Glossary

C/A

Current Assets

The difference between then call price and the security's value.

A provision that entitles the corporation to repurchase its bonds or preferred stock from their holders at stated prices over specified periods.

A bond that the issuing company has the right to buy back at a pre-specified price.

All property used in conducting a business other than assets held primarily for sale in the ordinary course of business or depreciable, and real property used in conducting a business.

An equation relating an asset's relative riskiness (beta) to its required return.

List of planned investment projects, usually prepared annually.

The decision-making process with respect to investment in fixed-assets. It involves measuring the additional cash flows associated with investment proposals and evaluating the viability of those proposed investment.

The profit or loss made when an asset is sold for more than the purchase price is a capital gain. If the sale price is less than the purchase price, this is a capital loss.

Payments to mutual fund shareholders of profits from the sale of securities in a fund's portfolio. Capital gains distributions (if any) are usually made annually.

Markets for long-term financial securities.

Shortage of funds that forces a company to choose between projects.

Mix of different securities issued by a company.

A company's amount of capital. Usually measured as the sum of a company's market value of equity and debt.

A detailed plan of future cash flows. This budget is composed of four elements: cash receipts, cash disbursements, net change in cash for the period, and new financing needed.

Receipts for funds deposited in bank or S&L for a fixed period. The funds earn a fixed interest rate.

South Korea's industrial giants.

This shows the change in price of a security from the previous day's closing price. For instance, -1 means the security has fallen $1.00.

The line of "bet fit" through a series of historical returns for the firm's stock relative to the market returns. The slope of this line, called beta, represents the average movement of the firm's stock returns in response to a change in the market's returns.

An asset is said to be cheap when it is worth (intrinsic value) more than its market value.

An investment fund that does not stand ready to purchase its own shares from its owners. Its shares can trade on an exchange.

The price at which the last trade took place on a given day in a particular security.

An upper and lower limit on the interest rate on a floating-rate note.

Assets that are used as security for a loan.

Unsecured debt (IOU), issued by large corporations, with maturities (at time of issue) less than a year. They can be traded on OTC.

The brokers fee for purchasing or selling assets.

A commodity is food, a metal or another physical substance that investors buy or sell, usually via futures contracts.

These are securities that represent equity ownership in a company. Common shares topically allow an investor to vote on such matters as the election of board of directors. They also give the holder a share in a company's profits via dividend payments or the capital appreciation of the security.

A mechanism to select a lead investment bank in which investment banks submit a bid representing their compensation. The issuing firm solicits bids on the underwriting and chooses the underwriter who offers the most favorable terms.

The process of determining the future value of a payment or a series of payments when applying the concept of compounding interest. This process is the opposite of discounting.

Merger between two corporations in unrelated business.

A perpetual bond issued by the British government. Sometimes used as a general term for perpetuity.

The CPI measures the prices of consumer goods and services and is a measure of the pace of U.S. inflation. The U.S. Department of Labor publishes the CPI every month.

The number of shares of common stock for which a convertible security can be exchanged for.

Bond that can be converted to equity at a pre-specified conversion ratio.

A shareholder or a group of investors that holds enough shares to be able to influence management decisions.

A legal entity that functions separate and apart from its owners.

Interest payment on debt.

Budgets prepared for every major expense category of the firm, such as administrative cost, financing cost, production cost, selling cost, and research and development. 

The rate that must be earned by the company to satisfy all the firm's providers of capital. It is based on the opportunity cost of funds.

Rate The Interest to be annually paid by the issuer of a bond as a percent of par value, which is specified in the contractual agreement.

A measure of co-movement between two variables.

A procedure for assigning scores to companies or individuals on the basis of the risk of default.

is an agency providing some financial services to its members.

With dividend.

With rights.

A shareholder may cast all his or her votes for one candidate for the board of directors. Also see majority voting.

Asset that is expected to be turned into cash within a year.

Liability that is expected to be paid in less than a year.

The stock of a company whose fortunes are closely tied to the cyclical ups and downs of the economy in general. For example, General Motors is a cyclical stock since its business of selling autos is highly dependent on the general health of the economy.