Accounting & Investement Dictionary
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An alphabetical listing of General terms and items.
Treasury savings bonds with a 30-yeat maturity indexed to account for inflation.
In over-the-counter trading, same as H-H page, but exclusively for OTC stocks.
Report giving the average yield of all major money market funds.
See: Institutional Brokers Estimate System
See: International Banking Facility
Stock or mutual fund whose purchase date and price may be identified for capital gains and tax purposes when shares sold.
Crime committed when someone gains access to and uses another person's credit card numbers, social security number, birth date, checking and savings account numbers, drivers' license, automobile records, or other important personal information for their own gain. A
Unsystematic risk or risk that is uncorrelated to the overall market risk. In other words, the risk that is firm-specific and can be diversified through holding a portfolio of stocks.
See: International Depository Receipt
A corporation's dividend that is declared in violation of its charter and/or of state laws, typically because of the way it is calculated.
In the context of finance. absence of cash flow needed to fulfill financial debts and meet obligations. In the context of investments, describes a lightly traded investment such as a stock or bond that is not easily converted into cash.
Used for listed equity securities. Too many market orders of one kind-buy or to sell or limit orders to buy up or sell down, without matching orders of the opposite kind. An imbalance usually follows a dramatic event such as a takeover, research recommendation, or death of a key executive, or a government ruling that will significantly affect the company's business. If it occurs before the stock exchange opens, trading in the stock is delayed. If it occurs during the trading day, the specialist halts and thensuspends trading (with floor governor's approval) until enough matching orders can be found to make an orderly market.
See: International Monetary Market
Term used in the NASD rules of fair practice to refer to one's parents, brothers, sisters, children, relatives supported financially, father-in-law, mother-in-law, sister-in-law, and brother-in-law.
Market or limited price order that is to be executed in whole or in part as soon as such order is represented in the trading crowd. The portion not executed is to be treated as cancelled. A stop is considered an execution in this context. See: AON order, FOK order.
An annuity contract paid by a single payment and with a specified payment plan the starts immediately after the contract is purchased.
Delivery and settlement of securities within five business days.
A bond portfolio strategy whose goal is to eliminate the portfolio's risk, in case of a general change in the rate of interest, through the use of duration.
When a company's total capital is less than the par value of all its capital stock.
Result of a borrower's reduced credit rating.
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The right of the homeowner to prepay, or call, a mortgage at any time.
The rate that a seller of a futures contract can earn by buying an issue and then delivering it at the settlement date. Related: Cheapest to deliver issue.
The expected volatility in a stock's return derived from its option price, maturity date, exercise price, and riskless rate of return, using an option pricing model such as Black-Scholes.
A development strategy followed by many Latin American countries and other L.D.C.s that emphasize import substitution-accomplished through protectionism-as the route to economic growth.
A petty cash fund in which all expenditures are documented by vouchers or vendors' receipts or invoices, the total of the vouchers and cash in the fund should equal the established balance.
Arrangement by which investors who receive a dividend also receive a tax credit for corporate taxes that the firm has paid.
Used in accounting to refer to interest that has effectively been paid to a bondholder, even though no money has actually been paid.
Refers to the value of an asset, service, or company that is not physically recorded in any accounts but is implicit in the product, e.g., the opportunity cost of cash remaining in a savings account and not invested.
Refers to over-the-counter trading. Trade in which the trader has both the buyers and sellers lined up for a clean trade. See: Cross
Used in the context of general equities. Priced higher than the bid price but lower than the offer price. See: In the middle
Indication that the customer has revealed trading interest to multiple brokers and that the trade will take place with the firm having the highest bid or lowest offer. Antithesis of exclusive.
Used in the context of general equities. Firm indicating control of a bid, offer, or order.
Often used in risk arbitrage. Company that has become the target of a takeover, and whose stock has now become a speculative issue.
Means that a dealer has a wire receipt for securities, indicating that effective delivery on them has been made.
Used in the context of general equities. Below the inside market when one is attempting to sell the stock; at a significant discount. Antithesis of premium.
