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Finance

Open-end fund
Open-end fund: Open-end fund (or open-ended fund) is a collective investment scheme which
can issue and redeem shares at any time.

Closed-end fund
A closed-end fund (or closed-ended fund) is a collective investment scheme that has a fixed
number of shares which are not redeemable from the fund

Annuity
An annuity is a series of equal amount of cash flow at regular interval or at certain
times.

Accounts receivable
Accounts receivable is an asset that created by selling goods and service on
created. Money owed by customers (individuals or corporations) to another entity in
exchange for goods or services that have been delivered or used, but not yet paid
for.

Accounts payable
Accounts payable is a liability that created by buying goods and service on created.

Amortization
Amortization is the process of systematically writing off the cost of an intangible
asset to expand over its estimated useful life.

Intangible asset
Intangible assets in an asset representing certain legal rights and economic
relationship that it has no physical existence but is beneficial to the owner.

Trademark
A trademark is a unique symbol used by a company in marketing its product or
service

Liabilities
In general, a liability means that because of a past event, a business has a present
obligation to make a future payment. More precisely, liabilities are probable future
payments of assets or services that an entity is presently obligated to make as a
result of past transactions or events.

Depreciation
The process of allocating the total cost of a plant assets over an accounting period
or economic life is called depreciation.

Right share
An issue of securities offered only to existing or current stockholders. An issue of
rights to a company's existing shareholders that entitles them to purchase
additional shares directly from the company in proportion to their existing
shareholders.

Sinking fund
Sinking is a fund that is created out of profit to meet a particular future liability.

Equity
Equity is the difference between a company's assets and its liabilities, more
precisely the resudal value of the assets of an entity that remains after deduction of
its liabilities.

Cash flow
Cash flow state that cash received and cash spent by the firm over a period of time.
The difference between the available cash at the beginning of an accounting period
and that at the end of the period. Cash comes in term of sales, loan proceeds,
investment and goes out to pay operating and direct appearance.

Cost of capital
The discount rate that is used to calculate the firms overall value.

Bond
The bond is a long-term debt instrument sold in the market to raise long-term
capital. It is an acknowledgement of a loan from the market.

Bond indenture
Bond indenture is a legal written document that specifies both the rights of
bondholders and the duties of the issuing corporation.

Bonus share
Bonus share is additional shares given to the current shareholders without any
additional cost base upon the number of shares that a shareholder owns.

Capital budget
The capital budget is the process of evaluating and selecting long term investment
that are consistent with the firms goal of maximizing owner wealth.

Capital market
A market that enables suppliers and demanders of long team funds to make
transactions. Capital markets are financial market for the buying and selling of long
term debt and equity. It is also called a plan for raising large and long term
instruments.

Dividend
Periodic cash dividend from the firm to its shareholders. A dividend is a payment
made by a corporation to its shareholders, usually a distribution of profit. When a
corporation earns a profit or surplus it can either re-invest in the business or it can
distribute to its shareholders.

Liquidity
Liquidity means its ability to payoff its short term debts when they become due.

Financial assets
The paper document which the owner has a certain amount of financial claim to the
issuer is called financial assets. For example: common share, preferred shares and
debenture.

Leverage
Results from the use of fixed cost assets or funds to magnify returns to the firms
owners.

Money market
The money market is a financial relationship created between suppliers and
demanders of short-term funds.

Return on investment
The overall effectiveness of management in generating profits with its available
assets is called return on investment.

Retained earnings
It is the amount of net profit after distribution of dividend to the shareholders.

Investment
Investment is the commitment of money or capital to purchase financial
instruments or other assets in order to gain profitable return in the form of interest,
income or appreciation of the value of instruments.

Return on equity
It measures the return earned on the common stockholder investment in the firm. It
measures a firm efficiency at generating profit from every unit of shareholder
equity. ROE shows how well a company uses an investment fund to generate
earnings growth.

Bankers' acceptance
Bankers acceptance is an assurance of acceptance given by the bank of the
importer to the bank of the exporter.

Commercial paper
Commercial paper is instruments (short term financial assets) with a face value sold
at a discount for a period of less than one year.

Junk bond
In finance junk bond is a bond that is rated below investment grade. Junk bond is
issued generally by smaller or relatively less well known firm to finance their
operations

Lockbox system
An area where important documents are stored in the event of the business
properly is destroyed or theft is attempt.

Debenture
Debenture is a debt instruments sold in the market to raise long term capital and
promise to repay it in future under clearly defined terms

Current yield
A measures of a bonds cash return for the year, calculated by dividing the bonds
annual interest payment by its current price.

Breakeven point
The level of business at which a company is making neither a profit nor a loss. At
this level total sales is equal to total production cost.

Working capital
Working capital is a financial metric which represents financial liquidity available to
a business, organization or entity.

Stock dividend
Distribution of additional shares to a firms stockholders.

Yield to maturity
Interest rate for which the present value of the bonds payments equals the price.

What is boucher? Write down the types of

voucher.

A document recording a liability or allowing for the payment of a liability, or debt. A

voucher would be held by the person or company who will receive payment. A small
printed piece of paper that entitles the holder to a discount or that may be
exchanged for goods or services.

Margin of safety
Margin of safety (safety margin) is the difference between the intrinsic value of
a stock and its market price. Another definition: In Break even analysis (accounting),
margin of safety is how much output or sales level can fall before a business
reaches its breakeven point.

Contribution margin
Contribution margin, or dollar contribution per unit, is the selling price per unit
minus the variable cost per unit. Consider a situation in which a business manager
determines that a particular product has a 35% contribution margin, which is below
that of other products in the company's product line. This figure can then be used to
determine whether variable costs for that product can be reduced, or if the price of
the end product could be increased.

