Subject: Finance

1. Finance.
The art of manipulating money.
2. Partnership.
A unincorporated business owned by two or more
persons.
3. Corporation.
A legal entity created by a state & distinct from
its owners.
4. Agency problem.
A potential conflict of interests between the
agent (manager) and owners (stockholders,
creditors)
5. Performance share.
Share that is awarded to executives on the basis
of company's performance.
6. Executive stock option.
An option to buy stock at a stated price within a
specified period of time.
7. Common stockholders equity.
The capital supplied by common stockholders;
common stock, paid in capital, and retained
earnings.
8. Retained earnings.
The portion of the firm's earning that has been
saved rather than paid out as dividends.
9. Depreciation.
It is not a cash outline.
10. Tangible assets.
Physical assets such as plants and equipments.
11. Intangible assets.
Assets such as patents, copyrights, trademarks
and goodwill.
12. Earning Before Tax (EBT)
Net income/(1-tax rate)
13. Expected rate of return.
The rate of return expected from an investment.
14. Risk premium.
Difference between expected rate of return on a
given risky assets that on a less risky assets.
15. Market risk.
The part of a security's risk that can't be
eliminated. e.g. inflation, recession etc.
16. Compounding.
Determining cash flow when compound interest
is used.
17. Present value.
The value today of a future cash flow.
18. Discounting.
Finding the present value of a cash flow or
series of cash flows.
19. Annuity.
A series of equal payments of an equal amount
at fixed interval for a specified number of
periods.
20. Treasury bond.
A bond issued by the government.
21. Par value.
The stated face value of share.
22. Coupon payment.
The specific amount of interest that is paid in
each period.
23. Coupon interest rate.
The stated annual rate of interest of a bond.
24. Zero coupon bond.
Bond that pays no annual interest.
25. Call provision.
The provision in a bond contract that gives the
issuer the right to redeem the bond.
26. Discount bond.
Bond that sells below its par value.
27. Premium bond.
Bond that sells above its par value.
28. Yield To Maturity (YTM).
The rate of return earned from a bond if hold till
the maturity.
29. Proxy.
Document giving one person the authority to act
for another.
30. Takeover.
An action whereby a person or group succeeds in
ousting a firm's management.
31. Initial Public Offering ( IPO)
The market for stocks of companies that is in
process of going public.
32. Flotation cost.
Percentage cost of issuing new common stock.
33. Capital budgeting.
The process of planning expenditures on assets.
34. Payback period.
Length of time required an investment's net
revenues to cover its cost.
35. Mutually exclusive projects.
Set of projects where only one can be accepted.
36. IRR method.
Internal Rate of Return (IRR), method of ranking
investment proposals using the rate of return on
an investment.
37. Sunk/Historical/part cost.
Cash outlay that already has incurred.
38. Opportunity cost.
The return on the best alternative use of assets.
39. Sensitivity analysis.
A risk analysis technique.
40. Business risk.
Risk inherent in the firm's operation if it uses no
debt.
41. Financial flexibility.
The ability to raise capital on reasonable terms
under adverse conditions.
42. Operating leverage.
The extent to which fixed cost are used in firm's
operation.
43. Financial leverage.
Extent to which fixed income securities (debt &
preferred stock) are used in a firm's capital
structure.
44. Target payout ratio.
The percentage of net income paid out as cash
dividend.
45. Stock-split.
It increases the number of shares outstanding.
46. Working capital.
A firm's short-term assets and liabilities.
47. Cash conversion cycle.
The average length of time a dollar is tied up in
current assets.
48. Transaction balance.
A cash balance necessary for day to day
operation.
49. Compensating balance.
A bank balance that a firm must maintain to
have loan from a bank.
50. Precautionary balance.
A cash balance held in reserve for unforeseen
fluctuation in cash flow.
51. Trade discount.
A reduction that supplier offer to customer for
early payment of bill.
52. Operating lease.
Clients stop the usage and transfer the assets to
the owner at the end.
53. Financial lease.
Client becomes owner at the end.
54. Merger.
The combination of two firms to form a single
firm.
55. Horizontal merger.
A combination of two firms that produce the
same types of goods or services.
56. Vertical merger.
A merger between a firm and one of its suppliers
or customers.
57. Congeneric merger.
A merger of firms in the same general industry.
58. Conglomerate merger.
A merger of company in the totally different
industries.
59. Financial market.
Financial market is a market in which financial
assets such as stock and bond can be sold.
60. Money market.
The markets that facilitate the flow of short-term
funds.
61. Capital market.
The financial market that facilitate the long-term
funds.
62. Primary market.
Primary market that facilitate the issuance of
new securities.
63. Secondary market.
Secondary market that facilitate the trading of
existing securities.
64. Liquidity.
The degree of which securities can be easily
sold without a less of value.
65. Credit risk/ default risk.
If credit risk high yield (return) will be high and
vice-versa.
66. Book value.
The value of an asset as recorded in the books
of account of an organization.
67. Capital gain.
A profit from the sale of investment or property.
68. Capital goods.
Goods especially machinery, plant etc. Used in
producing process.
69. Equities.
Stock and shares not bearing fixed interest.
70. Financial year.
A year reckoned for taxing or accounting.
71. Interest.
Money paid for the use of money lent.
72. Profit margin.
The profit remaining in a business after cost has
been deducted.
73. Rally.
The increase of price of share after fall.
74. Risk capital.
Money put up for speculative business
investment.
75. Sinking fund.
Money set aside for the gradual repayment of a
debt.
76. Trade cycle.
Recurring period of boom and recession.
77. Asset-stripping.
The practice of taking over a company and
selling off its assets to make a profit.
78. Prime cost.
The direct cost of a commodity in terms of
materials.
79. Terminal/Horizon date.
The date when growth rate become constant.
80. Exchange rate.
The value of one currency in terms of another.