Annuity: The term annuity is used in finance theory to refer to any terminating stream of fixed payments over a specified period of time 2. Annuity due: An annuity with payments made at the beginning of each period. Also called advance payment annuity. 3. Asymmetric information: Information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions which can sometimes cause the market breakdown. 4. Activity ratio An indicator of how rapidly a firm converts various accounts into cash or sales. In general, the sooner management can convert assets into sales or cash, the more effectively the firm is being run. 5. Asset-Backed Security (ABS): Debt obligation repaid from the future cash flows of different types of property or rights. This type of security often carries credit enhancements that limit investor exposure to the credit risk of the seller. 6. Arbitrage portfolio: A portfolio that provides inflow in some circumstances and requires no out flows under any circumstances 7. Abnormal return: The difference between the return on a stock (or entire portfolio) and the performance of an index, such as the S&P 500. The abnormal return is equal to the market return the normal return 8. Actuary: A specialist in the mathematics of risk, especially as it relates to insurance calculations such as premiums, reserves, dividends, and insurance and annuity rates. They work for insurance companies to evaluate applications based on risk. 9. Amortization: The repayment of a loan by installments. Amortization is the gradual repayment of a debt over a period of time, such as monthly payments on a mortgage loan or credit card balance 10. Annual report: Audited document required by the SEC and sent to a public company's or mutual fund's shareholders at the end of each fiscal year, reporting the financial results for the year

(including the balance sheet, income statement, cash flow statement and description of company operations) and commenting on the outlook for the future. 11. Accounting rate of return: ARR provides a quick estimate of a project's worth over its useful life. ARR is derived by finding profits before taxes and interest. 12. Business finance: Business finance is an important criterion in the decision-making processes of all organizations, providing the means and methodologies through which top leadership reviews operating activities, and engineers profit strategies in the short and long terms 13. Bullish market: A financial market of a group of securities in which prices are rising or are expected to rise. The term "bull market" is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies and commodities. 14. Bond: Obligation by a borrower to eventually repay money obtained from a lender. The bondholder buying the investment is entitled to receive both principal and interest payments from the borrower. A bond may be issued for $1 million or more but generally trades in smaller denominations of $1,000 increments. 15. Bond indenture: A bond indenture is the contract between a bondholder and the issuer. It is a legal document that states what the issuer can and cannot do, and states the bondholder’s rights. 16. Book value: 1. the value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated depreciation. 2. The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities 17. Broker and dealer: A person or firm in the business of buying and selling securities operating as both a broker and a dealer depending on the transaction. 18. Business risk: Generic term that refers to the chance of significant loss to a company whenever the actual value of an outcome falls short of its expected value. Business-risk losses can arise from a variety of events including natural disasters, credit events--such as loan default or

20. Break even point: In general. Beta is used in the capital asset pricing model (CAPM). 22. exchange rates. Bankruptcy: A legal proceeding involving a person or business that is unable to repay outstanding debts. or organized crime 28.corporate default--or market changes in interest rates. expressed as a percentage. the point at which gains equal losses. 26. black market. Bid ask spread: The difference between the price that a market maker is willing to pay for a security and the price at which the market maker is willing to sell the same security. 29. Bench mark portfolio: A portfolio against which the investment performance of an investor can be compared for the purpose of determining investment skill. 21. 27. 24. B O account: B O account is a safe and convenient means of holding securities just like a bank account is for funds. of a security or a portfolio in comparison to the market as a whole. Balance of payment: A record of all transactions made between one particular country and all other countries during a specified period of time. Blue chip stock: Blue chip stocks are seen as a less volatile investment than owning shares in companies without blue chip status because blue chips have an institutional status in the economy . Black money: Unaccounted and untaxed cash generated by dealings in a black economy. Balance of trade: The difference between a country's imports and its exports. Also known as "beta coefficient". a model that calculates the expected return of an asset based on its beta and expected market returns. or systematic risk. Bank rate: The discount rate fixed by a central bank. 19. 23. Beta co-efficient: A measure of the volatility. The amount the bank charges the consumer. commodity prices or stock prices. 25.

CAPM: A model that describes the relationship between risk and expected return and that is used in the pricing of risky securities. they are making that decision as a consumer. . 37. Consumption: An individual who buys products or services for personal use and not for manufacture or resale. Bonus share: Free shares of stock given to current shareholders. 31.30. as well as its liabilities and net worth. Corporate finance: The division of a company that is concerned with the financial operation of the company. Balance sheet: A balance sheet is a financial statement that represents a company's revenuegenerating assets. For investment banks and similar corporations. beverage. and when the book is closed. Coupon rate: The interest rate stated on a bond when it's issued. corporate finance focuses on the analysis of corporate acquisitions and other decisions 35. 34. 38. The book is filled with the prices that investors indicate they are willing to pay per share. In most businesses. shirt. Bear Hug: An offer made by one company to buy the shares of another for a much higher pershare price than what that company is worth. The coupon is typically paid semiannually. Balance sheets are used to evaluate a company's financial strength 33. based upon the number of shares that a shareholder owns. Capital market A market in which individuals and institutions trade financial securities. This is also referred to as the "coupon rate" or "coupon percent rate". A bear hug offer is usually made when there is doubt that the target company's management will be willing to sell. the issue price is determined by an underwriter by analyzing these values 32. Book building system: The process of determining the price at which an Initial Public Offering will be offered. Any time someone goes to a store and purchases a toy. corporate finance focuses on raising money for various projects or ventures. Organizations/institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. A consumer is someone who can make the decision whether or not to purchase an item at the store. or anything else. and someone who can be influenced by marketing and advertisements. 36.

