Encyclopedia financial management, Terms and Definitions

Financial Management Encyclopedia (7253 Terms) Powered by www.drawpack.com; All rights reserved.

Management
A to Z Keyword Definition
Topic

Financial
A Management
AAA+ Bank Refers to banks that are rated AAA by IBCA, Moodys Investor Service and Standard & Poors.

Financial
A Management
Abandonment Controlling party giving up rights to property voluntarily.

Financial
A Management
Abandonment option The option of terminating an investment earlier than originally planned.

Financial A contract between an employee and a brokerage firm outlining the rights of the firm purchasing an NYSE membership for that
A Management
ABC agreement
employee.

Financial
A Management
Ability to pay Refers to the borrower's ability to make interest and principal payments on debts. See: Fixed charge coverage ratio.

The component of the return that is not due to systematic influences (market-wide influences). In other words, the abnormal
Financial
A Management
Abnormal returns returns is the difference between the actual return and that is expected to result from market movements (normal return).
Related: excess returns.

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Financial A person, company or country has an absolute advantage if its output per unit of input of all goods and services produced is
A Management
Absolute advantage
higher than that of another person, company or country.

Financial Absolute Physical
A Management Life
The period of use after which an asset has deteriorated to such an extent that it can no longer be used.

Financial
A Management
Absolute priority Rule in bankruptcy proceedings requiring senior creditors to be paid in full before junior creditors receive any payment.

Used in context of general equities. Securities are "absorbed" as long as there are correspondingorders to buy and sell. The
Financial
A Management
Absorbed market has reached the absorption point when further assimilation is impossible without an adjustment in price. See: Sell the
book.

Absorption costing is a method of identifying and ascertaining the cost of products or services. This is done by including both
fixed and variable costs. The absorption method of costing can be contrasted with variable or marginal costing methods where
costs of products or services are calculated using variable costs only. The absorption costing method requires the choice of an
Financial
A Absorption costing ―absorption basis‖ by which fixed costs can be allocated appropriately. For example, the fixed costs of factory equipment
Management repairs and maintenance may be allocated to the cost of producing specific products on the basis of their use of machine time.
In another example, the cost of factory rent and rates may be allocated to products based on the amount of factory space that
their production takes up.

Financial
A Management
Abusive tax shelter A limited partnership that the IRS judges to be claiming tax deductions illegally.

Accelerated cost
Financial
A Management
recovery system Schedule of depreciation rates allowed for tax purposes.
(ACRS)

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Financial Accelerated Any depreciation method that produces larger deductions for depreciation in the early years of an asset's life. Accelerated cost
A Management depreciation recovery system (ACRS), which is a depreciation schedule allowed for tax purposes, is one such example.

Financial A contract stating that the unpaid balance becomes due and payable if specific actions transpire, such as failure to make
A Management
Acceleration clause
interests payments on time.

Financial Contractual agreement instigated when the drawee of a time draft "accepts" the draft by writing the word "accepted" thereon.
A Management
Acceptance
The drawee assumes responsibility as the acceptor and for payment at maturity. See: Letter of credit and banker's acceptance.

Financial Accommodative
A Management monetary policy
Federal Reserve System policy to increase the amount of money available to banks for lending. See: Monetary policy.

Financial Account Ad Valorem
A Management Duty
An imported merchandise tax expressed as a percentage.

Financial
A Management
Account balance Creditsminus debits at the end of a reporting period.

Financial
A Management
Account executive The brokerage firm employee who handles stockorders for clients. See: Broker.

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Financial
A Management
Account Party Party who applies to open a bank for the issuance of a letter of credit.

Financial
A Management
Account reconciliation The reviewing and adjusting of the balance in a personal checkbook to match your bank statement.

Financial In the context of securities, a summary of all transactions and positions (long and short) between a broker/dealer and a client.
A Management
Account statement
See also: Option agreement.

Financial A signed statement from an independent public accountant after examination of a firm's records and accounts. The opinion
A Management
Accountant's opinion
may be unqualified or qualified. See: Qualified opinion.

Accounting is a difficult term to define. However, it is formally defined by the American Accounting Association as ―The
classification and recording of monetary transactions, the presentation and interpretation of the results of those transactions in
Financial
A Management
Accounting order to assess performance over a period and the financial position at a given date, and the monetary projection of future
activities arising from alternative planned courses of action‖. Using this definition, accounting can be seen to be about the
identification and recording of business transactions as a way of assisting the management and planning of a business.

Accounting concepts are the principles that guide the preparation of accounting information. These fundamental accounting
Financial
A Accounting concepts concepts are best considered as the ―building blocks‖ on which historical accounting information. The fundamental accounting
Management concepts are generally taking to include ―prudence‖, ―consistency‖, ―accruals‖ and ―going concern‖.

Financial
A Management
Accounting earnings Earnings of a firm as reported on its income statement.

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Financial
A Management
Accounting exposure The change in the value of a firm's foreign currency-denominated accounts due to a change in exchange rates.

Financial Accounting
A Management insolvency
Total liabilities exceed total assets. A firm with a negative net worth is insolvent on the books.

Financial
A Management
Accounting liquidity The ease and quickness with which assets can be converted to cash.

Accounting policies are the specific accounting bases selected and consistently followed by a business. Accounting policies
need to be appropriate to the circumstances of a business so that, when applied to accounting transactions, the resulting
Financial
A Management
Accounting policies accounting information presents fairly its results and financial position. Accounting policies are largely governed by the
application of accounting standards. However, there remains a large amount of subjectivity that needs to be applied when
determining how to apply accounting policies.

Accounting reform is change to accounting rules that goes beyond the enforcement of standard accounting practices and the
elimination of "creative accounting". It is advocated by those who consider the present standards and practices of the
Financial
A Management
Accounting reform profession wholly inadequate to the task of measuring and reporting the activity, success, and failure of modern enterprise,
including government. "Accounting", says Baruch Lev, a notable proponent of such reform, "is about accountability". He notes
that the present regime of accounting rules dates back about 500 years to Renaissance Italian practices.

Accounting software is computer software that records and processes accounting transactions such as accounts payable,
Financial accounts receivable, payroll and trial balance. It may be developed inhouse by the company or organization using it, may be
A Management
Accounting software
purchased from a third party, or may be a combination of a third-party application software package with local modifications. It
varies greatly in its complexity and cost.

