Assignment

Corporate Finance
Course Code: FIN 4117
Section: C

Submitted to
Nusrat Farzana
Assistant Professor
Submitted by
Salman Farsi
ID: 111 162 086

Date: 1st October, 2019

 Financial Terminology
1.Proxy Fight: A proxy fight is the action of a group of shareholders joining forces, in a bid to
gather enough shareholder proxies to win a corporate vote. Sometimes referred to as a "proxy
battle”.

2. Hostile takeover: A hostile takeover is the acquisition of one company (called the target
company) by another (called the acquirer) that is accomplished by going directly to the
company's shareholders or fighting to replace management to get the acquisition approved. 

3. Sunk cost : A sunk cost is a cost that an entity has incurred, and which it can no longer
recover. Sunk costs should not be considered when making the decision to continue investing in
an ongoing project, since these costs cannot be recovered. Instead, only relevant costs should
be considered.

4. Opportunity cost: the loss of other alternatives when one alternative is chosen.

"idle cash balances represent an opportunity cost in terms of lost interest"

5. Incremental cash flows: Incremental cash flows are the net additional cash flows generated
by a company by undertaking a project. 

6.Cannebalization: In marketing strategy, cannibalization refers to a reduction in sales volume,

sales revenue, or market share of one product as a result of the introduction of a new product
by the same producer.

7. Mutually exclusive project: In capital budgeting, mutually-exclusive projects refer to a set

of projects out of which only one project can be selected for investment.

8. Capital rationing: It is the act of placing restrictions on the amount of new investments or
projects undertaken by a company. 

9.Venture capital: It is a type of private equity, a form of financing that is provided by firms or
funds to small, early-stage, emerging firms that are deemed to have high growth potential, or
which have demonstrated high growth. : Itis used to understand the effect of a set of
independent variables on some dependent variable. On the other hand, scenario analysis would
require the financial analyst to describe a specific scenario in detail.

10. Free cash flow : Free cash flow represents the cash a company generates after cash
outflows to support operations and maintain its capital assets. 

11. NOPAT: In corporate finance, net operating profit after tax is a company's after-tax
operating profit for all investors, including shareholders and debt holders.
12. The weighted average cost: The weighted average cost of capital is the rate that a company
is expected to pay on average to all its security holders to finance its assets. 

13. Financial distress: Financial distress is a term in corporate finance used to indicate a condition
when promises to creditors of a company are broken or honored with difficulty. If financial distress
cannot be relieved, it can lead to bankruptcy.

14. Asymmetric Information: In contract theory and economics, information asymmetry deals with
the study of decisions in transactions where one party has more or better information than the other

15.Agency cost: An agency cost is an economic concept concerning the fee to a "principal", when
the principal chooses or hires an "agent" to act on its behalf. 

16. Flotation cost: Flotation cost is the total cost incurred by a company in offering its securities to
the public. They arise from expenses such as underwriting fees, legal fees and registration fees.

17. Arbitrage: In economics and finance, arbitrage is the practice of taking advantage of a price
difference between two or more markets: striking a combination of matching deals that capitalize
upon the imbalance, the profit being the difference between the market prices at which the unit is
traded.

18. NPV: Net asset value is the value of an entity's assets minus the value of its liabilities.

19. Purchasing Power Parity: Purchasing Power Parity s a theory that measures prices at different
locations using a common basket of goods. While PPP can be used to measure between two places
using the same currency, its most common usage is between two locations that use different
currencies.
20. Systematic risk: It is the risk inherent to the entire market or market segment. Systematic
risk, also known as “undiversifiable risk,” “volatility” or “market risk,” affects the overall market,
not just a particular stock or industry.

21. Tobin's q: It is the ratio between a physical asset's market value and its replacement value. It
was first introduced by Nicholas Kaldor in 1966 in his article "Marginal Productivity and the Macro-
Economic Theories of Distribution: Comment on Samuelson and Modigliani".

22. Bond yield : It is the return an investor realizes on a bond. The bond yield can be defined in
different ways. Setting the bond yield equal to its coupon rate is the simplest definition. 

23. A zero-coupon bond: It is a bond where the face value is repaid at the time of
maturity. This definition assumes a positive time value of money. 

24. Ask price and bid price: The bid price represents the highest price an investor is willing to
pay for a share. The ask price represents the lowest price at which a shareholder is willing to
part with shares. The difference between the bid and ask prices is called the spread.
25. CAPM: In finance, the capital asset pricing model is a model used to determine a
theoretically appropriate required rate of return of an asset, to make decisions about adding
assets to a well-diversified portfolio. 

26. Collateral: Collateral is an asset that a lender accepts as security for a loan. If the borrower
defaults on the loan payments, the lender can seize the collateral and resell it to recoup the
losses.

27. Hedging: A hedge is an investment position intended to offset potential losses or gains that
may be incurred by a companion investment.

28. Operating cash flow: In financial accounting, operating cash flow, cash flow provided by
operations, cash flow from operating activities or free cash flow from operations, refers to the
amount of cash a company generates.

29. Sinking fund: A sinking fund is a fund established by an economic entity by setting aside
revenue over a period of time to fund a future capital expense, or repayment of a long-term
debt

30. Venture capital: Venture capital is a type of private equity, a form of financing that is
provided by firms or funds to small, early-stage, emerging firms that are deemed to have high
growth potential, or which have demonstrated high growth.