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Definition of Underperform
When a security is expected to appreciate at a slower rate than the overall market.
A stock's price movement over the past year as compared to a market index (the S&P 500).
A technical trading strategy that combines mechanical rules, such as the CRISMA
Related: relative strength
Related: relative strength
Ratio of the price of one item to the price of another.
Idea that the rate of change in the price level of commodities in
The attractiveness measured in terms of risk, liquidity, and return of one instrument relative to
The ratio of the yield spread to the yield level.
security’s risk-free interest rate.
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
The sum of all the interest options in your policy, including interest.
The representation of the double-entry system of accounting such that assets are equal to liabilities plus capital.
The formula Assets = Liabilities + Equity.
An Equation that reflects the two-sided nature of a
The period of time for which financial statements are produced – see also financial year.
Accounting rate of return (ARR)
A method of investment appraisal that measures
accounting rate of return (ARR)
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
Accounts receivable turnover
The ratio of net credit sales to average accounts receivable, a measure of how
accounts receivable turnover ratio
A ratio computed by dividing annual
An amount of money invested plus the interest earned on that money.
Acquisition of stock
A merger or consolidation in which an acquirer purchases the acquiree's stock.
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 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
The alpha of a fund is determined as follows:
American Stock Exchange (AMEX)
The second-largest stock exchange in the United States. It trades
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.
Annualized holding period return
The annual rate of return that When compounded t times, would have
The time between each payment under an annuity.
the amount of overhead that has been assigned to Work in Process Inventory as a result of productive activity; credits for this amount are to an overhead account
approximated net realizable value at split-off allocation
a method of allocating joint cost to joint products using a
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
Also known as a trading index (TRIN)= (number of advancing issues)/ (number of declining
A dealer's price to sell a security; also called the offer price.
A security that is collateralized by loans, leases, receivables, or installment contracts
Extent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position.
A bond indenture restriction that permits additional borrowing on if the ratio of assets to
The ratio of net sales to total assets.
a ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets
asset turnover ratio
A broad-gauge ratio computed by dividing annual
markets in which the prevailing price is determined through the free interaction of
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 Amortization Period
The average useful life of a company's collective amortizable asset base.
Average Collection Period
Average number of days necessary to receive cash for the sale of
Average collection period, or days' receivables
The ratio of accounts receivables to sales, or the total
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.
Money owed to the bank in a cheque account where payments exceed receipts.
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
Base interest rate
Related: Benchmark interest rate.
The reference year When constructing a price index. By tradition it is given the value 100.
Basic business strategies
Key strategies a firm intends to pursue in carrying out its business plan.
price expressed in terms of yield to maturity or annual rate of return.
Any market in which prices are in a declining trend.
A market in which stock or bond prices are generally
A prolonged period of falling stock market prices.
Benchmark interest rate
Also called the base interest rate, it is the minimum interest rate investors will
The amount of cash payable on a benefit.
Beta equation (Mutual Funds)
The beta of a fund is determined as follows:
Beta equation (Stocks)
The beta of a stock is determined as follows:
This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
An illegal market.
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
Designing a portfolio so that its performance will match the performance of some bond index.
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
Broker loan rate
Related: Call money rate.
A market where an intermediary offers search services to buyers and sellers.
Any market in which prices are in an upward trend.
A market in which stock or bond prices are generally rising.
A prolonged period of rising stock market prices.
The foreign market in the United Kingdom.
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
Buying the index
Purchasing the stocks in the S&P 500 in the same proportion as the index to achieve the
Call money rate
Also called the broker loan rate , the interest rate that banks charge brokers to finance
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.
CAPITAL IN EXCESS OF PAR VALUE
What a company collected When it sold stock for more than the par value per share.
The market for trading long-term debt instruments (those that mature in more than one year).
The market in which investors buy and sell shares of companies, normally associated with a stock Exchange.
A market that specializes in trading long-term, Relatively high risk
The market in which savings are made available to those needing funds to undertake investment projects. A financial market in which longer-term (maturity greater than one year) bonds and stocks are traded.
Capital market efficiency
Reflects the Relative amount of wealth wasted in making transactions. An efficient
Capital market imperfections view
The view that issuing debt is generally valuable but that the firm's
Capital market line (CML)
The line defined by every combination of the risk-free asset and the market portfolio.
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