Used in the context of general equities. At a price exactly in between the bid and offer prices.
Used in the context of general equities. Slang expression meaning market prices are dropping rapidly.
Used in the context of general equities. Having a sell inquiry in a stock (not a firm customer sell order), often entailing a capital commitment. Antithesis of looking for.
A daytrader, or a speculator who buys and sells the same security on the same day.
In the context of general equities, keeping an activity within the firm. For example, rather than go to the marketplace and sell a security for a client to anyone, an attempt is made to find a buyer to complete the transaction with the firm. Although a listed trade must be taken to the floor of the stock exchange, matching supply with demand within the confines of the firm results in higher commissions for the firm.
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The time it takes the receiver of a check to process a payment and deposit it in a bank for collection.
Used in the context of general equities. (1) An order or market in a specific security within the inside market; 2) any announcement (earnings) that adheres closely to Wall Street analysts' expectations.
Process through which debt is removed from the balance sheet but not cancelled.
A put option that has a strike price higher than the underlying futures price, or a call option with a strike price lower than the underlying futures price. For example, if the March COMEX silver futures contract is trading at $6 an ounce, a March call with a strike price of $5.50 would be considered in the money by $0.50 an ounce. Related: Put. Antithesis of out-of-the-money.
Asset not used in a productive manner at all times.
Trading post on NYSE floor where inactive, lightly traded stocks are traded in 10-share lots as opposed to 100-share lots.
A security that trades in very small volume on a daily basis. See:: Illiquid.
Compensation paid to commodities trading advisers or to any practitioner who achieves above-average returns. Sometimes called performance fee.
Trading of shares between companies in order to create a tax or financial benefit for the companies involved.
Earnings from work or investment.
One who receives income from a trust.
A bond whose payment of interest is contingent on sufficient earnings. These bonds are commonly used during the reorganization of a failed or failing business.
Any payout to mutual fund shareholders resulting from interest, dividends, or other income.
The IRS rule that excludes certain types of income from taxation, e.g., welfare payments.
A mutual fund that seeks to provid to liberal current income from investments.
A management company focused on managing a mutual fund whose primary purpose is income generation, typically investing in bonds and high dividend yielding stocks.
A limited partnership whose main goal is income generation, e.g., real estate, oil equipment.
Real estate purchased for the reasons of income generation.
(statement of earnings): The financial statement that summarizes the revenues generated and the expenses incurred by an entity during a period of time.
A statement showing the revenues, expenses, and income (the difference between revenues and expenses) of a corporation over some period of time.
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Common stock with a high dividend yield and few profitable investment opportunities.
A state or federal government's levy on individuals as personal income tax and on the earnings of corporations as corporate income tax.
The amount expected to be paid to the federal and state governments based on the income before taxes reported on t he income statement.
Clause in a life insurance contract preventing the insurer from revoking the policy after it has been in force for a year or two if the life insurance company discovers any important facts that the policyholder may have concealed, such as experiencing a stroke.
Difference between the firm's cash flows with and without a project.
Average cost applicable to the issue of each additional unit of debt and equity.
Costs and benefits that would occur if a particular course of action is taken, compared to those that would have obtained if that course of action had not been taken.
Internal rate of return (I.R.R.) on the incremental investment from choosing a larger instead of a smaller project.
A certified public accountant operating outside the company who can provide an accountant's opinion.
NYSE member who executes orders for floor brokers and firms other than its own.
Procedures for continual internal verification of other controls.
A project whose acceptance or rejection is independent of the acceptance or rejection of other projects.
A division of the CME established in 1982 for trading stock index products and options.
An investment/trading strategy that exploits divergences between actual and theoretical futures prices. An example is the simultaneous buying (selling) of stock index futures (i.e., S&P 500) while selling (buying) the underlying stocks of that index, capturing as profit the temporarily inflated basis between these two baskets. Often, the point at which profitability exists is expressed at the block call as the number of points the future must be over or under the underlying basket for an arbitrage opportunity to exist. See: Program trading.
