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Accounting & Investement Dictionary

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An alphabetical listing of General terms and items.

 
Each Way   Dico Tools
A broker's commission from his or her involvement on both the purchase and the sale side of a security.


EAFE Index   Dico Tools
European Australian and Far East index


Early Withdrawal Penalty   Dico Tools
Penalty paid by the holder of a fixed-term investment penalizing an investor who withdraws money before the agreed-upon maturity date.


Earn-out   Dico Tools
Refers to an additional payment in a merger or acquisition that is not part of the original acquisition cost, which is based on the acquired company's future earnings relative to a level determined by the merger agreement.


Earned Income   Dico Tools
Payment received for work, such as wages, salaries, commissions, and tips.


Earned Income Credit   Dico Tools
A tax credit for taxpayers with children.


Earned Surplus   Dico Tools
Retained earnings


Earnest Money   Dico Tools
Money given to a seller by a buyer to demonstrate the buyer's good faith. If the deal falls through, the deposit is usually forfeited.


Earning Asset   Dico Tools
An asset that generates income, e.g., income from rental property.


Earning Power   Dico Tools
Earnings before interest and taxes (EBIT) divided by total assets.


Earnings Before Interest After Taxes   Dico Tools
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest plus cash income taxes. Equivalent to EBIT minus cash taxes.


Earnings Before Interest And, Taxes   Dico Tools
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes.


Earnings Before Interest, Tax, Depreciation, And A   Dico Tools
Is used to isolate operating numbers from long-term costs -- for example, goodwill resulting from a flurry of acquisitions.


Earnings Before Interest, Taxes, And Depreciation   Dico Tools
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Depreciation expenses are not included in the costs.


Earnings Before Interest, Taxes, Depreciation, And   Dico Tools
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Depreciation and amortization expenses are not included in the costs.


Earnings Before Taxes   Dico Tools
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of income taxes.


Earnings Momentum   Dico Tools
An increase in the earnings per share growth rate from one reporting period to the next.


Earnings Per Share   Dico Tools
The amount of net income (earnings) related to each share of stock; computed by dividing net income by the number of shares of common stock outstanding during the period.


Earnings Retention Ratio   Dico Tools
Plowback rate.


Earnings Surprises   Dico Tools
Positive or negative differences from the consensus forecast of earnings by institutions such as First Call or IBES Negative earnings surprises generally have a greater adverse effect on stock prices than a reciprocal positive earnings surprise.


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Earnings Yield   Dico Tools
The ratio of earnings per share, after allowing for tax and interest payments on fixed interest debt, to the current share price. The inverse of the price-earnings ratio. It is the total twelve months, earnings divided by number of outstanding shares, divided by the recent price, multiplied by 100. The end result is shown in percentage terms. We often look at earnings yield because this avoids the problem of zero earnings in the denominator of the price-earning ratio.


Earnings-price Ratio   Dico Tools
Earnings yield


EASD   Dico Tools
European Association of Securities Dealers


Easy Money   Dico Tools
Tight money


Eating Stock   Dico Tools
When an underwriter can't find buyers for a stock and therefore has to buy them for his own account.


EBIAT   Dico Tools
Earnings Before Interest after Taxes


EBIT   Dico Tools
Earnings Before Interest and Taxes


EBITD   Dico Tools
Earnings Before Interest, Taxes and Depreciation


EBITDA   Dico Tools
earnings before interest, tax, depreciation, and amortization: Is used to isolate operating numbers from long-term costs -- for example, goodwill resulting from a flurry of acquisitions.


EBT   Dico Tools
Earnings Before Taxes


ECN   Dico Tools
Emerging company marketplace


Economic Assumptions   Dico Tools
General market environment a firm expects to operate in over the life of a financial plan.


Economic Defeasance   Dico Tools
In-substance defeasance


Economic Dependence   Dico Tools
When the costs and/or revenues of one project depend on those of another.


Economic Earnings   Dico Tools
The real flow of cash that a firm could pay out forever in the absence of any change in the firm's productive capacity.


Economic Exposure   Dico Tools
The extent to which the value of a firm will change because of an exchange rate change.


Economic Growth Rate   Dico Tools
The annual percentage rate of change in the Gross National Product.


Economic Income   Dico Tools
Cash flow plus change in present value.


Economic Indicators   Dico Tools
The key statistics of the economy that reveal the direction the economy is heading in; for example, the unemployment rate and the inflation rate.


Economic Order Quantity   Dico Tools
The order quantity that minimizes total inventory costs.


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Economic Rents   Dico Tools
Profits in excess of the competitive level.


Economic Risk   Dico Tools
In project financing, the risk that the project's output will not be salable at a price that will cover the project's operating and maintenance costs and its debt service requirements.


Economic Surplus   Dico Tools
For any entity, the difference between the market value of all its assets and the market value of its liabilities.


Economic Union   Dico Tools
An agreement between two or more countries that allows the free movement of capital, labor, and all goods and services, and involves the harmonization and unification of social, fiscal, and monetary policies.


