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trade-off theory

standard deviation: Square root of variance. Another measure of volatility.

statement of cash flows: Financial statement that shows the firm`s cash receipts and cash payments over a period of time.

stock dividend: Distribution of additional shares to a firm`s stockholders.

stock repurchase: Firm buys back stock from its shareholders.

stock split: Issue of additional shares to firm`s stockholders.

straight-line depreciation: Constant depreciation for each year of the asset`s accounting life.

strong-form efficiency: Market prices rapidly reflect all information that could in principle be used to determine true value.

subordinated debt: Debt that may be repaid in bankruptcy only after senior debt is paid.

sunk costs: Costs that have been incurred and cannot be recovered.

sustainable growth rate: Steady rate at which a firm can grow without changing leverage; plowback ratio ГЧ return on equity.

swap: Arrangement by two counter parties to exchange one stream of cash flows for another.

technical analysts: Investors who attempt to identify over- or undervalued stocks by searching for patterns in past prices.

tender offer: Takeover attempt in which outsiders directly offer to buy the stock of the firm`s shareholders.

terms of sale: Credit, discount, and payment terms offered on a sale.

trade-off theory: Debt levels are chosen to balance interest tax shields against the costs of financial distress.

treasurer: Manager responsible for financing, cash management, and relationships with financial markets and institutions.

treasury stock: Stock that has been repurchased by the company and held in its treasury.

underpricing: Issuing securities at an offering price set below the true value of the security.

underwriter: Firm that buys an issue of securities from a company and resells it to the public.

unique risk: Risk factors affecting only that firm. Also called diversifiable risk.

variable costs: Costs that change as the level of output changes.

variance: Average value of squared deviations from mean. A measure of volatility.

venture capital: Money invested to finance a new firm.

WACC: See weighted-average cost of capital.

warrant: Right to buy shares from a company at a stipulated price before a set date.

weak-form efficiency: Market prices rapidly reflect all information contained in the history of past prices.

weighted-average cost of capital (WACC): Expected rate of return on a portfolio of all the firm`s securities, adjusted for tax savings due to interest payments.

white knight: Friendly potential acquirer sought by a target company threatened by an unwelcome suitor.

workout: Agreement between a company and its creditors establishing the steps the company must take to avoid bankruptcy.

yield curve: Graph of the relationship between time to maturity and yield to maturity.

yield to maturity: Interest rate for which the present value of the bond`s payments equals the price.

zero-balance account: Regional bank account to which just enough funds are transferred daily to pay each day`s bills.