47. 40. convertible securities are the perfect hybrid 44. Cost volume profit: Cost-volume profit analysis is based upon determining the breakeven point of cost and volume of goods. Call money rate: the interest rate paid by brokerage firms to banks on loans used to finance margin purchase by the brokerage firm’s customer. Cost benefit analysis: A process by which business decisions are analyzed.39. dividend or other policy change affecting the company. or. 43. 45. Capital structure: The makeup of the liabilities and stockholders' equity side of the balance sheet. Cost of capital: The cost of capital is the cost of a company's funds (both debt and equity). especially the ratio of debt to equity and the mixture of short and long maturities. Circuit breaker: A set of upper and lower limits on the market price movements. 42. The benefits of a given situation or business-related action are summed and then the costs associated with taking that action are subtracted. Capital market line: Modern portfolio theory (MPT) is a theory of investment which tries to maximize return and minimize risk by carefully choosing different assets. 46. from an investor's point of view "the expected return on a portfolio of all the company's existing securities 41. Convertible securities: Convertible bonds and preferred shares are among the lesser known securities available to investors. Clientele effect: The theory that a company's stock price will move according to the demands and goals of investors in reaction to a tax. But for those who seek income and still want to participate in the upside offered by common shares. .

as when a parent company begins to acquire subsidiaries 49. In other words. they may be taxed as if they were persons. Current assets: A current asset is an asset on the balance sheet which is expected to be sold or otherwise used up in the near future. such as individuals. 50. with the adjusted for any improvement or deprecation in the asset. or governments. or without regard to differences in time. households. Cash budget: An estimation of the cash inflows and outflows for a business or individual for a specific period of time. Cross-sectional data refers to data collected by observing many subjects (such as individuals. 53. firms. industrial buildings or equipment 52. which are then reinvested in order to generate their own earnings. 56. Capital expenditure: Funds used by a company to acquire or upgrade physical assets such as property. 51. Cut off price: In Book building issue. Because corporations are legal entities separate from their owners. The actual discovered issue price can be any price in the . firms or countries/regions) at the same point of time. Capital gain: The difference between the current market value of an asset and the original cost of the asset. Cross section data: Cross-section data is parallel data on many units. Contrast panel data or time series data. usually within one year. Current Assets = Cash +Bank + Debtors + Bills Receivable + Short Term Investment + Inventory + Prepaid Expenses 57. Capital budgeting: The process in which a business determines whether projects such as building a new plant or investing in a long-term venture are worth pursuing. Corporate tax: A tax levied on corporations' profits. compounding refers to generating earnings from previous earnings. Conglomeration: The process by which a conglomerate is created. the issuer is required to indicate either the price band or a floor price in the red herring prospectus.48. 54. 55. Compounding: The ability of an asset to generate earnings.

Dividend payout: The ratio of dividends to profit for the period. in takeover attempts. . 60. these entities typically are the main objective of the acquirer and may be sold by a takeover target to make the rest of the company less attractive. earning power. and efficiency of financial intermediary services. Development finance: Financial development is usually defined as a process that marks improvement in quantity. Only retail individual investors to have an option of applying at cut off price. 59. 63. 64. issued by a government or large company. This process involves the interaction of many activities and institutions and possibly is associated with economic growth 61. Differed annuity: A series of payments in which the first payment is postponed (deferred) for one or more periods. Often used in risk arbitrage.price band or any price above the floor price. Debenture: A debt security. but rather by the all issuer's assets not otherwise secured. 65. and business prospects. The ultimate goal of portfolio is to diversify risk. covering Settlement of trades on the Dhaka and Chittagong Stock Exchanges as well as Settlement of OTC transaction of Treasury Bills and Government Bonds issued by the Bangladesh Bank. CDBL: CDBL provides services to the Bangladesh Capital Market. 62. Diversification: Resulting reduction in the overall risk of a portfolio or firm when its individual component risks do not move together. equal to the percentage of profit distributed to shareholders in the form of dividends. The most desirable entities within a diversified corporation as measured by asset value. Also known as Portfolio Effect. Dominance principle: The dominance principle in portfolio theory states that an investor will i) prefer the portfolio with the highest expected return for a given risk level and ii) prefer the portfolio with the lowest risk level for a given level of expected return. This issue price is called "Cut off price". quality. This is decided by the issuer and Lead Manager after considering the book and investors' appetite for the stock. that is not secured by an asset or lien. 58. Crown Jewel: A particularly profitable or otherwise particularly valuable corporate unit or asset of a firm.

a derivative is a financial instrument (an agreement between two parties) that has a value. and utility. . resource costs. 70. futures. based on the expected future price movements of the asset to which it is linked—called the underlying—such as a share or a currency. 73. decided by the board of directors. including chance event outcomes. 69. with the most common being swaps. Decision tree: Decision tree is a tree like diagram illustrating the choices available to a decision maker. A decision tree is a decision support tool that uses a tree-like graph or model of decisions and their possible consequences. Derivatives are a form of alternative investment. 71. Defaulter: Failure to make required payments against debt issues. 72. and options. Date of record: Only shareholders whose names appear on the register after the book closure/ Record Date are eligible to attend in the AGM/ EGM and also to receive dividends & bonus shares and entitlement to right shares. There are many kinds of derivatives. Depreciation: an expense recorded to allocate a tangible asset's cost over its useful life. 68. to a class of its shareholders. Dividend: A distribution of a portion of a company's earnings. Dilution: The reduction in earnings per share or ownership percentage that would result from issuing additional stock to raise capital or for an acquisition 67. each possible decision and its estimated outcome being shown as a separate branch of the tree.66. Derivative security: In finance. Discounting: The process of calculating the present value of a given stream of cash flow.

