Financial term of the day, Wednesday 7th of October 2015:

Devil's advocate (let me play)

Ponder or predict criticism of a project as a means to improve the quality of the proposal.

"In addition to being an effective role model, the new strategic leader needs at least one good alter ego, devil's advocate , or contrarian to avoid getting into a rut."
Planning Review, Sept. 10, 1994, p. 6.

Similar financial terms

Devil's advocate (let me play)
Ponder or predict criticism of a project as a means to improve the quality of the proposal.

"In addition to being an effective role model, the new strategic leader needs at least one good alter ego, devil's advocate , or contrarian to avoid getting into a rut."
Planning Review, Sept. 10, 1994, p. 6.

Medium-term or intermediate-term bonds
Bonds with a maturity of between five and twelve years.

Reinvestment risk on bonds
Usually, when the yield of a bond is calculated, you assume that the coupons received before maturity are reinvested. The additional income from such reinvestment is sometimes referred to as interest-on-interest which depends on the prevailing interest-rate levels at the time of reinvestment. Volatility in the reinvestment rate of a given strategy because of changes in market interest rates is called reinvestment risk. This risk is that the interest rate at which interim cash flows can be reinve ...

Refers to negotiations between friendly parties who arrive at a mutually agreeable decision to combine their companies. In practice, one part might be stronger and dominate the negotiations.

Commercial paper
Short-term, unsecured promissory notes issued by corporations with a high credit ratings. Their maturity ranges up to 270 days.

Horizontal merger
Involves two firms that operate and compete in the same kind of business activity. Forming a larger firm may have the benefit of economies of scale. Horizontal mergers are regulated by the government for possible negative effects on competition. They decrease the number of firms in an industry, possibly making it easier for the industry members to go into cartels for monopoly profits.

Vertical merger
Occur between firms in different stages of production operation for many reasons: (a) avoidance of fixed costs such as heating, storage, transportation, (b) eliminate cost of searching for prices, contracting, payment collection, communication, advertising and coordination and (c) more efficient information flow and better planning for inventory. Uncertainty over input supply is avoided by backward integration which reduces to the fact that long-term contracts are difficult to write, execute, an ...

Conglomerate merger
Involve firms engaged in unrelated types of business activity. Among conglomerate mergers, three types have been distinguished: (a) product extensions which broaden the product lines of firms (concentric mergers), (b) geographic market exentions which involves two firms whose operations have been conducted in non-overlapping geographic areas and (c) pure conglomerate mergers which involve unrelated business activities.

No-shop agreement
The target company involved in merger or acquisition agrees not to consider other offers while negotiating with a particular bidder.

Horizontal merger wave (1895-1904)
The first merger wave began right after the 1883 depression in a period of rapid economic expansion. The combination movement consisted mainly of horizontal mergers, which resulted in high concentration in many industries, including heavy manufacturing industries. Accomplished with this merger wave was the completion of the transcontinental railroad system, the advent of electricity and a major increase in the use of coal. The completed rail system resulted in the development of a national econo ...

The American Stock Exchange (AMEX) is the second-oldest U.S. stock exchange, located on Wall Street in New York City. AMEX started as an alternative to the NYSE, the AMEX originating on the curb outside the NYSE, where brokers traded stocks that failed to meet the Big Board's listing requirements. Considerably smaller in market capitalization and trading volume than NASDAQ and the NYSE, the AMEX conducts trading through a centralized specialist system and is home primarily to small and medium-si ...

AMEX Composite
The American Stock Exchange introduced a new AMEX Composite Index with a new ticker symbol, XAX, on 2 January 1997. The XAX is a market capitalization-weighted, price appreciation index, and replaced the AMEX Market Value Index (XAM) which, since its inception, has been calculated on a "total return basis" to include the reinvestment of dividends paid by AMEX companies. The new AMEX Composite Index is more comparable with other major indexes, which reflect only the price appreciation of their re ...

Announcement Date
The date on which a company makes it public that they will do a split.

Up on Unusual Volume
Refers to an increase in stock price for stocks exhibiting unusual volume.

Settlement price
The average of the prices that a futures contract trades for immediately before the bell signaling the close trading for a day. It is used in mark-to-market calculations.