Economies Of Scale   Dico Tools
The decrease in the marginal cost of production as a firm's extent of operations expands.


Economies Of Scope   Dico Tools
Scope economies exist whenever the same investment can support multiple profitable activities less expensively in combination than separately.


ECU   Dico Tools
European Currency Unit


Edge Corporations   Dico Tools
Specialized banking institutions, authorized and chartered by the Federal Reserve Board of Goverors in the U.S., that are allowed to engage in transactions of a foreign or international character. They are not subject to restrictions on interstate banking. Foreign banks operating in the U.S. are permitted to organize and own an edge corporation.


EDI   Dico Tools
Electronic Data Interchange


EDP   Dico Tools
A term referring to the use of computers in recording, classifying, manipulating, and summarizing data.


EDP   Dico Tools
Electronic data processing : A term referring to the use of computers in recording, classifying, manipulating, and summarizing data.


Education IRA   Dico Tools
A type of individual retirement account enabling the contribution of up to $500 per year for each child up to the age of 18 by the parents in the family.


Effective Annual Interest Rate   Dico Tools
An annual measure of the time value of money that fully reflects the effects of compounding.


Effective Annual Yield   Dico Tools
Annualized interest rate on a security computed using compound interest techniques.


Effective Call Price   Dico Tools
The strike price in a market redemption provision plus the accrued interest to the redemption date.


Effective Convexity   Dico Tools
The convexity of a bond calculated using cash flows that change with yields.


Effective Date   Dico Tools
In an interest rate swap, the date the swap begins accruing interest.


Effective Debt   Dico Tools
The total debt owed by a firm to its creditors.


Effective Duration   Dico Tools
The duration calculated using the approximate duration formula for a bond with an embedded option, reflecting the expected change in the cash flow caused by the option. Measures the responsiveness of a bond's price-taking into account that expected cash flows will change as interest rates change due to the embedded option.


Effective Margin   Dico Tools
Used with SAT performance measures, the amount equal to the net earned spread, or margin of income, on assets in excess of financing costs for a given interest rate and prepayment rate scenario.


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Effective Net Worth   Dico Tools
Net worth plus subordinated debt.


Effective Rate   Dico Tools
A measure of the time value of money that fully reflects the effects of compounding.


Effective Rate Of Interest   Dico Tools
The actual interest rate earned or paid on a bond investment.


Effective Sale   Dico Tools
A sale based on the most recent round-lot price, which determines the price of the next odd lot. The difference created between the last round-lot price and the odd-lot price is referred to as the odd-lot differential.


Effective Spread   Dico Tools
The gross underwriting spread adjusted for the impact that a common stock offering's announcement has on the firm's share price.


Effective Tax Rate   Dico Tools
A tax rate that reflects the percentage of the actual tax liability to the accounting income generated by the company, that is, net tax liability/financial (book) income before taxes.


Effective-interest Amortization   Dico Tools
A method of systematically writing off a bond premium or discount that takes into consideration the time value of money and results in an equal rate of amortization for each period.


Efficient Capital Market   Dico Tools
A market in which new information is very quickly reflected accurately in share prices.


Efficient Diversification   Dico Tools
The organizing principle of modern portfolio theory, which maintains that any risk-averse investor will search for the highest expected return for any particular level of portfolio risk.


Efficient Frontier   Dico Tools
The combinations of securities portfolios that maximize expected return for any level of expected risk, or that minimizes expected risk for any level of expected return. Pioneered by Harry Markowitz.


Efficient Market Hypothesis   Dico Tools
States that all relevant information is fully and immediately reflected in a security's market price, thereby assuming that an investor will obtain an equilibrium rate of return. In other words, an investor should not expect to earn an abnormal return (above the market return) through either technical analysis or fundamental analysis. Three forms of efficient market hypothesis exist: weak form (stock prices reflect all information on past prices), semistrong form (stock prices reflect all publicly available information), and strong form (stock prices reflect all relevant information including insider information).


Efficient Portfolio   Dico Tools
A portfolio that provides the greatest expected return for a given level of risk (i.e., standard deviation), or, equivalently, the lowest risk for a given expected return.


Efficient Set   Dico Tools
Graph representing a set of portfolios that maximize expected return at each level of portfolio risk.


Either-or Order   Dico Tools
Used in the context of general equities. Alternative order.


Either-way Market   Dico Tools
In the interbank Eurodollar deposit market, an either-way market is one in which the bid and offered rates are identical.


Either/or Facility   Dico Tools
An agreement permitting a bank customer to borrow either domestic dollars from the bank's head office or Eurodollars from one of its foreign branches.


Elasticity Of An Option   Dico Tools
Percentage change in the value of an option given a 1% change in the value of the option's underlying stock.