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Accounting standards are authoritative statements of how particular types of transaction and other events should be reflected
in financial statements. Accordingly, compliance with accounting standards will normally be necessary for financial statements
to give a ―true and fair view‖. When preparing accounts in the UK, businesses must take account of statements issued by the
Financial Accounting Standards Board. These require the adoption of certain accounting principles and methods. There are currently
A Management
Accounting standards
two forms of Accounting Standards in the UK - Financial Reporting Standards (FRSs) and Statements of Standard Accounting
Practice (SSAPs). The only difference between these is that SSAPs were issued prior to 1990. Since that date, the name has
been changed to FRS. Accounting standards apply to all companies, and other kinds of entities that prepare accounts that are
intended to provide a true and fair view.

The ASB is a UK standard-setting body set up in 1990 manage the use of accounting standards. Its declared aims are to
Accounting ‗establish and improve standards of financial accounting and reporting, for the benefit of users, preparers and auditors of
Financial
A Standards Board financial information‘. . Accounting standards developed by the ASB are contained in 'Financial Reporting Standards' (FRS‘s).
Management
(―ASB‖) The ASB collaborates with accounting standard-setters from other countries and the International Accounting Standards Board
(IASB) in order to ensure that its standards are developed as far as possible to be consistent from country to country.

Accounts payable is one of a series of accounting transactions dealing with the paying of suppliers to which one owes money
Financial
A Management
Accounts payable for goods and services. The average household performs this task by writing checks each month to such suppliers as the
electric company, telephone company, cable TV or satellite dish service, the local newspaper, and so on.

Accounts receivable is one of a series of accounting transactions dealing with the billing of customers which owe money to a
Financial
A Management
Accounts receivable person, company or organization for goods and services that have been provided to the customer. This is typically done in a
one person organization by writing an invoice and mailing or delivering it to each customer.

Financial Accounts receivable
A Management days
A liquidity metric that provides an indication of how long a company takes to collect its accounts receivable.

A Management financing
A short-termfinancing method in which accounts receivable are collateral for cash advances. See: Factoring.

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A Management turnover
The ratio of netcreditsales to averageaccounts receivable, which is a measure of how quickly customers pay their bills.

Refers to an individual whose net worth, or joint net worth with a spouse, exceeds $1,000,000; or whose individual income
Financial exceeded $200,000 or whose joint income with a spouse exceeded $300,000 in each of the 2 most recent years and can be
A Management
Accredited investor
expected to meet that income in the current year. More details of the definitions for investors other that individuals are found in
Regulation D of the Securities and Exchange Commission.

Financial An interest rate swap in which the notional principal amount increases over time, for example as with a construction loan
A Management
Accreting Swap
provided in tranches as each stage of the project is completed.

Financial Accretion (of a In portfolio accounting, a straight-line accumulation of capital gains on a discount bond in anticipation of receipt of par at
A Management discount) maturity.

Financial Accrual Accounting An accounting system that tries to match the recognition of revenues earned with the expenses incurred in generating those
A Management Convention revenues. It ignores the timing of the cash flows associated with revenues and expenses.

Accrual-basis accounting records financial events based on events that change your net worth (the amount owed to you less
the amount you owe others). Standard practice is to record expenses with the incomes they are associated with. For example,
Financial Accrual basis
A Management accounting
your landlord would record an income event on the day your rent comes due (you owe it to him). He records an expense event
when the fee owed to the rental agent comes due for your apartment that month (he owes it to the agent). The details of the
actual cash flows and their timing are tracked by bookkeeping.

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

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Accruals are amounts that are owed to third parties for which a business has not yet been invoiced. The total of accruals is
Financial shown in the balance sheet as part of creditors due less than one year. For example, where a business has not been invoiced
A Management
Accruals
by an advertising agency for its costs for the last three months of the year, it will show in its accounts an accrual for the
estimated amount of the invoice.

One of the fundamental accounting concepts, the accruals concept is also known as the ―matching concept‖. Under the
accruals concept, revenue and costs are credited or charged to the profit and loss account for the year in which they are
Financial earned or incurred, not when any cash is received or paid. For example, if a sale is made on credit this year, but the cash is
A Management
Accruals concept
only received next year, the sale is treated as income in this year. Similarly, if a business incurs a cost during the year (e.g.
electricity) but is not invoiced until early in the next year, the accounts will show an estimated liability for the expected amount
of the invoice.

Financial
A Management
Accrued benefits The pension benefits earned by an employee according to the years of the employee's service.

Interest that accumulates on savings bonds from the date of purchase until the date of redemption or final maturity, whichever
Financial comes first. Series A, B, C, D, E, EE, F, I, and J are discount or accrual bonds, meaning principal and interest are paid when
A Management
Accrued discount
the bonds are redeemed. Series G, H, HH, and K are income bonds, and the semiannual interest paid to their holders is not
included in accrued discount.

Applies mainly to convertible securities. Interest that has accumulated between the most recent payment and the sale of a
bond or other fixed-income security. At the time of sale, the buyer pays the seller the bond's price plus "accrued interest,"
Financial
A Management
Accrued interest calculated by multiplying the coupon rate by the fraction of the coupon period that has elapsed since the last payment. (If a
bondholder receives $40 in coupon payments per bond semiannually and sells the bond one-quarter of the way into the
coupon period, the buyer pays the seller $10 as the latter's proportion of interest earned.)

Financial Accrued market The rise in the market value of a discount bond as it approaches maturity (when it is redeemable at par) and not because of
A Management discount falling marketinterest rates.

Broker/analyst recommendation that could mean slightly different things depending on the broker/analyst. In general, it means
Financial
A Management
Accumulate to increase the number of shares of a particular security over the near term, but not to liquidate other parts of the portfolio to
buy a security that might skyrocket. A buy recommendation, but not an urgent buy.

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Financial Accumulated Benefit An approximate measure of the liability of a pension plan in the event of a termination at the date the calculation is performed.
A Management Obligation (ABO) Related: Projected benefit obligation.

Financial Accumulated
A Management dividend
A dividend that has reached its due date, but is not paid out. See: Cumulative preferred stock.

Financial Accumulated profits
A Management tax
A tax on earnings retained in a firm as a way for the principals to defer personal income taxes.

Financial In the context of investments, refers to the purchase by an institutional broker of a large number of shares over a period of time
A Management
Accumulation
in order to avoid pushing the price of that share up.

Financial
A Management
Accumulation area A range within which a buyer accumulatesshares of a stock. See: On-balance volume and distribution area.

Financial A liquidity measure that compares the most liquid current assets to total current liabilities (cash & equivalents + receivables /
A Management
Acid ratio
total current liabilities). It is also known as the Quick ratio.

Financial The surplus acquired when a company is purchased in a pooling of interests combination, i.e. the net worth not considered to
A Management
Acquired surplus
be capital stock.