Underlying instrument
An underlying instrument is the financial instrument upon which the price of derivative is derived from.

Earned income
The compensation from participation in a business, including normal remuneration (wages, salary and commissions) and bonuses.

Investment Club
A group of equal-minded individuals (friends, colleagues or acquaintances) who gather together for the purpose of investing in the stock exchange.

Zero-investment portfolio
A zero-investment portfolio consists of zero net value because of a balanced establishment between long and short position, usually in the context of an arbitrage strategy.

Zero prepayment assumption
The assumption of payment of scheduled principal and interest with no payments.

Zero-sum game
A game wherein one player can only gain at the expense of another player.

The average of LIBID and LIBOR.

Home run
Sharp increase in the stock price over a short period of time.

Arrangement Fee
Whilst some lenders charge an administration fee others may charge an arrangement fee. The arrangement fee is charged to cover administration and primarily reserving the funds for fixed rate and/or discounted rate mortgages. This fee may be paid separately added to the mortgage or in rarer cases taken from the mortgage loan.
Arrangement fee is commonly added to the spread in eurosyndicated and syndicated loans.

Cash flow statement
Alternative name for the statement of cash flow.

Dept investments
Investments that involve making capital available to others in exchange for intrest, through savings accounts, loans, or bonds.

Equity investments
Investments that involve ownership of shares or units, through purchase of stock or mutual fund shares.

Fundamental analysis
A method of research that studies basic financial information to forecast profits, supply and demand, industry strength, management ability, and other intrinsic matters affecting a stock's market value and growth potential.

Abandonment option
The option of terminating an investment earlier than originally planned.

Advance commitment
A promise to sell an asset before the seller has lined up purchase of the asset. This seller can offset risk by purchasing a futures contract to fix the sales price.

Working capital management
The management of current assets and current liabilities to maximize short-term liquidity.

Alternative mortgage instruments
Variations of mortgage instruments such as adjustable-rate and variablerate mortgages, graduated-payment mortgages, reverse-annuity mortgages, and several seldom-used variations.

American Depositary Receipts (ADRs)
Certificates issued by a U.S. depositary bank, representing foreign shares held by the bank, usually by a branch or correspondent in the country of issue. One ADR may represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If the ADR's are "sponsored," the corporation provides financial information and other assistance to the bank and may subsidize the administration of the ADRs. "Unsponsored" ADRs do not receive such assistance. ADRs carry the same ...

American option
An option that may be exercised at any time up to and including the expiration date.

American shares
Securities certificates issued in the U.S. by a transfer agent acting on behalf of the foreign issuer. The certificates represent claims to foreign equities.

American Stock Exchange (AMEX)
The second-largest stock exchange in the United States. It trades mostly in small-to medium-sized companies.

American-style option
An option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American style.

This is the daily number of shares of a security that change hands between a buyer and a seller.

Unemployment rate
The ratio of the number of people classified as unemployed to the total labor force.

Underwriting income
For an insurance company, the difference between the premiums earned and the costs of settling claims.

Underinvestment problem
The mirror image of the asset substitution problem, wherein stockholders refuse to invest in low-risk assets to avoid shifting wealth from themselves to the debtholders.

Turnaround time
Time available or needed to effect a turnaround.

Top-down equity management style
A management style that begins with an assessment of the overall economic environment and makes a general asset allocation decision regarding various sectors of the financial markets and various industries. The bottom-up manager, in contrast, selects the specific securities within the favored sectors.

Tolling agreement
An agreement to put a specified amount of raw material per period through a particular processing facility. For example, an agreement to process a specified amount of alumina into aluminum at a particular aluminum plant.

Times-interest-earned ratio
Earnings before interest and tax, divided by interest payments.

Time value of money
The idea that a dollar today is worth more than a dollar in the future, because the dollar received today can earn interest up until the time the future dollar is received.

Time value of an option
The portion of an option's premium that is based on the amount of time remaining until the expiration date of the option contract, and that the underlying components that determine the value of the option may change during that time. Time value is generally equal to the difference between the premium and the intrinsic value.

Time to maturity
The time remaining until a financial contract expires. Also called time until expiration.