Elasticity Of Demand And Supply   Dico Tools
The degree of buyers' responsiveness to price changes. Elasticity is measured as the percent change in quantity divided by the percent change in price. A large value (greater than 1) of elasticity indicates sensitivity of demand to price, e.g., luxury goods. Goods with a small value of elasticity (less than 1) have a demand that is insensitive to price, e.g., food.


Electronic Data Interchange   Dico Tools
The direct exchange of information electronically, from one firm's computer to another firm's computer in a structured format.


Electronic Data Processing   Dico Tools
A term referring to the use of computers in recording, classifying, manipulating, and summarizing data.


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Electronic Data Processing   Dico Tools
A term referring to the use of computers in recording, classifying, manipulating, and summarizing data (EDP).


Electronic Depository Transfers   Dico Tools
The transfer of funds between bank accounts through the Automated Clearing House (ACH) system.


Elephants   Dico Tools
A term used to refer to large institutional investors.


Eleven Bond Index   Dico Tools
An index based on the average yield of 11 municipal bonds that mature in 20 years and carry an average AA rating. The eleven bonds used to calculate the index are also found in the 20 bond index, which serves as a benchmark in tracking municipal bond yields.


Eligible Bankers' Acceptances   Dico Tools
In the BA market, an acceptance may be referred to as eligible because it is acceptable by the Fed as collateral at the discount window and/or because the accepting bank can sell it without incurring a reserve requirement.


Elliott Wave Theory   Dico Tools
Technical market timing strategy that predicts price movements on the basis of historical price wave patterns and their underlying psychological motives. Robert Prechter is a famous Elliott Wave theorist.


Embedded Option   Dico Tools
An option that is part of the structure of a bond that gives either the bondholder or the issuer the right to take some action against the other party, as opposed to a bare option, which trades separately from any underlying security.


Emergency Fund   Dico Tools
A reserve of cash kept available to meet the costs of any unexpected financial emergencies.


Emergency Home Finance Act Of 1970   Dico Tools
The federal legislation creating the Federal Home Loan Mortgage Corporation, a partially government-run program initiated to stimulate the development of a secondary mortgage market and expand mortgages available to veterans and other groups.


Emerging Company Marketplace   Dico Tools
A service once offered by the American Stock Exchange to help small growth companies fulfill special listing requirements. The service is no longer available.


Emerging Markets   Dico Tools
The financial markets of developing economies.


Emerging Markets Free Index   Dico Tools
A Morgan Stanley Capital International index created to track stock markets in selected emerging markets that are open to foreign investment like Argentina, Chile, Jordan, Malaysia, Mexico, Philippines, and Thailand.


Employee Benefit   Dico Tools
Something of value that an employee receives in addition to a wage or salary. Examples include health insurance, life insurance, discounted childcare, and subsidized meals at the company cafeteria.


Employee Retirement Income Security Act   Dico Tools
The law that regulates the operation of private pensions and benefit plans.


Employee Stock Fund   Dico Tools
A firm-sponsored program that enables employees to purchase shares of the firm's common stock on a preferential basis.


Employee Stock Option Appreciation Rights Securiti   Dico Tools
(ESOARS): An auction process to assign a value to the options. The high bidder owns the option and receives a payment from the company for the ESOARS when the employee exercises the option.


Employee Stock Ownership Plan   Dico Tools
A company contributes to a trust fund that buys stock on behalf of employees.


Employer-sponsored Retirement Savings Program   Dico Tools
Tax-deferred savings plans offered by employers that provide a federal tax deduction, tax-deferral of contributions and earnings, and, in some cases, employer matching. They include 401(k) plans for corporate employees, 403(b) plans for employees of schools and non-profit organizations, and Section 457 plans for state and local government employees.


Employer-sponsored Savings Plan   Dico Tools
A government-approved program through which an employer can assist workers in building their personal retirement funds.


Empty Head And Pure Heart Test   Dico Tools
Securities and Exchange Commission rule that allows only the bidder of a tender offer to trade in the stock while possessing inside information.


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EMS   Dico Tools
European Monetary System


End-of-year Convention   Dico Tools
Treating cash flows as if they occur at the end of a year as opposed to the date convention. Under the end-of-year convention, the present is time 0, the end of year 1 occurs one year hence; and so on.


Endogenous Variable   Dico Tools
A value determined within the context of a model. Related: Exogenous variable.


Endorsement   Dico Tools
Signature on the back of the check, entitling the payee to either receive or transfer payment.


Endowment Funds   Dico Tools
Investment funds established for the support of institutions such as colleges, private schools, museums, hospitals, and foundations. The investment income may be used for the operation of the institution and for capital expenditures.


Energy Mutual Fund   Dico Tools
Mutual fund investing in energy stocks only, e.g., oil and gas companies.


Enhanced Indexing   Dico Tools
Also called indexing-plus, an indexing strategy whose objective is to exceed or replicate the total return performance of some predetermined index.


Entity   Dico Tools
An organizational unit (a person, partnership, or corporation) for which accounting records are kept and about which accounting reports are prepared.


