Pro forma capital structure analysis

Similar financial terms

Put provision on bonds
A put provision grants the bondholder the right to sell the issue back to the issuer at par value on designated dates. Here the advantage to the investor is that if interest rates rise after the issue date, thereby reducing a bond’s price, the investor can force the issuer to redeem the bond at par value.

Agency problem
The conflict of interest between principal (e.g. shareholders) and agent (e.g. managers) in which agents have an incentive to act in their own self-interest because they bear less than the total costs of their actions.

Wiener Process
The wiener process is a stochastic process used in option value calculations where the change in a variable during each short period of time of length has a normal distribution with a mean equal to zero and a variance equal to length.

Stochastic process
An equation describing the probabilistic behavior of a stochastic variable.

Hard call protection
Hard call protection usually refers to callable bonds. The protection is the period of time when the bond cannot be called, no matter what the interest rate is. That is, if the interest rate falls sharply, most callable bonds will be called (so the bond issuer can reissue at a lower interest rate). Hard call protection ensures that the holder of the bond can benefit when rates fall.

Gross profit
The profit remaning after direct costs are subtracted from sales, but before any expenses are deducted.

Zero-one integer programming
An analytical method that can be used to determine the solution to a capital rationing problem.

After-tax profit margin
The ratio of net income to net sales.

Variance minimization approach to tracking
An approach to bond indexing that uses historical data to estimate the variance of the tracking error.

Underinvestment problem
The mirror image of the asset substitution problem, wherein stockholders refuse to invest in low-risk assets to avoid shifting wealth from themselves to the debtholders.

Tandem programs
Under Ginnie Mae, mortgage funds provided at below-market rates to residential mortgage buyers with FHA Section 203 and 235 loans and to developers of multifamily projects with Section 236 loans initially and later with Section 221(d)(4) loans.

Subjective probabilities
Probabilities that are determined subjectively (for example, on the basis of judgement rather than using statistical sampling).

Stratified sampling approach to indexing
An approach in which the index is divided into cells, each representing a different characteristic of the index, such as duration or maturity.

Sole proprietorship
A business owned by a single individual. The sole proprietor pays no corporate income tax but has unlimited liability for business debts and obligations.

Signaling approach
Approach to the determination of the optimal capital structure asserting that insiders in a firm have information that the market does not have; therefore, the choice of capital structure by insiders can signal information to outsiders and change the value of the firm. This theory is also called the asymmetric information approach.

Simple prospect
An investment opportunity where a certain initial wealth is placed at risk and only two outcomes are possible.

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.

Risk premium approach
The most common approach for tactical asset allocation to determine the relative valuation of asset classes based on expected returns.

Risk prone
Willing to pay money to transfer risk from others.

Risk-adjusted profitability
A probability used to determine a "sure" expected value (sometimes called a certainty equivalent) that would be equivalent to the actual risky expected value.

Residual dividend approach
An approach that suggests that a firm pay dividends if and only if acceptable investment opportunities for those funds are currently unavailable.

Reproducible assets
A tangible asset with physical properties that can be reproduced, such as a building or machinery.

Replacement-chain problem
Idea that future replacement decisions must be taken into account in selecting among projects.

Regulatory accounting procedures
Accounting principals required by the FHLB that allow S&Ls to elect annually to defer gains and losses on the sale of assets and amortize these deferrals over the average life of the asset sold.

Quadratic programming
Variant of linear programming whereby the equations are quadratic rather than linear.

Put provision
Gives the holder of a floating-rate bond the right to redeem his note at par on the coupon payment date.

Proxy vote
Vote cast by one person on behalf of another.

Proxy contest
A battle for the control of a firm in which the dissident group seeks, from the firm's other shareholders, the right to vote those shareholder's shares in favor of the dissident group's slate of directors. Also called proxy fight.

Proxy
Document intended to provide shareholders with information necessary to vote in an informed manner on matters to be brought up at a stockholders' meeting. Includes information on closely held shares. Shareholders can and often do give management their proxy, representing the right and responsibility to vote their shares as specified in the proxy statement.