76. Du point analysis: Decomposition of ROE into ROA and Leverage. 79.The sale. 77. 81. Efficient market hypothesis: A hypothesis which states that the price of a security is a reflection of all available information about it and thus represents its true value. Emerging market: Emerging markets are sought by investors for the prospect of high returns. 82. The amount of dividend that a stockholder will receive for each share of stock held. a firm may decide to divest itself of a division in order to concentrate its managerial efforts on more promising segments of its business. Efficient market: An investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. For example. The sum of declared dividends for every ordinary share issued. as they often experience faster economic growth as measured by GDP. That is. 78. the dividend payment dates are the dates where stockholders receive dividends that they are either guaranteed or that was previously declared by the company. Most analysts believe that information should be released in portions so that the market can price out good or bad information and reduce volatility. liquidation. Efficient Set: . Dividend payment date: The dates on which stockholders are sent dividend payments. 80.A study to determine what affect the release of information or its timing has on a security's price. Dividend per share: The total amount a publicly-traded company pays in ordinary dividends over a given period of time divided by the average number of shares outstanding.A graphical representation of the set of portfolios giving the highest level of expected return at different levels of risk. Divestiture: . Event Study: .74. 75. It states also that the current price of a security is the most appropriate measure of future returns . or spinoff of a division or subsidiary.

Euro market: In some instances it may be more attractive for a U. A stock will be given ex-dividend status if a person has been confirmed by the company to receive the dividend payment.The price of one currency expressed in terms of another currency. they may change from day to day) or they may be pegged to another currency. The value of two currencies relative to each other. dollar for a certain number of British pounds.S.-dollar denominated bond issued by an overseas company and held in a foreign institution outside both the U.S. For example. Exchange risk: The uncertainty in the return on foreign financial asset owing to unpredictability regarding the rate which the foreign currency can be exchanged into the investors own currency. 89. bank to borrow or place funds in the Euro market rather than buying or selling Federal funds.S. However rates on both Fed funds and overnight Eurodollars are closely related. standard deviation). . 84. one may trade one U. Ex-dividend: A classification of trading shares when a declared dividend belongs to the seller rather than the buyer.83.. Earnings per share serve as an indicator of a company's profitability. 87. A currency's exchange rates may be floating (that is. 86. Economic order quantity: An inventory-related equation that determines the optimum order quantity that a company should hold in its inventory given a set cost of production. Electronic money & digital currency Electronic money is money which exists only in banking computer systems and is not held in any physical form.S. 91.e. or. Exchange rate: . on a given day. demand rate and other variables. 90. 85. 88. equivalently. the lowest risk for a given expected return. Efficient portfolio: A portfolio that provides the greatest expected return for a given level of risk (i. and the issuer's home nation. Earning per share: The portion of a company's profit allocated to each outstanding share of common stock. Euro dollar: A U.

97. Effective Interest Rate: The effective interest rate. Financial market: Broad term describing any marketplace where buyers and sellers participate in the trade of assets such as equities. Euro bond: Eurobond is issued by an international syndicate and categorized according to the currency in which it is denominated. the effective interest rate generally does not incorporate one-time charges such as front-end fees. The effective interest rate is (generally) not defined by legal or regulatory authorities (as APR is in many jurisdictions). The effective interest rate differs in two important respects from the annual percentage rate (APR): 1. 93. Fourth market: The trading of exchange-listed securities between institutions on a private over-the-counter computer network. capital. 95. banking. Forward Rate: The rate at which a particular currency or commodity may be purchased on a forward contract. bank deposits. Factor market: A marketplace where factors of production such as labor. Finance: The science that describes the management of money. and assets. currencies and derivatives. effective annual interest rate. and resources are purchased and sold 96. rather than over a recognized exchange 98. Financial assets: An asset that derives value because of a contractual claim.92. and the like are all examples of financial assets. Stocks. bonds. annual equivalent rate (AER) or simply effective rate is the interest rate on a loan or financial product restated from the nominal interest rate as an interest rate with annual compound interest payable in arrears. Forward market: The over-the-counter trading of forward contracts. 94. 100. The forward market is a general term used to refer to the informal market in which these contracts are entered and exited. credit. 99. bonds. . investments. 2.