Investment fund designed to match the returns on a stock market index. Mutual fund whose portfolio matches that of a broad-based index such as the S&P 500 and whose performance therefore mirrors the market as represented by that index.
A model of stock returns using a market index such as the S&P 500 to represent common or systematic risk factors.
A call or put option based on a stock market index.
A stock index option issued by either a corporate or a sovereign entity as part of a security offering, and guaranteed by an option clearing corporation.
Bond whose payments are linked to an index, e.g., the consumer price index.
See: Enhanced indexing
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Total amount of dividends that would be paid on a share of stock over the next 12 months if each dividend were the same amount as the most recent dividend. Usually represented by the letter "e" in stock tables.
The yield, based on the most recent quarterly rate times four. To determine the yield, divide the annual dividend by the price of the stock. The resulting number is represented as a percentage. See: Dividend yield.
A dealer's or investor's interest in purchasing (not commitment to buy) securities that are still in the underwriting stage and are being registered by the Securities and Exchange Commission.
The expression in a graph of a utility function, where the horizontal axis measures risk and the vertical axis measures expected return. The curve connects all portfolios with the same utility.
A method of reporting net cash flow from operations that involves converting accrual-basis net income to a cash basis.
For foreign exchange, the number of units of a foreign currency needed to buy one U.S. dollar.
A retirement account that may be established by an employed person. IRA contributions are tax deductible according to certain guidelines, and the gains in the account are tax-deferred.
A provision of the law governing IRA's that enables a retiree or anyone receiving a lump-sum payment from a pension, profit-sharing, or salary reduction plan to transfer the amount into an IRA.
A tax return filed by an individual to account for their personal income and taxes payable.
The attempt to use information about a specific situation to draw a conclusion.
A statistic determined by the Federal Reserve Board focusing on the total output of all U.S. factories and mines on a monthly basis. Used as an economic indicator.
A bond issued by local government agencies on behalf of corporations.
General term used in the financial markets to refer to companies manufacturing, producing, or distributing goods and services.
Argument that industries in the developing and emerging sectors of the economy need protection against international competition in order to establish themselves.
An increase in the general price level of goods and services; alternatively, a decrease in the purchasing power of the dollar.
Accounting practices allowing for the effects of inflation.
Investments designed to hedge against inflation and the loss of purchasing power associated with it.
Also called purchasing power risk, the risk that changes in the real return the investor will realize after adjusting for inflation will be negative.
The fact that future inflation rates are not known. It is a possible contributing factor to the makeup of the term structure of interest rates.
A clause in a contract providing for increases or decreases in inflation depending on fluctuations in the cost of living, production costs, and so forth.
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Securities such as bonds or notes that guarantee a return higher than the rate of inflation if the security is held to maturity.
Expenses that cannot be adjusted or eliminated such as car payments or rental payments. Antithesis of flexible expenses.
Condition that information is known to some, but not all, participants.
The correlation between predicted and actual stock returns, sometimes used to measure the contribution of a financial analyst. An IC of 1.0 indicates a perfect linear relationship between predicted and actual returns, while an IC of 0.0 indicates no linear relationship.
The rise in the stock price following a dividend signal, or publication of some other related news.
Transactions costs that include the assessment of the investment merits of a financial asset. Related: Search costs.
Organizations that furnish investment and other types of information, such as information that helps a firm monitor its cash position.
Trades in which an investor believes he or she possesses pertinent information not currently reflected in the stock's price.
The speed and accuracy with which prices reflect new information.
Trades that are the result of either a reallocation of wealth or an implementation of an investment strategy that acts only on existing information.
Tax form required to determine the amount of state tax due on an inheritance.
Has various meanings. It could refer to a form that is filed with the Securities and Exchange Commission in advance of a major event, such as a public offering or a share repurchase. It could also refer to filings that occur before legal inside transactions.
(1) Amount of money deposited by both buyers and sellers of futures contracts to ensure performance of the terms of the contract; (2) amount of cash or eligible securities required to be deposited with a broker before engaging in margin transactions.
