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24 Cards in this Set
- Front
- Back
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10-K
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A comprehensive report summarizing a company's performance; it must be submitted annually to the SEC. Typically, the 10-K is more detailed than the annual report and includes information such as company history, organizational structure, equity, holdings, earnings per share, and subsidiaries.
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401(k)
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A qualified plan established by employers by which eligible employees can make salary deferral contributions on a posttax and/or pretax basis. Employers may make matching or nonelective contributions to the plan on behalf of eligible employees and may add a profit-sharing feature to the plan. Earnings accrue on a tax-deffered basis.
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403(b), TSA
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A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan for employees of public schools, certain tax-exempt organizations, and certain ministers. 403(b) plan accounts can be any of the following types: (1) an annuity contract, which is provided through an insurance company; (2) a custodial account, which is invested in mutual funds; or (3) a retirement account set up for church employees. Generally, retirement income accounts can invest in either annuities or mutual funds. Very similar to 401(k) plans.
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Absolute return
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The return an asset achieves over a certain period of time; it considers appreciation depreciation (expressed as a percentage) of the asset, which is usually a stock or a mutual fund. Absolute return differs from relative return because it looks only at an asset's return; it does not compare returns to any other measure or benchmark.
Generally, mutual funds seek returns that are better than those of their peers, the fund category, and/or the market as a whole. This type of fund management is referred to as a relative return approach to fund investing. Absolute return funds seek positive returns by employing investment strategies that often are not permitted in traditional mutual funds, such as short selling, futures, options, derivatives, arbitrage, leverage, and unconventional assets... a hedge fund. |
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Accounts payable
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An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors; it is found on the balance sheet under current liabilities. Accounts payable often are referred to as "payables."
Accounts payable debts must be paid off within a specified period to avoid default.A short-term IOU obligation. |
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Accounts Payable Turnover Ratio
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A short-term liquidity measure used to quantify the rate at which a company pays off its accounts payable to suppliers. The accounts payable turnover ratio is calculated by taking the total purchases made from suppliers and dividing it by the average accounts payable during the same period.
The measure reveals how many times per period a company pays its average payable amount. A falling turnover ratio is a sign that the company is taking longer to pay off its suppliers, and vice-versa. |
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Accounts Receivable
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Money owed by customers to vendors in exchange for good or services rendered. Receivables usually come in the form of operating lines of credit and are usually due within a relatively short period, ranging from a few days to a year. On a balance sheet, AR often is recorded as an asset because it represents cash legally owned by a customer.
When a company has receivables, that means that it has made a sale but has not collected the money from the purchaser yet. |
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Accrual Accounting
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An accounting method that measures the performance and status of a company of when cash transactions occur; financial transactions and events are recognized by matching revenues to expenses (the matching principle) at the time when the transaction occurs rather than when the payment is actually made (or received). This allows current cash inflows and outflows to be combined with expected future cash inflows and outflows to provide a more accurate picture of the company's current financial condition. Accrual accounting is the standard accounting practice for most big companies. It is the opposite of cash accounting, which recognizes transactions only when there is an exchange of cash.
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Accrued Expense
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An accounting expense (current liability) recognized on the company's books before it actually is paid for. Such expenses are typically periodic and are recorded on a company's balance sheet because of the high probability that they ultimately will be collected.
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Accrued Interest
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(1) A term used to describe an accrual accounting method when interested from a payable or a receivable has been recognized but not yet paid or received. Accrued interest occurs as a result of the difference in the timing of cash flows and the measurement of those cash flows. (2) Interest that has accumulated on a bond since the last interest payment up to but not including the settlement date.
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Acid-Test Ratio
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A stringent test to determine whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory; the acid-test ratio is far more strenuous than the working capital ratio because the working capital ratio allows for the inclusion of inventory assets.