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Financial
A Management
Acquiree A firm that is being acquired.

Financial
A Management
Acquirer A firm or individual that is purchasing another firm or asset.

The term acquisition commonly refers to the take-over of one business by another. Sometimes the acquisition will involve the
purchase of the entire share capital of a company. In other situations the acquisition is off certain trading assets rather than an
Financial actual company. Acquisitions can be financed by paying cash. Often they also involve the issue of shares by the acquiring
A Management
Acquisition
business - given to the shareholders of the business being sold. Acquisitions are subject to regulatory control via the
competition authorities. For larger, cross-border acquisitions, regulation by authorities such as the European Competition
Commission must also be taken into account.

Financial
A Management
Acquisition cost Refers to the price (including the closing costs) to purchase another company or property.

Financial
A Management
Acquisition of assets A merger or consolidation in which an acquirerpurchases the selling firm's assets.

Financial
A Management
Acquisition of stock A merger or consolidation in which an acquirerpurchases the acquiree'sstock.

Financial
A Management
Across the board Movement or trend in the stock market that causes all stocks in all sectors to move in the same direction.

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Financial This doctrine says that a nation is sovereign within its own borders, and its domestic actions may not be questioned in the
A Management
Act of state doctrine
courts of another nation.

Financial
A Management
Acting in concert Investors working together and performing identical actions to attain the same investment goal.

Financial Refers to a brokerage account in which many transactions occur. Brokerage firms may levy a fee if an account generates an
A Management
Active account
inadequate level of activity.

Financial
A Management
Active bond crowd Refers to members of the bond department of the NYSE who trade the most bonds. Antithesis of cabinet crowd.

Financial
A Management
Active box Securities that are held in safekeeping and are available as collateral for securing brokers'loans or customers' marginpositions.

Financial Active fund An investment approach that purposely shifts funds either between asset classes (asset allocation) or between individual
A Management management securities (security selection).

Financial
A Management
Active income Income from an active business as opposed to passiveinvestment income according to the U.S. tax code.

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Financial
A Management
Active Management The pursuit of investmentreturns in excess of a specified benchmark.

Financial Active portfolio A strategy that uses available information and forecasting techniques to seek better performance than a buy and holdportfolio.
A Management strategy Related: Passive portfolio strategy.

Financial Return relative to a benchmark. If a portfolio'sreturn is 5%, and the benchmark's return is 3%, then the portfolio's active return
A Management
Active Return
is 2%.

Financial
A Management
Active Risk The risk (annualizedstandard deviation) of the activereturn. Also called the tracking error.

Financial
A Management
activity accounting The collection of financial or operational performance information about significant activities in an enterprise.

Activity-based costing (commonly shortened to ―ABC‖) is a system of costing which recognises that costs are incurred by each
activity that takes place within a business and that products (or customers) should bear costs according to the activities they
Financial
A Activity-based costing use. The use of ABC requires the identification of ―cost drivers‖ – those activities that take place in a business that cause costs
Management to be incurred. The costs associated with these cost drivers also need to be identified so that they can be appropriately
allocated to each activity being costed.

activity-based
Financial
A Management
management (ABM) Using an activity-based costing system to improve the operations of an organization

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Financial
A Management
Actual market Used in context of general equities. Firm market. Antithesis of Subject market.

Financial
A Management
Actuals The physical commoditiesunderlying a futures contract. Cash commodity, physical asset.

Advance-Decline, or measurement of the number of issuestrading above their previous closing prices less the number trading
Financial
A Management
A-D below their previous closing prices over a particular period. As a technical measure of marketbreadth, the steepness of the AD
line indicates whether a strong bull or bear market is under way.

Financial
A Management
Ad valorem tax A type of tax calculated based on percentage of gross or stated value. For example, VAT.

Financial
A Management
Additional bonds test A test for ensuring that bondissuers can meet the debt service requirements of issuing any new additional bonds.

Financial
A Management
Additional hedge A protection against fallout risk in the mortgage pipeline.

Financial Adequacy of A test that measures the extent to which the value of an asset is protected from potential loss either through insurance or
A Management coverage hedging.

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Applies mainly to convertible securities. Refers to interest rate or dividend that is adjusted periodically, usually according to a
Financial
A Management
Adjustable rate standard market rate outside the control of the bank or savings institution, such as that prevailing on Treasury bonds or notes.
Typically, such issues have a set floor or ceiling, called caps and collars that limits the adjustment.

A mortgage that features predetermined adjustments of the loaninterest rate at regular intervals based on an established
Financial Adjustable-rate
A Management mortgage (ARM)
index. The interest rate is adjusted at each interval to a rate equivalent to the index value plus a predetermined spread, or
margin, over the index, usually subject to per-interval and to life-of-loaninterest rate and/or payment rate caps.

Adjustable-rate
Financial
A Management
preferred stock Publicly tradedissues that may be collateralized by mortgages and MBS
(ARPS)

Method of calculating finance charges that uses the account balance remaining after adjusting for all transactions posted
Financial Adjusted balance
A Management method
during the given billing period as its basis. Related: Average daily balance method, previous balance method, past due balance
method.

Financial Price from which to calculate and derive capital gains or losses upon sale of an asset. Account actions such as any stock splits
A Management
Adjusted basis
that have occurred since the initial purchase must be accounted for.

Financial Adjusted debit The account balance for a margin account that is calculated by combining the balance owed to a broker with any outstanding
A Management balance (ADB) balance in the special miscellaneous account, and any paper profits on short accounts.

Term used in options on Ginnie Mae (Government National Mortgage Association) contracts. The final exercise price of the
Financial Adjusted exercise
A Management price
option accounts for the coupon rates carried on Ginnie Maemortgages. For example, if the standard GNMA mortgage has an
9% yield, the price of GNMA pools with 13% mortgages in them is altered so that the investor receives the same yield.

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Financial Adjusted gross
A Management income (AGI)
Gross income less allowable adjustments, which is the income on which an individual is taxed by the federal government.

The net present value analysis of an asset if financed solely by equity (present value of unlevered cash flows), plus the present
Financial Adjusted present value of any financing decisions (levered cash flows). In other words, the various tax shields provided by the deductibility of
A Management value (APV) interest and the benefits of other investment tax credits are calculated separately. This analysis is often used for highly
leveraged transactions such as a leveraged buyout.

Financial
A Management
Adjustment bond A bondissued in exchange for outstanding bonds when a corporation facing bankruptcy is recapitalized.