Entrepreneur   Dico Tools
A person who starts a business.


Environmental Fund   Dico Tools
A mutual fund that invests strictly in stocks of companies that are environmentally friendly and/or have the goal of environmental betterment. The investors are trying to support and profit from opportunities related to the environmental movement.


EOE   Dico Tools
European Options Exchange


EOQ   Dico Tools
Economic Order Quantity


EPS   Dico Tools
earnings per share : The amount of net income (earnings) related to each share of stock; computed by dividing net income by the number of shares of common stock outstanding during the period.


EPS   Dico Tools
(Earnings per share): The amount of net income (earnings) related to each share of stock; computed by dividing net income by the number of shares of common stock outstanding during the period.


Equal Dollar Swap   Dico Tools
Selling common stock/convertibles in one company and reinvesting the proceeds in as many shares of (1) another type of security issued by the company, or (2) another security of the same type but of another company -- as can be bought with the proceeds of the sale. Equal shares swap.


Equal Shares Swap   Dico Tools
Applies mainly to convertible securities. Selling the underlying common and reinvesting the proceeds in as much of the convertible as can be converted into the number of shares of common just sold. See equal dollar swap.


Equalizing Dividend   Dico Tools
Special dividends received by investors of a firm for income the investor lost because the firm altered the dividends payment schedule.


Equilibrium Market Price Of Risk   Dico Tools
The slope of the capital market line (CML). Since the C.M.L. represents the expected return offered to compensate for a perceived level of risk, each point on the line is a balanced market condition, or equilibrium. The slope of the line determines the additional expected return needed to compensate for a unit change in risk. The equation of the CML is defined by the capital asset pricing model.


Equilibrium Price   Dico Tools
The price when the supply of goods matches demand.


Equilibrium Rate Of Interest   Dico Tools
The interest rate that clears the market. Also called the trade-clearing interest rate.


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Equipment Leasing Partnership   Dico Tools
A limited partnership that receives income and tax benefits such as depreciation costs by purchasing equipment and leasing it to other parties.


Equipment Trust Certificates   Dico Tools
Certificates issued by a trust that is formed to purchase an asset and lease it to a lessee. When the last of the certificates has been repaid, title and ownership of the asset transfers to the lessee.


Equitable Owner   Dico Tools
The beneficiary of a property held in a trust.


Equity Cap   Dico Tools
An agreement in which one party, for an up-front premium, agrees to pay the other at specific time periods if a designated stock market benchmark tops a predetermined level.


Equity Claim   Dico Tools
Also called a residual claim; a claim to a share of earnings after debt obligations have been satisfied.


Equity Collar   Dico Tools
The simultaneous purchase of an equity floor and sale of an equity cap.


Equity Contribution Agreement   Dico Tools
An agreement to contribute equity to a project under certain specified conditions.


Equity Financing   Dico Tools
Acquiring funds in the form of investments by owners (proprietor, partner, or stockholder).


Equity Floor   Dico Tools
An agreement in which one party agrees to pay the other at specific time periods if a specific stock market benchmark falls below a predetermined level.


Equity Funding   Dico Tools
An investment consisting of a life insurance policy and a mutual fund. The insurance policy is paid by the collateral value of fund shares, give the investor the advantages of insurance protection with the growth potential of a mutual fund.


Equity Kicker   Dico Tools
Stock warrants issued attached to privately placed bonds.


Equity Market   Dico Tools
Related: stock market


Equity Method Or Accounting For Investments In Sto   Dico Tools
Method used to account for an investments in the stock of another company when significant influence can be imposed (presumed to exist when 20 to 50 percent of the


Equity Multiplier   Dico Tools
Total assets divided by total common stockholders' equity; the total assets per dollar of stockholders' equity.


Equity Options   Dico Tools
Securities that give the holder the right (but not the obligation) to buy or sell a specified number of shares of stock, at a specified price for a certain (limited) time period. Typically one option equals 100 shares of stock.


Equity REIT   Dico Tools
A Real Estate Investment Trust that assumes ownership status in the property it invests in enabling investors of the REIT to earn dividends on rental income from the property and appreciation in property resale. Antithesis of a Mortgage REIT.


Equity Securities   Dico Tools
Shares of ownership in a corporation that can change significantly in value and that provide for a return to investors in the form of dividends.


Equity Swap   Dico Tools
A swap in which the cash flows exchanged are based on the total return on some stock market index and an interest rate (either a fixed rate or floating rate). Related: Interest rate swap.


Equity-linked Policies   Dico Tools
Related: Variable life


Equityholders   Dico Tools
Stockholders; those holding shares of the firm's equity.


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Equivalent Annual Annuity   Dico Tools
The amount per year for some number of years that has a present value equal to a given amount.


Equivalent Annual Benefit   Dico Tools
The annual annuity with the same value as the net present value of an investment project.


Equivalent Annual Cash Flow   Dico Tools
Annuity with the same net present value as the company's proposed investment.