Provisional call feature
A feature in a convertible issue that allows the issuer to call the issue during the non-call period if the price of the stock reaches a certain level.

Protective put buying strategy
A strategy that involves buying a put option on the underlying security that is held in a portfolio.

Protective covenant
A part of the indenture or loan agreement that limits certain actions a company takes during the term of the loan to protect the lender's interests.

Protectionism
Protecting domestic industry from import competition by means of tariffs, quotas, and other trade barriers.

Prospectus
Formal written document to sell securities that describes the plan for a proposed business enterprise, or the facts concerning an existing one, that an investor needs to make an informed decision. Prospectuses are used by mutual funds to describe the fund objectives, risks and other essential information.

Property rights
Rights of individuals and companies to own and utilize property as they see fit and to receive the stream of income that their property generates.

Promissory note
Written promise to pay.

Projected maturity date
With CMOs, final payment at the end of the estimated cash flow window.

Projected benefit obligation (PBO)
A measure of a pension plan's liability at the calculation date assuming that the plan is ongoing and will not terminate in the foreseeable future.

Project financing
A form of asset-based financing in which a firm finances a discrete set of assets on a standalone basis.

Project notes (PNs)
Project notes are issued by municipalities to finance federally sponsored programs in urban renewal and housing and are guaranteed by the US Department of Housing and Urban Development.

Project loans
Usually FHA-insured and HUD-guaranteed mortgages on multiple-family housing complexes, nursing homes, hospitals, and other development types.

Project loan securities
Securities backed by a variety of FHA-insured loan types - primarily multi-family apartment buildings, hospitals, and nursing homes.

Project loan certificate (PLC)
A primary program of Ginnie Mae for securitizing FHA-insured and coinsured multifamily, hospital, and nursing home loans.

Progressive tax system
A tax system wherein the average tax rate increases for some increases in income but never decreases with an increase in income.

Progress review
A periodic review of a capital investment project to evaluate its continued economic viability.

Program trading
Trades based on signals from computer programs, usually entered directly from the trader's computer to the market's computer system and executed automatically.

Program trades
Also called basket trades, orders requiring the execution of trades in a large number of different stocks at as near the same time as possible.

Pro forma financial statements
Financial statements as adjusted to reflect a projected or planned transaction.

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.

Profitability index
The present value of the future cash flows divided by the initial investment. Also called the benefit-cost ratio.

Profit margin
Indicator of profitability. The ratio of earnings available to stockholders to net sales. Determined by dividing net income by revenue for the same 12-month period. Result is shown as a percentage.

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

Production payment financing
A method of nonrecourse asset-based financing in which a specified percentage of revenue realized from the sale of the project's output is used to pay debt service.

Product risk
A type of mortgage-pipeline risk that occurs when a lender has an unusual loan in production or inventory but does not have a sale commitment at a prearranged price.

Product cycle
The time it takes to bring new and/or improved products to market.

Probability function
A function that assigns a probability to each and every possible outcome.

Probability distribution
Also called a probability function, a function that describes all the values that the random variable can take and the probability associated with each.

Probability density function
The probability function for a continuous random variable.

Probability
The relative likelihood of a particular outcome among all possible outcomes.

Pro forma statement
A financial statement showing the forecast or projected operating results and balance sheet, as in pro forma income statements, balance sheets, and statements of cash flows.

Price discovery process
The process of determining the prices of the assets in the marketplace through the interactions of buyers and sellers.

Preliminary prospectus
A preliminary version of a prospectus.

Planned financing program
Program of short-term and long-term financing as outlined in the corporate financial plan.

Planned capital expenditure program
Capital expenditure program as outlined in the corporate financial plan.

Optimization approach to indexing
An approach to indexing which seeks to optimize some objective, such as to maximize the portfolio yield, to maximize convexity, or to maximize expected total returns.

Optimal redemption provision
Provision of a bond indenture that governs the issuer's ability to call the bonds for redemption prior to their scheduled maturity date.

