Vocabulary List For Corporate Finance

Front 1

Acceleration Clause

Back 1

Provision, normally present in an indenture agreement, mortgage or other contract, that the unpaid balance is to become due and payable if specified events of default should occur.

Such events include failure to meet interest, principal or sinking fund payments; insolvency; and nonpayment of taxes on mortgaged property.

Front 2

Accounts Payable

Back 2

Amounts owing on open account to creditors for goods and services.

Analysts look at the relationship of accounts payable to purchases for indications of sound day-to-day financial management.

Front 3

Accounts Receivable

Back 3

Money owed to a business for merchandise or services sold on open account, a key factor in analyzing a company's liquidity-- its ability to meet current obligations without additional revenues.

Front 4

Accrual Basis

Back 4

Accounting method whereby income and expense items are recognized as they are earned or incurred, even though they may not have been received or actually paid in cash.

Front 5

Adjustable Rate Mortgage (ARM)

Back 5

Mortgage agreement between a financial institution and a real estate buyer stipulating predetermined adjustments of the interest rate at specified intervals. Mortgage payments are tied to some index outside the control of the bank or savings and loan institution. Adjustments are made regularly, usually at intervals of one, three, or five years. In return for taking some of the risk of a rise in interest rates, borrowers get lower rates at the beginning of the ARM than they would if they took out a fixed rate mortgage covering the same term.

(A homeowner who is worried about sharply rising interest rates should probably choose a fixed rate mortgage, whereas one who thinks rates will rise modestly, stay stable or fall should choose an adjustable rate mortgage)

Front 6

Alpha (coefficient definition)

Back 6

Coefficient measuring the portion of an investment's return arising from specific (nonmarket risk). In other words, alpha is a mathematical estimate of the amount of return expected from an investment's inherent values, such as the rate of growth in earnings per share.

Front 7

American Depository Receipt

Back 7

Receipt for the shares of a foreign-based corporation held in the vault of a US bank and entitling the shareholder to all dividends and capital gains.

Front 8

Amortization

Back 8

Accounting procedure that gradually reduces the cost value of a limited life or intangible asset through periodic charges to income.

Also refers to the reduction of debt by regular payments of interest and principal sufficient to pay off a loan by maturity.

Front 9

Annuity

Back 9

Form of contract sold by life insurance companies that guarantees a fixed or variable payment to the annuitant at some future time, usually retirement.

(There are fixed and variable annuities)

Front 10

Arbitrage

Back 10

Profiting from differences in price when the same security, currency, or commodity is traded on two or more markets.