Equivalent Annual Cost   Dico Tools
The cost per year of owning an asset over its entire life.


Equivalent Bond Yield   Dico Tools
Annual yield on a short-term, noninterest-bearing security calculated for comparison to yields quoted on coupon securities.


Equivalent Loan   Dico Tools
Given the after-tax stream associated with a lease, the maximum amount of conventional debt that the same period-by-period after-tax debt service stream is capable of supporting.


Equivalent Taxable Yield   Dico Tools
The yield that must be offered on a taxable bond issue to give the same after-tax yield as a tax-exempt issue.


ERM   Dico Tools
Exchange Rate Mechanism


Escalator Clause   Dico Tools
Provision in a contract allowing cost increases to be passed on. In an employment contract, for example an escalator clause may call for wage increases in line with inflation.


Escrow Receipt   Dico Tools
A document provided by a bank in options trading to guarantee that the underlying security is on deposit and available for potential delivery.


Escrowed To Maturity   Dico Tools
Holding of the proceeds from a new bond issue to pay off an existing bond issue at its maturation date.


ESOARS   Dico Tools
employee stock option appreciation rights securities: An auction process to assign a value to the options. The high bidder owns the option and receives a payment from the company for the ESOARS when the employee exercises the option.


Essential Purpose (or Function) Bond   Dico Tools
Public purpose bond


Estate Tax   Dico Tools
A federal or state tax imposed on an individual's assets inherited by heirs.


Ethical Fund   Dico Tools
Social conscious mutual fund.


EUREX   Dico Tools
The European derivatives exchange formed in 1998 by a merger of the Deutsche Terminb?rse (DTB) and the Swiss Options and Financial Futures Exchange (SOFFEX).


Euro CDs   Dico Tools
CDs issued by a U.S. bank branch or foreign bank located outside the U.S. Almost all Euro CDs are issued in London.


Euro Lines   Dico Tools
Lines of credit granted by banks (foreign or foreign branches of U.S. banks) for Eurocurrencies.


Euro Straight   Dico Tools
A fixed-rate coupon Eurobond.


Euro-commercial Paper   Dico Tools
Short-term notes with maturities up to 360 days that are issued by companies in international money markets.


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Euro-medium Term Note   Dico Tools
A nonunderwritten Euronote issued directly to the market. Euro-MTNs are offered continuously rather than all at once as a bond issue is. Most Euro-MTN maturities are under five years.


Euro-note   Dico Tools
Short- to medium-term debt instrument sold in the Eurocurrency market.


Euro.NM   Dico Tools
Created on March 1, 1996, Euro.NM is a pan-European network of regulated markets dedicated to growth companies, regardless of their sector of activity or country of origin. Euro.NM member exchanges and their respective new markets consist of the Paris Stock Exchange (Le Nouveau March), the Deutsche B?rse AG (Neuer Markt), the Amsterdam Exchanges (NMAX), and the Brussels Stock Exchange (Euro.NM Belgium).


Eurobank   Dico Tools
A bank that regularly accepts foreign currency-denominated deposits and makes foreign currency loans.


Eurobond   Dico Tools
A bond that is (1) underwritten by an international syndicate, (2) issued simultaneously to investors in a number of countries, and (3) issued outside the jurisdiction of any single country.


Euroclear   Dico Tools
One of two principal clearing systems in the Eurobond market. It began operations in 1968, is located in Brussels, and is managed by Morgan Guaranty Bank. Applies mainly to international equities. European clearing organization that functions much like the DTC


Eurocredits   Dico Tools
Intermediate-term loans of Eurocurrencies made by banking syndicates to corporate and government borrowers.


Eurocurrency Deposit   Dico Tools
A short-term fixed-rate time deposit denominated in a currency other than the local currency (i.e., U.S. dollars deposited in a London bank).


Eurocurrency Market   Dico Tools
The money market for borrowing and lending currencies that are held in the form of deposits in banks located outside the countries where the currencies are issued as legal tender.


Eurodollar Bonds   Dico Tools
Eurobonds denominated in U.S.dollars.


Eurodollar Certificate Of Deposit   Dico Tools
A certificate of deposit paying interest and principal in dollars, but issued by a bank outside the United States, usually in Europe.


Euroequity Issues   Dico Tools
Securities sold in the Euromarket. That is, securities initially sold to investors simultaneously in several national markets by an international syndicate. Related: External market.


Europea, Australia, And Far East Index   Dico Tools
Stock index, computed by Morgan Stanley Capital International.


European Association Of Securities Dealers Automat   Dico Tools
European equivalent of NASDAQS.


European Central Bank   Dico Tools
Bank created to monitor the monetary policy of the 11 countries that have converted to the Euro from their local currencies. The 11 countries are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain.


European Currency Unit   Dico Tools
An index of foreign exchange consisting of European currencies, originally devised in 1979. See also: Euro.


European Monetary System   Dico Tools
An exchange arrangement formed in 1979 that governs the currencies of European Union member countries.


