Financial Terms related to Term This document is part of the valuable contents available at www.ftpall.com, a free online glossary with more than five thousand financial and business terms. This document can be copied and distributed freely Find thousands of financial terms at www.ftpall.com respecting its original format. It is forbidden its transcription, translation or change on its format without authorization of its author or editor. TERM Aftermarket • Refers to trading in the secondary market following a new securities issuance. Coefficient of determination • A measure of the goodness of fit of the relationship between the dependent and independent variables in a regression analysis; for instance, the percentage of variation in the return of an asset explained by the market portfolio return. Cost of long term debt • The after tax cost today of raising long-term funds through borrowing. Credit terms • The terms of sale for customers who have been extended credit by the firm. Deterministic models www.ftpall.com 2|Page • Liability-matching models that assume that the liability payments and the asset cash flows are known with certainty. Related: Compare stochastic models Disintermediation • It means by-passing the banks. It refers to corporations borrowing directly from institutions or individuals. Disintermediation occurs when corporations issue bonds or commercial paper instead of taking a bank loan. Similarly, individual savers can disintermediate by putting money in mutual funds directly instead of using checking and savings accounts at the banks. Find thousands of financial terms at www.ftpall.com • Withdrawal of funds from a financial institution in order to invest them directly. Euro medium term note • Euro-MTN. A non-underwritten Euronote issued directly to the market. Euro-MTNs are offered continuously rather than all at once as a bond issue is. Most Euro-MTN maturities are under five years. Financial intermediaries • Institutions that provide the market function of matching borrowers and lenders or traders. Intermarket sector spread • The spread between the interest rate offered in two sectors of the bond market for issues of the same maturity. Intermarket spread swaps • An exchange of one bond for another based on the manager's projection of a realignment of spreads between sectors of the bond market. Intermarket trading system • Is the network which links the trading floors of several registered exchanges. It encourages competition in issues listed on the American or New York Stock www.ftpall.com 3|Page Exchanges with the other participating regional exchanges. The competitive edge occurs if there is a better price out in the network than on a particular exchange. If so, then a broker or market maker can execute at that better price. Intermediate cash inflows • Cash inflows received before the termination of a project. Intermediate corporate bonds • Are investment grade notes and bonds issued by corporations. The maturities Find thousands of financial terms at www.ftpall.com range between 1 to 10 years. These securities encompass banks, other financial institutions, and industrial issuers. Intermediate term • Typically 1-10 years. Intermediation • Investment through a financial institution. Related: disintermediation. Liquidity theory of the term structure • A biased expectations theory that asserts that the implied forward rates will not be a pure estimate of the market's expectations of future interest rates because they embody a liquidity premium. Long term • In accounting information, one year or greater. Long term assets • Value of property, equipment and other capital assets minus the depreciation. This is an entry in the bookkeeping records of a company, usually on a cost basis and thus does not necessarily reflect the market value of the assets. • On the balance sheet, the value of a company's property, equipment and other capital assets, minus depreciation. These are usually recorded at cost and so do not www.ftpall.com 4|Page necessarily reflect the market value of the assets. Long term care ltc insurance • Coverage available on an individual or group basis to provide medical and other services to patients who need constant care in their own home or in a nursing home. Long term debt • A contractual liability between the two parties, the borrower (issuer) and the lender (saver). Examples include bonds and debentures. Find thousands of financial terms at www.ftpall.com • An obligation having a maturity of more than one year from the date it was issued. Also called funded debt. • Often companies need more funds to support their activities than their profits can provide. Therefore they will borrow money and make interest payments regularly. Long-term debt describes the debt amount due after one year or more. Long term debt ratio • The ratio of long-term debt to total capitalization. Long term debt to capitalization • A ratio that indicates a company's financial leverage. It is calculated by dividing long term debt by the capital available to the company. The available capital is the sum of long term debt, preferred stock and stocholders' equity. Long term debt to equity ratio • A capitalization ratio comparing long-term debt to shareholders' equity. Long term debt/capitalization • Indicator of financial leverage. Shows long-term debt as a proportion of the capital available. Determined by dividing long-term debt by the sum of long-term debt, preferred stock and common stockholder equity. www.ftpall.com 5|Page Long term financial plan • Financial plan covering two or more years of future operations. Long term financing • Financing with an initial maturity of more than one year. Long term liabilities • Amount owed for leases, bond repayment and other items due after 1 year. • Liabilities that will remain as debt for longer than one year, such as long term Find thousands of financial terms at www.ftpall.com borrowing • A company's liabilities for leases, bond repayments, and other items due in more than one year. Long term strategic financial plans • Planned financial actions and the anticipated financial impact of those actions over periods ranging from 2 to 10 years. Medium term notes • Abbreviated MTN. Unsecured, investment-grade senior debt securities of major corporations that are sold either on a continuous or an intermittent basis. MTNs are highly flexible debt instruments that can be structured to respond to market opportunities or to investor preferences. • A corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer. Investors can select from the following maturity bands: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years. • Continuously offered notes, having any or all of the features of corporate bonds and ranging in maturity from nine months out to 30 years. Bank deposit notes