BIS ratio

Similar financial terms

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.

Four-firm concentration ratio
The sum of the portions of sales, value added, assets, or employees held by the largest four firms in an industry. A measure of competitiveness according to the structural theory

Hedge ratio
The percentage of the position in an asset that is hedged with derivatives.

Quick ratio
The quick ratio (also known as acid test) is a financial ratio similar to the current ratio, but more stringent. It is defined as: current assets minus stocks, divided by current liabilities. It shows whether a company would be able to pay its debts if its creditors were hammering at the door AND it had no time to sell any of its stock. If the acid test is 1 or higher, a company passes the test.

Bond ratio
A ratio showing the portion of total capitalization represented by bonds. To compute the ratio, dived the dollar value of bonds by total capitalization; the result is expressed as a percentage

Common stock ratio
A ratio showing the portion of total capitalization represented by common stock and retained earnings. To calculate, add the dollar value of common stock plus retained earnings and divide by total capitalization; the result is expressed as a percentage

Current ratio
A ratio that tests the strength of a company's working capital. Current assets are divided by current liabilities and the result is expressed as a factor, x to y.

Dept/equity ratio
A ratio showing the percentage of total shareholders' equity represented by long-term dept. This important fundamental test shows the degree of capitalization that is derived from dept rather than from equity.

Dividend payout ratio
A ratio showing the percentage of net profits paid out in dividends on common stock, after reducing net profits by the amount of dividends paid on preferred stock.

Expiration date
The date on which an option expires, after which the option cannot be exercised.

Acid-test ratio
Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid items to current liabilities.

Yield ratio
The quotient of two bond yields.

Working capital ratio
Working capital expressed as a percentage of sales.

Two-fund separation theorem
The theoretical result that all investors will hold a combination of the risk-free asset and the market portfolio.

Total debt to equity ratio
A capitalization ratio comparing current liabilities plus long-term debt to shareholders' equity.

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

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

Target payout ratio
A firm's long-run dividend-to-earnings ratio. The firm's policy is to attempt to pay out a certain percentage of earnings, but it pays a stated dollar dividend and adjusts it to the target as base-line increases in earnings occur.

Soft Capital Rationing
Capital rationing that under certain circumstances can be violated or even viewed as made up of targets rather than absolute constraints.

Short-term solvency ratios
Ratios used to judge the adequacy of liquid assets for meeting short-term obligations as they come due, including (a) the current ratio, (b) the acid-test ratio, (c) the inventory turnover ratio, and (d) the accounts receivable turnover ratio.

Shelf registration
A procedure that allows firms to file one registration statement covering several issues of the same security.

Sharpe ratio
A measure of a portfolio's excess return relative to the total variability of the portfolio.

Separation theorem
The value of an investment to an individual is not dependent on consumption preferences. All investors will want to accept or reject the same investment projects by using the NPV rule, regardless of personal preference.

Separation property
The property that portfolio choice can be separated into two independent tasks: (a) determination of the optimal risky portfolio, which is a purely technical problem, and (b) the personal choice of the best mix of the risky portfolio and the risk-free asset.

Reward-to-volatility ratio
Ratio of excess return to portfolio standard deviation.

Reserve ratios
Specified percentages of deposits, established by the Federal Reserve Board, that banks must keep in a non-interest-bearing account at one of the twelve Federal Reserve Banks.

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

Receivables turnover ratio
Total operating revenues divided by average receivables. Used to measure how effectively a firm is managing its accounts receivable.

Rational expectations
The idea that people rationally anticipate the future and respond to what they see ahead.

Rate of return ratios
Ratios that are designed to measure the profitability of the firm in relation to various measures of the funds invested in the firm.

Q ratio
Market value of a firm's assets divided by replacement value of the firm's assets.

Public Securities Administration (PSA)
The trade association for primary dealers in US government securities, including MBSs.

Profitability ratios
Ratios that focus on the profitability of the firm. Profit margins measure performance with relation to sales. Rate of return ratios measure performance relative to some measure of size of the investment.

Private Export Funding Corporation (PEFCO)
Company that mobilizes private capital for financing the export of big-ticket items by US firms by purchasing at fixed interest rates the medium- to long-term debt obligations of importers of US products.

Price/sales ratio
Determined by dividing current stock price by revenue per share (adjusted for stock splits). Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares outstanding.

Price/earnings ratio
Shows the "multiple" of earnings at which a stock sells. Determined by dividing current stock price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio is determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher "multiple" means investors have higher expectations for future growth, and have bid up the stock's price.

Possessions corporation
A type of corporation permitted under the U.S. tax code whereby a branch operation in a U.S. possessions can obtain tax benefits as though it were operating as a foreign subsidiary.

Portfolio separation theorem
An investor's choice of a risky investment portfolio is separate from his attitude towards risk.

Pension Benefit Guaranty Corporation (PBGC)
A federal agency that insures the vested benefits of pension plan participants (established in 1974 by the ERISA legislation).

Payout ratio
Generally, the proportion of earnings paid out to the common stockholders as cash dividends. More specifically, the firm's cash dividend divided by the firm's earnings in the same reporting period.

P/E ratio
Assume Deutsche Bank sells for €25.50 per share and has earned €2.55 per share this year; €25.50 = 10 times €2.55. Deutsche Bank stock sells for 10 times earnings. P/E = Current stock price divided by trailing annual earnings per share or expected annual earnings per share.

Operationally efficient market
Also called an internally efficient market, one in which investors can obtain transactions services that reflect the true costs associated with furnishing those services.