When buying securities on margin, the proportion of the total market value of the securities that the investor must pay for in cash. The Security Exchange Act of 1934 gives the Board of Governors of the Federal Reserve the responsibility to set initial margin requirements, but individual brokerage firms are free to set higher requirements. In futures contracts, initial margin requirements are set by the exchange.
A company's first sale of stock to the public. Securities offered in an IPO are often, but not always, those of young, small companies seeking outside equity capital and a public market for their stock. Investors purchasing stock in IPOs generally must be prepared to accept considerable risks for the possibility of large gains. IPOs by investment companies (closed-end funds) usually include underwriting fees that represent a load to buyers.
(1) Firm is now followed by analysts at a particular securities house; (2) Indication to cover short position by purchasing the underlying stock (this cancels out the short position).
Tables that indicate how much each industry requires of the production of each other industry in order to produce each dollar of its own output.
Refers to over-the-counter trading. Best (highest) bid and best (lowest) offer, often used in the O.T.C. Market. See: In-line.
Material information about a company that has not yet been made public. It is illegal for holders of this information to make trades based on it, however received.
Trading by officers, directors, major stockholders, or others who hold private inside information allowing them to benefit from buying or selling stock.
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Act imposing civil and criminal penalties for insider trading violations.
These are directors and senior officers of a corporation-in effect, those who have access to inside information about a company. An insider also is someone who owns more than 10% of the voting shares of a company.
The risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk.
The sale of an asset in exchange for a specified series of payments (the installments).
Computerized subscriber service that serves as a vehicle for the fourth market. "Instinet" is registered with the SEC As a stock exchange it numbers among its subscribers a large number of mutual funds and other institutional investors linked to each other by computer terminals. The system permits subscribers to display bids and offers (which are exposed system wide for whatever length of time the initiating party specifies) and to consummate trades electronically. Instinet is largely used by market makers, but, nonmarket makers and customers have equal access.
A broker who buys and sells securities for institutional investors such as banks, and mutual funds, pensions.
Service that assembles analysts' estimates of future earnings for thousands of publicly traded companies, detailing how many estimates are available for each company and the high, low, and average estimates for each.
Organizations that invest, including insurance companies, depository institutions, pension funds, investment companies, mutual funds, and endowment funds.
The gradual domination of financial markets by institutional investors, as opposed to individual investors. This process has occurred throughout the industrialized world.
Financial securities, such as money market instruments or capital market instruments.
An insurance term referring to the relationship between a policy's insured person or property and the potential beneficiary. The beneficiary must have an insurable interest in the insured person or property to receive payment of the policy if the insured died while the policy was in force.
Protection against the loss of life, health, home, car, or other valuables.
The insurance company representative and adviser who sells insurance policies.
A broker, independent of any insurance company, who represents the interests of the buyer in searching for insurance coverage at the lowest cost and providing the highest benefit to the buyer.
A claim for reimbursement from the insurance company when the insured has suffered a loss that is covered under an insurance policy.
Money paid annually to policyholders participating in cash value life insurance policies.
A contract detailing an insurance policy and outlining what risks are insured, what insurance premiums are to be paid by the policyholder, what deductibles prevail, and all the details associated with a policy.
Payments calculated by the insurance company based on risk factors that must be made by the insured to guarantee protection of property loss under an insurance policy.
The law of averages. The average outcome for many independent trials of an experiment will approach the expected value of the experiment.
The payment of proceeds by an insurance company to the insured to settle an insurance claim within the guidelines stipulated in the insurance policy.
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A bank or financial account that is insured for the benefit of the depositor, protecting against loss in the event that the savings institution becomes insolvent. See: FDIC.
A municipal bond backed both by the credit of the municipal issuer and by commercial insurance policies.
Defined benefit pension plans that are guaranteed by life insurance products. Related: Non-insured plans
A legal claim to some future benefit, typically a claim to future cash. Goodwill, intellectual property, patents, copyrights, and trademarks are examples of intangible assets.