Fixed cost: Fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. Risk. Financial lease: A long-term lease in which the lessee must record the leased item as an asset on his/her balance sheet and record the present value of the lease payments as debt. 102. plant. Often referred to as financial institutions. 109. and will include higher expenses before interest and taxes (EBIT). and Others which are considered in choosing alternative financing sources. 110. . Financial statement Any list of the assets and liabilities of a company designed to show its financial health. Timing. 107. Income. 113. Financial intermediary An institution that acts as the middleman between investors and firms raising funds. Control. 104. Flexible budget: A set of revenue and expense projections at various production or sales volumes. Face value: The nominal value or dollar value of a security stated by the issuer. Flotation cost: The selling cost or distribution cost of issuing new securities 103. 106. The cost allowances for each expense are able to vary as sales or productions vary. 105. 108.101. Fill or kill order: A trading order that is canceled if the broker is unable to execute it immediately. also known as a non-current asset or as property. and equipment (PP&E). Fixed assets: Fixed asset. FRICTO: The acronym stands for Flexibility. is a term used in accounting for assets and property which cannot easily be converted into cash. Financial risk: Financial risk is the additional risk a shareholder bears when a company uses debt in addition to equity financing. and/or other variables. 111. Filter rule: A technical trading rule in which an investor buys and sells stocks if their price movement reverses direction by a minimally acceptable percentage. 112. Financial leverage: Financial leverage involves using fixed costs to finance the firm. profits or losses.

116. Mezzanine financing is basically debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. 115. Financial structure differs from capital structure in that capital structure accounts for long-term debt and equity only. such as short-term borrowings. It is similar to blackmail and can be effective because a company wishing to thwart the takeover may have to pay the holder of the shares an inflated price to get buy the shares back. Hybrid financing: A hybrid of debt and equity financing that is is typically used to finance the expansion of existing companies. An analyst uses technical or fundamental signals to determine which securities are likely to be profitable. Golden parachute: is an agreement between a company and an employee (usually upper executive) specifying that the employee will receive certain significant benefits if employment is terminated 120. 118. long-term debt. it can be very difficult. specialized knowledge to reduce risks and maximize profit. such as fees paid to lawyers or the costs of extra interest for late payments. .Financial manager play an important role in mergers and consolidations and in global expansion and related financing. Financial engineering: The process of creating a new investment vehicle.114. 121. Financial analyst: An individual who analyzes financial assets in order to determine the investment characteristics of those assets and to identify mispricing among that asset. Financial distress: A stage before bankruptcy where a company's creditors are not being paid or are paid with significant difficulty. These areas require extensive. as a number of risks and other factors must be considered before the new product is marketable. and which are not. Greenmail: is the practice of acquiring a large portion of the shares of a company and then forcing the issuing company to buy enough of the shares back to avoid a hostile takeover. 117. Financial analysts help persons and organizations in making investment decisions. Often. and owners equity. Financial manager: . 119.The way in which a company's assets are financed. While a company can avoid moving from financial distress to bankruptcy. financial distress can come with its own costs. Financial structure:. Financial engineering is often mathematically intensive.

128. investment is the commitment of money or capital to the purchase of financial instruments or other assets so as to gain profitable returns in the form of interest. 125. 2. younger companies seeking capital to expand. 129. if the interest is unpaid on an income bond. 131. options and currency swaps. The user may be the owner for tax purposes. Holding company: A parent corporation that owns enough voting stock in another corporation to control its board of directors 123. 124. dividends.The right to purchase an asset by the user of the asset according to a preagreed method. but can also be done by large privately owned companies looking to become publicly traded. More specifically. International finance is a branch of international economics. Investment: Investment is putting money into something with the expectation of profit. When the general price level rises. Paper currency. It also studies international projects. each unit of currency buys fewer goods and services. It includes the study of futures. In some cases. is when a company (called the issuer) issues common stock or shares to the public for the first time. Homemade Dividend: A form of investment income that comes from the sale of a portion of shares held by a shareholder.122. Income bond: Generally. The "one-time" funding from governments and organizations for a project or special purpose. Hard money or soft money: Governments and organizations prefer hard money because it provides a predictable stream of funds. and trade deficits. Soft money 1. . foreign investment. 127. This differs from dividends that shareholders receive from a company according to the number of shares the shareholder has. silver. or some other coined metal. They are often issued by smaller. Immunization: Protection against interest rate risk by holding assets and liabilities of equal durations. or appreciation of the value of the instrument (capital gains). Hire Purchase: . Initial public offering: An initial public offering (IPO). 126. It is related to saving or deferring consumption. referred to simply as an "offering" or "flotation". 130. it may accumulate as a claim against the company when the bond matures. as opposed to gold. and how these affect international trade. International finance: International finance is the branch of economics that studies the dynamics of exchange rates. inflation is a rise in the general level of prices of goods and services in an economy over a period of time. an income bond promises to repay principal but only to pay interest when the company earns a certain amount of money. international investments and capital flows. Inflation: In economics.

. c) An internal rate of return ranking of capital projects from best to worst.Inventory management is primarily about specifying the size and placement of stocked goods. 138. Investment opportunity schedule: a) A determination of the weighted average cost of capital at various increments of financing. b) A list of investment opportunities available to the firm. 140.A dividend declared before a firm's annual earnings and dividend-paying ability are accurately known by its management. 134. and offer advisory services to investors. and management quality. a person may have access to a company's financial state prior to its official announcement. justified by factors such as assets. Internal rate of return: The internal rate of return (IRR) is a rate of return used in capital budgeting to measure and compare the profitability of investments. Interim Dividend: . For example. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods. . Income tax: An income tax is a tax levied on the income of individuals or businesses (corporations or other legal entities). 135. Inside information: . earnings. An interim dividend is ordinarily paid in each of the first three quarters of the fiscal year. dividends.132. 139. 137. maintain markets for previously issued securities.Relevant information on a company that has not been released to the public. Most also maintain broker/dealer operations. Income statement: Income statement is a company's financial statement that indicates how the is transformed into the net income. Intrinsic value is at the core of fundamental analysis since it is used in an attempt to calculate the value for an individual stock and then compare it with the market price. It is also called the discounted cash flow rate of return. Inventory management:. 133. Intrinsic value: The value of a security. d) A set of decision criteria for determining the acceptability of capital projects. 136. Investment banker: An individual or institution which acts as an underwriter or agent for corporations and municipalities issuing securities.