Open-market purchase operation
A systematic program of repurchasing shares of stock in market transactions at current market prices, in competition with other prospective investors.

Open-market operation
Purchase or sale of government securities by the monetary authorities to increase or decrease the domestic money supply.

Negative duration
A situation in which the price of the MBS moves in the same direction as interest rates.

Multinational corporation
A firm that operates in more than one country.

Mortgage-Backed Securities Clearing Corporation
A wholly owned subsidiary of the Midwest Stock Exchange that operates a clearing service for the comparison, netting, and margining of agency-guaranteed MBSs transacted for forward delivery.

Mortgage duration
A modification of standard duration to account for the impact on duration of MBSs of changes in prepayment speed resulting from changes in interest rates. Two factors are employed: one that reflects the impact of changes in prepayment speed or price.

Modified duration
The ratio of Macaulay duration to (1 + y), where y = the bond yield. Modified duration is inversely related to the approximate percentage change in price for a given change in yield.

Market value ratios
Ratios that relate the market price of the firm's common stock to selected financial statement items.

Macaulay duration
The weighted-average term to maturity of the cash flows from the bond, where the weights are the present value of the cash flow divided by the price of the bond.

D = [(1 x (C/1+y)) + (2 x (C/1+y^2)) + (3 x ((C + FV)/1+y^3))] / [(C/1+y) + (C/1+y^2) + (C + FV/1+y^3)]

Low price-earnings ratio effect
The tendency of portfolios of stocks with a low price-earnings ratio to outperform portfolios consisting of stocks with a high price-earnings ratio.

Long-term debt to equity ratio
A capitalization ratio comparing long-term debt to shareholders' equity.

Long-term debt ratio
The ratio of long-term debt to total capitalization.

Liquidity ratios
Ratios that measure a firm's ability to meet its short-term financial obligations on time.

Leverage ratios
Measures of the relative contribution of stockholders and creditors, and of the firm's ability to pay financing charges. Value of firm's debt to the total value of the firm.

Incorporation
Incorporation is the process of creating a legal, tax-paying entity. Businesses or companies can be incorporated or unincorporated. If unincorporated, the owner(s) of the business personally take on the assets and liabilities of the business and are personally responsible for all taxes. When incorporating, which is simply a legal registration process, a new, tax-payer is, in essence, created. Incorporating a business is a straightforward process. Lawyers and other agencies usually provide this s ...

Capital rationing
Placing one or more limits on the amount of new investment undertaken by a firm, either by using a higher cost of capital, or by setting a maximum on parts of, and/or the entirety of, the capital budget.

Capitalization ratios
Also called financial leverage ratios, these ratios compare debt to total capitalization and thus reflect the extent to which a corporation is trading on its equity. Capitalization ratios can be interpreted only in the context of the stability of industry and company earnings and cash flow.

Cash flow coverage ratio
The number of times that financial obligations (for interest, principal payments, preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental payments, and depreciation.

Cash flow from operations
A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus non-cash expenses that were deducted in calculating net income.

Cash ratio
The proportion of a firm's assets held as cash.

Common stock ratios
Ratios that are designed to measure the relative claims of stockholders to earnings (cash flow per share), and equity (book value per share) of a firm.

Concentration account
A single centralized account into which funds collected at regional locations (lockboxes) are transferred.

Concentration services
Movement of cash from different lockbox locations into a single concentration account from which disbursements and investments are made.

Conversion ratio
The number of shares of common stock that the security holder will receive from exercising the call option of a convertible security.

Corporation
A legal "person" that is separate and distinct from its owners. A corporation is allowed to own assets, incur liabilities, and sell securities, among other things.

Cost-benefit ratio
The net present value of an investment divided by the investment's initial cost. Also called the profitability index.

Coverage ratios
Ratios used to test the adequacy of cash flows generated through earnings for purposes of meeting debt and lease obligations, including the interest coverage ratio and the fixed charge coverage ratio.

Customary payout ratios
A range of payout ratios that is typical based on an analysis of comparable firms.

Rationality
In game theory, one of the most common assumptions made is that every player/participant is rational. In its mildest form, rationality implies that every player is motivated by maximizing his own payoff. In a stricter sense, it implies that every player always maximizes his utility, thus being able to perfectly calculate the probabilistic result of every action.

Capital coverage ratio
Available capital divided by required capital.

Remuneration and Nomination Committee
A committee that advises the Supervisory Board in a company on compensation policies and the composition of the Supervisory Board and Executive Board. The committee also advises the Supervisory Board on the compensation packages of the members of the Executive Board and the Supervisory Board.

Generation-skipping trust
A trust in which a principal amount is placed in a trust on the death of person A and is transferred to A's grandchildren when A's children die. However, the income generated from the trust while the children of person A are alive goes to the children of person A.

Controlled Foreign Corporation (CFC)
An offshore company which, because of ownership or voting control of U.S. persons, is treated by the IRS as a U.S. tax reporting entity. IRC 951 and 957 collectively define the CFC as one in which a U.S. person owns 10 percent or more of a foreign corporation or in which 50 percent or more of the total voting stock is owned by U.S. shareholders collectively or 10 percent or more of the voting control is owned by U.S. persons.

The Securities Industry Protection Corporation
Commonly named the SIPC. Provides up to $500,000 insurance protection for your U.S. stock brokerage account.

Duration
A measure of a bond's price sensitivity to changes in interest rates.

Vertical Integration
The acquisition by a company operating in one market, of another company that is complementary to its existing business, perhaps as a supplier or user of product, for example a newspaper publishing company acquiring a paper manufacturer. See Vertical merger.