Long-lived assets without physical substance that are used in business, such as licenses, patents, franchises, and goodwill.
Variant of linear programming in which the solution values must be integers.
A trust created between living persons. Antithesis of a testamentary trust.
In the commodities market, a spread consisting of a long position and a short position in different but related commodities for example, speculating that the price relationship between the two commodities will change, e.g., platinum and gold.
Loan made by one unit of a corporation to another unit of the same corporation.
A transaction between a parent company and a subsidiary company.
Used in futures or options market to refer the purchase of one month of a contract and selling another month in the same contract, in the hope that the price difference will widen or narrow, depending on the investment.
The payment (cost) for the use of money. Money paid to savers and investors by financial institutions, government, or corporations for the use of their money (example: 5% interest on a Certificate of Deposit or 6% interest on a bond).
The ratio of earnings before interest and taxes to annual interest expense. This ratio measures a firm's ability to pay interest.
A debt limitation that prohibits the issuance of additional long-term debt if the issuer's interest coverage would, as a result of the issue, fall below some specified minimum.
An interest expense, such as interest on a margin account, that is allowed as a deduction for tax purposes.
Tax on foreign investment by residents of the U.S. which was abolished in 1974.
Interest expense is the money the corporation or individual pays out in interest on loans.
Interest earned on reinvestment of each interest payment on money invested. See: compound interest.
Contractual debt payments based on the coupon rate of interest and the principal amount.
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The cost of using money, expressed as an annual percentage.
An agreement whereby one party, for an up-front premium, agrees to compensate the other at specific time periods if a designated interest rate (the reference rate) is different from a predetermined level (the strike rate).
An interest rate agreement in which payments are made when the reference rate exceeds the strike rate. Also called an interest rate ceiling.
See: Interest rate cap
An interest rate agreement in which payments are made when the reference rate falls below the strike rate. Related: Interest rate cap.
A futures contract based on an interbank deposit rate or an underlying debt security. The value of the contract rises and falls inversely to changes in interest rates.
The firm's cost of debt capital.
Expression that the interest rate differential between two countries is equal to the difference between the forward foreign exchange rate and the spot rate.
The chance that a security's value will change due to a change in interest rates. For example, a bond's price drops as interest rates rise. For a depository institution, also called funding risk: The risk that spread income will suffer because of a change in interest rates.
A binding agreement between counterparties to exchange periodic interest payments on some predetermined dollar principal, which is called the notional principal amount. For example, one party will pay fixed and receive variable.
The value of a firm's deduction of the interest payments on its debt from its earnings before calculation of its tax bill under current tax law.
The reduction in income taxes that results from the tax-deductibility of interest payments.
A loan in which payment of principal is deferred and interest payments are the only current obligation.
A security based solely on the interest payments from a pool of mortgages, Treasury bonds, or other bonds. Once the principal on the mortgages or bonds has been repaid, interest payments stop, and the value of the IO falls to zero.
A cash value life insurance policy whose insurance dividend rates vary with respect to inflation, enabling the policyholder to avoid the loss of purchasing power associated with inflation.
Stocks whose earnings are dependent upon and change with the interest rate, e.g., bank stocks.
The declaration and payment of a dividend prior to annual earnings determination.
A short-term loan made to a company on the condition that a takeout will follow with long-term or intermediate financing.
A financial statement that reflects only a limited period of a company's financial statement, not the entire fiscal year.
Describes cross-memberships of directors on each other's company Board of Directors.
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The spread between the interest rate offered in two sectors of the bond market for issues of the same maturity.
An exchange of one bond for another based on the manager's projection of a realignment of spreads between sectors of the bond market.
A database that distributes information from all the major stock exchanges in the United States.
Electronic communications network linking the trading floors of seven registered exchanges to permit trading among them in stocks listed on either the NYSE or AMEX and one or more regional exchanges. Through ITS, any broker or market maker on the floor of any participating exchange can reach other participants for an execution whenever the nationwide quote shows a better price available. A floor broker on the exchange can enter an ITS order to assure excecution of all of an offering or bid, instead of splitting it with competing brokers.
