Initial Outlay
The total dollar amount to begin a project.
Cost of Equity
How much it costs a firm (in percentage terms) to use equity financing.
... [Show More] From the investor's perspective, it is what they require given the riskiness/opportunity cost of the company. From the companies perspective, it is the same rate, but it is what it "costs" to attract those potential investors. It is the return they must give investors for them to invest with their company.
American Depository Receipts (ADRs)
Certificates issued by U.S. banks and traded on U.S. markets but represent shares of foreign stocks
Degree of Operating Leverage (DOL)
Business risk examines the %change in operating cash flow relative to the %change in quantity sold
Degree of Financial Leverage (DFL)
Financial Risk examines %change earnings per share relative to %change in OI (EBIT)
National Banking Act of 1863
Federal regulation to deal with "wildcat banking" (state-mandated remote and inaccessible banks not federally regulated)
Federal Reserve Act of 1913
Federal regulation to deal with bank runs and recessions; gave the 12 Federal Reserve banks the ability to print money to ensure economic stability. The Federal Reserve System created the dual mandate to maximize employment and keep inflation low.
Form S-1
Original prospectus (registration statement) filed with the SEC by firms prior to the sale of new securities to the public.
Net Present Value (NPV)
Capital budgeting with TVM to analyze the projected profitability. Difference between the present value of cash inflows and the present value of cash outflows over a period of time.
Internal Rate of Return (IRR)
Capital budgeting with TVM to evaluate the attractiveness of a project or investment. The discount rate that forces a project's NPV to equal zero.
Sarbanes-Oxley Act of 2002
Federal regulations resulting from corporate frauds such as Enron and designed to protect investors from fraud.
Securities Act of 1933
Federal regulation as a result of the Great Depression. Requires firms to register with the SEC to sell public securities.
Bank Holding Company Act of 1956
Federal regulation designed to protect the banking industry from competition.
Gram-Leach-Bliley Act of 1999
Repeals the last vestiges of the Glass-Stegall Act of 1933 and created new financial holding companies allowed to engage in underwriting, selling insurance and securities and conducting both commercial and merchant banking
Volcker Rule
A federal regulation that prohibits banks from conducting certain investment activities with their own accounts, and limits their ownership of and relationship with hedge funds and private equity funds, also called covered funds.
Form 10-Q
Quarterly report that publicly traded companies must file with the SEC
McFadden Act of 1927
Federal regulation designed to provide greater accessibility for bank customers.
Glass-Steagall Act of 1933
federal regulation to curb bank failures by separating commercial/consumer banks from investment banks
Degree of Combined Leverage (DCL)
=DOL * DFL; measure of the sensitivity of pre-tax profits to changes in sales.
Net Operating Profit After Taxes (NOPAT)
=EBIT (1-tax rate); measure of profit that excludes the costs and tax benefits of debt financing
Firm Analysis
1) Basic Data
2) Differences
3) Deepen Analysis
4) Cause + Cure
Cost of Capital
the rate of return a company must earn in order to meet the demands of its lenders and expectations of its equity holders
Current Yield
=investment's annual income (interest or dividends)/current security price; measure examines the current price of a bond, rather than looking at its face value.
Discounted Cash Flow (DCF)
Using TVM to forecast/estimate the present value of an investment/company based on its future cash flows
Flotation Costs
the transaction cost incurred when a firm raises funds by issuing a particular type of security
dividends in arrears
unpaid dividends on cumulative preferred stock; concern for common stock holders as common dividends can't be paid until arrears is paid off.
Beta
A measure of systematic security risk quantifies a security's price sensitive to changes in the market.
Rule 144A
Safe harbor for SEC to allow secondary trading of private securities to large accredited investors
fixed/pegged Exchange Rate
Currency matched to another currency
Managed Floating Exchange Rate
An exchange rate that is allowed to change (float) as a result of changes in currency supply and demand but at times is altered (managed) by governments via their buying and selling of particular currencies.
S+P 500
Standard and Poor's index designed to approximate total stock market; benchmarks against 500 companies how well the market performs overall
FINRA (Financial Industry Regulatory Authority)
Private corporation that acts as a self-regulatory organization for its members
Dodd-Frank Act of 2010
Federal regulation to regain control of financial institutions by the federal government after the 2008 meltdown; expanded authority over non-depository financial institutions
FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act of 1989)
Created requirements of banks issuing capital; anti-fraud tool to prosecute banks making intentionally bad loans and regulation of competency of the appraisers, supervisory standards, and accurate and full documentation.
SEC (Securities and Exchange Commission) 1934
enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets
Form 10-K
Annual comprehensive summary report of a company's performance that must be submitted to SEC [Show Less]