Operating profit margin
The ratio of operating margin to net sales.

NPV profile
A graph of NPV as a function of the discount rate.

Normal probability distribution
A probability distribution for a continuous random variable that is forms a symmetrical bell-shaped curve around the mean.

Non-reproducible assets
A tangible asset with unique physical properties, like a parcel of land, a mine, or a work of art.

Net profit margin
Net income divided by sales; the amount of each sales dollar left over after all expenses have been paid.

Modigliani and Miller Proposition II
A proposition by Modigliani and Miller which states that the cost of equity is a linear function of the firm's debt/equity-ratio.

Modigliani and Miller Proposition I
A proposition by Modigliani and Miller which states that a firm cannot change the total value of its outstanding securities by changing its capital structure proportions. Also called the irrelevance proposition.

Mathematical programming
An operations research technique that solves problems in which an optimal value is sought subject to specified constraints. Mathematical programming models include linear programming, quadratic programming, and dynamic programming.

Linear programming
Technique for finding the maximum value of some equation subject to stated linear constraints.

American Production and Inventory Control Society
American Production and Inventory Control Society (APICS) is a not-for-profit international educational organization respected throughout the world for its education and professional certification programs.

A lick and a promise
Incomplete or limited preparation

Intellectual Property
This terms refers to all assets of a company that have an intellectual nature to them. They are often referred to as "soft" assets such as trademarks, logos, patents, software, trade secrets, brands, industrial designs, music, colors, designs, etc. They usually have intangible value unlike hard assets such as land, buildings, and equipment.

Base probability of loss
The probability of not achieving a portfolio expected return.

Before-tax profit margin
The ratio of net income before taxes to net sales.

Book profit
The cumulative book income plus any gain or loss on disposition of the assets on termination of the SAT.

Call protection
A feature of some callable bonds that establishes an initial period when the bonds may not be called.

Call provision
An embedded option granting a bond issuer the right to buy back all or part of the issue prior to maturity.

Conventional project
A project with a negative initial cash flow (cash outflow), which is expected to be followed by one or more future positive cash flows (cash inflows).

Corporate processing float
The time that elapses between receipt of payment from a customer and the depositing of the customer's check in the firm's bank account; the time required to process customer payments.

Cross-sectional approach
A statistical methodology applied to a set of firms at a particular point in time.

Cumulative probability distribution
A function that shows the probability that the random variable will attain a value less than or equal to each value that the random variable can take on.

Progressive tax
A tax that tends to take a smaller percentage of the incomes of lower income citizens compared to the percentage it takes of the incomes of wealthier citizens. Example: an income tax with steeper rates for those in higher income brackets, or a special sales tax levied only on expensive "luxuries" like Philippe Patek watches or Mercedes-Benz sport cars.

Automatic Data Processing (ADP)
A private company that acts as an intermediary to perform proxy services for several banks and brokers. Distributes proxy material to beneficial owners, tabulates the returned proxies, and provides the Corporation or its tabulator compiled reports of the tabulation results. ADP also distributes quarterly reports and other corporate information to the beneficial owners.

Affordability programs
Usually refers to special schemes set up and/or managed by utility companies which are designed to minimize the burden of utility costs for customers of limited means. These programs are usually targetted at specific classes of low-income residential consumers (e.g. unemployed or pensioners) and institutional customers (e.g. schools, non-profit organizations, hospitals and other essential public-sector services).

Benefits provided by these programs can include forgiveness of arrearage ...

Net national product
The technical term for national income, it is GNP minus capital consumption.

Lean production
Lean production is a range of management techniques that aim to make business more efficient in its use of resources. This minimises waste, reduces costs, increases productivity and should expand margins.

Asset Protection Trust (APT)
A special form of irrevocable trust, usually created (settled) offshore for the principal purposes of preserving and protecting part of one's wealth offshore against creditors. Title to the asset is transferred to a person named the trustee. Generally used for asset protection and usually tax neutral. Its ultimate function is to provide for the beneficiaries of the APT.