Administration is a term used to describe a situation relating to the possible insolvency of a business. Under an
Financial ―Administration Order‖, a court supervises the affairs of a company in financial difficulties with to the aim of securing its survival
A Management
Administration
as a going concern or, failing that, to achieving a more favourable realisation of its assets than would be possible on
liquidation. While the administration order is in force, the affairs of the company are managed by an ―administrator‖.

Financial Administrative pricing
A Management rules
IRS rules used to allocate income on export sales to a foreign sales corporation.

Financial Administrative Insolvency practitioner appointed when a company goes into receivership (work out). A company may go straight to
A Management receiver administrative receivership, presided over by an administrative receiver, usually known simply as the receiver.

Financial A promise to sell an asset before the seller has lined up purchase of the asset. This seller can offsetrisk by purchasing a
A Management
Advance commitment
futures contract to fix the sales price approximately.

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Advance
Refers to the Advance Computerized Execution System, run by Nasdaq. ACES automates trades between order entry and
Financial Computerized
A Management Execution System
market makerfirms that have established trading relationships with each other. Securities are designated as specified for
automatic execution.
(ACES)

Financial Advance corporation An installment of UK Corporation tax, required under UK tax rules. It represents a minimum tax on companies that earn most
A Management tax (ACT) of their profits overseas.

Financial Advance funded
A Management pension plan
A pension plan in which funds are set aside in advance of the date of retirement.

In the context of municipal bonds, refers to the sale of new bonds (the refundingissue) before the first call date of old bonds
Financial
A Management
Advance refunding (the issue to be refunded). The refunding issue usually specifies a rate lower than the issue to be refunded, and the proceeds
are invested, usually in governmentsecurities, until the higher-rate bonds become callable.

Financial An independent auditor's opinion expressing that a firm'sfinancial statements do not reflect the company'sposition accurately.
A Management
Adverse opinion
See also: Qualified opinion.

Financial Refers to a situation in which sellers have relevant information that buyers lack (or vice versa) about some aspect of product
A Management
Adverse selection
quality.

Financial
A Management
Advising bank Corresponding bank in the beneficiary's country to which an issuing bank sends a letter of credit.

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Financial
A Management
Advisory letter A newsletter offering financial advice to its readers.

Financial A sworn statement describing the particulars and circumstances of the loss of securities. This affidavit is required before a
A Management
Affidavit of Loss
Bond of Indemnity can be issued and the securities replaced.

Financial Relationship between two companies when one company owns substantial interest, but less than a majority of the voting stock
A Management
Affiliate
of another company, or when two companies are both subsidiaries of a third company. See: Subsidiaries, parent company.

Financial
A Management
Affiliated corporation A corporation that is an affiliate to the parent company.

Financial
A Management
Affiliated person An individual who possesses enough influence and control in a corporation as to be able to alter the actions of the corporation.

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

A New York Stock Exchange rule that governs the behavior of specialists. Affirmative obligation is the mandate of the
Financial
A Management
Affirmative obligation specialists to step in and act as either the buyer or the seller when public investor orders exist do not match up naturally. Also
known as positive obligation. Related: negative obligation.

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Financial
A Management
Affordability index An index that measures the financial ability of consumers to purchase a home.

Financial A contractual clause in a mortgage agreement stating that any additional mortgageable property attained by the borrower after
A Management
After acquired clause
the mortgage is signed will be regarded as additional security for the obligation addressed in the mortgage.

Financial After-hours dealing or
A Management trading
Securitiestrading after regular trading hours on organized exchanges.

Financial
A Management
Aftermarket See: Secondary market.

Financial
A Management
After-tax basis The comparisonbasis used to analyze the net after-tax returns on a corporate taxable bond and a municipal tax-free bond.

Financial
A Management
After-tax profit margin The ratio of net income to net sales.

Financial After-tax real rate of
A Management return
The after-tax rate of return minus the inflation rate.

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Financial
A Management
Against the box See: Selling short against the box.

Most businesses make use of an aged-creditors report to manage the timing of payment to trade creditors. The report lists the
Financial
A Management
Aged creditors report amounts payable to trade creditors based on the payment terms agreed with them. It also lists creditors who have been owed
money for the longest period.

An aged debtors report lists amounts owed to a business by trade debtors and analyses how long the amounts have been due.
Financial
A Management
Aged debtors report The report is a crucial piece of information for managing the amount of credit given to customers and for chasing outstanding
amounts.

Financial An account between two broker/dealers that remains intact 30 days after the settlement date. The receiving firm must adjust its
A Management
Aged fail
capital as it can no longer treat this account as an asset.

Financial
A Management
Agencies See: Federal agency securities.

In context of general equities, buying or selling for the account and risk of a customer. Generally, an agent, or broker, acts as
Financial intermediary between buyer and seller, taking no financial risk personally or as a firm, and charging a commission for the
A Management
Agency
service. The broker represents a customer buyer/seller to a customer seller/buyer and does not act as principal for the firm's
own trading account. Antithesis of principal. See: Dealer.

A form of organization commonly used by foreign banks to enter the US market. An agency bank cannot accept deposits or
Financial
A Management
Agency bank extend loans in its own name; it acts as agent for the parent bank. It is also the financial_institution that issuesADRs to the
general market.

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Financial A means of compensating the broker of a program trade solely on the basis of commission established through bids submitted
A Management
Agency basis
by various brokerage firms.

Financial The argument that specifies that the various agency costs create a complex environment in which total agency costs are at a
A Management
Agency cost view
minimum with some, but less than 100%, debtfinancing.

Financial
A Management
Agency costs The incremental costs of having an agent make decisions for a principal.

Financial Agency incentive A means of compensating the broker of a program trade using benchmarkprices for issues to be traded in determining
A Management arrangement commissions or fees.

Mortgage pass-through securities whose principal and interest payments are guaranteed by government agencies, such as the
Financial Agency pass-
A Management throughs
Government National Mortgage Association (Ginnie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), and
Federal National Mortgage Association (Fannie Mae).

Financial
A Management
Agency problem Conflicts of interest among stockholders, bondholders, and managers.

The term ―agency relationship‖ describes the relationship between management and shareholders. It explains how
Financial
A Management
Agency relationship management act as agents for shareholders, using their delegated powers to run the business in the best interests of the
shareholders

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Financial Securitiesissued by federally related institutions and U.S. government-sponsored entities. Such agencies were created to
A Management
Agency securities
reduce borrowingcosts for certain sectors of the economy, such as agriculture.

Financial
A Management
Agency theory The analysis of principal-agent relationships, in which one person, an agent, acts on behalf of another person, a principal.