European Option   Dico Tools
Option that may be exercised only at the expiration date. Related: American option.


European Options Exchange   Dico Tools
Now AEX-Optiebeurs. Amsterdam Exchanges (AEX).


European Union   Dico Tools
An economic association of European countries founded by the Treaty of Rome in 1957 as a common market for six nations. It was known as the European Community until January 1, 1994 and currently comprises 15 European countries. Its goals are a single market for goods and services without any economic barriers, and a common currency with one monetary authority.


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European-style Exercise   Dico Tools
A method of exercising options contracts in which the buyer can exercise the contract on the last day before expiration.


European-style Option   Dico Tools
An option contract that can be exercised only on the expiration date.


Euroyen Bonds   Dico Tools
Eurobonds denominated in Japanese yen.


Evaluation Period   Dico Tools
The time interval over which funds assess a money manager's performance.


Evening Up   Dico Tools
Buying or selling to offset an existing market position.


Event Risk   Dico Tools
The risk that the ability of an issuer to make interest and principal payments will change because of rare, discontinuous, and very large, unanticipated changes in the market environment such as (1) a natural or industrial accident or some regulatory change or (2) a takeover, or corporate restructuring.


Event Study   Dico Tools
A statistical study that examines how the release of information affects prices at a particular time.


Events Of Default   Dico Tools
Contractually specified events that allow lenders to demand immediate repayment of a debt.


Evergreen Credit   Dico Tools
Revolving credit without maturity.


Evergreen Funding   Dico Tools
A British term referring to the gradual injection of capital into a new or existing enterprise.


Ex Ante Return   Dico Tools
The expected return or anticipated return of an asset or portfolio.


Ex Post Return   Dico Tools
Related: Holding-period return


Ex-all   Dico Tools
The sale of a security without the privileges associated with the security such as dividends, voting rights, or warrants.


Ex-dividend   Dico Tools
This literally means "without dividend." The buyer of shares when they are quoted ex-dividend is not entitled to receive a declared dividend. It is the interval between the record date and the payment date during which the stock trades without its dividend-the buyer of a stock selling ex-dividend does not receive the recently declared dividend. Antithesis of cum dividend (with dividend).


Ex-dividend Date   Dico Tools
The first day of trading when the seller, rather than the buyer, of a stock will be entitled to the most recently announced dividend payment. The date set by the NYSE (and generally followed on other U.S. exchanges) is currently two business days before the record date. A stock that has gone ex-dividend is denoted by an x in newspaper listings on that date.


Ex-legal   Dico Tools
A municipal bond offered without a law firm's legal opinion. As the majority of bonds are issued with legal opinions.


Ex-pit Transaction   Dico Tools
The purchase of commodities off the exchange's floor.


Ex-rights   Dico Tools
Shares of stock that are trading without rights attached.


Ex-rights Date   Dico Tools
The date on which a share of common stock begins trading ex-rights.


Ex-stock Dividends   Dico Tools
The time period between the announcement of a stock dividend and its actual payment. The buyer of shares during this time period does is not entitled to the dividend.


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Ex-warrants   Dico Tools
Describes a stock sale in which the buyer is not entitled to the warrant accompanying the stock.


Exact Interest   Dico Tools
Interest paid based on the basis of a 365-day/year schedule by a bank or other financial institution as opposed to a 360-day basis (ordinary interest). Difference can be material when large principal sums of money are involved.


Exact Matching   Dico Tools
A bond portfolio management strategy that involves finding the lowest cost portfolio generating cash inflows exactly equal to cash outflows that are being financed by investment.


Except For Opinion   Dico Tools
An auditor's opinion reflecting the fact that the auditor is unable to audit certain areas of the company's operations because of restrictions imposed by management or other conditions beyond the auditor's control.


Excess Kurtosis   Dico Tools
Kurtosis measures the "fatness" of the tails of a distribution. Excess kurtosis means that distribution has fatter tails than a normal distribution. Fat tails means there is a higher than normal probability of big positive and negative returns realizations.


Excess Margin   Dico Tools
Equity present in an individual's account above the legal minimum required for a margin account or the maintenance requirement at a brokerage firm.


Excess Profits Tax   Dico Tools
Additional federal taxes placed on the earnings of a business, used only in time of national emergency such as war.


Excess Reserves   Dico Tools
Actual reserves that exceed required reserves.


Excess Return On The Market Portfolio   Dico Tools
Difference between the return on the market portfolio and the riskless rate.


Excess Returns   Dico Tools
Difference between asset return and riskless rate. Sometimes confused with abnormal returns, returns in excess of those required by some asset pricing model.


Exchange Controls   Dico Tools
Government restrictions on the purchase of foreign currencies by domestic citizens or on the purchase of the local domestic currency by foreigners.


Exchange Distribution   Dico Tools
A sale on an exchange floor of a large block of stock in a single transaction. A broker bunches a large number of buy orders and sells the block all at once. The broker receives a special commission from the seller.


