Cash flow coverage ratio

Similar financial terms

Petty Cash
Minor amount of money held by a person or business to pay for small miscellaneous and infrequent items of expenditure.

Cash flow
Increased and decreases in working capital affected by fluctuating income and/or expenses.

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

Wanted for cash
A statement displayed on market tickers signaling that a bidder will pay cash for same day settlement of a block of a specified security.

Target cash balance
Optimal amount of cash for a firm to hold, considering the trade-off between the opportunity costs of holding too much cash and the trading costs of holding too little cash.

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.

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.

Scheduled cash flows
The mortgage principal and interest payments due to be paid under the terms of the mortgage not including possible prepayments.

Real cash flow
A cash flow is expressed in real terms if the current, or date 0, purchasing power of the cash flow is given.

Operating cash flow
Earnings before depreciation minus taxes. It measures the cash generated from operations, not counting capital spending or working capital requirements.

Noncash charge
A cost, such as depreciation, depletion, and amortization, that does not involve any cash outflow.

Nominal cash flow
A cash flow expressed in nominal terms if the actual dollars to be received or paid out are given.

Net cash balance
Beginning cash balance plus cash receipts minus cash disbursements.

Ledger cash
A firm's cash balance as reported in its financial statements. Also called book cash.

Book cash
A firm's cash balance as reported in its financial statements. Also called ledger cash.

Cash
The value of assets that can be converted into cash immediately, as reported by a company. Usually includes bank accounts and marketable securities, such as government bonds and Banker's Acceptances. Cash equivalents on balance sheets include securities (e.g., notes) that mature within 90 days.

Cash budget
A forecasted summary of a firm's expected cash inflows and cash outflows as well as its expected cash and loan balances.

Cash and carry
Purchase of a security and simultaneous sale of a future, with the balance being financed with a loan or repo.

Cash and equivalents
The value of assets that can be converted into cash immediately, as reported by a company. Usually includes bank accounts and marketable securities, such as government bonds and Banker's Acceptances. Cash equivalents on balance sheets include securities (e.g., notes) that mature within 90 days.

Cash commodity
The actual physical commodity, as distinguished from a futures contract.

Cash conversion cycle
The length of time between a firm's purchase of inventory and the receipt of cash from accounts receivable.

Cash cow
A company that pays out all earnings per share to stockholders as dividends. Or, a company or division of a company that generates a steady and significant amount of free cash flow.

Cash cycle
In general, the time between cash disbursement and cash collection. In net working capital management, it can be thought of as the operating cycle less the accounts payable payment period.

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 delivery
The provision of some futures contracts that requires not delivery of underlying assets but settlement according to the cash value of the asset.

Cash discount
An incentive offered to purchasers of a firm's product for payment within a specified time period, such as ten days.

Cash dividend
A dividend paid in cash to a company's shareholders. The amount is normally based on profitability and is taxable as income. A cash distribution may include capital gains and return of capital in addition to the dividend.

Cash equivalent
A short-term security that is sufficiently liquid that it may be considered the financial equivalent of cash.

Cash flow after interest and taxes
Net income plus 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 flow matching
Also called dedicating a portfolio, this is an alternative to multiperiod immunization in which the manager matches the maturity of each element in the liability stream, working backward from the last liability to assure all required cash flows.

Cash flow per common share
Cash flow from operations minus preferred stock dividends, divided by the number of common shares outstanding.

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

Cash-flow break-even point
The point below which the firm will need either to obtain additional financing or to liquidate some of its assets to meet its fixed costs.

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 markets
Also called spot markets, these are markets that involve the immediate delivery of a security or instrument.

Cash offer
A public equity issue that is sold to all interested investors.

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

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

Cash transaction
A transaction where exchange is immediate, as contrasted to a forward contract, which calls for future delivery of an asset at an agreed-upon price.

Cash-equivalent items
Temporary investments of currently excess cash in short-term, high-quality investment media such as treasury bills and Banker's Acceptances.

Cash-surrender value
An amount the insurance company will pay if the policyholder ends a whole life insurance policy.

Cashout
Refers to a situation where a firm runs out of cash and cannot readily sell marketable securities.

Vault cash
Currency that is physically held by banks and stored in vaults overnight.

Wallflower
Stock that has fallen out of favor with investors. These stocks tends to have a low price-earnings (P/E) ratio.

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

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.

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.

Capital coverage ratio
Available capital divided by required capital.

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.

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.

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.

BIS ratio
The BIS ratio gives an indication of the solvency of a bank. It gives the ratio between the risk-bearing capital and the risk-weighted assets.

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.