Financial A party appointed to act on behalf of a principal entity or person. In context of project financing, refers to the bank in charge of
A Management
Agent
administering the project financing.

The exercise price multiplied by the number of shares in a put or callcontract. The option premium is excluded in the aggregate
Financial Aggregate exercise
A Management price
exercise price. In the case of options traded on debt instruments, the aggregate exercise price is the exercise price of the
underlying security multiplied by its face value.

Financial Process in corporate financial planning whereby the smaller investment proposals of each of the firm's operational units are
A Management
Aggregation
aggregated and effectively treated as a whole.

Financial Aggressive Growth In the context of hedge funds, a style of management that focuses primarily on equities that are expected to have strong
A Management Hedge Fund earnings growth.

Financial Aggressive growth
A Management mutual fund
A mutual fund designed for maximum capital appreciation that places its money in companies with high growth rates.

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Used in context of general equities. For a customer it means working to buy or sell one's stock, with an emphasis on execution
Financial
A Management
Aggressively over price. For a trader it means acting in a way that puts the firm'scapital at higher risk through paying a higher price, selling
cheaper, or making a larger short sale or purchase than the trader would under normal circumstances.

Financial A table of accounts receivable broken down into age categories (such as 0-30 days, 30-60 days, and 60-90 days), which is
A Management
Aging schedule
used to determine if customer payments are keeping close to schedule.

A contract among participating members of a syndicate that defines the members' proportionate liability, which is usually
Financial Agreement among
A Management underwriters
limited to and based on the participants' level of involvement. The contract outlines the payment schedule on the settlement
date. Compare: Underwriting agreement.

Financial Agreement Corporationchartered by a state to engage in international banking: so named because the corporation enters into an
A Management corporation "agreement" with the Fed's Board of Governors that it will limit its activities to those permitted by an Edge Act Corporation.

Financial
A Management
Ahead of itself In context of general equities, refers to equities that are overbought or oversold on a fundamental basis.

AIMR Performance
Presentation The Association for Investment Management and Research (AIMR) Performance Presentation Standards Implementation
Financial
A Management
Standards Committee is charged with the responsibility to interpret, revise, and update the AIMR Performance Presentation Standards
Implementation (AIMR-PPS(TM) for portfolio performance presentations.
Committee

Financial Air Freight An air freight carrier that does not own or operate its own aircraft but ships its cargo with actual equipment operating carriers.
A Management Consolidator Consolidators issue house air waybills to their customers and receive master air waybills from the actual carriers.

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Financial
A Management
Air pocket stock A stock whose price drops precipitously, often on the unexpected news of poor results.

Financial
A Management
Alien corporation A company incorporated under the laws of a foreign country regardless of where the company conducts its operations.

Financial
A Management
All equity rate The discount rate that reflects only the business risks of a project, distinct from the effects of financing.

Financial
A Management
All in Refers to an issuer'sinterest rate after accounting for commissions and various related expenses.

Used in context of general equities. A limited price order that is to be executed in its entirety or not at all (no partial transaction),
and thus is testing the strength/conviction of the counterparty. Unlike an FOK order, an AON order is not to be treated as
Financial All or none order cancelled if not executed as soon as it is represented in the trading crowd, but instead remains alive until executed or
A Management (AON) cancelled. The making of "all or none" bids or offers in stocks is prohibited, and the making of "all or none" bids or offers in
bonds is subject to the restrictions of Rule 61. AON orders are not shown on the specialist's book because they cannot be
traded in pieces. Antithesis of any-part-of order. See: FOK order.

The major stock price index in Australia. The capitalization weighted index is made up of the largest 500 companies as
Financial
A Management
All Ordinaries Index measured by market capitalization that are listed on the Australian Stock Exchange. The index was developed with a base
value of 500 as of 1979.

Financial Marine cargo insurance which covers most perils except strikes, riots, civil unrest, capture, war, seizure, civil war, piracy, loss
A Management
All Risk Insurance
of market, and inherent vice.

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Financial A partner or stockholder of a firm that is a member of the NYSE, the partner or stockholder is not personally a member of the
A Management
Allied member
NYSE.

Financial The term used to describe a spread in the optionsmarket that generates such a large commission that the client is unlikely to
A Management
Alligator spread
make a profit even if the markets move as the investoranticipated.

Financial
A Management
All-in cost Total costs, explicit and implicit.

Financial Rate used in charging customers for accepting banker's acceptances, consisting of the discount interest rate plus the
A Management
All-in-rate
commission.

Financial
A Management
Allocational efficiency The effectiveness with which a market channels capital toward its most productive uses.

Financial Allocation-of-income US tax provisions that define how income and deductions are to be allocated between domestic source and foreign source
A Management rules income.

Financial All-or-none
A Management underwriting
An arrangement whereby a securityissue is cancelled if the underwriter is unable to resell the entire issue.

Page 24 of 1042


When new shares are issued in a company it may be that there is excess demand for the shares. In such a case, shares are
Financial
A Allotment of shares ―allotted‖ to new subscribers on a fair basis – although almost always in lower numbers than were requested. The process of
Management share allotment is a common feature of new share issues on the London Stock Exchange.

Measure of risk-adjusted performance. An alpha is usually generated by regressing the security or mutual fund'sexcess return
on the S&P 500 excess return. The beta adjusts for the risk (the slope coefficient). The alpha is the intercept. Example:
Financial Suppose the mutual fund has a return of 25%, and the short-terminterest rate is 5% (excess return is 20%). During the same
A Management
Alpha
time the market excess return is 9%. Suppose the beta of the mutual fund is 2.0 (twice as risky as the S&P 500). The expected
excess return given the risk is 2 x 9%=18%. The actual excess return is 20%. Hence, the alpha is 2% or 200 basis points.
Alpha is also known as the Jensen Index. Related: Risk-adjusted return.

Regression usually run over 36-60 months of data: Return-Treasury bill= alpha + beta (S&P 500 - Treasury bill) + error. The
Financial
A Management
Alpha equation alpha is the intercept. Note that the benchmark does not necessarily have to be the S&P 500. A mutual fund specializing in
international investment might be benchmarked to a broader world market index, such as the MSCI World Index.

Categories of common stock of a corporation associated with a particular subsidiary resulting from acquisitions and
Financial
A Management
Alphabet stock restructuring. The various alphabetical categories have different voting rights and pay dividends tied to the operating
performance of the particular divisions. See also: Tracking stocks.

