Definition of White knight

White knight

A friendly potential acquirer of a firm sought out by a target firm that is threatened by a less
welcome suitor.

white knight

Friendly potential acquirer sought by a target company threatened by an unwelcome suitor.

Acquirer

A firm or individual that is acquiring something.

Affirmative covenant

A bond covenant that specifies certain actions the firm must take.

Blue-chip company

Large and creditworthy company.

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.

Company Acquisitions

Assets acquired to create money. May include plant, machinery and equipment, shares of another company etc.

company cost of capital

Expected rate of return demanded by investors in a company, determined by the average risk of the company’s assets and operations.

Company-specific risk

Related: Unsystematic risk

Companyspecific Risk

See asset-specific risk

Confirmation

he written statement that follows any "trade" in the securities markets. Confirmation is issued
immediately after a trade is executed. It spells out settlement date, terms, commission, etc.

Cost company arrangement

Arrangement whereby the shareholders of a project receive output free of
charge but agree to pay all operating and financing charges of the project.

Crowding Out

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

Customary payout ratios

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

Days' sales outstanding

Average collection period.

Depository Trust Company (DTC)

DTC is a user-owned securities depository which accepts deposits of
eligible securities for custody, executes book-entry deliveries and records book-entry pledges of securities in
its custody, and provides for withdrawals of securities from its custody.

Dividend payout ratio

Percentage of earnings paid out as dividends.

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.

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.

FIFO (First In, First Out)

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

Finance Company

company engaged in making loans to individuals or businesses. Unlike a bank, it does not receive deposits from the public.

Firm

Refers to an order to buy or sell that can be executed without confirmation for some fixed period. Also,
a synonym for company.

Firm commitment underwriting

An undewriting in which an investment banking firm commits to buy the
entire issue and assumes all financial responsibility for any unsold shares.

Firm's net value of debt

Total firm value minus total firm debt.

Firm-specific risk

See:diversifiable risk or unsystematic risk.

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.

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.

First-in, first-out (FIFO)

A method of accounting for 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.

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.

Freight out

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

Full-Employment Output

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

Full-payout lease

See: financial lease.

Harmless warrant

Warrant that allows the user to purchase a bond only by surrendering an existing bond
with similar terms.

Holding company

A corporation that owns enough voting stock in another firm to control management and
operations by influencing or electing its board of directors.

Informationless trades

Trades that are the result of either a reallocation of wealth or an implementation of an
investment strategy that only utilizes existing information.

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

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.

Insurance Company

A firm licensed to sell insurance to the public.

Intercompany loan

Loan made by one unit of a corporation to another unit of the same corporation.

Intercompany transaction

Transaction carried out between two units of the same corporation.

Intrinsic value of a firm

The present value of a firm's expected future net cash flows discounted by the
required rate of return.

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.

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.

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.

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.

Last-in, first-out (LILO)

A method of accounting for inventory.

Lessee

An entity that leases an asset from another entity.

Lessee

The entity that contracts to make rental payments to a lessor in exchange for the
use of an asset.

Lessee

A person to whom a lease is granted; the user of the asset.

Lessor

An entity that leases an asset to another entity.
Letter of comment A communication to the firm from the SEC that suggests changes to its registration
statement.

Lessor

An entity that leases an asset to another entity.

Lessor

The entity that rents property that it owns to a second party in exchange for a
periodic set of rental payments.

Lessor

A person who grants a lease; the owner of the asset.

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.

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.

leveraged buyout (LBO)

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

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.

LIFO (Last In, First Out)

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

limited liability company

an organizational form that is a hybrid of the corporate and partnership organizational
forms and used to limit the personal liability of the owners;
it is typically used by small professional (such as accounting) firms

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.

management buyout (MBO)

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

National Output

GDP.

Neglected firm effect

The tendency of firms that are neglected by security analysts to outperform firms that
are the subject of considerable attention.

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-pocket cost

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

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.

Outbound stock point

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

outlier

an abnormal or nonrepresentative point within a data set

Output Gap

The difference between full employment output and current output.

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.

outsourcing

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

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.

outsourcing decision

see make-or-buy decision

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.

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.

outstanding shares

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

Parent company

A company that retains control over one or more other companies.

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.

payout ratio

Fraction of earnings paid out as dividends.

Potential Output or Potential GDP

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

Priced out

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

Riskless arbitrage

The simultaneous purchase and sale of the same asset to yield a profit.

Riskless or risk-free asset

An asset whose future return is known today with certainty. The risk free asset is
commonly defined as short-term obligations of the U.S. government.

Riskless rate

The rate earned on a riskless investment, typically the rate earned on the 90-day U.S. Treasury Bill.

Riskless rate of return

The rate earned on a riskless asset.

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.

routing document

see operations flow document

service company

an individual or firm engaged in a high or moderate degree of conversion that results in service output

Small-firm effect

The tendency of small firms (in terms of total market capitalization) to outperform the
stock market (consisting of both large and small firms).

Stockless purchasing

The purchase of material for direct delivery to the production
area, bypassing any warehouse storage.

Stockout

Running out of inventory.

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