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Definition of Firm
Refers to an order to buy or sell that can be executed without confirmation for some fixed period. Also,
A bond covenant that specifies certain actions the firm must take.
he written statement that follows any "trade" in the securities markets. Confirmation is issued
An undewriting in which an investment banking firm commits to buy the
Total firm value minus total firm debt.
See:diversifiable risk or unsystematic risk.
The present value of a firm's expected future net cash flows discounted by the
The tendency of firms that are neglected by security analysts to outperform firms that
The tendency of small firms (in terms of total market capitalization) to outperform the
A firm that is the object of a takeover by another firm.
Earnings of a firm as reported on its income statement.
The change in the value of a firm's foreign currency denominated accounts due to a
Total liabilities exceed total assets. A firm with a negative net worth is insolvent on
A firm that is being acquired.
A firm or individual that is acquiring something.
Takeover of a firm by purchase of that firm’s common
Acquisition of assets
A merger or consolidation in which an acquirer purchases the selling firm's assets.
Adjusted Cash Flow Provided by Continuing Operations
Cash flow provided by operating
A means of compensating the broker of a program trade solely on the basis of commission
Conflicts of interest between the firm’s owners and managers.
Process in corporate financial planning whereby the smaller investment proposals of each of the
Aggressive Cost Capitalization
Cost capitalization that stretches the flexibility within generally
Yearly record of a publicly held company's financial condition. It includes a description of the
Asset activity ratios
Ratios that measure how effectively the firm is managing its assets.
A firm's investing in assets that are riskier than those that the debtholders expected.
Asset substitution problem
Arises when the stockholders substitute riskier assets for the firm's existing
A firm's productive resources.
authorized share capital
Maximum number of shares that the company is permitted to issue, as specified in the firm’s articles of incorporation.
Number of shares authorized for issuance by a firm's corporate charter.
The restricting of liability holders from collection efforts of collateral seizure, which is
Average age of accounts receivable
The weighted-average age of all of the firm's outstanding invoices.
Average cost of capital
A firm's required payout to the bondholders and to the stockholders expressed as a
Brokerage house clerical operations that support, but do not include, the trading of stocks and
Financial statement that shows the value of the
A short-term credit investment created by a non-financial firm and guaranteed by a
State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from
The reorganization or liquidation of a firm that cannot pay its debts.
The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.
The argument that expected bankruptcy costs preclude firms from being financed entirely
BARRA's performance analysis (PERFAN)
A method developed by BARRA, a consulting firm in
Basic business strategies
Key strategies a firm intends to pursue in carrying out its business plan.
A method of securities distribution/ underwriting in which the securities firm agrees to sell
Risk of a firm measured from the standpoint of an investor who holds a highly diversified portfolio.
A firm or person that wants to buy a firm or security.
Brokerage firms that help to find potential buyers or sellers of large block trades.
cash A firm's cash balance as reported in its financial statements. Also called ledger cash.
Net worth of the firm’s assets or liabilities according
A financial analyst employed by a non-brokerage firm, typically one of the larger money
Money invested in a firm.
A firm's set of planned capital expenditures.
The process of choosing the firm's long-term capital assets.
capital budgeting decision
Decision as to which real assets the firm should acquire.
Capital market imperfections view
The view that issuing debt is generally valuable but that the firm's
Placing one or more limits on the amount of new investment undertaken by a firm, either
firm’s mix of long-term financing.
The mix of the various types of debt and equity capital maintained by a firm. The more debt capital a firm has in its capital structure, the more highly leveraged the firm is considered to be.
The debt and/or equity mix that fund a firm's assets.
A table showing the capitalization of a firm, which typically includes the amount of
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.
A forecasted summary of a firm's expected cash inflows and cash outflows as well as its
Cash conversion cycle
The length of time between a firm's purchase of inventory and the receipt of cash
cash conversion cycle
Period between firm’s payment for materials
An incentive offered to purchasers of a firm's product for payment within a specified time
Payment of cash by the firm to its shareholders.
In investments, NET INCOME plus DEPRECIATION and other noncash charges. In this sense, it is synonymous with CASH EARNINGS. Investors focus on cash flow from operations because of their concern with a firm's ability to pay dividends.
Cash-flow break-even point
The point below which the firm will need either to obtain additional financing
Cash flow from operations
A firm's net cash inflow resulting directly from its regular operations
Cash flow time-line
Line depicting the operating activities and cash flows for a firm over a particular period.
The proportion of a firm's assets held as cash.
Refers to a situation where a firm runs out of cash and cannot readily sell marketable securities.
A reduction in the likelihood one or more of the firm's claimants will be fully repaid,
A member firm of a clearing house. Each clearing member must also be a member of the
The grouping of investors who have a preference that the firm follow a particular financing
Refers to the fact that the merger of two firms decreases the probability of default on
Procedures followed by a firm in attempting to collect accounts receivables.
A privately owned, profit-seeking firm that accepts deposits and makes loans.
Short-term unsecured notes issued by firms.
A firm which buys and sells future contracts for customer accounts. Related: futures
Common stock ratios
Ratios that are designed to measure the relative claims of stockholders to earnings
Comparative credit analysis
A method of analysis in which a firm is compared to others that have a desired
A securities offering process in which securities firms submit competing bids to the
Voluntary arrangement to restructure a firm's debt, under which payment is reduced.
Comprehensive due diligence investigation
The investigation of a firm's business in conjunction with a
A firm engaged in two or more unrelated businesses.
A merger involving two or more firms that are in unrelated businesses.
The combining of two or more firms to form an entirely new entity.
Credit granted by a firm to consumers for the purchase of goods or services. Also called
An obligation that is dependent on the occurrence or nonoccurrence of
Contingent pension liability
Under ERISA, the firm is liable to the plan participants for up to 39% of the net
The corporate manager responsible for the firm's accounting activities.
The extra advantage that firms derive from holding the commodity rather than the future.
Securities (generally bonds or preferred shares) that are exchangeable at the option of the holder for common shares of the issuing firm.
A measure of earnings that includes only the results of the primary operating
The acquisition of one firm by anther firm.
One of the three areas of the discipline of finance. It deals with the operation of the firm
Corporate financial planning
Financial planning conducted by a firm that encompasses preparation of both
Corporate processing float
The time that elapses between receipt of payment from a customer and the
cost of capital (COC)
the weighted average cost of the
Provisions in a bond indenture or preferred stock agreement that require the bond or preferred
The ability of the bankruptcy court to confirm a plan of reorganization over the objections of
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