are a form of MTN. www.ftpall.com 6|Page Other long term liabilities • Value of leases, future employee benefits, deferred taxes and other obligations not requiring interest payments that must be paid over a period of more than 1 year. • A balance sheet item. Value of leases, future employee benefits, deferred taxes, and other obligations not requiring interest payments that must be paid over a period of more than one year. Secured short term financing Find thousands of financial terms at www.ftpall.com • Short-term financing (loans) that has specific assets pledged as collateral. Short term debt • All debt due in the next 12 months. This figure is found on the Balance Sheet under current liabilities. See also: Long-Term Debt. Short term financial management • Management of current assets and current liabilities. Short term financial plan • A financial plan that covers the coming fiscal year. Short term investment services • Services that assist firms in making short-term investments. Short term operating financial plans • Planned short-term financial actions and the anticipated financial impact of those actions. Short term self liquidating loan • An unsecured short-term loan in which the use to which the borrowed money is put provides the mechanism through which the loan is repaid. Short term solvency ratios www.ftpall.com 7|Page • Ratios used to judge the adequacy of liquid assets for meeting short-term obligations as they come due, including (1) the current ratio, (2) the acid-test ratio, (3) the inventory turnover ratio, and (4) the accounts receivable turnover ratio. Short term tax exempts • Short-term securities issued by states, municipalities, local housing agencies, and urban renewal agencies. Term bond Find thousands of financial terms at www.ftpall.com • A bond issue in which all bonds mature at the same time. • Often referred to as bullet-maturity bonds or simply bullet bonds, bonds whose principal is payable at maturity. Related: serial bonds • Is a newly issued municipal bond with one stated maturity. This compares to Serial Bonds. Term fed funds • Fed funds sold for a period of time longer than overnight. • Fed Funds sold for a period of time longer than overnight. Term insurance • Life insurance that provides protection for a specific period of time and does not accrue any cash value; term insurance is the least expensive and simplest form of life insurance. • Provides a death benefit only, no build-up of cash value. Term life insurance • A contract that provides a death benefit but no cash build-up or investment component. The premium remains constant only for a specified term of years, and the policy is usually renewable at the end of each term. www.ftpall.com 8|Page Term loan • Loan extended by a bank for more than the normal 90day period. A term loan might run five years or more. • A bank loan, typically with a floating interest rate, for a specified amount that matures in between one and ten years and requires a specified repayment schedule. Term loan agreement • A formal contract, ranging from a few to a few hundred pages, specifying the Find thousands of financial terms at www.ftpall.com conditions under which a financial institution has made a long-term loan. Term long term loan • A loan made by a financial institution to a business and having an initial maturity of more than one year. Term premiums • Excess of the yields to maturity on long-term bonds over those of short-term bonds. Term repo • Repo borrowings for a period longer than overnight; may be 7, 30, 60, or even 90 days. • A repurchase \agreement with a term of more than one day. • Are Repurchase Agreements which are negotiated or renegotiated (rolled over) for more than 1 day periods. These periods can be for multiple days, weeks, or sometimes, months. They are a form of borrowing/lending. Term structure • Term structure denotes the relation between interest rates and maturity. They are also referred to as the yield curve. Term structure of interest rates www.ftpall.com 9|Page • The relationship between the interest rate or rate of return (as measured by the yield to maturity on a bond) and the time to maturity for similar risk debt securities. • Relationship between \interest rates on bonds of different maturities usually depicted in the form of a graph often depicted as a yield curve. Harvey shows that inverted term structures (long rates below short rates) have preceded every recession over the past 30 years. Term structure of interest rates and volatility • Refers to the variability of short-term rates relative to longer-term rates. It has been Find thousands of financial terms at www.ftpall.com documented that short-term rates exhibit greater variability or volatility than long- term rates. However, longer-term instruments experience greater price sensitivity than short-term instruments for a given change in the underlying rate. A quick measure of this price sensitivity is provided by duration. Typically, debt instruments without option features, explicit or implicit, have greater duration with longer maturities. Zero coupon securities tend to have the greater price sensitivity relative to coupon paying securities. See Duration. Term to maturity • The time remaining on a bond's life, or the date on which the debt will cease to exist and the borrower will have completely paid off the amount borrowed. See: Maturity Term trust • A closed-end fund that has a fixed termination or maturity date. Terminal cash flow • The after tax nonoperating cash flow occurring in the final year of a project, usually attributable to liquidation of the project. Terminal loss • This is a positive balance remaining in a capital cost allowance (CCA) pool (asset www.ftpall.com 10 | P a g e class) following the disposal of the last physical asset in the class. A terminal loss is a deductible non-cash expense that gives rise to a tax shield benefit for the firm equal to the amount of the terminal loss multiplied by the corporate tax rate. Terminal value • The value of a bond at maturity, typically its par value, or the value of an asset (or an entire firm) on some specified future valuation date. • Refers to the financial remainder, residual amount, or end-of-process (life) valuation. Some examples are the remaining value of an expired option or hedge Find thousands of financial terms at www.ftpall.com position. It may also refer to a non-discounted or discounted financial value for an investment. Terms of sale • Conditions on which a firm proposes to sell its goods services for cash or credit. Terms of trade • The weighted average of a nation's export prices relative to its import prices. Unsecured short term financing • Short-term financing obtained without pledging specific assets as collateral.
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