Time until expiration
The time remaining until a financial contract expires. Also called time to maturity.

Time premium
Also called time value, the amount by which the option price exceeds its intrinsic value. The value of an option beyond its current exercise value representing the optionholder's control until expiration, the risk of the underlying asset, and the riskless return.

Time draft
Demand for payment at a stated future date.

Time deposit
Interest-bearing deposit at a savings institution that has a specific maturity.

Throughput agreement
An agreement to put a specified amount of product per period through a particular facility. For example, an agreement to ship a specified amount of crude oil per period through a particular pipeline.

Temporal method
Under this currency translation method, the choice of exchange rate depends on the underlying method of valuation. Assets and liabilities valued at historical cost (market cost) are translated at the historical (current market) rate.

Taxable income
Gross income less a set of deductions such as allowances, deeds of covenants, and losses.

Tax-deferred retirement plans
Employer-sponsored and other plans that allow contributions and earnings to be made and accumulate tax-free until they are paid out as benefits.

Tax clawback agreement
An agreement to contribute as equity to a project the value of all previously realized project-related tax benefits not already clawed back to the extent required to cover any cash deficiency of the project.

Target zone arrangement
A monetary system under which countries pledge to maintain their exchange rates within a specific margin around agreed-upon, fixed central exchange rates.

Symmetric cash matching
An extension of cash flow matching that allows for the short-term borrowing of funds to satisfy a liability prior to the liability due date, resulting in a reduction in the cost of funding liabilities.

Structured settlement
An agreement in settlement of a lawsuit involving specific payments made over a period of time. Property and casualty insurance companies often buy life insurance products to pay the costs of such settlements.

Street name
Describes securities held by a broker on behalf of a client but registered in the name of the Wall Street firm.

Stock replacement strategy
A strategy for enhancing a portfolio's return, employed when the futures contract is expensive based on its theoretical price, involving a swap between the futures, treasury bills portfolio and a stock portfolio.

Statement of Financial Accounting Standards No. 52
This is the currency translation standard currently used by U.S. firms. It mandates the use of the current rate method.

Statement of Financial Accounting Standards No. 8
This is a currency translation standard previously in use by U.S. accounting firms.

Statement-of-cash-flows method
A method of cash budgeting that is organized along the lines of the cash flow statement.

Statement of cash flows
A financial statement showing a firm's cash receipts and cash payments during a specified period.

Statement billing
Billing method in which the sales for a period such as a month (for which a customer also receives invoices) are collected into a single statement and the customer must pay all of the invoices represented on the statement.

Standstill agreements
Contracts where the bidding firm in a takeover attempt agrees to limit its holdings another firm.

Standby agreement
In a rights issue, agreement that the underwriter will purchase any stock not purchased by investors.

Spread income
Also called margin income, the difference between income and cost. For a depository institution, the difference between the assets it invests in (loans and securities) and the cost of its funds (deposits and other sources).

Smithsonian agreement
A revision to the Bretton Woods international monetary system which was signed at the Smithsonian Institution in Washington, D.C., U.S.A., in December 1971. Included were a new set of par values, widened bands to +/- 2.25% of par, and an increase in the official value of gold to US$38.00 per ounce.

Skip-day settlement
The trade is settled one business day beyond what is normal.

Sinking fund requirement
A condition included in some corporate bond indentures that requires the issuer to retire a specified portion of debt each year. Any principal due at maturity is called the balloon maturity.

Single-payment bond
A bond that will make only one payment of principal and interest.

Simple compound growth method
A method of calculating the growth rate by relating the terminal value to the initial value and assuming a constant percentage annual rate of growth between these two values.

SIMEX (Singapore International Monetary Exchange) is a leading futures and options exchange in East Asia.

Short-term investment services
Services that assist firms in making short-term investments.

Settlement rate
The rate suggested in Financial Accounting Standard Board (FASB) 87 for discounting the obligations of a pension plan. The rate at which the pension benefits could be effectively settled off the pension plan wished to terminate its pension obligation.

Settlement date
The date on which payment is made to settle a trade. For stocks traded on US exchanges, settlement is currently 3 business days after the trade. For mutual funds, settlement usually occurs in the U.S.the day following the trade. In some regional markets, foreign shares may require months to settle.