Companies with ratios under 1 cannot pay their current liabilities. If the acid-test ratio is much lower than the working capital ratio, this means current assets are highly dependent on inventory. |
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Alpha
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(1) A measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance with a benchmark index. The excess return of the fund relative to the return of the benchmark index is the funds alpha. (2) The abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium such as the capital asset pricing model (CAPM).
(1) Alpha is one of the five technical risk measures that are used in modern portfolio theory (MPT); the others are beta, standard deviation, R-squared, and the Sharpe ratio. These indicators help investors determine the risk-reward profile of a mutual fund. Simply stated, alpha often is considered to represent the value that a portfolio manager adds to or subtracts from a fund's return. A positive alpha of 1.0 means the fund has outperformed the benchmark index by 1%. (2) If a CAPM analysis estimates that a portfolio should earn 10% on the basis of the risk of that portfolio yet the portfolio actually earns 15%, the portfolio's alpha would be 5%. The 5% is the excess return above the predicted CAPM return. |
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American Deposit Receipt (ADR)
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A negotiable certificate issued by a U.S. bank representing a specified number of shares in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by U.S. financial institutions overseas. ADRs help reduce administrative and duty costs that otherwise would be levied on each transaction.
ADRs are an excellent way to buy shares in a foreign company and realize any dividends and capital gains in U.S. dollars. However, ADRs do not eliminate the currency and economic risks for the underlying shares in another country. For example, dividend payments in a foreign currency would be converted to U.S. dollars, net of any conversion expenses or foreign taxes. |
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American Stock Exchange (AMEX)
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The third-largest stock exchange by trading volume in the US. AMEX is located in New York City and handles about 10% of all securities traded in the United States.
Merged with Nasdaq. Today, almost all trading on the AMEX is in small-cap stocks, exchange-traded funds, and derivatives. |
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Amortization
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(1) The paying of debt in regular installments over a period of time. (2) The deduction of capital expenses over a specific period (usually over the asset's life). More specifically, a method of measuring the consumption of the value of intangible assets, such as a patent or copyright.
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Annual Percentage Yield (APY)
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The effective annual rate of return after considering the effect of compounding interest; APY assumes that funds will remain in the investment vehicle for a full 365 days.
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Annuity
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A financial product designed to pay out of stream of payments to the holder at a later point in time. Annuities are used primarily as a means of securing cash flow for an individual during his or her retirement years.
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Arbitrage
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The simultaneous purchase and sale of an asset to profit from a difference in the price; a trade that creates profit by exploiting price differences in identical or similar financial instruments in different markets. Arbitrage is the result of market inefficiencies; it is a mechanism that helps ensure that prices do not deviate substantially from fair value for long periods.
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Ask
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The price a seller is willing to accept for a security; also known as the offer price. The ask price quote also stipulates the number of shares offered at that price.
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Asset
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(1) A resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide future benefit. (2) A balance sheet item that reflects what a firm owns.
Something that can generate cash flow. Current asset means generating cash flow within one year. Fixed assets are expected to provide benefits beyond one year. |
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Asset Allocation
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An investment strategy that aims to balance risk and reward by spreading investments across three main asset classes--equities, bonds and cash--in accordance with an individual's goals, risk tolerance, and investment horizon.
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Asset Turnover
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The amount of revenue generated for every dollar's worth of assets; it is calculated by dividing revenue by assets.
Measures a firm's efficiency at using its assets to generate revenue. |
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Asset-Backed Security (ABS)
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A financial security backed by a loan, a lease, or receivables other than real-estate and mortgage-backed securities. Asset-backed securities are an alternative to investing in corporate debt.
An ABS is essentially the same thing as a mortgage-backed security except that the securities backing it are assets such as loans, leases, credit card debt, a companies receivables, or royalties but not mortgage-based securities. |
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Average Directional Index (ADX)
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The ADX is used in technical analysis as an objective value for the strength of a trend; it is nondirectional so that it will quantify trend strength whether it is up or down.
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