Business & Financial [A-B]
Abnormal returns
Part of the return that is not due to systematic influences (market wide influences). In other words, abnormal returns are above those predicted by the market movement alone.
Accelerated cost recovery system (ACRS)
Schedule of depreciation rates allowed for tax purposes.
Accelerated depreciation
Any depreciation method that produces larger deductions for depreciation in the early years of a project's life. Accelerated cost recovery system (ACRS), which is a depreciation schedule allowed for tax purposes, is one such example.
Accounting earnings
Earnings of a firm as reported on its income statement.
Accounting insolvency
Total liabilities exceed total assets. A firm with a negative net worth is insolvent on the books.
Accounting liquidity
The ease and quickness with which assets can be converted to cash.
Accounts receivable turnover
The ratio of net credit sales to average accounts receivable, a measure of how quickly customers pay their bills.
Active
A market in which there is much trading.
Additional hedge
A protection against borrower fallout risk in the mortgage pipeline.
Agency bank
A form of organization commonly used by foreign banks to enter the U.S. market. An agency bank cannot accept deposits or extend loans in its own name; it acts as agent for the parent bank.
Agent
The decision-maker in a principal-agent relationship.
Alpha
A measure of selection risk (also known as residual risk) of a mutual fund in relation to the market. A positive alpha is the extra return awarded to the investor for taking a risk, instead of accepting the market return. For example, an alpha of 0.4 means the fund outperformed the market-based return estimate by 0.4%. An alpha of -0.6 means a fund's monthly return was 0.6% less than would have been predicted from the change in the market alone.
In a Jensen Index, it is factor to represent the portfolio's performance that diverges from its beta, representing a measure of the manager's performance.
Amortization
Paying off debt in regular installments over a period of time, or deducting certain capitalized expenditures over a specified period of time.
Appraisal ratio
The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard deviation.
Arbitrage
The simultaneous buying and selling of a security at two different prices in two different markets, resulting in profits without risk. Perfectly efficient markets present no arbitrage opportunities. Perfectly efficient markets seldom exist.
Assets
A firm's productive resources.
Average
An arithmetic mean of selected stocks intended to represent the behavior of the market or some component of it. One good example is the widely quoted Dow Jones Industrial Average, which adds the current prices of the 30 DJIA's stocks, and divides the results by a predetermined number, the divisor.
Backward integration
Occurs when a company joins with a firm that is involved at an earlier stage of the production chain. An example might be a brewery taking over a hop or barley farm.
Balance of payments
A record of the income and expenditure transactions between UK residents and persons abroad. The balance of payments accounts record all flows of money in and out of the UK. These flows might result from the sale of exports (an inflow or credit) or from the UK purchasing imports from overseas (an outflow or debit). They might also arise from other countries investing in the UK (inward investment - a credit), or from UK companies investing abroad (a debit). All flows of money are added together and grouped according to their type. The overall account is then called the balance of payments - principally because the total of outflows must be equivalent to the total of inflows. The balance of payments therefore balances!!
Balance sheet
The balance sheet is one of the financial statements that limited companies and PLCs produce every year for their shareholders. It is like a financial snapshot of the company's financial situation at that moment in time. It is worked out at the company's year end, giving the company's assets and liabilities at that moment.
Bar chart
A bar chart is a way of summarising a set of categorical data. It is often used in exploratory data analysis to illustrate the major features of the distribution of the data in a convenient form. It displays the data using a number of rectangles, of the same width, each of which represents a particular category. The length (and hence area) of each rectangle is proportional to the number of cases in the category it represents, for example, age group, religious affiliation.
Bankruptcy
A condition in which a business cannot meet its debt obligations and petitions a federal district court for either reorganization of its debts (Chapter 11) or liquidation of its assets (Chapter 7). In the action the property of a debtor is taken over by a receiver or trustee in bankruptcy for the benefit of the creditors. The action may be voluntary or involuntary.
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