When payment is made for a trade.

Sale and lease-back agreement
Sale of an existing asset to a financial institution that then leases it back to the user.

Risk management
The process of identifying and evaluating risks and selecting and managing techniques to adapt to risk exposures.

Revolving credit agreement
A legal commitment wherein a bank promises to lend a customer up to a specified maximum amount during a specified period.

Return on investment (ROI)
Generally, book income as a proportion of net book value.

A price movement in the opposite direction of the previous trend.

Residual method
A method of allocating the purchase price for the acquisition of another firm among the acquired assets.

Reserve requirements
The percentage of different types of deposits that member banks are required to hold on deposit at the Fed.

Repurchase agreement
An agreement with a commitment by the seller (dealer) to buy a security back from the purchaser (customer) at a specified price at a designated future date. Also called a repo, it represents a collateralized short-term loan, where the collateral may be a Treasury security, money market instrument, federal agency security, or mortgage-backed security. From the purchaser (customer) perspective, the deal is reported as a reverse Repo.

Replacement-chain problem
Idea that future replacement decisions must be taken into account in selecting among projects.

Replacement value
Current cost of replacing the firm's assets.

Replacement cycle
The frequency with which an asset is replaced by an equivalent asset.

Replacement cost
Cost to replace a firm's assets.

Remote disbursement
Technique that involves writing checks drawn on banks in remote locations so as to increase disbursement float.

REMIC (real estate mortgage investment conduit)
A pass-through tax entity that can hold mortgages secured by any type of real property and issue multiple classes of ownership interests to investors in the form of pass-through certificates, bonds, or other legal forms. A financing vehicle created under the Tax Reform Act of 1986.

REIT (real estate investment trust)
Real estate investment trust, which is similar to a closed-end mutual fund. REITs invest in real estate or loans secured by real estate and issue shares in such investments.

Reinvestment risk
The risk that proceeds received in the future will have to be reinvested at a lower potential interest rate.

Reinvestment rate
The rate at which an investor assumes interest payments made on a debt security can be reinvested over the life of that security.

Regular way settlement
In the money and bond markets, the regular basis on which some security trades are settled is that the delivery of the securities purchased is made against payment in Fed funds on the day following the transaction.

Regression toward the mean
The tendency for subsequent observations of a random variable to be closer to its mean.

Registration statement
A legal document that is filed with the SEC to register securities for public offering.

Real time
A real time stock or bond quote is one that states a security's most recent offer to sell or bid (buy). A delayed quote shows the same bid and ask prices 15 minutes and sometimes 20 minutes after a trade takes place.

Raw material supply agreement
As used in connection with project financing, an agreement to furnish a specified amount per period of a specified raw material.

Pyramid scheme
An illegal, fraudulent scheme in which a con artist contrives victims to invest by promising an extraordinary return but simply uses newly invested funds to pay off any investors who insist on terminating their investment.

Purchase method
Accounting for an acquisition using market value for the consolidation of the two entities' net assets on the balance sheet. Generally, depreciation/amortization will increase for this method compared with pooling and will result in lower net income.

Purchase agreement
As used in connection with project financing, an agreement to purchase a specific amount of project output per period.

Pro forma financial statements
Financial statements as adjusted to reflect a projected or planned transaction.

Production-flow commitment
An agreement by the loan purchaser to allow the monthly loan quota to be delivered in batches.

Production payment financing
A method of nonrecourse asset-based financing in which a specified percentage of revenue realized from the sale of the project's output is used to pay debt service.

Pro forma statement
A financial statement showing the forecast or projected operating results and balance sheet, as in pro forma income statements, balance sheets, and statements of cash flows.

Private placement
The sale of a bond or other security directly to a limited number of investors.

Prime rate
The interest rate at which banks lend to their best (prime) customers. Much more often than not, a bank's most creditworthy customers borrow at rates below the prime rate.

Price-volume relationship
A relationship espoused by some technical analysts that signals continuing rises and falls in security prices based on accompanying changes in volume traded.