Foreign Investor in Real Property Tax Act of 1980
Under FIRPTA (Foreign Investor in Real Property Tax Act of 1980), and the Economic Recovery Act of 1981, unless an exemption is granted by the IRS, upon the sale of real property owned by offshore (foreign) persons, the agency, attorney or escrow officer handling the transaction is required to withhold capital gains taxes at the closing of the sale transaction. Unless withheld and submitted to the IRS, the party handling the sale transaction is personally liable for the taxes.

Probate
The legal process for the distribution of the estate of a decedent.

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

Profit and Loss Account
An accounting statement that shows a company's trading position over a given period of time - usually the financial year. This statement details the sales revenue and business expenditure over the period. In the account, the cost of sales is deducted from the sales income to provide a gross profit. From this, other items of expenditure, such as salaries, rent, rates and other itemised costs are deducted to show a net profit (or loss). In US and under IFRS known as the Income Statement.

Proforma
This term is normally used in connection with invoices, whereby a company issues a pro-forma invoice in advance of services or goods being provided to speed up payment. Small, new companies are often asked to pay for goods or services in advance as security against non-payment. In these instances, the service or goods provider raises a pro-forma invoice.

Proxy fight
A hostile takeover technique that may occurs when the acquiring company attempts to convince shareholders to use their proxy votes to install new management that is open to the takeover. The technique allows the acquired to avoid paying a premium for the target.

Dual track process
A process where the seller of a company postpones the decision of doing an IPO or trade sale. The divestment method that yields the most value (adjusted for execution risks) is chosen prior to the official listing notification (application) to the stock exchange

Performance Related Pay
Performance Related pay is a remuneration system whereby the employee's pay is based on his or her performance. It is basically a payments by results system that is designed to give incentive to the employee to work harder or more productively. In its simplest form, this may be an annual bonus based on subjective assessment of performance. In many larger organisations this can be more structured, based on a set of pre-agreed objectives or targets. Performance related pay is becoming increasingly ...

Performance shares
Shares of stock given to managers on the basis of performance as measured by earnings per share and similar criteria. A control device used by shareholders to tie management to the self-interest of shareholders.

Performance measurement
The calculation of the return realized by a money manager over some time interval.

Performance evaluation
The evaluation of a manager's performance which involves, first, determining whether the money manager added value by outperforming the established benchmark (performance measurement) and, second, determining how the money manager achieved the calculated return (performance attribution analysis).

Performance attribution analysis
The decomposition of a money manager's performance results to explain the reasons why those results were achieved. This analysis seeks to answer the following questions: (a) What were the major sources of added value? (b) Was short-term factor timing statistically significant? (c) Was market timing statistically significant? And (d), Was security selection statistically significant?

American Standard Code for Information Interchange
American Standard Code for Information Interchange (ASCII) is the most common format for text files in computers and on the internet.

BARRA's performance analysis (PERFAN)
A method developed by BARRA, a consulting firm in Berkeley, California. It is commonly used by institutional investors applying performance attribution analysis to evaluate their money managers' performances.

Capital stock
The value of an outstanding share of stock at the time it was issued

Capitalization
The combined sources of capital, consisting of dept capital (liabilities) and equity capital (capital stock and retained earnings).

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

Working capital management
The management of current assets and current liabilities to maximize short-term liquidity.

Working capital
Defined as the difference in current assets and current liabilities (excluding short-term debt). Current assets may or may not include cash and cash equivalents, depending on the company.

Weighted average cost of capital
The weighted average cost of capital (WACC) is the expected return on a portfolio of all the firm's securities when debt, equity and tax shields are taken into account. Used as a hurdle rate for capital investment.

Venture capital
An investment in a start-up business that is perceived to have excellent growth prospects but does not have access to capital markets. Type of financing sought by early-stage companies seeking to grow rapidly.

Static theory of capital structure
Theory that the firm's capital structure is determined by a trade-off of the value of tax shields against the costs of bankruptcy.

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

Real capital
Wealth that can be represented in financial terms, such as savings account balances, financial securities, and real estate.

