Monetary / non-monetary method

Similar financial terms

Monetary policy
Actions taken by the Board of Governors of the Federal Reserve System to influence the money supply or interest rates.

Monetary gold
Gold held by governmental authorities as a financial asset.

Monetary neutrality
A proposition that in the long run, a percentage rise in the money supply is matched by the same percentage rise in the price level, leaving unchanged the real money supply and all other economic variables such as interest rates.

This theory, a core belief of classical economics, was first put forward in the 18th century by David Hume. He set out the classical dichotomy that economic variables come in two varieties, nominal and real, and that the things that influence nominal variables ...

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.

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.

P/E effect
That portfolios with low P/E stocks have exhibited higher average risk-adjusted returns than high P/E stocks.

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.

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.

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.

Letter of credit (L/C)
A form of guarantee of payment issued by a bank used to guarantee the payment of interest and repayment of principal on bond issues.

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

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.

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.

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.

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.

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