Investor Education - Financial Glossary
The option of terminating an investment earlier than originally planned.
Accelerated cost recovery system (ACRS)
Schedule of depreciation rates allowed for tax purposes.
Any depreciation method that produces larger deductions for depreciation in the early years of a assets life. Accelerated cost recovery system (A.C.R.S.), which is a depreciation schedule allowed for tax purposes, is one such example.
Earnings of a firm as reported on its income statement.
Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid items to current liabilities.
A firm that is being acquired.
When a firm buys another firm.
Acquisition of assets
A merger or consolidation in which an acquirer purchases the selling firms assets.
Acquisition of stock
A merger or consolidation in which an acquirer purchases the acquirees stock.
Annual percentage yield (APY)
The effective, or true, annual rate of return. The A.P.Y. is the rate actually earned or paid in one year, taking into account the affect of compounding. The A.P.Y. is calculated by taking one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate has an A.P.Y. of 12.68% (1.01^12 -1).
Annual rate of return
There are many ways of calculating the annual rate of return. If the rate of return is calculated on a monthly basis, we sometimes multiply this by 12 to express an annual rate of return. This is often called the annual percentage rate (A.P.R.). The annual percentage yield annual percentage yield (A.P.Y.), described above, is used to include the affect of compounding interest.
If stock X appreciates 1.5% in one month, the annualized gain for that stock over a twelve month period is 12*1.5% = 18%. Compounded over the twelve month period, the gain is (1.015)^12 -1 = 19.6%.
A regular periodic payment made by an insurance company to a policyholder for a specified period of time.
An annuity with n payments, wherein the first payment is made at time t = 0 and the last payment is made at time t = n - 1.
Present value of $1 paid for each of t periods.
Annuity in arrears
An annuity with a first payment one full period hence, rather than immediately.
This is the quoted ask, or the lowest price an investor will accept to sell a stock. Practically speaking, this is the quoted offer at which an investor can buy shares of stock; also called the offer price.
Used in context of general equities. Price at which a security or commodity is offered for sale on an exchange or in the O.T.C. Market.
Asked to bid/offer
Used in context of general equities. Usually a seller (buyer) looking to aggressively sell (buy) stock, usually asking for a capital commitment from an investment bank.
Any possession that has value in an exchange.
Asset activity ratios
Ratios that measure how effectively the firm is managing its assets.
Asset allocation decision
The decision regarding how an institutions funds should be distributed among the major classes of assets in which it may invest.
Categories of assets, such as stocks, bonds, real estate and foreign securities.
A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate.
Methods of financing in which lenders and equity investors look principally to the cash flow from a particular asset or set of assets for a return on, and the return of, their financing.
The ratio of total assets to stockholder equity.
Also called surplus management, the task of managing the funds of a financial institution to accomplish the two goals of a financial institution: (1) to earn an adequate return on funds invested and (2) to maintain a comfortable surplus of assets beyond liabilities.