Glossary

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Accounts Payable (Payables)

    Money owed to suppliers.
Accounts Receivable (Receivables)
    Money owed by customers.
ACRS (Accelerated Cost Recovery System)
    Schedule of depreciation rates allowed for tax purposes.
ADR (American Depository Receipts)
    A security, created by a U.S. bank, that evidences ownership to a specified number of shares of a foreign security held in a depositary in the issuing company's country of domicile. The certificate, transfer, and settlement practices for ADRs are identical to those for U.S. securities. U.S. investors often prefer ADRs to direct purchase of foreign shares because of the ready availability of price information, lower transaction costs, and timely dividend distribution.
Agency Costs
    Costs to the firm associated with the potential for conflict of interest between management and shareholders when these two groups are different.
Agency Theory
    Theory concerning the relationship between a principal (shareholder) and an agent of the principal (company's managers). It involves the nature of the costs of resolving conflicts between the principals and agents.
Airport Finance
    Reference to books on finance that you might find at airports, with titles like "How To Buy a House with Zero Down," or "All you need is $5,000 to Make a Million in One Year," or "Which Investments are Best in 1990's."
AMEX
    American Stock Exchange.
Amortized Loans
    Loans that are paid off in equal periodic payments.
Annuity
    Investment that generates a stream of equal cash flows.
Arbitrage (risk arbitrage)
    Simultaneous purchase of a security and sale of another to generate a risk-free profit.
Arbitrageur
    A person involved in arbitrage.
Arrearage
    An overdue payment, generally referring to omitted preferred stock dividends.
Ask
    The highest price anyone wants to pay for the security at a given time.
Asset Allocation
    The process of determining the optimal division of an investor's portfolio among different assets. Most frequently this refers to allocations between debt, equity, and cash.
Assets
    Anything that the firm owns.
Asymmetric Information
    One group has more information about, say, on the well being of the company, than another. An example would be managers having more intimate knowledge about the company than a typical shareholder.
Average Maturity
    The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater impact on funds with longer average life.
Average Tax Rate
    The rate calculated by dividing the total tax liability by the entity's taxable income.