CONCEPT BUILDING ASSIGNMENT

1. Account receivable and payables. Accounts receivable is money owed to a business by its clients and shown on its balance sheet as an asset Accounts payable is money owed by a business to its suppliers shown as a liability on a company's balance sheet.

2. Amortization

Amortization is the process of decreasing or accounting for, an amount over a period.

The paying off of debt in regular installments over a period of time.

3. Return The total gain or lost experienced on an investment over a given period of time; calculated by dividing the asset's cash distribution during the period , plus change in value, by its beginning - of - period investment value.

4. Bond indenture A legal document that specifies both the rights of the bond holders and the duties of the issuing corporation.

5. Current assets Short term assets, expected to be converted into cash with in 1 year or less.

6. Risk The chance of financial lost or , more formally the variability of returns associated with a given asset.

7. Stock dividend The payment, to existing owners of a dividend in the form of stock.

8. Stock split A method commonly used to lower the market price of a firm's stock by increasing number of share belonging to each share holder.

9. Earnings Per Share (EPS) Net income available to common stockholders dividend by the number of shares of common stock outstanding.

10. IRR ( Internal rate of return ) A discounted cash flow method for evaluating capital budgeting projects. The IRR is a discount rate that makes the present value of the cash inflows equal to the present value of the cash flows.

11. return on equity The amount of net income returned as a percentage of shareholders equity.

12. leverage Results from the use of fixed - cost assets or funds to magnify returns to the firm's owners.

13. liquidity The ability to sell an asset at a reasonable price on short notice.

14. marketable security Short-term debt instruments such as U.S treasury bills, commercial paper, and negotiable certificates of deposit issued by government, business, and financial institutions, respectively.

15. portfolio A collection, or group, of assets.

16. Retained Earnings

The percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt

17. treasury bills Short term obligations of the federal government.

18. lock box Lockbox banking is a service offered to organizations by commercial banks that simplifies collection and processing of account receivables by having those organizations' customers' payments mailed directly to a location accessible by the bank.

19. ROI

A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments.

20. Sinking fund A required annual payment designed to amortize a bond or preferred stock issue.

21. Capital budgeting The process of evaluating and selecting long-term investments those are consistent with the firms goal of maximizing owner wealth.

22. Capital rationing The financial situation in which a firm has only a fixed number of dollars/ taka available for capital expenditures, and numerous projects complete for these dollars.

23. Junk bond A high-risk, high-yield bond used originally to finance mergers, lever-aged buyouts, and troubled companies.

24. Zero coupon bond Bonds that pay no annual interest but are sold at a discount below par, thus providing compensation to investors in the form of capital appreciation.

25. Yield to maturity The rate of return earned on a bond if it is bought at a given market price and held to maturity.

26. Right share

A security giving stockholders entitlement to purchase new shares issued by the corporation at a predetermined price (normally less than the current market price) in proportion to the number of shares already owned.

27. Investment company

An investment company is a company whose main business is holding securities of other companies purely for investment purposes. The investment company invests money on behalf of its shareholders who in turn share in the profits and losses.

28. Deflation Actual declining prices.

29. Debenture A long-term unsecured corporate bond. Debentures are usually issued by large firms having excellent credit ratings in the financial community.

30. Break even Break-even (or break even) is the point of balance between making either a profit or a loss

31. Cost of capital The cost of alternative sources of financing to the firm.

32. hybrid security A form of debt or equity financing that possesses characteristics of both debt and equity financing.

33. Leasing the process by which a firm can obtain the use of certain fixed assets for which it must make a series of contractual , periodic, task - deductable payments .

34. Salvage value The market price of a capital asset at the end of a specified period. In a capital budgeting decision, it is also the current market price of an asset being considered for replacement.

35. Cash flow The actual net cash .as opposed to accounting net income, which flows into or out of the firm during a specified period; equal to net income plus depreciation and other noncash expenses.

36. Financial statement A financial statement is a formal record of the financial activities of a business, person, or other entity.

37. Bonus share

A bonus share is a free share of stock given to current shareholders in a company, based upon the number of shares that the shareholder already owns.

38. Financial institution An intermediary that channels the saving of individuals, businesses, and governments into loans or investments.

39. Financial instrument

A financial instrument is a tradable asset of any kind; either cash, evidence of an ownership interest in an entity, or a contractual right to receive or deliver cash or another financial instrument.

40. Financial market Forums in which suppliers of funds and demanders of funds can transact business directly.

41. Financial derivatives A derivative is a financial instrument which derives its value from the value of underlying entities such as an asset, index, or interest rateit has no intrinsic value in itself.

42. Financial engineering Financial engineering is a multidisciplinary field involving financial theory, the methods of engineering, the tools of mathematics and the practice of programming. It has also been defined as the application of technical methods, especially from mathematical finance and computational finance, in the practice of finance.

43. Shares A corporation divides its capital into shares, which are offered for sale to raise capital, termed as issuing shares. Thus, a share is an indivisible unit of capital, expressing the contractual relationship between the company and the shareholder.

44. Working capital Current assets, which represent the portion of investment that circulates from one form to another in the ordinary conduct of business.

45. Corporate finance

Corporate finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make these decisions

46. Residual owners A way to refer to shareholders in a corporation which reinforces the fact that if the company goes out of business; they will only get what's left over after everyone else is paid.

47. Time value of money The time value of money is the value of money with a given amount of interest earned or inflation accrued over a given amount of time.

48. Annuity A series of consecutive payments or receipts of equal amount.

49. Preemptive right The right of current common stockholders to maintain their ownership percentage on new issues of common stock

50. Capital gain The profit from the sale of a capital asset for more than its purchase price.