. as long as he or she does not exceed the maximum set in the agreement. Liquidity: The ability to convert an asset to cash quickly. 144. exchanging that currency for another currency and investing in interest-bearing instruments of the second currency. 147. 143. Junk bond: A bond rated 'BB' or lower because of its high default risk. 146. 2. and a customer that establishes a maximum loan balance that the bank will permit the borrower to maintain. retirement plan. Liquidation: 1. Letter of credit: A L/C is used in EXIM business which is a written statement made by company bank’s to company foreign suppliers that a certain sum of money will be paid by the company’s bank if all the terms and conditions in the letter are duly abide by. its assets are sold and the proceeds pay creditors. The borrower can draw down on the line of credit at any time. Investment policy statement: A formal description of the investment philosophy that will be utilized for a given fund. while simultaneously purchasing futures contracts to convert the currency back at the end of the holding period. or other investment vehicle. When a business or firm is terminated or bankrupt. Also known as a "high risk and high-yield bond" or "speculative bond". Also known as "marketability". Line of credit: An arrangement between a financial institution. 148. Kerb Market: A kerb market is one where trading takes place outside official market hours.141. Any leftovers are distributed to shareholders. Interest rate parity: is a non-arbitrage condition which says that the returns from borrowing in one currency. 142. Any transaction that offsets or closes out a long or short position. should be equal to the returns from purchasing and holding similar interest-bearing instruments of the first currency. usually a bank. The expression comes from the practice in years gone by of trading on the kerb in the street. 145.

which is calculated by taking the company's long-term debt and dividing it by its long-term debt added to its preferred and common stock.A party using under lease an asset owned by another party. typically financial sponsor. In the case of real estate. Lump-sum payment: A payment of all principal and interest at the maturity of a promissory note 155. 156. Lease versus Buy Analysis:. 159. Leveraged lease: . Lessee: . the lessee is also known as the tenant. 157. Lock out: A lockout is a work stoppage in which an employer prevents employees from working. One example of a gearing ratio is the long-term debt/capitalization ratio. This is different from a strike. 151. 152. Leverage ratio: any ratio that measures a company's leverage. 154. Leverage buy out: occurs when an investor.149.An agreement between two parties whereby one party allows the other to use his/her property for a certain period of time in exchange for a periodic fee. The lender is given a senior . For a lease versus buy analysis. Lessor: An entity that leases an asset to another entity or The owner of an asset who permits another party to use the asset under a lease. While the process of analyzing the economics of buying an asset has been discussed in this document. 150. 158. acquires a controlling interest in a company's equity and where a significant percentage of the purchase price is financed through leverage (borrowing). 153.A lease versus buy analysis can be performed once the decision is made to acquire an asset. in which employees refuse to work. the analysis behind the decision is slightly different. Liquidity ratio: A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Lease: .A leveraged lease is a lease in which the lessor puts up some of the money required to purchase the asset and borrows the rest from a lender. Lock in system: The embargo imposed on share transactions for a certain time. One who rents property from another. various tradeoffs need to be examined.

through a purchase acquisition or a pooling of interests. The lessee makes payments to the lessor. 164. for money or barter. Multinational corporation: Enterprise operating in several countries but managed from one (home) country. services. 160. Margin trading can bring big returns. and where buyers and sellers interact (directly or through intermediaries) to trade goods. Differs from a consolidation in that no new entity is created from a merger. Mutual fund: An open-ended fund operated by an investment company which raises money from shareholders and invests in a group of assets. 167. who makes payments to the lender. They both determine the accounting period. Matching principle: The matching principle is a culmination of accrual accounting and the revenue recognition principle. or contracts or instruments. 165. Lumpy Assets: Lumpy Assets are assets that cannot be acquired in small increments but must be obtained in large. Lumpy assets have a major effect on the fixed assets/sales (FA/S) ratio. any firm or group that derives a quarter of its revenue from operations outside of its home country is considered a MNC . in which revenues and expenses are recognized. discrete units. Market Actual or conceptual (see market space) place in commercial world where forces of demand and supply operate. 163. Generally. Managerial finance Managerial finance takes into consideration how to improve financial techniques to better the company and where changes can be made to prevent loss. 161. 169.secured interest on the asset and an assignment of the lease and lease payments. 166. This approach is a mixture between basic corporate financing and managerial 162. Merger The combining of two or more entities into one. 168. in accordance with a stated set of objectives. but is also risky. with the expectation of increasing profits. Margin call: A call from the credit department for further funds to be deposited in the account to support additional exposure from running losses A call from a broker to a customer (called a maintenance margin call) or from a clearinghouse to a clearing member (called a variation margin call) demanding the deposit of cash or marginable securities to satisfy the Regulation T requirements and the house maintenance requirement for the purchase or short sale of securities or to cover an adverse price movement. Margin trading: Margin trading represents using borrowed money to buy securities. Money market Money market is a financial market where short term securities are traded.

"NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations".170. 175. Mortgage bond: A mortgage bond is a bond backed by a pool of mortgages on a real estate asset such as a house. 177. also known as the NASDAQ. 174. Once these are calculated. Market portfolio: Involves investments that a carry a high risk on a return rate. with the NPV on the y-axis and the cost of capital on the x-axis. otherwise it should not. and taxes needed to sustain the business or an activity. . Net present value: The present value of an investment's future net cash flows minus the initial investment. 171. 176. bonds which are secured by the pledge of specific assets are called mortgage bonds. is an American stock exchange. It is the opposition to annuity. the investment should be made (unless an even better investment exists). The regression coefficient is the Beta volatility coefficient. plot the values on the graph. Mixed stream: . expenses. "normal" is any gained revenue that exceeds the cost.Unequal series of payment. If positive. To begin. Normal return: In business. 173. simply calculate a project's NPV using different cost-of-capital assumptions. Market model: This is the regression model developed by William Sharpe which relates the yield of an asset with that of the market in which it is negotiated. NASDAQ: The NASDAQ Stock Market. NPV Profile: .The NPV profile is a graph that illustrates a project's NPV against various discount rates. 172. More generally.

Investors use the profit . An operating lease is commonly used to acquire equipment on a short-term basis. Opportunity cost 184. and their activities are monitored by the NASDAQ. Opportunity Set: . Presenting an investor with an opportunity set may help him/her in making investment decisions. For such securities. generally from 1to 99 shares. The higher the profit margin is. Optimal dividend policy: The optimal dividend policy is derived under general conditions which allow variable risk parameters and discounting. Odd lot: an amount of stock that is less than the standard unit of trading. The option contracts define the trading limitations of the market. 180. 185. 187.A measure of how well a company controls its costs. the better the company is thought to control costs. 179. 183. usually due to an inability to meet listing requirements. One may construct both high. It is calculated by dividing a company's profit by its revenues and expressing the result as a percentage.178. Operating leverage calculation:-fixed operating costs divided by total (fixed plus variable) operating costs. Operating margin: . Open market: A market which is widely accessible to all investors or consumers. broker/dealers negotiate directly with one another over computer networks and by phone. Operating leverage: The operating leverage is a measure of how revenue growth translates into growth in operating income. Optimum capital structure:.and low-risk portfolios from an opportunity set.The set of all possible portfolios that one may construct from a given set of assets. Any lease that is not a capital lease is an operating lease.Optimum capital structure of a firm is redefined under two alternative hypotheses. it is shown that under conditions of perfect competition optimum equity/debt ratio of a firm can be uniquely determined in inter temporal maximization models of investor behavior. OTC market: A security which is not traded on an exchange. 186. 182. By the optimum control theory. including the option type and the expiration date. 181. Operating lease: A lease for which the lessee acquires the property for only a small portion of its useful life. Option market: Medium of exchange for options contracts allowing the holder the right to sell or buy an underlying commodity on an open market.

Opportunity cost The best alternative that is forgone because a particular course of action is pursued. The greater the liquidity. 190. Preferred stock: Capital stock which provides a specific dividend that is paid before any dividends are paid to common stock holders. Operating margin=operating income/Revenue 188. Perfect market A perfect market is defined by several conditions. In the primary market the security is purchased directly from the issuer.margin to compare companies in the same industry and well as between industries to determine which are the most profitable. 191. Profitability: The ability to earn a profit. An example is the interest income that is given up when large balances are kept in a checking account. Among these conditions are • • • • Perfect market information No participant with market power to set prices No barriers to entry or exit Equal access to production technology 193. This differs from the secondary market. 192. Product market is a mechanism that allows people to easily buy and sell products. the smaller the profitability and conversely vice-versa. . 189. collectively called perfect competition. Primary market The market for new securities issues. Public finance Collection of taxes from those who benefit from the provision of public goods by the government. Services are often included in the scope of the term. and which takes precedence over common stock in the event of a liquidation 194. and the use of those tax funds toward production and distribution of the public goods. It is the opposition to liquidity.

Some variable interest rates may be expressed as a percentage above or below prime rate. and as a result become less valuable over time because of inflation. . historical financial statements. Preemptive rights: The right granting to shareholders the first opportunity to buy a new issue of stock. provides protection against dilution of the shareholder's ownership interest 196.Proxy: A written authorization given by a shareholder for someone else. Also called offering circular or circular. required by the Securities Act of 1933. it can provide only a partial picture of whether the investment is worthwhile. and overlap with the political component of force majeure risks. 201. Since this method ignores the time value of money and cash flows after the payback period.195. 198. Prime rate: Prime rate or prime lending rate is a term applied in many countries to a reference interest rate used by banks. Political risk: Probability of loss due to political instability in the buyer's country that may result in cancellation of a license or otherwise affect the buyer's ability to make payments. issuer. The term originally indicated the rate of interest at which banks lent to favored customers.. Prospectus: A legal document offering securities or mutual fund shares for sale. to cast his/her vote at a shareholder meeting or at another time. 199. 200. A profitability index number greater than 1 indicates an acceptable project. Payback period: The amount of time taken to break even on an investment. 197. and is consistent with a net present value greater than 0. and other information that could help an individual decide whether the investment is appropriate for him/her. 203. It must explain the offer. Profitability ratio: Measures that indicate how well a firm is performing in terms of its ability to generate profit.e. 202. though this is no longer always the case. objectives (if mutual fund) or planned use of the money (if securities). Perpetuity: Cash flows paid to a person or company on an ongoing basis that are expected to go on indefinitely. usually the company's management. Political risks are insurable risks. those with high credibility. Profitability index: Ratio of the present value of a project's cash flows to the initial investment. The cash flows ordinarily do not increase. i. including the terms.

