Leveraged equity

Similar financial terms

Unleveraged required return
The required return on an investment when the investment is financed entirely by equity (i.e. no debt).

Unleveraged beta
The beta of an unleveraged required return (i.e. no debt) on an investment when the investment is financed entirely by equity.

Leveraged required return
The required return on an investment when the investment is financed partially by debt.

Leveraged portfolio
A portfolio that includes risky assets purchased with funds borrowed.

Leveraged lease
A lease arrangement under which the lessor borrows a large proportion of the funds needed to purchase the asset and grants the lender a lien on the assets and a pledge of the lease payments to secure the borrowing.

Leveraged buyout (LBO)
A transaction used for taking a public corporation private financed through the use of debt funds: bank loans and bonds. Because of the large amount of debt relative to equity in the new corporation, the bonds are typically rated below investment grade, properly referred to as high-yield bonds or junk bonds. Investors can participate in an LBO through either the purchase of the debt (i.e., purchase of the bonds or participation in the bank loan) or the purchase of equity through an LBO fund ...

Leveraged beta
The beta of a leveraged required return; that is, the beta as adjusted for the degree of leverage in the firm's capital structure.

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.

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

All equity rate
The discount rate that reflects only the business risks of a project and abstracts from the effects of financing.

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

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.

Stratified equity indexing
A method of constructing a replicating portfolio in which the stocks in the index are classified into stratum, and each stratum is represented in the portfolio.

Stockholder's equity
The residual claims that stockholders have against a firm's assets, calculated by subtracting total liabilities from total assets.

Stockholder equity
Balance sheet item that includes the book value of ownership in the corporation. It includes capital stock, paid in surplus, and retained earnings.

Shareholders' equity
This is a company's total assets minus total liabilities. A company's net worth is the same thing. Also referred to as ownership interest in the UK.

Return on equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12 months by common stockholder equity (adjusted for stock splits). Result is shown as a percentage. Investors use ROE as a measure of how a company is using its money. ROE may be decomposed into return on assets (ROA) multiplied by financial leverage (total assets/total equity).

Preferred equity redemption stock (PERC)
Preferred stock that converts automatically into equity at a stated date. A limit is placed on the value of the shares the investor receives.

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

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.

Common stock/other equity
Value of outstanding common shares at par, plus accumulated retained earnings. Also called shareholders' equity.

Growing-equity mortgage (GEM)
A fixed-rate mortgage that provides scheduled payment increases over an established period of time, with the increased amount of the monthly payment applied directly toward reducing the remaining balance of the mortgage.

Private Equity Fund
A fund that buys majority stakes in companies and/or entire business units to restructure its capital, management and organization. Usually the targets are delisted (unless already unlisted), held private and restructured over a period of 3-7 years, and then again listed through an IPO.

Restructuring may be done through leveraged buyouts, venture capital, growth capital, angel investing, mezzanine debt, management share participation programmes and others.

Big players in th ...

Pure Equity Trust
A special type of irrevocable trust marketed by promoters. The trust assets are obtained by an exchange of a certificate of beneficial interest in return for the assets, as opposed to traditional means, such as by gifting.

Equity-Linked Note (ELN)
An equity-linked note combines the characteristics of a zero or low coupon bond or note with a return component based on the performance of a single equity security, a basket of equity securities, or an equity index. In the latter case, the security would typically be called an equity index-linked note. Equity-linked notes come in a variety of styles. The minimum return may be nil with all of what would normally be an interest payment going to pay for upside equity participation. Alternatively, ...