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. |
Similar financial terms
CapitalizationThe combined sources of capital, consisting of dept capital (liabilities) and equity capital (capital stock and retained earnings).
Market capitalization rate
Expected return on a security. The market-consensus estimate of the appropriate discount rate for a firm's cash flows.
Market capitalization
The total dollar value of all outstanding shares. Computed as shares times current market price. It is a measure of corporate size.
Long-term debt/capitalization
Indicator of financial leverage. Shows long-term debt as a proportion of the capital available. Determined by dividing long-term debt by the sum of long-term debt, preferred stock and common stockholder equity.
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.
Capitalization table
A table showing the capitalization of a firm, which typically includes the amount of capital obtained from each source - long-term debt and common equity - and the respective capitalization ratios.
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.
Statement-of-cash-flows method
A method of cash budgeting that is organized along the lines of the cash flow statement.
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.
Residual method
A method of allocating the purchase price for the acquisition of another firm among the acquired assets.
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.
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.
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.
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.
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.