This means that the exchange rate between two countries should equal the ratio of the two countries' price level of a fixed basket of goods and services. A company with a Quick Ratio of less than 1 can not currently pay back its current liabilities. Poison Pill: A strategy used by corporations to discourage hostile takeovers.e. Proxy fight or proxy battle: is an event that may occur when a corporation's stockholders develop opposition to some aspect of the corporate governance. Corporate activists may attempt to persuade shareholders to use their proxy votes (i. Return: The performance of an investment over a designated period of time. or an excessively large dividend payout. votes by one individual or institution as the authorized representative of another) to install new management for any of a variety of reasons. Purchasing power parity (PPP): is a theory which states that exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries. including any income from the investment (dividends. 209. the purchase of a big block of shares. interest and capital gains) as well as any changes in share price . such as a hostile takeover. Poison Put: Provision in an indenture giving bondholders the privilege of redemption at par if certain designated events occur. 207. Quick test ratio: The Acid-test or quick ratio or liquid ratio measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. Risk premium: The excess return on the risky asset that is the difference between expected return on risky assets and the return of risk-free assets. increase liquid assets or pay off loans.204. the target company attempts to make its stock less attractive to the acquirer. Right offering: An offering of common stock to existing shareholders who hold subscription rights or pre-emptive rights that entitle them to buy newly issued shares at a discount from the price at which they will be offered to the public later "the investment banker who handles a rights offering usually agrees to buy any shares not bought by shareholders" 212. 206. Retained Earnings: Portion of a company’s total earnings that is not paid out in dividends but is used to finance fixed investments. With a poison pill. Quick assets include those current assets that presumably can be quickly converted to cash at close to their book values. 210. 205. 211. 208. often focusing on directorial and management positions.

in contrast to installment credit. also called cash market. In this policy. Reverse split: On a stock exchange. also called aftermarket. subsequent to the original issuance in the primary market. activities carried out on the property. crude oil. 219. 221. Restrictive covenants: Any written provision that places limitations or conditions on some aspect of use of the property. but cannot be withdrawn by check writing. and represents a claim on its proportional share in the corporation's assets and profits. which finance new projects through equity that is internally generated. or restrictions on future subdivision or land development.213. materials to be used in structure exterior. 217. Systematic risk: Risk which is common to an entire class of assets or liabilities. The value of investments may decline over a given time period simply because of economic changes or other events that impact large portions of the market. Savings: A deposit account at a bank or savings and loan which pays interest. Speculation for arbitrage: Taking large risks. gold. are bought and sold for cash and delivered immediately.a reduction in the number of shares and an accompanying increase in the share price 214. especially with respect to trying to predict the future. 216. in the hopes of making quick. such as grain. the dividend payments are made from the equity that remains after all the project capital needs are met.e. Revolving credit: Revolving credit is a type of credit that does not have a fixed number of payments. large gains. location or height of structures. a stock merge . Spot market: A market in which commodities. or RAM chips. Examples of revolving credits used by consumers include credit cards. 215. Stock An instrument that signifies an ownership position (called equity) in a corporation. Residual dividend policy: Residual dividend policy is used by companies. . such as size. 222. Secondary market: A market in which an investor purchases a security from another investor rather than the issuer. a reverse stock split or reverse split is the opposite of a stock split. 220. i. 218. gambling.

223. there usually are not tax consequences until the shares are sold. 231. Sinking fund: Reserved created by periodically setting aside certain sums in a custodial account (as cash or investment in marketable securities) for future replacement of an asset or repayment of a liability. Semi strong form of efficiency: A class of EMH (Efficient Market Hypothesis) that implies all public information is calculated into a stock's current share price. Strong form of efficiency: Stronger formulation of the notion of market efficiency. Meaning that neither fundamental nor technical analysis can be used to achieve superior gains. Stock split: An increase in the number of outstanding shares of a company's stock. such that proportionate equity of each shareholder remains the same. Under strong form efficiency. substances. Expressed also as 'the whole is greater than the sum of its parts. Share price index: Statistical indicator used in measurement and reporting of changes in the market value of a group of stocks/shares. non-diversifiable risk (its beta). rather than cash. those dividends are taxable. 227. which states that the price of a stock already takes all possible market information into account. factors. processes. 229. or systems work together in a particularly fruitful way that produces an effect greater the sum of their individual effects. the Security Market Line (SML) is the graphical representation of the Capital Asset Pricing Model. Security market line: In Modern Portfolio Theory. 228. 225. If dividends paid are in the form of cash. Stock dividend: A dividend paid as additional shares of stock rather than as cash. It displays the expected rate of return of an individual security as a function of systematic. entities. 226. 230. This requires approval from the board of directors and shareholders. Synergy: State in which two or more agents. as the information is already "priced-in" to the value of the stock. insider trading cannot offer an advantage. . Sensitivity analysis: Measurement of the impact on the results of a simulation when small changes in critical assumptions are made. 224. When a company issues a stock dividend.