Economic Order Quantity - EOQ

The Economic Order Quantity (EOQ) is the number of units that a company
should add to inventory with each order to minimize the total costs of inventory
such as holding costs, order costs, and shortage costs. The EOQ formula can be
modified to determine production levels or order interval lengths, and is used by
large corporations around the world, especially those with large supply chains and
high variable costs per unit of production.

COMPONENTS OF FINANCIAL STATEMENT

Balance Sheet
Income Statement
Cash Flow Statement
Notes to Accounts and Accounting Policies
Statement of changes in equity

IOU
I Owe yoU. Non-negotiable debt instrument addressed to a creditor, dated, and
signed by the borrower. It serves as an informal acknowledgment of a debt of a
specified sum but (depending on the terminology used) may or may not serve as an
evidence of debt in a court.

Financial leverage
Financial leverage refers to the use of debt to acquire additional assets.
Financial leverage is also known as trading on equity. The use of borrowed
money to increase production volume, and thus sales and earnings. It is measured
as the ratio of total debt to total assets. The greater the amount of debt, the greater
the financial leverage.

Common stock
A security that represents ownership in a corporation. Holders of common stock
exercise control by electing a board of directors and voting on corporate policy.
Common stockholders are on the bottom of the priority ladder for ownership
structure. In the event of liquidation, common shareholders have rights to a
company's assets only after bondholders, preferred shareholders and other
debtholders have been paid in full.

'Required Rate Of Return

DEFINITION of 'Required Rate of Return - RRR' The minimum annual percentage
earned by an investment that will induce individuals or companies to put money
into a particular security or project. The required rate of return (RRR) is used in
both equity valuation and in corporate finance.

Risk premium
Risk premium is the minimum amount of money by which the expected return on
a risky asset must exceed the known return on a risk-free asset, or the expected
return on a less risky asset, in order to induce an individual to hold the risky asset
rather than the risk-free asset.

Unlevered Company
An Unlevered Company is a company that has no debt. When a company is
unlevered it has zero Financial Leverage making it less risky; however becoming an
unlevered company should not be the goal for business owners or managers. If a
firm can borrow funds and reinvest those funds into positive NPV projects then it
should. The goal of any firm should be to increase the wealth of the owners so a
firm usually should accept any project that would increase the owners wealth even
if it requires taking on debt.

'Debt Issue'
DEFINITION of 'Debt Issue' A fixed corporate or government obligation, such as a
bond or debenture. A debt issue is a financial obligation that allows the issuer to
raise funds by promising to repay the lender at a certain point in the future and in
accordance with the terms of the contract. Debt issues include notes, bonds,
certificates, mortgages, leases or other agreements between the issuer (the
borrower) and lender. Debt issues, such as bonds, are issued by corporations to
raise money for certain projects or to expand into new markets.

Coupon rate
Coupon Rate of a Bond A bond is a form of debt that is usually issued by
governments and Corporation s. The coupon rate is simply the annual interest rate
of the bond and therefore determines the annual interest payments. Issuers usually
set coupon rates just high enough to induce investors to purchase the bonds at par
value (face value). The annual interest payments are determined by multiplying the
coupon rate by the face value

Leverage
The degree to which an investor or business is utilizing borrowed money.
Companies that are highly leveraged may be at risk of bankruptcy if they are unable
to make payments on their debt; they may also be unable to find new lenders in the
future. Leverage is not always bad, however; it can increase the shareholders'
return on investment and often there are tax advantages associated with borrowing.
also called financial leverage. Mary uses $400,000 of her cash to purchase 40
acres of land with a total cost of $400,000. Mary is not using financial leverage.
Sue uses $400,000 of her cash and borrows $800,000 to purchase 120 acres of
land having a total cost of $1,200,000. Sue is using financial leverage. Sue is
controlling $1,200,000 of land with only $400,000 of her own money.
If the properties owned by Mary and Sue increase in value by 25% and are then

sold, Mary will have a $100,000 gain on her $400,000 investment, a 25% return.
Sue's land will sell for $1,500,000 and will result in a gain of $300,000. Sue's
$300,000 gain on her $400,000 investment results in Sue having a 75% return.
When assets increase in value leverage works well.
When assets decline in value the use of leverage works against you.

Shares outstanding are all the shares of a corporation or financial asset that have
been authorized, issued and purchased by investors and are held by them. They
have rights and represent ownership in the corporation by the person that holds the
shares

bondholder
A bondholder is a person who owns a bond issued by a borrower, typically a
company or a government.

How it works/Example:
A bond represents a loan agreement between an issuer and an investor, and the terms of the bond
obligate the issuer to repay the borrowed amount (the principal) by a specific date. The investor
(the bondholder) usually earns a specific amount of interest on a semiannual basis.
Bondholders can buy and sell their bonds on the bond market.
The owner of a government or corporate bond. Being a bondholder is often
considered safer than being a shareholder because if a company liquidates, it must
pay its bondholders before it pays its shareholders. Being a bondholder entitles one
to receive regular interest payments, if the bond pays interest (usually semiannually
or annually), as well as a return of principal when the bond matures.

Optimal capital structure

The best debt-to-equity ratio for a firm that maximizes its value. The optimal capital
structure for a company is one which offers a balance between the ideal debt-toequity range and minimizes the firm's cost of capital. In theory, debt financing
generally offers the lowest cost of capital due to its tax deductibility. However, it is
rarely the optimal structure since a company's risk generally increases as debt
increases.
A firm finances its activities using funds from debt and equity. Debt refers to loans
the firm secures from outside sources. Equity refers money the firm's owners or
stockholders invest in the firm. A firm's capital structure is its ratio of long-term debt

to equity. An optimal capital structure is the best debt-to-equity ratio for the firm,
which minimizes the cost of financing and maximizes the value of the firm.