that uses
the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the standard deviation
of the stock return.


Bonds are debt and are issued for a period of more than one year. The U.S. government, local
governments, water districts, companies and many other types of institutions sell bonds. When an investor
buys bonds, he or she is lending money. The seller of the bond agrees to repay the principal amount of the
loan at a specified time. Interest-bearing bonds pay interest periodically.


A long-term, interest-bearing promissory note that companies may use to borrow money for periods of time such as five, ten, or twenty years.


A long-term debt instrument in which the issuer (borrower) is
obligated to pay the investor (lender) a specified amount of
money, usually at specific intervals, and to repay the principal
amount of the loan at maturity. The periodic payments are based
on the rate of interest agreed upon at the time the instrument is


any object or facility whose processing speed is
sufficiently slow to cause the other processing mechanisms
in its network to experience idle time

Bubble theory

Security prices sometimes move wildly above their true values.


A plan expressed in monetary terms covering a future period of time and based on a defined
level of activity.

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).

Building a binomial tree

For a binomial option model: plotting the two
possible short-term price-changes values, and then the subsequent two values
each, and then the subsequent two values each, and so on over time, is known
as “building a binomial tree.” See Binomial model.

Buy-and-hold strategy

A passive investment strategy with no active buying and selling of stocks from the
time the portfolio is created until the end of the investment horizon.

Buy/Sell Agreement

This is an agreement entered into by the owners of a business to define the conditions under which the interests of each shareholder will be bought and sold. The agreement sets the value of each shareholders interest and stipulates what happens when one of the owners wishes to dispose of his/her interest during his/her lifetime as well as disposal of interest upon death or disability. Life insurance, critical illness coverage and disability insurance are major considerations to help fund this type of agreement.

Calendar effect

The tendency of stocks to perform differently at different times, including such anomalies as
the January effect, month-of-the-year effect, day-of-the-week effect, and holiday effect.


a. An option to buy a certain quantity of a stock or commodity for a
specified price within a specified time. See Put.
b. A demand to submit bonds to the issuer for redemption before the maturity date.
c. A demand for payment of a debt.
d. A demand for payment due on stock bought on margin.

Canada Savings Bonds

A bond issued each year by the federal government. These bonds can be cashed in at any time for their full face value.

Candlestick chart

A financial chart usually used to plot the high, low, open,
and close price of a security over time. The body of the “candle” is the region
between the open and close price of the security. Thin vertical lines extend up
to the high and down to the low, respectively. If the open price is greater than
the close price, the body is empty. If the close price is greater than the open
price, the body is filled. See also High-low-close chart.

capital asset pricing model (CAPM)

Theory of the relationship between risk and return which states that the expected risk
premium on any security equals its beta times the market risk premium.

capital budgeting

Refers generally to analysis procedures for ranking
investments, given a limited amount of total capital that has to be allocated
among the various capital investment opportunities of a business.
The term sometimes is used interchangeably with the analysis techniques
themselves, such as calculating present value, net present value,
and the internal rate of return of investments.

Capitalization Rate

A discount rate used to find the present value of a series of future cash receipts. Sometimes called discount rate.


A purchase that has been recorded on the company books as an asset. The
grounds for capitalizing an item include a purchase price that is higher than a minimum
limit (known as the capitalization limit) and an estimated lifetime for the item
that will exceed one year.

Capitalized interest

Interest that is not immediately expensed, but rather is considered as an asset and is then
amortized through the income statement over time.


A loose quantity term sometimes used to describe a the amount of a commodity underlying one
commodity contract; e.g., "a car of bellies." Derived from the fact that quantities of the product specified in a
contract used to correspond closely to the capacity of a railroad car.

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.


The balance in a company’s checking account(s) plus short-term or temporary investments (sometimes called “marketable securities”), which are highly liquid.

Cash conversion cycle

The length of time between a firm's purchase of inventory and the receipt of cash
from accounts receivable.

Cash cycle

In general, the time between cash disbursement and cash collection. In net working capital
management, it can be thought of as the operating cycle less the accounts payable payment period.

Cash Cycle

The length of time between a purchase of materials and collection of accounts receivable generated by the sale of the products made from the materials.

Cash discount

An incentive offered to purchasers of a firm's product for payment within a specified time
period, such as ten days.







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