Exchange Fund   Dico Tools
Investment vehicle introduced in 1999 that appeals to wealthy investors with large holdings in a single stock who want to diversify without paying capital gains taxes. These funds allow investors to exchange their stock for shares in the diversified portfolio of stocks in a tax-free transaction.


Exchange Gain Or Loss   Dico Tools
The gain or loss incurred when the exchange rates are different on the purchase and payment dates or on the sale and receipt of payment dates.


Exchange Members   Dico Tools
Member firm; seat


Exchange Of Assets   Dico Tools
Acquisition of another company by purchase of its assets in exchange for cash or stock.


Exchange Of Stock   Dico Tools
Acquisition of another company by purchase of its stock in exchange for cash or shares.


Exchange Offer   Dico Tools
An offer by a firm to give one security, such as a bond or preferred stock, in exchange for another security, such as shares of common stock.


Exchange Privilege   Dico Tools
A mutual fund shareholder's right to switch from one fund to another within one fund family, usually at no additional charge.


Exchange Rate   Dico Tools
The value of one currency in terms of another.


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Exchange Rate Mechanism   Dico Tools
The methodology by which members of the EMS maintain their currency exchange rates within an agreed-upon range with respect to other member countries.


Exchange Rate Risk   Dico Tools
Also called currency risk; the risk that an investment's value will change because of currency exchange rates.


Exchange Risk   Dico Tools
The variability of a firm's value that results from unexpected exchange rate changes, or the extent to which the present value of a firm is expected to change as a result of a given currency's appreciation or depreciation.


Exchange, The   Dico Tools
A nickname for the New York Stock Exchange. Also known as the Big Board, where more than 2000 common and preferred stocks are traded. The exchange is the oldest in the United States, founded in 1792, and the largest. It is located on Wall Street in New York City.


Exchangeable Instrument   Dico Tools
Applies mainly to convertible securities. Bond or preferred stock that may be exchangeable into the common stock of a different public corporation.


Exchangeable Security   Dico Tools
Investment instrument that grants its holder the right to exchange it for the common stock of a firm other than the issuer of the instrument.


Excise Tax   Dico Tools
Federal or state tax placed on the sale or manufacture of a commodity, typically a luxury item e.g., alcohol.


Exclusionary Self-tender   Dico Tools
A firm's offer to buy a given amount of its own stock while excluding targeted stockholders.


Exclusions   Dico Tools
Gross receipts that are not subject to tax and are not included in gross income, such as interest on state and local government bonds.


Execution Costs   Dico Tools
The difference between the execution price of a security and the price that would have existed in the absence of a trade, which can be further divided into market impact costs and market timing costs.


Exempt Securities   Dico Tools
Instrumentsexempt from the registration requirements of the Securities Act of 1933 or the margin requirements of the SEC Act of 1934. Such securities include government bonds, agencies, munis, commercial paper, and private placements.


Exercise Limit   Dico Tools
Cap on the number of option contracts of any one class of contract. that can be exercised within a five-day period contract. Stock option's exercise limit is typically 2000 contracts.


Exercise Notice   Dico Tools
A broker's notification a client want to exercise a right to buy or sell (depending on the type of contract) the underlying security of the option contract.


Exercise Price   Dico Tools
The price at which the security underlying a future or options contract may be bought or sold.


Exercise Value   Dico Tools
The amount of advantage over a current market transaction provided by an in-the-money option.


Exercising The Option   Dico Tools
The act of buying or selling the underlying asset via the option contract.


Exhaust Price   Dico Tools
The low price at which a broker must liquidate a client's holding in a stock purchased in a margin account in order to meet a margin call when the client cannot meet the call.


Exim Bank   Dico Tools
Export-Import Bank


Exit Fee   Dico Tools
Back-end load


Exogenous Variable   Dico Tools
A variable whose value is determined outside the model in which it is used. Related: Endogenous variable


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Exotic Option   Dico Tools
Refers to options that are more complex than simple puts or call options. For example, a Caput is a call option on a put option.


Expectations Hypothesis Theories   Dico Tools
Theories of the term structure of interest rates, which include the pure expectations theory; the liquidity theory of the term structure, and the preferred habitat theory. These theories hold that each forward rate equals the expected future interest rate for the relevant period. These three theories differ, however, on whether other factors also affect forward rates, and how.


Expectations Theory Of Forward Exchange Rates   Dico Tools
A theory of foreign exchange rates that states that the expected future spot foreign exchange rate t periods from now equals the current t-period forward exchange rate.


Expected Dividend Yield   Dico Tools
Total amount of dividends received during the life of a futures contract or total dividends received for holding a particular stock one year. Current yield.


Expected Future Cash Flows   Dico Tools
Projected future cash flows associated with an asset.


Expected Future Return   Dico Tools
The return that is expected to be earned on an asset in the future. Also called the expected return.


