to buy, or "call," a share of stock at a certain price within a specified
in a bond contract that gives the issuer the right to redeem the bonds
under specified terms prior to the normal maturity date.
when the introduction of a new product causes sales of existing products
Asset Pricing Model (CAPM)
based on the proposition that any stock's required rate of return is
equal to the risk-free rate of return plus a risk premium which reflects
only the risk remaining after diversification.
of planning expenditures on assets whose cash flows are expected to
extend beyond one year.
the types of capital used by firms to raise money.
Gain or Loss
(loss) from the sale of a capital asset for more (less) than its purchase
gain during a given year divided by the beginning price.
of assets required per dollar of sales (A*/So)
markets for stocks and for long-term debt (one year or longer)
in which a constraint is placed on the total size of the firm's capital
showing cash flows (receipts, disbursements, and cash balances) for
a firm over a specified period.
in the price of goods given to encourage early payment.
designates uneven cash flows.
in Net Working Capital
current assets resulting from a new project minus the spontaneous increase
in accounts payable and accruals.
of converting a check that has been written and mailed into cash in
the payee's account.
stock that is given a special designation, such as Class A, Class B,
and so forth, to meet special needs of the company.
of a firm to attract a set of investors who like its dividend policy.
that is owned by a few individuals who are typically associated with
the firm's management.
of Variation (CV)
measure of the risk per unit of return; calculated as the standard deviation
divided by the expected return.
that a firm follows to collect accounts receivable.
of checks that we have received but which have not yet been credited
to our account.
short-term promissory notes of large firms, usually issued in denominations
of $100,000 or more and having an interest rate somewhat below the prime
that is used to hedge against price changed for input materials.
Stockholders' Equity (Net Worth)
supplied by common stockholder-capital stock, paid-in capital, retained
earnings and, occasionally, certain reserves. Total equity is common
equity plus preferred stock.
balance that a firm must maintain to compensate the bank for services
rendered or for granting a loan.
checking account balance that a firm must maintain with a commercial
bank, generally equal to 10 to 20 percent of the amount of loan outstanding.
process of determining the final value of a cash flow or series of cash
flows when compound interest is applied.
Inventory Control System
of inventory control in which a computer is used to determine reorder
points and to adjust inventory balances.
of firms in the same general industry, but for which no customer or
supplier relationship exists.
of companies in totally different industries.
bond issued by the British government to consolidate past debts; in
general, any perpetual bond.
the Gordon Model, it is used to find the value of a constant growth
of forecasting future financial statements, and future financial requirements,
that assumes certain financial ratios will remain constant.
in which interest is added continuously rather than at discrete points
price paid for common stock obtained by converting a convertible security.
of shares of common stock that are obtained by converting a convertible
bond or share of convertible preferred stock.
of common stock obtained by converting a convertible security.
that is exchangeable, at the option of the holder, for common stock
of the issuing firm.
that may be readily exchanged for other currencies.
usually a bond or preferred stock, that is exchangeable at the option
of the holder for the common stock of the issuing firm.
issued by corporations.
or Strategic, Alliance
deal that stops short of a merger.
or Within-Firm, Risk
considering the effects of stockholders' diversification; it is measured
by a project's effect on uncertainty about the firm's future earnings.
entity created by a state, separate and distinct from its owners and
managers, having unlimited life, easy transferability of ownership,
and limited liability.
of two variables to move together.
of the degree of relationship between two variables.
of New Common Equity, ke
of external equity; based on the cost of retained earnings, but increased
for flotation costs.
of Preferred Stock, kps
of return investors require on the firm's preferred stock. kps is calculated
as the preferred dividend, Dps, divided by the net issuing price, Pn.
of Retained Earnings, ks
of return required by stockholders on a firm's common stock.
taken in excess of free trade credit, whose cost is equal to the discount
that arises from investing or doing business in a particular country.
annual rate of interest on a bond.
number of dollars of interest paid each period, generally each six months.
of time for which credit is granted.
of decisions that include a firm's credit period, credit standards,
collection procedures, and discounts offered.
that stipulate the required financial strength that an applicant must
demonstrate to granted credit.
of the credit period and any discounts offered--for example, 2/10, net
rate at which the NPV profiles of two projects cross and, thus, at which
the projects' NPV's are equal .
features on preferred dividends previously not paid to be paid before
any common dividends can be paid.
is calculated by dividing current assets by current liabilities. It
indicates the extent to which current liabilities are covered by those
assets expected to be converted to cash in the near future.
interest payment on a bond divided by the bond's current price.
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