Pie model of capital structure
A model of the debt/equity ratio of the firms, graphically depicted in slices of a pie that represent the value of the firm in the capital markets.

Personal tax view (of capital structure)
The argument that the difference in personal tax rates between income from debt and income from equity eliminates the disadvantage from the double taxation (corporate and personal) of income from equity.

Perfect market view (of capital structure)
Analysis of a firm's capital structure decision, which shows the irrelevance of capital structure in a perfect capital market.

Perfect capital market
A market in which there are never any arbitrage opportunities.

Pecking-order view (of capital structure)
The argument that external financing transaction costs, especially those associated with the problem of adverse selection, create a dynamic environment in which firms have a preference, or pecking-order of preferred sources of financing, when all else is equal. Internally generated funds are the most preferred, new debt is next, debt-equity hybrids are next, and new equity is the least preferred source.

Outstanding share capital
Issued share capital less the par value of shares that are held in the company's treasury.

Other capital
In the balance of payments, other capital is a residual category that groups all the capital transactions that have not been included in direct investment, portfolio investment, and reserves categories. It is divided into long-term capital and short-term capital and, because of its residual status, can differ from country to country. Generally speaking, other long-term capital includes most non-negotiable instruments of a year or more like bank loans and mortgages. Other short-term capital i ...

Opportunity cost of capital
Expected return that is foregone by investing in a project rather than in comparable financial securities.

Nondiversifiability of human capital
The difficulty of diversifying one's human capital (the unique capabilities and expertise of individuals) and employment effort.

Net working capital
Current assets minus current liabilities. Often simply referred to as working capital.

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.

Legal capital
Value at which a company's shares are recorded in its books.

Capital
Money invested in a firm.

Capital account
Net result of public and private international investment and lending activities.

Capital allocation decision
Allocation of invested funds between risk-free assets versus the risky portfolio.

Capital budget
A firm's set of planned capital expenditures.

Capital budgeting
The process of choosing the firm's long-term capital assets.

Capital Builder Account (CBA)
A Merrill Lynch brokerage account that allows investors to access the loan value of his or her eligible securities to buy or sell securities. Excess cash in a CBA can be invested in a money market fund or an insured money market deposit account without losing access to the money.

Capital expenditures
Amount used during a particular period to acquire or improve long-term assets such as property, plant or equipment.

Capital flight
The transfer of capital abroad in response to fears of political risk.

Capital gain
When a stock is sold for a profit, it's the difference between the net sales price of securities and their net cost, or original basis. If a stock is sold below cost, the difference is a capital loss.

Capital gains yield
The price change portion of a stock's return.

Capital lease
A lease obligation that has to be capitalized on the balance sheet.

Capital loss
The difference between the net cost of a security and the net sale price, if that security is sold at a loss.

Capital market
The market for trading long-term debt instruments (those that mature in more than one year).

Capital market efficiency
Reflects the relative amount of wealth wasted in making transactions. An efficient capital market allows the transfer of assets with little wealth loss.

Capital market imperfections view
The view that issuing debt is generally valuable but that the firm's optimal choice of capital structure is a dynamic process that involves the other views of capital structure (net corporate/personal tax, agency cost, bankruptcy cost, and pecking order), which result from considerations of asymmetric information, asymmetric taxes, and transaction costs.

Capital market line (CML)
The line defined by every combination of the risk-free asset and the market portfolio.

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.

Capital structure
The makeup of the liabilities and stockholders' equity side of the balance sheet, especially the ratio of debt to equity and the mixture of short and long maturities.

Capital surplus
Amounts of directly contributed equity capital in excess of the par value.

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.

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.

Capitalized
Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives greater than one year.

Capitalized interest
Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time.

Complete capital market
A market in which there is a distinct marketable security for each and every possible outcome.

Cost of capital
The required return for a capital budgeting project.

Cost of limited partner capital
The discount rate that equates the after-tax inflows with outflows for capital raised from limited partners.

Authorised capital
The maximum amount of share capital that a public limited company or a private limited company can issue according to its articles of association. Part of the authorised capital can remain unissued.