Expected Return   Dico Tools
The expected return on a risky asset, given a probability distribution for the possible rates of return. Expected return equals some risk-free rate (generally the prevailing U.S. Treasury note or bond rate) plus a risk premium (the difference between the historic market return, based upon a well diversified index such as the S&P 500 and the historic U.S. Treasury bond) multiplied by the assets beta. The conditional expected return varies through time as a function of current market information.


Expected Return On Investment   Dico Tools
The return one can expect to earn on an investment. Capital asset pricing model.


Expected Return-beta Relationship   Dico Tools
Implication of the CAPM that security risk premiums will be proportional to beta.


Expected Value   Dico Tools
The weighted average of a probability distribution. Also known as the mean value.


Expected Value Of Perfect Information   Dico Tools
The expected value if the future uncertain outcomes could be known minus the expected value with no additional information.


Expense Ratio   Dico Tools
The percentage of the assets that are spent to run a mutual fund (as of the last annual statement). This includes expenses such as management and advisory fees, overhead costs, and 12b-1 (distribution and advertising) fees. The expense ratio does not include brokerage costs for trading the portfolio, although these are reported as a percentage of assets to the SEC by the funds in a Statement of Additional Information (SAI). The SAI is available to shareholders on request. Neither the expense ratio nor the SAI includes the transactions costs of spreads, normally incurred in unlisted securities and foreign stocks. These two costs can add significantly to the reported expenses of a fund. The expense ratio is often termed an Operating Expense Ratio (OER).


Expensed   Dico Tools
Charged to an expense account, fully reducing reported profit of that year, as is appropriate for expenditures for items with useful lives under one year.


Expenses   Dico Tools
Costs incurred in the normal course of business to generate revenues.


Experience Rating   Dico Tools
A technique insurance companies use to determine the correct price of a policy premium.


Expiration Cycle   Dico Tools
Dates on which options on a particular security expire. A given option will be placed in one of three cycles; the January cycle, the February cycle, or the March cycle. At any time, an option has contracts with four expiration dates outstanding: two in near-term months and two in far-term months. Last day on which an option may be exercised.


Expiration Date   Dico Tools
The last day (in the case of American-style) or the only day (in the case of European-style) on which an option may be exercised. For stock options, this date is the Saturday immediately following the thrid Friday of the expiration month; brokerage firms may set an earlier deadline for notification of an option holder's intention to exercise. If Friday is a holiday, the last trading day will be the preceding Thursday.


Exploding Term Sheet   Dico Tools
Venture capital jargon. Often a proposed term sheet, might explode or be null and void in a fixed period set to negotiate the final contract.


Export-Import Bank   Dico Tools
The U.S. federal government agency that extends trade credits to U.S. companies to facilitate the financing of U.S. exports.


Exposure Netting   Dico Tools
Offsetting exposures in one currency with exposures in the same or another currency, when exchange rates are expected to move in such a way that losses or gains on the first exposed position should be offset by gains or losses on the second currency exposure.


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Extendable Bond   Dico Tools
Bond whose maturity can be extended at the option of the lender or issuer.


Extendable Notes   Dico Tools
Note with maturity that can be extended by mutual agreement between the issuer and investors.


Extension Date   Dico Tools
The day on which the first option either expires or is extended.


Extension Swap   Dico Tools
Extending maturity through a swap, e.g. selling a 2-year note and buying one with a slightly longer current maturity.


External Auditors   Dico Tools
Independent CPAs who are retained by organizations to perform audits of financial statements.


External Audits   Dico Tools
Audits conducted by CPAs who are independent of the client company.


External Efficiency   Dico Tools
Related: Pricing efficiency


External Finance   Dico Tools
Funding that is not generated by a firm's operations: new borrowing or a stock issue.


External Funds   Dico Tools
Funds originating from a source outside the corporation to increase cash flow and to aid in expansion efforts, e.g., bank loan or bond offering.


External Market   Dico Tools
Also referred to as the international market, the offshore market, or, more popularly, the Euromarket. A mechanism for trading securities that at issuance (1) are offered simultaneously to investors in a number of countries and (2) are issued outside the jurisdiction of any single country. Related: Internal market.


Extra Or Special Dividends   Dico Tools
A dividend that is paid in addition to a firm's established or expected quarterly dividend.


Extraordinary Call   Dico Tools
Early redemption of a revenue bond because the revenue source paying the interest on the bond has been eliminated or has disappeared.


Extraordinary Item   Dico Tools
An unusual and unexpected one-time event that must be explained to shareholders in an annual or quarterly report, e.g., employee fraud, a lawsuit, etc.


Extraordinary Items   Dico Tools
Nonoperating gains and losses that are unusual in nature, infrequent in occurrence, and material in amount.


Extraordinary Positive Value   Dico Tools
A positive net present value.


Extrapolative Statistical Models   Dico Tools
Models that apply a formula to historical data and project results for a future period. Such models include the simple linear trend model, the simple exponential model, and the simple autoregressive model.



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