Price-specie-flow mechanism
Adjustment mechanism under the classical gold standard whereby disturbances in the price level in one country would be wholly or partly offset by a countervailing flow of specie (gold coins) that would act to equalize prices across countries and automatically bring international payments back in balance.

Payments made in excess of scheduled mortgage principal repayments.

Prepayment speed
Also called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage pass-through securities.

Preferred stock agreement
A contract for preferred stock.

Postponement option
The option of postponing a project without eliminating the possibility of undertaking it.

A bank depositing Eurodollars with (selling Eurodollars to) another bank is often said to be making a placement.

Performance measurement
The calculation of the return realized by a money manager over some time interval.

Payment-In-Kind (PIK) bond
A bond that gives the issuer an option (during an initial period) either to make coupon payments in cash or in the form of additional bonds.

Payments pattern
Describes the lagged collection pattern of receivables, for instance the probability that a 72-day-old account will still be unpaid when it is 73-days-old.

Payments netting
Reducing fund transfers between affiliates to only a netted amount. Netting can be done on a bilateral basis (between pairs of affiliates), or on a multi-lateral basis (taking all affiliates together).

Payment float
Company-written checks that have not yet cleared.

Payment date
The date on which each shareholder of record will be sent a check for the declared dividend.

Passive investment management
Buying a well-diversified portfolio to represent a broad-based market index without attempting to search out mispriced securities.

A representation that characterizes a part of a model (e.g. a growth rate), the value of which is determined outside of the model.

Official statement
A statement published by an issuer of a new municipal security describing itself and the issue

Offering memorandum
A document that outlines the terms of securities to be offered in a private placement.

Notes to the financial statements
A detailed set of notes immediately following the financial statements in an annual report that explain and expand on the information in the financial statements.

Note agreement
A contract for privately placed debt.

Normalizing method
The practice of making a charge in the income account equivalent to the tax savings realized through the use of different depreciation methods for shareholder and income tax purposes, thus washing out the benefits of the tax savings reported as final net income to shareholders.

Net present value of future investments
The present value of the total sum of NPVs expected to result from all of the firm's future investments.

Net investment
Gross, or total, investment minus depreciation.

Net income
The company's total earnings, reflecting revenues adjusted for costs of doing business, depreciation, interest, taxes and other expenses.

Net advantage to merging
The difference in total post- and pre-merger market value minus the cost of the merger.

Mutually exclusive investment decisions
Investment decisions in which the acceptance of a project precludes the acceptance of one or more alternative projects.

Monthly income preferred security (MIP)
Preferred stock issued by a subsidiary located in a tax haven. The subsidiary relends the money to the parent.

Monetary / non-monetary method
Under this translation method, monetary items (e.g. cash, accounts payable and receivable, and long-term debt) are translated at the current rate while non-monetary items (e.g. inventory, fixed assets, and long-term investments) are translated at historical rates.

Merchant bank
A British term for a bank that specializes not in lending out its own funds, but in providing various financial services such as accepting bills arising out of trade, underwriting new issues, and providing advice on acquisitions, mergers, foreign exchange, portfolio management, etc.

All movable goods such as cars, textiles, appliances, etc. and 'f.o.b.' means free on board.

Membership or a seat on the exchange
A limited number of exchange positions that enable the holder to trade for the holder's own accounts and charge clients for the execution of trades for their accounts.

Medium-term note (MTN)
A corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer. Investors can select from the following maturity bands: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years.

Measurement error
Errors in measuring an explanatory variable in a regression that leads to biases in estimated parameters.

Mean-variance criterion
The selection of portfolios based on the means and variances of their returns. The choice of the higher expected return portfolio for a given level of variance or the lower variance portfolio for a given expected return.

Mean-variance analysis
Evaluation of risky prospects based on the expected value and variance of possible outcomes.

Mean of the sample
The arithmetic average; that is, the sum of the observations divided by the number of observations.

The expected value of a random variable.

Materials requirement planning
Computer-based systems that plan backward from the production schedule to make purchases in order to manage inventory levels.

Market timer
A money manager who assumes he or she can forecast when the stock market will go up and down.

Market segmentation or preferred habitat theory
A biased expectations theory that asserts that the shape of the yield curve is determined by the supply of and demand for securities within each maturity sector.

