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Definition
| The ways people and organizations raise and allocate capital, use monetary resources and account for the risks involved. |
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| The process for and the analysis of making financial decisions in the business context. |
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| The places and processes that facilitate the trading of financial assets between investors |
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| Those who buy securities or other assets in hopes of earning a return and getting more money back in the future. |
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| The portion of company profits that are kept by the company rather than distributed to the stockholders as cash dividends |
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| The analysis and process of choosing securities and other assets to purchase |
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| The organizations that facilitate the flow of capital between investors and companies |
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| The use of finance theory in a global business environment |
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Definition
| A potential future negative impact to value and/or cash flows. It is often discussed in terms of the probability of loss and the expected magnitude of the loss. |
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| A general term for securities like stocks, bonds, and other assets that represent ownership in cash flow. |
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| Physical property like gold, machinery, equipment, or real estate. |
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Definition
| The places and processes that facilitate the trading of real assets. |
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| Time value of money (TVM) |
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Definition
| The theory and application of valuing cash flows at various points in time |
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Definition
| A retirement plan in which the employer sets aside money for the employees' retirement benefits |
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| Defined Contribution Plan |
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Definition
| A retirement plan in which the employee contributes money and directs its investment. The amount of retirement benefits is directly related to the amount of money contributed and the success of its investment. |
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| Individual Retirement Account (IRA) |
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Definition
| A self-sponsored retirement program. |
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Term
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Definition
| A defined contribution plan that is sponsored by corporate employers. |
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Term
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Definition
| A business entity that is not legally separate from its owner |
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Definition
| A situation in which a person's personal assets are at risk from a business liability |
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Definition
| An ownership interest in a business enterprise. |
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Term
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Definition
| Individuals who provide small amounts of capital and expert business advice to small firms in exchange for an ownership stake in the firm. |
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Definition
| Similar to angel investors except that they are organized as groups of investors and can provide larger amounts of capital |
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Definition
| A form of business organization where the partners own the business together and are personally liable for legal actions and debts of the firm. |
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Definition
| A company owned by a large number of stockholders from the general public |
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Term
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Definition
| A situation in which two taxes must be paid on the same income |
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Term
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Definition
| Limitation of a person's financial ability to a fixed sum or investment |
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Term
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Definition
| A metaphor used to illustrate how an individual pursuing his own interests also tends to promote the good of the community |
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Term
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Definition
| The difficulties that arise when a principal hires an agent and cannot fully monitor the agent's actions |
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Term
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Definition
| The opportunity to buy stock at a fixed price over a specific period of time |
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Term
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Definition
| The set of laws, policies, incentives, and monitors designed to handle the issues arising from the separation of ownership and control |
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Term
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Definition
| The legal duty between two parties where one party must act in the interest of the other party |
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Term
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Definition
| A special type of stock that is not transferable from the current holder to others until specific conditions are satisfied. |
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Term
| Common Stock and Paid-in-surplus |
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Definition
| Cash that common stockholders paid to the firm when it originally issued the stock |
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Term
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Definition
| The cumulative earnings the firm has reinvested rather than pay out as dividends |
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Term
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Definition
| The difference between a firm's current assests and current liabilities |
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Term
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Definition
| The extent to which debt securities are used by a firm |
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Term
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Definition
| The amount of debt versus equity financing to maintain on the balance sheet. |
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Term
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Definition
| Assets are listed on the balance sheet at the amount the firm paid for them |
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Term
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Definition
| Assets are listed at the amount the firm would get if it sold them. |
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Term
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Definition
| Net sales minus cost of goods sold |
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Term
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Definition
| Percentage of each dollar of taxable income that the firm pays in taxes |
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Term
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Definition
| The amount of additional taxes a firm must pay out for every additional dollar of taxable income it earns. |
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Term
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Definition
| The process of calculating and analyzing financial ratios to assess the firm's performance and to identify actions needed to improve firm performance |
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Term
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Definition
| Measure the relation between a firm's liquid or current assets and its current liabilities |
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Term
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Definition
| Measure how efficiently a firm uses its assets as well as its accounts payable |
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Definition
| Measure the extent to which the firm uses debt versus equity to finance its assets |
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Term
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Definition
| Ratios that relate a firm's stock price to its earnings and book value |
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Term
| DuPont System of Analysis |
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Definition
| An analytical method that uses the balance sheet and income statement to break the ROA and ROE ratios into component prices |
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Term
| Common-size Financial Statements |
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Definition
| Dividing all balance sheet amounts by total assets and all income statement amounts by net sales |
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Term
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Definition
| The growth rate a firm can sustain if it finances growth using only internal financing, that is, retained earnings growth. |
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Term
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Definition
| The growth rate a firm can sustain if it finances growth using both debt and internal financing such that the debt ratio remains constant |
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Term
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Definition
| Analzing firm performance by monitoring ratio trends |
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Term
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Definition
| Analyzing the performance of a firm against one or more companies in the same industry |
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Term
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Definition
| The cost of borrowing money denoted as a percent |
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Term
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Definition
| Interest earned only on the |
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Term
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Definition
| The process of finding present value by reducing future values using the discount, or interest, rate |
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Term
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Definition
| The interest rate used to discount future cash flow(s) to be present |
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Term
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Definition
| An approximation for the number of years it will take an investment to double in value |
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Term
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Definition
| A stream of level and frequent cash flows paid at the end of each time period-often referred to as an ordinary annuity |
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Term
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Definition
| Investment assets structured as perpetuities |
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Term
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Definition
| An annuity in which cash flows are paid at the beginning of each time period |
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Term
| Annual Percentage Rate (APR) |
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Definition
| The interest rate per period times the number of periods in a year |
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Term
| Effective Annual Rate (EAR) |
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Definition
| An interest rate that reflects annualizing with compounding figured in |
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Term
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Definition
| A loan in which the borrower pays interest and principal over time |
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Term
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Definition
| The balance yet to be paid on a loan |
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Term
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Definition
| Any securities that make fixed payments |
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Term
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Definition
| Legal contract describing the bond characteristics and the bondholder and issuer rights |
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Term
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Definition
| An issuer redeeming the bond before the scheduled maturity date. |
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Term
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Definition
| Current price that the bond sells for in the bond market |
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Term
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Definition
| Bonds issued by U.S. Government Agencies |
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