The Alternative Investment Market (usually shortened to ―AIM‖) is a junior market of the main London Stock Exchange. AIM
Financial Alternative
A Management Investment Market
replaced the Unlisted Securities Market in 1995. It provides an opportunity for smaller companies with growth prospects to
raise capital and have their shares traded in a market without the expense of a full market listing.

Usually refers to investments in hedge funds. Many hedge funds pursue strategies that are uncommon relative to mutual
Financial Alternative funds. Examples of alternative investment strategies are: long--short equity, event driven, statistical arbitrage, fixed income
A Management investments arbitrage, convertible arbritage, short bias, global macro, and equity market neutral. May also refer to the high frequency style
of commodity trading advisors who often employ technical and quantitative tools for intraday investments

Financial Alternative Minimum A federal tax aimed at ensuring that wealthy individuals, estates, trusts, and corporations pay a minimal level income tax. For
A Management Tax (AMT) individuals, the AMT is calculated by adding adjusted gross income to tax preference items.

Page 25 of 1042


Financial Alternative mortgage Variations of mortgageinstruments such as adjustable-rate and variable-rate mortgages, graduated-payment mortgages,
A Management instruments reverse-annuity mortgages, and several seldom-used variations.

Used in context of general equities. Order giving a broker a choice between two courses of action, either to buy or sell, never
both. Execution of one course automatically eliminates the other. An example is a combination buy limit/ buy stop order, where
Financial the buy limit is below the current market and the buy stop is above. If the order is for one unit of trading, when one part of the
A Management
Alternative order
order is executed on the occurrence of one alternative, the order on the other alternative is to be treated as cancelled. If the
order is for an amount of more than one unit of trading, the number of units executed determines the amount of the alternative
order to be treated as cancelled. Sometimes known as One Cancels the Other. Also see: Either-or order.

American Association
Financial
A Management
of Individual Investors A not-for-profit organization to educate individual investors about stocks, bonds, mutual funds, and other financial instruments.
(AAII)

Certificates issued by a US depository bank, representing foreign shares held by the bank, usually by a branch or
correspondent in the country of issue. One ADR may represent a portion of a foreign share, one share or a bundle of shares of
a foreign corporation. If the ADR's are "sponsored," the corporation provides financial information and other assistance to the
Financial American Depositary
A Management Receipt (ADR)
bank and may subsidize the administration of the ADR. "Unsponsored" ADRs do not receive such assistance. ADRs are
subject to the same currency, political, and economic risks as the underlying foreign share. Arbitrage keeps the prices of ADRs
and underlying foreign shares, adjusted for the SDR/ordinary ratio essentially equal. American depository shares (ADS) are a
similar form of certification.

Financial American Depositary Fees associated with the creating or releasing of ADRs from ordinary shares, charged by the commercial banks with
A Management Receipt Fees correspondent banks in the international sites.

A Management Receipt Ratio
The number of ordinary shares into which an ADR can be converted.

Page 26 of 1042


A Management Share (ADS)
Foreign stock issued in the US and registered in the ADR system.

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

Financial Securitiescertificatesissued in the US by a transfer agent acting on behalf of the foreign issuer. The certificates represent
A Management
American shares
claims to foreign equities.

Stock exchange with the third highest volume of trading in the US. Located at 86 Trinity Place in downtown Manhattan. The
Financial American Stock
A Management Exchange (AMEX)
bulk of trading on AMEX consists of index options (computer technology index, institutional index, major market index) and
shares of small to medium-sized companies are predominant. Recently merged with Nasdaq See: Curb.

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

Financial Amman Financial
A Management Market (AFM)
Established in 1976, the AFM is the only stock exchange in Jordan.

Financial Amortization is the spreading of expenses over future time periods of an intangible balance sheet item such as a Leasing
A Management
Amortization
(mortgage) or goodwill.

Page 27 of 1042


Financial
A Management
Amortization factor The pool factor implied by the scheduled amortization assuming no prepayments.

Financial Amortizing interest
A Management rate swap
Swap in which the principal or notional amount declines over time.

Financial Amount outstanding All currency issued by the Bureau of the Mint and intended as a medium of exchange. Coins sold by the Bureau of the Mint at
A Management and in circulation premium prices are not included; uncirculated coin sets sold at face value plus handling charge are included.

Exchange that comprises the AEX-Effectenbeurs, the AEX-Optiebeurs (formerly the European Options Exchange or EOE) and
Financial Amsterdam
A Management Exchange (AEX)
the AEX-Agrarische Termijnmarkt. AEX-Data Services is the operating company responsible for the dissemination of data from
the Amsterdam Exchange via its integrated Mercury 2000 system.

Financial
A Management
AMTEL Used in context of general equities. In-house message system entered and displayed through Quotron A page.

Financial Employee of a brokerage or fund management house who studies companies and makes buy-and-sell recommendations on
A Management
Analyst
stocks of these companies. Most specialize in a specific industry.

Analysts, Stockbrokers and banks give opinions and forecasts (often referred to as estimates) as to future company
Financial
A Management
Analysts' estimates performance. Broker recommendations and other data are provided by Barra's Global Estimates service. BARRA collate and
analyze the brokers' forecasts, and calculate consensus figures from the individual data.

Page 28 of 1042


Financial
A Management
Andean Pact A regional trade pact that includes Venezuela, Colombia, Ecuador, Peru, and Bolivia.

Financial
A Management
Angel An investment-grade bond. Antithesis to fallen angel. In the context of venture capital, the first investor.

Financial
A Management
Angels Individuals providing venture capital.

Financial
A Management
Ankle biter Stock issued with a market capitalization of less than $500 million.

Financial Date on which particular news concerning a given company is announced to the public. Used in event studies, which
A Management
Announcement date
researchers use to evaluate the economic impact of events of interest.

Financial The technique in statistics of taking a figure covering a period of less than one year and extrapolating it to cover a full one year
A Management
Annual basis
period. The process is known as annualizing.

Financial
A Management
Annual effective yield See: Annual percentage yield.

Page 29 of 1042


Financial
A Management
Annual exclusion A tax rule allowing the deduction of certain income from taxation.

For investmentcompanies, the management fee and "other expenses," including the expenses for maintaining shareholder
Financial Annual fund
A Management operating expenses
records, providing shareholders with financial statements, and providing custodial and accounting services. For 12b-1 funds,
selling and marketingcosts are also included.

The annual general meeting (―AGM‖) is an annual meeting of the shareholders of a company, which must be held every year.
Financial Annual general The usual business transacted at an AGM is the presentation of the audited accounts, the appointment of directors and
A Management meeting auditors, the fixing of their remuneration, and recommendations for the payment of dividends. Other business may be
transacted if notice of it has been given to the shareholders.

