Financial Terms Main Page

This site contains comprehensive definitions for a wide range of terms that cover topics such as financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit...

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Monthly Financial Term Picks:

Accretion (of a discount)

In portfolio accounting, a straight-line accumulation of capital gains on discount
bond in anticipation of receipt of par at maturity.

Conglomerate merger

A merger involving two or more firms that are in unrelated businesses.

Deferred equity

A common term for convertible bonds because of their equity component and the
expectation that the bond will ultimately be converted into shares of common stock.

Free cash flows

Cash not required for operations or for reinvestment. Often defined as earnings before
interest (often obtained from operating income line on the income statement) less capital expenditures less the
change in working capital.

Go-around

When the Fed offers to buy securities, to sell securities, to do repo, or to do reverses, it solicits
competitive bids or offers from all primary dealers.

Government National Mortgage Association (Ginnie Mae)

A wholly owned U.S. government corporation
within the Department of Housing & Urban Development. Ginnie Mae guarantees the timely payment of
principal and interest on securities issued by approved servicers that are collateralized by FHA-issued, VAguaranteed,
or Farmers Home Administration (FmHA)-guaranteed mortgages.

Nominal price

Price quotations on futures for a period in which no actual trading took place.

Trough

The transition point between economic recession and recovery.

product cost

This is a key factor in the profit model of a business. Product
cost is the same as purchase cost for a retailer or wholesaler (distributor).
A manufacturer has to accumulate three different types of production
costs to determine product cost: direct materials, direct labor, and
manufacturing overhead. The cost of products (goods) sold is deducted
from sales revenue to determine gross margin (also called gross profit),
which is the first profit line reported in an external income statement
and in an internal profit report to managers.

Profit Margin Ratio

A measure of how much profit is earned on each dollar of sales. It
is calculated by dividing the net income available for distribution to
shareholders by the total sales generated during the period.

Statement of cash flows

Part of the financial statements; it summarizes an entity’s cash
inflows and outflows in relation to financing, operating, and investing activities.

Autonomous Expenditure

Elements of spending that do not vary systematically with variables such as GDP that are explained by the theory. See also exogenous expenditure.

Laffer Curve

Curve showing how tax receipts vary with the tax rate.

Target Benefit Plan

A defined benefit plan under which the employer makes
annual contributions into the plan based on the actuarial assumption at that time
regarding the amount of funding needed to achieve a targeted benefit level.

Reconciling inventory

The process of comparing book to actual inventory balances,
and adjusting for the difference in the book records.