Typically one-ten years.
An employee of a company who analyzes the company's accounting records to that the company is following and complying with all regulations.
An independent group of experts in controls, accounting, and operations, who monitor operating results and financial records, evaluate internal controls, assist with increasing the efficiency and effectiveness of operations, and detect fraud.
Safeguards in the form of policies and procedures established to provide management with reasonable assurance that the objectives of an entity will be achieved.
Growth of assets resulting from internal financing or internally generated cash flow.
Finance generated within a firm by retained earnings and depreciation.
Maximum rate a firm can expand without outside sources of funding. Growth generated by cash flows retained by company.
The mechanisms for issuing and trading securities within a nation, including its domestic market and foreign market. Compare: External market.
The number of days that a firm can finance operations without additional cash income.
Dollar-weighted rate of return. Discount rate at which net present value (NPV) investment is zero. The rate at which a bond's future cash flows, discounted back to today, equal its price.
The various statutes and regulatilons making up federal tax law.
The federal agency responsible for the collection of federal taxes, including personal and corporate income taxes, Social Security taxes, and excise and gift taxes.
The legislation targeted at IRS reform, particularly related to the time period required for capital gains and taxpayer protection and rights.
See: Operationally efficient market
Simultaneous buying and selling of foreign securities and A.D.R.s to capture the profit potential created by time, currency, and settlement inconsistencies that vary across international borders.
IBRD or World Bank makes loans at nearly conventional terms to countries for projects of high economic priority.
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A branch that an American bank establishes in the United States to do Eurocurrency business.
A collective term that refers to global bonds, Eurobonds, and foreign bonds.
A receipt issued by a bank as evidence of ownership of one or more shares of the underlying stock of a foreign corporation that the bank holds in trust. The advantage of the IDR structure is that the corporation does not have to comply with all the issuing requirements of the foreign country where the stock is to be traded. The U.S. version of the IDR is the American Depository Receipt (ADR).
The attempt to reduce risk by investing in more than one nation. By diversifying across nations whose economic cycles are not perfectly correlated, investors can typically reduce the variability of their returns.
A corporation owned by the World Bank that produces a number of well-known stock indexes for emerging markets. Its major role is to provide financing for projects in less developed countries.
A subsidiary incorporated in the U.S., usually in Delaware, whose sole purpose once was to issue debentures overseas and invest the proceeds in foreign operations, with the interest paid to foreign bondholders not subject to U.S. withholding tax. Elimination of the corporate withholding tax has ended the need for this type of subsidiary.
States that the interest rate differential between two countries should be an unbiased predictor of the future change in the spot rate.
A mutual fund that can invest only outside the United States.
Related: External market
An index listed on the American Stock Exchange tracking the performance of 50 American Depository Receipts traded on the AMEX, NYSE, and NASDAQ.
An organization founded in 1944 to oversee exchange arrangements of member countries and to lend foreign currency reserves to members with short-term balance of payment problems.
A division of the CME established in 1972 for trading financial futures. Related: Chicago Mercantile Exchange (CME)
A mutual fund that invests strictly in securities markets throughout the world, excluding the United States. A global fund, on the other hand, invests in both foreign and domestic securities.
Energy futures and options exchange based in London.
Swiss law association located in Zurich that regroups all the participants on the Eurobond primary and secondary markets. Establishes uniform trading procedures in the international bond markets.
Organization that replaced the London stock exchange after its merger with the International Securities Regulatory Organization (ISRO).
Formed in 1985 to promote uniform practices in the writing, trading, and settlement of swaps and other derivatives.
The practice of using a second broker in a securities transaction, which is considered illegal it is if used to generate additional commission.
Used in the context of futures trading to refer to a trader holding, buying, and selling contracts in the same commodity on the same exchange, but for different months.
Term meaning "within the day," often to refer to the high and the low price of a stock.
