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14 Cards in this Set
- Front
- Back
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Working Capital Management |
Financing and management of current assets of the firm. The financial manager determines the mix between temporary and permanent " current assets" and the nature of the financing arrangement. |
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Self-Liquidating Assets |
Assets that are converted into cash within the normal operating cycle of the firm. An example is the purchase and sale of seasonal inventory. |
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Permanent Current Assets |
Current assets that will not be reduced or converted into cash within the the normal cycle of the firm. Though from a strict accounting standpoint the assets should be removed from the current assets category, they generally are not. |
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Temporary Current Assets |
Current assets that will be reduced or converted into cash within the normal operating cycle of the firm. |
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Level Production |
Equal monthly production used to smooth out production schedules and employ manpower and equipment more efficiently and at a lower cost. |
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Point of Sale Terminals |
Computer terminals in retail stores that either allow digital input or use optical scanners. These terminals may be used for inventory control purposes. |
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Term Structure of Interest Rates (Yield Curve) |
The term structure shows the relative level of short-term and long-term interest rates at a point in time. |
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Yield Curve |
A curve that shows interest rates at a specific point in time for all securities having equal risk but different maturity dates. Usually, government securities are used to construct such curves. The yield curve is also referred to as the term structure of interest rates. |
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Liquidity Premium Theory |
This theory indicates that long-term rates should be higher than short term rates. The premium of long term rates over short term rates exists because short term securities have a greater liquidity, and therefore, higher rates have to be offered to potential long term bond buyers to entice them to hold these less liquid and more price sensitive securities. |
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Market Segmentation Theory |
A theory that Treasury securities are divided into market segments by various financial institutions investing in the market. The changing needs, desires, and strategies of these investors tend to strongly influence the nature and relationship of short-term and long-term interest rates. |
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Expectations Hypothesis |
The hypothesis maintains that the yields on long-term securities are a function of short-term rates. The result of the hypothesis is that, when long-term rates are much higher than short-term rates, the market is saying it expects short-term rates to rise. Conversely when long-term rates are lower than short-term rates, the market is expecting short-term rates to fall. |
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Basis Points |
One Basis Point equals 1/100 of 11 percent |
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Expected Value |
A representative value from a probability distribution arrived at by multiplying each outcome by the associated probability and summing up the values. |
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Tight Money |
A term to indicate time periods in which financing may be difficult to find and interest rates may be quite high by normal standards |
