Simple compound growth method

Similar financial terms

Simple moving average
The mean, calculated at any time over a past period of fixed length.

Simple linear trend model
An extrapolative statistical model that asserts that earnings have a base level and grow at a constant amount each period.

Simple linear regression
A regression analysis between only two variables, one dependent and the other explanatory.

Simple interest
Interest calculated only on the initial investment.

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

Realized compound yield
Yield assuming that coupon payments are invested at the going market interest rate at the time of their receipt and rolled over until the bond matures.

Compound interest
Interest paid on previously earned interest as well as on the principal.

Compound option
Option on an option.

Compounding
The process of accumulating the time value of money forward in time. For example, interest earned in one period earns additional interest during each subsequent time period.

Compounding frequency
The number of compounding periods in a year. For example, quarterly compounding has a compounding frequency of 4.

Compounding period
The length of the time period (for example, a quarter in the case of quarterly compounding) that elapses before interest compounds.

Continuous compounding
The process of accumulating the time value of money forward in time on a continuous, or instantaneous, basis. Interest is earned continuously, and at each instant, the interest that accrues immediately begins earning interest on itself.

Growth in earnings per share
A ratio comparing current earnings per share to the same ratio in a base year; it is used to track rates of growth for the economy.

Growth in sales
A ratio comparing sales levels to sales in a base year; it identifies the percentage of increase in volume.

Sustainable growth rate
Maximum rate of growth a firm can sustain without increasing financial leverage.

Present value of growth opportunities (PVGO)
The net present value (NPV) of investments the firm is expected to make in the future.

Net present value of growth opportunities
A model valuing a firm in which net present value of new investment opportunities is explicitly examined.

Constant-growth model
Also called the Gordon-Shapiro model, an application of the dividend discount model which assumes (a) a fixed growth rate for future dividends and (b) a single discount rate.

Harrod-Domar growth model
An economic model which maintains that the growth rate of GDP depends upon the level of savings and the capital output ratio.

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.

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.

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 / 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.