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The spread between two issues of the same maturity within a market sector. For instance, the difference in interest rates offered for five-year industrial corporate bonds and five-year utility corporate bonds.
A securities offering limited to just one state in the United States.
The present value of a firm's expected future net cash flows discounted by the required rate of return.
The amount by which an option is in the money. An option that is not in the money has no intrinsic value.
Goods held for resale.
The determination of which items should be included in the year-end inventory balance.
Used in the context of factoring and general finance to refer to loans to consumer product producers that use inventory as collateral. See also: Inventory loan.
A secured short-term loan to purchase inventory. The three basic forms are a blanket inventory lien, a trust receipt, and field warehousing financing.
The ratio of annual sales to average inventory, which measures the speed at which inventory is produced and sold. Low turnover is an unhealthy sign, indicating excess stocks and/or poor sales.
A measure of the efficiency with which inventory is managed; computed by dividing cost of goods sold by average inventory for a period.
A derivative instrument whose coupon rate is linked to the market rate of interest in an inverse relationship.
A variable-rate security whose coupon rate increases as a benchmark interest rate declines.
A futures market in which the nearer months are selling at price premiums to the more-distant months. Related: Premium.
A serial bond offering whose bonds with earlier maturity dates have higher yields than bonds with later maturity dates.
When short-term interest rates are higher than long-term rates. Antithesis of positive yield curve.
The process of setting money aside to increase wealth over time and accumulate funds for long-term financial goals, such as retirement.
Transactions and events that involve the purchase and sale of securities (excluding cash equivalents), property, plant, equipment, and other assets not generally held for resale, and the making and collecting of loans.
Legislation passed in 1940 requiring financial advisers to register with the Securities and Exchange Commission. The measure was enacted to protect the public from fraud or misrepresentation by investment advisers.
A business that specializes in providing investment advice for a fee. All advisers of an advisory service must be registered with the Securities and Exchange Commission.
Related: Financial analysts
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Financial intermediaries who perform a variety of services, including aiding in the sale of securities, facilitating mergers and other corporate reorganizations, acting as brokers to both individual and institutional clients, and trading for their own accounts. See: Underwriters.
A document that serves as proof that an individual has an investment in a savings and loan association.
Factors such as economic, monetary, and other conditions that affect the performance of investments.
A group of people who combine their money into a larger pool, then invest collectively in stocks and bonds, making decisions as a group.
A firm that that invests the funds of investors in securities appropriate for their stated investment objectives in return for a management fee. See also: Mutual fund.
Legislation that requires investment companies to register with the SEC and that outlines standards by which they must operate.
Decisions concerning the asset side of a firm's balance sheet, such as the decision to offer a new product.
The history of a member firm that establishes certain norms in respect of its investment practice.
The revenue from a portfolio of invested assets.
A letter of intent between the issuer of new securities and the buyer, in the private placement of these new securities. The letter of intent establishes that the securities are being bought for a minimum time period and are treated as an investment, not for resale. If no such letter exists, the securities must be registered with Securities and Exchange Commission.
The process of managing money. Also called portfolio management and money management.
The individual who manages a portfolio of investments. Also called a portfolio manager or a money manager.
The financial objective of an investor. Whether the investor requires income or capital appreciation, for example. The investor's objective governs the investment strategy.
The style and general ideology of investment practiced by an investor. Certain investors favor small-capitalization stocks, while others prefer large blue-chip stocks, for example.
The line of required returns for investment projects as a function of beta (nondiversifiable risk).
Computer software that helps investors make investment decisions by identifying situations that meet programmed parameters.
A strategy, or plan of attack, an investor uses when deciding how to allocate capital among several options including stocks, bonds, cash equivalents, commodities, and real estate. The strategy should take into account the investor's tolerance for risk as well as future needs for capital.
A committee within a brokerage firm that conducts research and makes recommendations on the firm's stated investment strategy.
Proportion of new capital investment that could be used to reduce a company's tax bill (abolished in 1986).