Margin requirement (Options)
The amount of cash an uncovered (naked) option writer is required to deposit and maintain to cover his daily position valuation and reasonably foreseeable intra-day price changes.

Mangement's discussion
A report from management to the shareholders that accompanies the firm's financial statements in the annual report. This report explains the period's financial results and enables management to discuss other ideas that may not be apparent in the financial statements in the annual report.

Management fee
An investment advisory fee charged by the financial advisor to a fund based on the fund's average assets, but sometimes determined on a sliding scale that declines as the dollar amount of the fund increases.

Management buyout (MBO)
Leveraged buyout whereby the acquiring group is led by the firm's management.

Management/closely held shares
Percentage of shares held by persons closely related to a company, as defined by the Securities and exchange commission. Part of these percentages often is included in Institutional Holdings -- making the combined total of these percentages over 100. There is overlap as institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company.

Maintenance margin requirement
A sum, usually smaller than -but part of the original margin, which must be maintained on deposit at all times. If a customer's equity in any futures position drops to, or under, the maintenance margin level, the broker must issue a margin call for the amount at money required to restore the customer's equity in the account to the original margin level.

Log-linear least-squares method
A statistical technique for fitting a curve to a set of data points. One of the variables is transformed by taking its logarithm, and then a straight line is fitted to the transformed set of data points.

Limited-liability instrument
A security, such as a call option, in which the owner can only lose his initial investment.

Limitation on merger, consolidation, or sale
A bond covenant that restricts in some way a firm's ability to merge or consolidate with another firm.

Letter of comment
A communication to the firm from the SEC that suggests changes to its registration statement.

Legal investments
Investments that a regulated entity is permitted to make under the rules and regulations that govern its investing.

Lag response of prepayments
There is typically a lag of about three months between the time the weighted average coupon of an MBS pool has crossed the threshold for refinancing and an acceleration in prepayment speed is observed.

American National Standards (ANSI)
ANSI is a private, non-profit organization that administers and coordinates the U.S. voluntary standardization and conformity assessment.

American Production and Inventory Control Society
American Production and Inventory Control Society (APICS) is a not-for-profit international educational organization respected throughout the world for its education and professional certification programs.

American Standard Code for Information Interchange
American Standard Code for Information Interchange (ASCII) is the most common format for text files in computers and on the internet.

More shares (or other instrument) has been alloted to buyers or investors (of an IPO, for example) than what is available.

Income Statement
This is company's accounting statement that shows its Income, Expenses, and Profit (or Loss) over a period of time. It is a picture of the financial performance of a company. It is sometimes referred to as a Profit & Loss (P&L) Statement. It allows a compay (or others) to compare its performance to that of other similar businesses. It tells shareholders how well their company is doing with respect to generating profits and earnings per share.

Goodwill impairment
An asset reported mainly as goodwill on the balance sheet may be worth much less than the value reported. In this case the good will is impaired and the company will likely have to take a write-down on this asset. This often happens when intellectual property such as software is acquired and a premium price is paid for it. Subsequently, if the software is not commercialized, the goodwill associated with it must be reduced - often to zero.

Balance of payments
A statistical compilation formulated by a sovereign nation of all economic transactions between residents of that nation and residents of all other nations during a stipulated period of time, usually a calendar year.

Bank for International Settlements (BIS)
An international bank headquartered in Basel, Switzerland, which serves as a forum for monetary cooperation among several European central banks, the Bank of Japan, and the U.S. Federal Reserve System. Founded in 1930 to handle the German payment of World War I reparations, it now monitors and collects data on international banking activity and promulgates rules concerning international bank regulation.

Bond agreement
A contract for privately placed debt.

Bottom-up equity management style
A management style that de-emphasizes the significance of economic and market cycles, focusing instead on the analysis of individual stocks.

Break-even lease payment
The lease payment at which a party to a prospective lease is indifferent between entering and not entering into the lease arrangement.

Break-even payment rate
The prepayment rate of a MBS coupon that will produce the same CFY as that of a predetermined benchmark MBS coupon. Used to identify for coupons higher than the benchmark coupon the prepayment rate that will produce the same CFY as that of the benchmark coupon; and for coupons lower than the benchmark coupon the lowest prepayment rate that will do so.