Financial Annual percentage
A Management rate (APR)
The periodic rate times the number of periods in a year. For example, a 5% quarterly return has an APR of 20%.

The effective, or true annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the
Financial Annual percentage
A Management yield (APY)
effect of compounding. The APY is calculated by taking one plus the periodic rate, raising it to the number of periods in a year
and then subtracting one. For example, a 1% per month rate has an APY of 12.68% (1.01^12 -1).

There are many ways of calculating the annual rate of return. If the rate of return is calculated on a monthly basis, we
Financial
A Management
Annual rate of return sometimes multiply this by 12 to express an annual rate of return. This is often called the annual percentage rate (APR). The
annual percentage yield (APY) includes the effect of compoundinginterest.

Yearly record of a publicly heldcompany'sfinancial condition. It includes a description of the firm's operations, as well as
Financial
A Management
Annual report balance sheet, income statement, and cash flow statement information. SEC rules require that it be distributed to all
shareholders. A more detailed version is called a 10-K.

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Financial If stock X appreciates 1.5% in one month, the annualizedgain for that stock over a twelve month period is (12 x 1.5%) = 18%.
A Management
Annualized gain
Compounded over the 12 month period, the gain is (1.015)^12 -1 = 19.6%.

Financial Annualized holding- The annual rate of return that when compoundedt times generates the same t -period holding return as actually occurred from
A Management period return period 1 to period t .

An annuity is a constant annual payment. The guarantee of the maintenance of such annual payments is also known as an
Financial annuity, and can usually be purchased from insurance companies. A certain‘ annuity is paid over a specified number of years,
A Management
Annuity
whereas a life‘ annuity is paid until the death of the named recipient. An annuity may be bought with a lump sum or through a
series of contributions.

Financial
A Management
Annuity factor Present value of $1 paid for each of t periods.

Financial Anticipated holding
A Management period
The period of time an individual expects to hold an asset.

Financial
A Management
Anticipation Paying what is owed before it is due (usually to save interest charges).

Financial
A Management
Antidilutive effect Result of a transaction that increases earnings per common share (e.g., by decreasing the number of sharesoutstanding).

Page 31 of 1042


Greenmail refers to the agreement between a large shareholder and a company in which the shareholder agrees to sell his
Financial stock back to the company, usually at a premium, in exchange for the promise not to seek control of the company for a
A Management
Antigreenmail
specified period of time. Antigreenmail provisions prevent such arrangements unless the same repurchaseoffer is made to all
shareholders or approved by shareholder vote. There are some states that have antigreenmail laws.

In R/S Analysis, an anti-persistent time series reverses itself more often than a random series would. If the system had been
Financial
A Management
Anti-Persistence up in the previous period, it is more likely that it will be down in the next period and vice versa. Also called pink noise, or 1/f
noise. See: Persistence, R/S Analysis, Hurst Exponent, Joseph Effect, Noah Effect.

Financial
A Management
Antitrust laws U.S. legislation to prevent monopolies and restraint of trade.

Financial A call provision in a municipal bondindenture that establishes the right of redemption for the issuer on any interest payment
A Management
Any-interest-date
due date.

Financial Often used in risk arbitrage. Takeoverbid in which the acquireroffers to pay a set price for all outstanding shares of the target
A Management
Any-or-all bid
company, or any part thereof; contrasts with two-tier bid.

Financial In context of general equities, order to buy or sell a quantity of stock in pieces if necessary. Antithesis of an all-or-none order
A Management
Any-part-of order
(AON).

Financial
A Management
Appraisal ratio The signal-to-noise ratio of an analyst'sforecasts. The ratio of alpha to residualstandard deviation.

Page 32 of 1042


Financial
A Management
Appraisal rights A right of shareholders in a merger to demand the payment of a fair price for their shares, as determined independently.

Financial
A Management
Appreciation Increase in the value of an asset.

Financial
A Management
Appropriation request Formal request for funds for capital investment project.

Financial
A Management
Approved list A list of equities and other investments that a financial institution or mutual fund is allowed to invest in. See: Legal list.

Financial
A Management
APR Annual percentage rate - the true interest rate charged on a loan.

Financial
A Management
APS Auction Preferred Stock. A type of Dutch Auction Preferred Stock (Goldman Sachs product).

Page 33 of 1042


Arbitrage refers to the exploitation of differences between the prices of financial assets or currency or a commodity within or
between markets by buying where prices are low and selling where they are higher. For example, if coffee is cheaper in New
York than in London after allowing for transport and dealing costs, it will pay to buy in New York and sell in London. If interest
Financial
A Management
Arbitrage rates are higher on a Euro deposit in London than in Frankfurt, a higher return will be obtained by switching funds from one
centre to the other. Unlike speculation, arbitrage does not normally involve significant risks, since the buying and selling
operations are carried out more or less simultaneously and the profit made does not depend upon taking a view on future price
changes. By eliminating price differentials, arbitrage contributes to the achievement of market equilibrium.

Financial Municipalityissuedbonds issued intended to gain an interest rate advantage by refunding a higher-rate bond in ahead of their
A Management
Arbitrage bonds
call date. Lower-rate refunding issue proceeds are invested in Treasuries until the first call date of the higher-rate issue.

An alternative model to the capital asset pricing model developed by Stephen Ross and based purely on arbitrage arguments.
Financial Arbitrage Pricing
A Management Theory (APT)
The APT implies that there are multiple risk factors that need to be taken into account when calculating risk-adjusted
performance or alpha.

Financial Arbitrage Trading
A Management Program (ATP)
See: Program trading.

Financial Arbitrage-free option-
A Management pricing models
Yield curve option-pricing models.

Financial Traditionally someone who indulges in arbitrage of any sort; now a Wall Street term for a professional investor who specializes
A Management
Arbitrageur
in issues during takeovers.

Page 34 of 1042


Financial Arithmetic average
A Management (mean) rate of return
Arithmetic mean return.

Financial Arithmetic mean
A Management return
An average of the subperiod returns, calculated by summing the subperiod returns and dividing by the number of subperiods.

Financial Arizona Stock
A Management Exchange
A single price auction exchange for equity trading that allows anonymous buyers and sellers to trade at low transactioncosts.

Also known as a TRading INdex (TRIN). The index is usually calculated as the number of advancing issues divided by the
number of declining issues. This, in turn, is divided by the advancing volume divided by the declining volume. If there is
Financial
A Management
Arms index considerably more advancing volume relative to declining volume this will tend to reduce the index (i.e. increase the
denominator). Hence, a value less than 1.0 is bullish while values greater than 1.0 indicate bearish demand. The index often is
smoothed with a simple moving average.