A closed-end fund regulated by the Investment Company Act of 1940. These funds have a fixed number of shares that are traded on the secondary markets, like corporate stock. The market price may exceed the net asset value per share, in which case shares are selling at a premium. When the market price falls below the (NAV)/share, shares are selling at a discount. Many closed-end funds are of a specialized nature; the portfolio represents a particular industry or, country. These funds are usually listed on U.S. and foreign exchanges.
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Applies mainly to dealer securities. Fixed income value of a convertible, the price at which the convert would have to sell as a straight debt instrument relative to the yield of other bonds of like maturity, or size, and quality; represents a presumed floor to the bond, assuming the continued creditworthiness of the issuer and the general level of interest rates. Bond value. See: conversion value.
A bond that is assigned a rating in the top four categories by commercial credit rating companies. S&P classifies investment-grade bonds as BBB or higher, and Moody's classifies investment grade bonds as Ba or higher. Related: High-yield bond.
As a discipline, the study of financial securities, such as stocks and bonds, from the investor's viewpoint.
In the mortgage pipeline, risk that occurs when the originator commits loan terms to the borrowers and gets commitments from investors at the time of application, or if both sets of terms are made at closing.
The process by which the corporation communicates with its investors.
The balance of a margin account. Related: Buying on margin, initial margin requirement.
People investing in securities, such as stock and bonds, to achieve long-term financial goals.
NYSE service that deals with all general inquiries concerning securities investments.
Invisible Trade: Business transactions that occur with no exchange of tangible goods. Invisible trade involves the transfer of non-tangible goods and/or services, including customer service, intellectual property and patents. The items involved in invisible trade are associated with a value and can be exchanged for tangible goods. By contrast, visible trade involves the exchange, or the import and export, of tangible goods. Examples of invisible trade include consulting, income from foreign investments, shipping services and tourism. Invisible trade represents an increasing percentage of world trade.
Billing system in which invoices are sent off at the time of customer orders and are all separate bills to be paid.
Usually the date when goods are shipped. Payment dates are set relative to the invoice date.
The price that the buyer of a futures contract must pay the seller when a Treasury bond is delivered.
A premium that must be paid to preferred or preference stockholders if the issuer of the stock is forced into involuntary liquidation.
See: Immediate or cancelled order
See: Index and Option Market
See: Investment Product Line
Special accounts that allow saving taxes deferred until money is withdrawn. These plans are subject to frequent changes in law with respect to the deductibility of contributions. Withdrawals of tax-deferred contributions are taxed as income, including the capital gains from such accounts.
See: Industrial Revenue Bond
See: Internal rate of return
The implied call imbedded in a MBS. Irrational because the call is sometimes not exercised when it is in the money (interest rates are below the threshold to refinance), and sometimes exercised when it is not in the money. Option exercise like this affects payments on the MBS.
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A bond lacking a call feature or a right of redemption. Also refers to a perpetual bond.
The Modigliani and Miller theorem that a firm's capital structure is irrelevant to the firm's value.
See: International Swap Dealers Association
See: International Security Market Association
Total amount of shares that have been issued. Related: Outstanding shares.
Authorized stock originally issued to stockholders; it may or may not still be outstanding.
Used in the context of general equities. "The firm, and not a customer, is the party involved."
A derivatives market operated by the Italian Stock Exchange Council. It trades futures and options on the 30 index and individual stock options. See: Italian Stock Exchange.
The Milan-based stock exchange, which came into effect after the unification of Italy's ten national exchanges in 1991. All listed securities are traded electronically. The main indexes are the MIB and the MIBTEL, based on the prices of all listed shares, and the MIB 30, based on a sample of the 30 most liquid and highly capitalized shares.
Amounts paid by an individual taxpayer for personal and quasi-business expenses that can be deducted in computing taxable income, such as medical expenses, property and income taxes, mortgage and investment interest, charitable contributions, moving expenses, casualty and theft losses, and certain miscellaneous expenses.
See: Intermarket Trading System
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