PVAn
The present
value of an annuity of n periods.
Par
Value
The face
value of a stock or bond.
Parent
Company
A holding
company; a firm which controls another firm by owning a large block
of its stock.
Partnership
An unincorporated
business owned by two or more persons.
Payback
Period
The length
of time required for an investment's net revenues to cover its cost.
Payment
(PMT)
This term
designates equal cash flows coming at regular intervals.
Payment
Date
The date
on which a firm actually mails dividend checks.
Pegged
Exchange Rate
Occurs
when a country establishes a fixed exchange rate with another major
currency; consequently, values of pegged currencies move together over
time.
Perfect
Hedge
Occurs
when the gain or loss on the hedged transaction exactly offsets the
loss or gain on the unhedged position.
Performance
Shares
Stock
which is awarded to executives on the basis of the company's performance.
Permanent
Current Assets
Current
assets that a firm must carry even at the trough of its cycles.
Perpetuity
A stream
of equal payments expected to continue forever.
Poison
Pill
An action
which will seriously hurt a company if it is acquired by another.
Political
Risk
Potential
actions by a host government which would reduce the value of a company's
investment.
Post-Audit
A comparison
of the actual versus the expected results for a given capital project.
Precautionary
Balance
A cash
balance held in reserve for random, unforeseen fluctuations in cash
inflow and outflows.
Preemptive
Right
A provision
in the corporate charter or bylaws that gives common stockholders the
right to purchase on a pro rata basis new issues of common stock (or
convertible securities).
Premium
Bond
A bond
that sells above its par value; occurs whenever the going rate of interest
falls below the coupon rate.
Premium
on Forward Rate
The situation
when the spot rate is greater than the forward rate.
Present
Value (PV)
The value
today of a future cash flow or series of cash flows.
Present
Value Interest Factor for an Annuity (PVIFAi,n)
The present
value interest factor for an annuity of n periods discounted at i percent.
Present
Value Interest Factor for i and n (PVIFi,n)
The present
value of $1 due n periods in the future discounted at i percent per
period.
Price/Earning
(P/E) Ratio
The ratio
of the price per share to earnings per share; shows the dollar amount
investors will pay for $1 of current earnings.
Primary
Market
The market
in which firms issue new securities to raise corporate capital.
Primary
Markets
Markets
in which corporations raise capital by issuing new securities.
Prime
Rate
A published
interest rate charged by commercial banks to large, strong borrowers.
Probability
Distribution
A listing
of all possible outcomes, or events, with a probability (chance of occurrence)
assigned to each outcome.
Production
Opportunities
The returns
available within an economy from investments in productive (cash-generating)
assets.
Professional
Corporation (Pro Association)
A type
of corporation common among professional that provides most of the benefits
of incorporation but does not relieve the participants of malpractice.
Profit
Margin on Sales
This ratio
measures income per dollar of sales; it is calculated by dividing net
income by sales.
Profit
Maximization
The maximization
of the firm's net income.
Profitability
Ratios
A group
of ratios which show the combined effects of liquidity, asset management,
and debts on operating results.
Progressive
Tax
A tax
system where the tax rate is higher on higher incomes. The personal
income tax in the United States, which goes form 0 percent on the lowest
increments of income to 39.6 percent, is progressive.
Project
Cost of Capital, kp
The risk-adjusted
cost of capital for an individual project.
Promissory
Note
A document
specifying the terms and conditions of a loan including the amount,
interest rate, and repayment schedule.
Proxy
A document
gibing one person the authority to act for another, typically the power
to vote share of common stock.
Proxy
Fight
An attempt
by a person or group to gain control of a firm by getting its stockholders
to grant that person or group the authority to vote their shares to
place a new management into office.
Proxy
Fight
An attempt
to gain control of a firm by soliciting stockholders to vote for a new
management team.
Publicly
Owned Corporation
A corporation
that is owned by a relatively large number of individuals who are not
actively involved in its management.
Purchasing
Power Parity
The relationship
where the same products cost roughly the same amount in different countries
after taking into account the exchange rate.
Pure
Play Method
An approach
used for estimating the beta of a project in which a firm (1) identifies
several companies whose only business is the product in question, (2)
calculates the beta for each firm, and then (3) averages the betas to
find an approximation to its own projects beta.
Put
Option
An option
to sell a share of stock at a certain price within a specified period.
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