Basel II (Basel Capital Accord)
Basel II - short for the new Basel Capital Accord - lays down new guidelines for determining the minimum solvency requirements for banks. The main change in these guidelines is a new system for weighting the risks run by banks in their loans to retail and corporate customers. The objective of Basel II is to improve the soundness of the financial system.

Capital coverage ratio
Available capital divided by required capital.

Risk-adjusted return on capital (RAROC)
Measures performance on a risk-adjusted basis. Calculated as the economic return divided by economic capital. RAROC helps determine if a company has the right balance between capital, returns and risk. The central concept in RAROC is economic capital: the amount of capital a company should put aside needed based on the risk it runs.

Flight Capital
Money that flows offshore and likely never returns. Flight is exacerbated by a lack of confidence as government grows without bounds.

Risk Capital
Money put up by ordinary shareholders, an individual entrepreneur or venture capitalist that will be lost if the enterprise fails.

Volatility term structure
The volatility term structure is the variation of implied volatility with time to maturity.

Term structure of interest rates
The relationship between interest rates and their maturities.

Structured settlement
An agreement in settlement of a lawsuit involving specific payments made over a period of time. Property and casualty insurance companies often buy life insurance products to pay the costs of such settlements.

Structured portfolio strategy
A strategy in which a portfolio is designed to achieve the performance of some predetermined liabilities that must be paid out in the future.

Structured debt
Debt that has been customized for the buyer, often by incorporating unusual options.

Structured arbitrage transaction
A self-funding, self-hedged series of transactions that usually utilize mortgage securities as the primary assets.

Liquidity theory of the term structure
A biased expectations theory that asserts that the implied forward rates will not be a pure estimate of the market's expectations of future interest rates because they embody a liquidity premium.

Flat Organisational Structure
An organisation where there is less distance between the higher and lower levels within the hierarchy. This involves a shorter chain of command and usually, a wider span of control.

SWOT analysis
A SWOT analysis assesses the strenghts, weaknesses, opportunities and threats of a certain entity. Thus far, it is a common approach to formulating firm strategy via assessments of firm capabilities in relation to the market

Fundamental analysis
A method of research that studies basic financial information to forecast profits, supply and demand, industry strength, management ability, and other intrinsic matters affecting a stock's market value and growth potential.

Vertical analysis
The process of dividing each expense item in the income statement of a given year by net sales to identify expense items that rise faster or slower than a change in sales.

Technical analysis
Security analysis that seeks to detect and interpret patterns in past security prices.

Sensitivity analysis
Analysis of the effect on a project's profitability due to changes in sales, cost, and so on.

Scenario analysis
The use of horizon analysis to project bond total returns under different reinvestment rates and future market yields.

Regression analysis
A statistical technique that can be used to estimate relationships between variables.

Multiple-discriminant analysis (MDA)
Statistical technique for distinguishing between two groups on the basis of their observed characteristics.

Mean-variance analysis
Evaluation of risky prospects based on the expected value and variance of possible outcomes.

Break-even analysis
An analysis of the level of sales at which a project would make zero profit.

Cluster analysis
A statistical technique that identifies clusters of stocks whose returns are highly correlated within each cluster and relatively uncorrelated between clusters. Cluster analysis has identified groupings such as growth, cyclical, stable and energy stocks.

Common-base-year analysis
The representing of accounting information over multiple years as percentages of amounts in an initial year.

Common-size analysis
The representing of balance sheet items as percentages of assets and of income statement items as percentages of sales.

Comparative credit analysis
A method of analysis in which a firm is compared to others that have a desired target debt rating in order to infer an appropriate financial ratio target.

Credit analysis
The process of analyzing information on companies and bond issues in order to estimate the ability of the issuer to live up to its future contractual obligations.

Design Failure Mode and Effects Analysis (DFMEA)
An analytical technique used by a design responsible engineer/team as a means to assure, to the extent possible, that potential failure modes and, their associated causes/mechanisms have been considered and addressed.