Capitalization method
A method of constructing a replicating portfolio in which the manager purchases a number of the largest-capitalized names in the index stock in proportion to their capitalization.

Cash deficiency agreement
An agreement to invest cash in a project to the extent required to cover any cash deficiency the project may experience.

Cash flow time-line
Line depicting the operating activities and cash flows for a firm over a particular period.

Cash management bill
Very short maturity bills that the Treasury occasionally sells because its cash balances are down and it needs money for a few days.

Cash settlement contracts
Futures contracts, such as stock index futures, that settle for cash, not involving the delivery of the underlying.

Chicago Mercantile Exchange (CME)
A not-for-profit corporation owned by its members. Its primary functions are to provide a location for trading futures and options, collect and disseminate market information, maintain a clearing mechanism and enforce trading rules.

Clearing House Automated Payments System (CHAPS)
A computerized clearing system for sterling funds that began operations in 1984. It includes 14 member banks, nearly 450 participating banks, and is one of the clearing companies within the structure of the Association for Payment Clearing Services (APACS).

Clearing House Interbank Payments System (CHIPS)
An international wire transfer system for high-value payments operated by a group of major banks.

Clearing member
A member firm of a clearing house. Each clearing member must also be a member of the exchange. Not all members of the exchange, however, are members of the clearing organization. All trades of a non-clearing member must be registered with, and eventually settled through, a clearing member.

Commercial draft
Demand for payment.

Commercial risk
The risk that a foreign debtor will be unable to pay its debts because of business events, such as bankruptcy.

A trader is said to have a commitment when he assumes the obligation to accept or make delivery on a futures contract.

Commitment fee
A fee paid to a commercial bank in return for its legal commitment to lend funds that have not yet been advanced.

Common size statement
A statement in which all items are expressed as a percentage of a base figure, useful for purposes of analyzing trends and the changing relationship between financial statement items. For example, all items in each year's income statement could be presented as a percentage of net sales.

Concession agreement
An understanding between a company and the host government that specifies the rules under which the company can operate locally.

A firm engaged in two or more unrelated businesses.

Consumer credit
Credit granted by a firm to consumers for the purchase of goods or services. Also called retail credit.

Consumer Price Index
The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of U.S. inflation. The U.S. Department of Labor publishes the CPI very month.

Controlled disbursement
A service that provides for a single presentation of checks each day (typically in the early part of the day).

Convention statement
An annual statement filed by a life insurance company in each state where it does business in compliance with that state's regulations. The statement and supporting documents show, among other things, the assets, liabilities, and surplus of the reporting company.

Corporate financial management
The application of financial principals within a corporation to create and maintain value through decision making and proper resource management.

Cost company arrangement
Arrangement whereby the shareholders of a project receive output free of charge but agree to pay all operating and financing charges of the project.

Coupon payments
A bond's interest payments.

Credit enhancement
Purchase of the financial guarantee of a large insurance company to raise funds.

Cumulative Translation Adjustment (CTA) account
An entry in a translated balance sheet in which gains and/or losses from translation have been accumulated over a period of years. The CTA account is required under the FASB No. 52 rule.

Current / noncurrent method
Under this currency translation method, all of a foreign subsidiary's current assets and liabilities are translated into home currency at the current exchange rate while noncurrent assets and liabilities are translated at the historical exchange rate, that is, the rate in effect at the time the asset was acquired or the liability incurred.

Current rate method
Under this currency translation method, all foreign currency balance-sheet and income statement items are translated at the current exchange rate.

Premium income
The income made by an insurance company resulting from premiums paid for insurance products.

Confidential memorandum
A document that presents detailed financial information required by prospective buyers prior to making an offer to acquire a firm.

Federal Home Loan Bank Act of 1932
Law that created the Federal Home Loan Bank Board and a network of regional home loan banks.

Federal Home Loan Bank Board (FHLBB)
The FHLBB is an agency responsible for regulating and controlling savings and loan institutions, superseded by FIRREA in 1989.