Financial The price at which a willing buyer and a willing unrelated seller would freely agree to transact or a trade between related parties
A Management
Arm's length price
that is conducted as if they were unrelated, so that there is no conflict of interest in the transaction.

Financial The senior tier of a syndication. This implies the entity that agreed and negotiated the project financing structure. Also refers to
A Management
Arranger
the bank or underwriter entitled to syndicate the loan or bondissue. Also known as the lead underwriter.

Financial In the context of investments, refers to the amount by which interest on bonds or dividends on cumulative preferred stock is
A Management
Arrearage
due and unpaid.

Page 35 of 1042


The Articles of Association (the ―Articles‖) is the official company document that acts as a contract between a business and its
Financial Articles of
A Management Association
shareholders. The Articles describe the rights and duties of the shareholders with the business and between themselves (see
also Memorandum of Association)

Financial Articles of
A Management incorporation
Legal document establishing a corporation and its structure and purpose.

Financial
A Management
Artificial currency A currency substitute, e.g., special drawing rights (SDRs).

Financial
A Management
Artificial Intelligence The creation of models that mimic thought processes. See: Neural Networks, Fuzzy Logic, and Genetic Algorithms.

Financial A chart pattern that depicts that each peak in a security's price over a period of time is higher than the preceding peak.
A Management
Ascending tops
Antithesis of descending tops.

Financial Asian Currency Units
A Management (ACU)
Dollar deposits held in Singapore or other Asian centers.

Financial Asian Development A financial_institution established in 1966 to reduce poverty in the Asia-Pacific region. The bank is headquartered in Manila,
A Management Bank Philippines and consists of 61 member countries.

Page 36 of 1042


Financial
A Management
Asian dollar market Asian banks that collect deposits and make loansdenominated in US dollars.

Financial
A Management
Asian option Option based on the average price of the underlying assets during the life of the option.

Asia-Pacific
Financial Economic A loose economic affiliation of Southeast Asian and Far Eastern nations. The most prominent members are China, Japan, and
A Management Cooperation Pact Korea.
(APEC)

Financial This is the quoted ask, or the lowest price an investor will accept to sell a stock. Practically speaking, this is the quoted offer at
A Management
Ask
which an investor can buyshares of stock; also called the offer price.

Financial
A Management
Asked price In context of general equities, price at which a security or commodity is offered for sale on an exchange or in the OTCMarket.

Financial Used in context of general equities. Usually a seller (buyer) looking to aggressively sell (buy) stock, usually asking for a capital
A Management
Asked to bid/offer
commitment from an investment bank.

Australian Stock Price Riskless Indexed Notes. Zero-coupon four-year bonds repayable at face value plus the percentage
Financial
A Management
Aspirin increase by which the Australian stock index of all ordinaries (common stocks) rises above a predefined level during the given
period.

Page 37 of 1042


Financial Metal purity test to confirm that the metal meets the standards for trading on a commodities exchange (commodities exchange
A Management
Assay
center).

Financial The value assigned to property by a municipality for the purpose of tax assessment. Such an assessed valuation is important
A Management
Assessed valuation
to investors in municipal bonds that are backed by property taxes.

In business and accounting an asset is anything owned, whether in possession or by right to take possession, by a person or a
group acting together, e.g. a company, the value of which can be expressed in monetary terms. Asset is listed on the balance
sheet. It has a normal balance of debit. Assets may be classified in many ways. The principal distinction normally made for
Financial
A Management
Asset business purposes is between: fixed assets and current assets. Other business subdivisions include intangible assets, that is,
those assets which, though not visible, add to the earning power of the business, e.g. goodwill, patents, copyrights, etc. (also
called invisible assets); liquid assets, which are a subdivision of current assets and also categories labelled trade
investments,quoted investments, etc.

Financial
A Management
Asset activity ratios Ratios that measure how effectively the firm is managing its assets.

Financial Asset allocation The decision regarding how an institution's funds should be distributed among the major classes of assets in which it may
A Management decision invest.

Financial Asset allocation A mutual fund that rotates among stocks, bonds, and money marketsecurities to maximize return on investment and minimize
A Management mutual fund risk.

Financial
A Management
Asset classes Categories of assets, such as stocks, bonds, real estate, and foreign securities.

Page 38 of 1042


Financial Asset Depreciation
A Management Range System
A range of depreciable lives the IRS allows for particular classes of assets.

Financial
A Management
Asset for asset swap Creditors exchange the debt of one defaultingborrower for the debt of another defaulting borrower.

Financial Asset management
A Management account
Account at a brokerage house, bank, or savings institution that integrates banking services and brokerage features.

Financial
A Management
Asset play A company with assets that are not believed to be accurately reflected in its stock price, making it an attractive buy or play.

Financial A model for determining the required or expected rate of return on an asset. Related: Capital asset pricing model and arbitrage
A Management
Asset pricing model
pricing theory.

A corporate raider (company A) that takes over a target company (company B) in order to sell large assets of company B to
Financial
A Management
Asset stripper repay debt. Company A calculates that the net, selling off the assets and paying off the debt, will leave the raider with assets
that are worth more than what it paid for company B.

Financial
A Management
Asset stripping Buying a business and then realizing a profit by selling off the assets separately.

Page 39 of 1042


Financial
A Management
Asset substitution Occurs when a firm invests in assets that are riskier than those that the debtholders expected.

Financial Asset substitution
A Management problem
Arises when the stockholders substitute riskierassets for the firm's existing assets and expropriate value from the debtholders.

Financial An interest rate swap used to alter the cash flow characteristics of an institution's assets in order to provide a better match with
A Management
Asset swap
its liabilities.

Asset turnover is an accounting ratio. It measures the productivity of the assets of a business achieved by comparing asset
Financial
A Asset turnover values with sales revenue. For example, ―fixed asset turnover‖ could be calculated by dividing the net book value of fixed
Management assets by sales.

Financial The net market value of a corporation'sassets on a per-share basis, not the market value of the shares. A company is
A Management
Asset value
undervalued in the market when asset value exceeds market value.

Financial
A Management
Asset/equity ratio The ratio of total assets to stockholder equity.

Financial Asset/liability The task of managing the funds of a financial institution to accomplish two goals: (1) to earn an adequate return on funds
A Management management invested and (2) to maintain a comfortable surplus of assets beyond liabilities. Also called surplus management.

Page 40 of 1042

Encyclopedia financial management, Terms and Definitions

Encyclopedia financial management, Terms and Definitions

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