It is used to capitalize on an expected decline in the security's price. 239.The stated price per share for which underlying stock may be purchased or sold (in the case of a put) by the option holder upon exercise of the option contract.Leaseback. notably real estate and planes. Securities trading: Selling a borrowed security with the expectation of purchasing it at a lower price at the time of its return to the lender. including financing. where one sells an asset and leases it back for a long-term. 235. Simulation: A financial modeling technique that considers the likely outcomes of different hypothetical circumstances. and staggering the election of directors. For example. as in a Monte Carlo simulation’ or worst cases by the use of stress testing.232. gas. suppose one's landlord rolls utility costs together with the rent. Uncertainty may be modeled by the use of random numbers. One's rent thus becomes a semi-variable cost because one pays the rent (a fixed cost) and the electric. Shark repellent: is a strategy used by corporations to ward off unwanted takeovers. Strike price:. Current delivery price of a commodity traded in the spot market. Short sale: selling a security that the seller does not own but is committed to repurchasing eventually. short for sale-and-leaseback. issuing new shares of stock or securities convertible into stock. therefore. and water bills (variable costs) together with the same check. 234. The transaction is generally done for fixed assets. 238. Semi variable cost: A cost for an individual or company that consists of a fixed base cost and another cost that changes from time period to time period. 233. . Spot Rate: . Examples of this anti takeover measure include making a major acquisition. Also called cash price. taxing. one continues to be able to use the asset but no longer owns it. 240. and the purposes are varied. in which goods are sold for cash and delivered immediately. 237. 236. Sunk cost: Sunk Cost is a cost that has already been paid and cannot be removed and therefore should not be considered in an investment decision. is a financial transaction. Sale-and-leaseback:.The current market price of the actual physical commodity. accounting.

244.The total cost of a security transaction after commissions. 246. 243. Transaction cost: . a party that guarantees the proceeds to the firm from a security sale. Under writer: A firm. For example. Treasury bond A debt security backed by the full faith and credit of the United States government with a maturity of more than 10 years. Time value of money: The concept that holds that a specific sum of money is more valuable the sooner it is received. but transaction costs include the fee one must pay the broker. or a natural catastrophe that can be eliminated through diversification. voting. 249. 247. Time series data: Statistics a series of values of a variable taken in successive periods of time. or calculating earnings per share. The risk that is unique to a company such as a strike. and other expenses. taxes. Treasury note: A debt security backed by the full faith and credit of the United States government with a maturity between one and 10 years. Unsystematic risk: Also called the diversifiable risk or residual risk. Time value of money is dependent not only on the time interval being considered but also the rate of discount used in calculating current or future values. among other things. Treasury stocks: The shares of a firm's stock that have been issued and then repurchased. capital gains taxes. Treasury bill A debt security backed by the full faith and credit of the United States government with a maturity of one year or less. 242. It may be retired or reissued. usually an investment bank. . thereby in effect taking ownership of the securities. the outcome of unfavorable litigation. a security has a price. 245. that buys an issue of securities from a company and resells it to investors. Treasury stock is not considered in paying dividends. 248. In general.241.

This is done by purchasing a stock via one broker and selling it via another broker within a short time period. Variable cost: Variable costs are expenses that change in proportion to the activity of a business. 252. It typically entails high risk for the investor. The white knight may make an improved offer. The deceptive practice of some mutual funds. in order to give the appearance that they've been holding good stocks all along. in which recently weak stocks are sold and recently strong stocks are bought just before the fund's holdings are made public. It can also be considered normal costs. 251. or it may just be a more acceptable predator than the first bidder. 2. 254. 253. 258. White Knight: A company that comes to the rescue of another listed company when it is under siege from an unwelcome bidder (sometimes called a black knight).250. Window dressing: 1. Weak from of efficiency: Prices of the securities instantly and fully reflect all information of the past prices. but it has the potential for above-average returns. often at the request of the targets management. Variable cost is the sum of marginal costs over all units produced. 255. . This means future price movements cannot be predicted by using past prices. This is a very important source of funding for startups that do not have access to capital markets. and then claiming a loss on the sale 256. Wash sale: A strategy used by investors to try to claim additional tax benefits. Weighted Average Cost of Capital: . 257. as far as the management is concerned. Venture Capital: Money provided by investors to startup firms and small businesses with perceived long-term growth potential. The deceptive practice of using accounting tricks to make a company's balance sheet and income statement appear better than they really are. Wealth maximization as a goal: The maximization of economic profit rather than accounting profit of a firm.The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. Warrant A derivative security that gives the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame.

262. . with the face value repaid at the time of maturity. Yo-yo stocks are highly volatile and.259. can be very risky. This is expressed as an annual rate. 261. 260. YTM: The rate of return on a bond if it is held until maturity. YTC: The yield of a bond or note if you were to buy and hold the security until the call date. as such. This yield is valid only if the security is called prior to maturity. Zero coupon bonds: A zero-coupon bond (also called a discount bond or Pure discount bond) is a bond bought at a price lower than its face value. Yo Yo Stock: A stock that moves upwards and downward in price frequently and with little pattern.

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