Direct placement
An issuer's bypassing the dealer and selling the security directly to the investor.

Replacement cost
What it would cost today to replace a company’s existing assets.

Effective gross income
Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.

IRA (Individual Retirement Account)
A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds.

Design Failure Mode and Effects Analysis (DFMEA)
An analytical technique used by a design responsible engineer/team as a means to assure, to the extent possible, that potential failure modes and, their associated causes/mechanisms have been considered and addressed.

Full employment equilibrium
This is the level at Net National Income at which everyone who wants to work is able to. There is in other words sufficient demand to employ everyone. Classical economists argued that the economy would automatically tend to this equilibrium, whereas Keynesians said that it was the role of government, through their policy, to ensure we got there.

Frictional unemployment
Sometimes called transitional, this occurs when unemployed workers are temporarily without a paid occupation while moving from one job to another. There are other frictions in the labor market that prevent it working smoothly e.g. lack of knowledge about available jobs. When somebody loses their job (or chooses to leave it), they will have to look for another one. If they are lucky they find one quite quickly, but they may be unlucky and it may take some time. On average it will take everybody a ...

Financial intermediaries
Institutions which channel funds from people and institutions wishing to lend to those wishing to borrow.

Gold metal
The Bank of England is perhaps best known for storing gold. The standard weight of a bar is around 12.5 kilos (27-28 pounds). The purity of a bar of gold is measured by its assay. An assay of 1000 means it is completely pure. To be in the vaults a bar has to have an assay of more than 995 (995 parts per 1000 gold).

Household income
The total level of income earned by all the households in the economy. This will be a significant part of the overall level of National Income.

National income
The value of goods and services created by a country in one year.

Just-in-time production is a system in which materials, parts and finished products are delivered at the precise time they are needed. This encourages lower stock holdings, shorter lead times, quicker supply chains, better customer contact and relations, greater efficiency and a more profit-focused organisation.

Societe Anonyme (SA) or Sociedad Anonima (SA)
A Societe Anonyme is a limited liability corporation established under French Law. Requires a minimum of seven shareholders. In Spanish speaking countries, it is known as the Sociedad Anonima. Important characteristic of both is that the liability of the shareholder is limited up to the amount of their capital contribution.

The acronym for a class of securities initially known as Home Owner Marketable Equity Receipt Securities. This innovative financial vehicle allows for the securitization and hedging the equity-side of real estate. Previously, only hedges were doable for the debt-side of the equation.

Precious Metals
Refer to Gold, Palladium, Platinum and Silver from a futures or bullion trading perspective.

Precious Metals Lease
A vehicle or technique used to finance precious metals inventories. It is related to the term structure of precious metals prices.

Seasonal Adjustment
A statistical technique used to remove the effect of normal seasonal fluctuations in data so underlying trends become more evident. For example, the seasonally-adjusted unemployment rate smoothes out the changes in unemployment due to the typical seasonal hiring in the summer and layoffs in the winter for workers in industries such as agriculture and construction.

Commercial Grain Stocks
Domestic grain in store in public and private elevators at important markets and grain afloat in vessels or barges in lake and seaboard ports.

In technical analysis, the relative change in price over a specific time interval. Often equated with speed or velocity and considered in terms of relative strength.

Commercial Paper
Short-term promissory notes issued in bearer form by large corporations, with maturities ranging from 5 to 270 days. Since the notes are unsecured, the commercial papers market generally is dominated by large corporations with impeccable credit ratings.

A shipment made by a producer or dealer to an agent elsewhere with the understanding that the commodities in question will be cared for or sold at the highest obtainable price. Title to the merchandise shipped on consignment rests with the shipper until the goods are disposed of according to agreement.

Management BuyIn (MBI)
This is when a small group of shareholders organise a take-over of a company and form a new management team. The opposite of a Management Buyout.

Money or property given to a person by the deceased before death and intended as an advance against the beneficiary's share in the will.

Agency incentive arrangement
A means of compensating the broker of a program trade using benchmark prices for issues to be traded in determining commissions or fees.

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Real market

The bid and offer prices at which a dealer could do "size." Quotes in the brokers market may reflect not the real market, but pictures painted by dealers playing trading games.

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