Definition of bottleneck

bottleneck

any object or facility whose processing speed is
sufficiently slow to cause the other processing mechanisms
in its network to experience idle time

Bottleneck

An operation in the midst of a manufacturing or service process in which the
required production level matches or exceeds the actual capacity.

Bottleneck

A resource whose capacity is unable to match or exceed that of the demand
volume required of it.

Limiting factor

The production resource that, as a result of scarce resources, limits the production of goods
or services, i.e. a bottleneck.

theory of constraints (TOC)

a method of analyzing the bottlenecks
(constraints) that keep a system from achieving
higher performance; it states that production cannot take
place at a rate faster than the slowest machine or person
in the process

Actuals

The physical commodity underlying a futures contract. Cash commodity, physical.

Blue-chip company

Large and creditworthy company.

Break-even time

Related: Premium payback period.

Cash flow from operations

A firm's net cash inflow resulting directly from its regular operations
(disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing
securities), calculated as the sum of net income plus non-cash expenses that were deducted in calculating net
income.

Cash flow matching

Also called dedicating a portfolio, this is an alternative to multiperiod immunization in
which the manager matches the maturity of each element in the liability stream, working backward from the
last liability to assure all required cash flows.

Cash flow time-line

Line depicting the operating activities and cash flows for a firm over a particular period.

Combination matching

Also called horizon matching, a variation of multiperiod immunization and cash
flow matching in which a portfolio is created that is always duration matched and also cash-matched in the
first few years.

Common stock/other equity

Value of outstanding common shares at par, plus accumulated retained
earnings. Also called shareholders' equity.

Company-specific risk

Related: Unsystematic risk

Concentration services

Movement of cash from different lockbox locations into a single concentration
account from which disbursements and investments are made.

Confidence level

The degree of assurance that a specified failure rate is not exceeded.

Corporate processing float

The time that elapses between receipt of payment from a customer and the
depositing of the customer's check in the firm's bank account; the time required to process customer
payments.

Cost company arrangement

Arrangement whereby the shareholders of a project receive output free of
charge but agree to pay all operating and financing charges of the project.

Debt capacity

Ability to borrow. The amount a firm can borrow up to the point where the firm value no
longer increases.

Debt service

Interest payment plus repayments of principal to creditors, that is, retirement of debt.

Debt service parity approach

An analysis wherein the alternatives under consideration will provide the firm
with the exact same schedule of after-tax debt payments (including both interest and principal).

Debt-service coverage ratio

Earnings before interest and income taxes plus one-third rental charges, divided
by interest expense plus one-third rental charges plus the quantity of principal repayments divided by one
minus the tax rate.

Demand deposits

Checking accounts that pay no interest and can be withdrawn upon demand.

Demand line of credit

A bank line of credit that enables a customer to borrow on a daily or on-demand basis.

Demand master notes

Short-term securities that are repayable immediately upon the holder's demand.

Demand shock

An event that affects the demand for goods in services in the economy.

Depository Trust Company (DTC)

DTC is a user-owned securities depository which accepts deposits of
eligible securities for custody, executes book-entry deliveries and records book-entry pledges of securities in
its custody, and provides for withdrawals of securities from its custody.

Diffusion process

A conception of the way a stock's price changes that assumes that the price takes on all
intermediate values. dirty price. Related: full price

Either/or facility

An agreement permitting a bank customer to borrow either domestic dollars from the
bank's head office or Eurodollars from one of its foreign branches.

Exact matching

A bond portfolio management strategy that involves finding the lowest cost portfolio
generating cash inflows exactly equal to cash outflows that are being financed by investment.

FHA prepayment experience

The percentage of loans in a pool of mortgages outstanding at the origination
anniversary, based on annual statistical historic survival rates for FHA-insured mortgages.

Financial objectives

objectives of a financial nature that the firm will strive to accomplish during the period
covered by its financial plan.

Full-service lease

Also called rental lease. Lease in which the lessor promises to maintain and insure the
equipment leased.

Funds From Operations (FFO)

Used by real estate and other investment trusts to define the cash flow from
trust operations. It is earnings with depreciation and amortization added back. A similar term increasingly
used is Funds Available for Distribution (FAD), which is FFO less capital investments in trust property and
the amortization of mortgages.

Hedging demands

demands for securities to hedge particular sources of consumption risk, beyond the usual
mean-variance diversification motivation.

Holding company

A corporation that owns enough voting stock in another firm to control management and
operations by influencing or electing its board of directors.

Income statement (statement of operations)

A statement showing the revenues, expenses, and income (the
difference between revenues and expenses) of a corporation over some period of time.

Information services

Organizations that furnish investment and other types of information, such as
information that helps a firm monitor its cash position.

Intercompany loan

Loan made by one unit of a corporation to another unit of the same corporation.

Intercompany transaction

Transaction carried out between two units of the same corporation.

International Banking Facility (IBF)

International Banking facility. A branch that an American bank
establishes in the United States to do Eurocurrency business.

In-house processing float

Refers to the time it takes the receiver of a check to process the payment and
deposit it in a bank for collection.

Just-in-time inventory systems

Systems that schedule materials/inventory to arrive exactly as they are
needed in the production process.

Level pay

The characteristic of the scheduled principal and interest payments due under a mortgage such that
total monthly payment of P&I is the same while characteristically the principal payment component of the
monthly payment becomes gradually greater while the monthly interest payment becomes less.

Level-coupon bond

Bond with a stream of coupon payments that are the same throughout the life of the bond.

Leveraged required return

The required return on an investment when the investment is financed partially by debt.

Market timer

A money manager who assumes he or she can forecast when the stock market will go up and down.

Match fund

A bank is said to match fund a loan or other asset when it does so by buying (taking) a deposit of
the same maturity. The term is commonly used in the Euromarket.

Matched book

A bank runs a matched book when the distribution of maturities of its assets and liabilities are equal.

Matching concept

The accounting principle that requires the recognition of all costs that are associated with
the generation of the revenue reported in the income statement.

Mismatch bond

Floating rate note whose interest rate is reset at more frequent intervals than the rollover
period (e.g. a note whose payments are set quarterly on the basis of the one-year interest rate).

Money market demand account

An account that pays interest based on short-term interest rates.

Multi-option financing facility

A syndicated confirmed credit line with attached options.

Non-financial services

Include such things as freight, insurance, passenger services, and travel.

Note issuance facility (NIF)

An agreement by which a syndicate of banks indicates a willingness to accept
short-term notes from borrowers and resell these notes in the Eurocurrency markets.

Objective (mutual fund)

The fund's investment strategy category as stated in the prospectus. There are
more than 20 standardized categories.

Open-market operation

Purchase or sale of government securities by the monetary authorities to increase or
decrease the domestic money supply.

Open-market purchase operation

A systematic program of repurchasing shares of stock in market
transactions at current market prices, in competition with other prospective investors.

Operationally efficient market

Also called an internally efficient market, one in which investors can obtain
transactions services that reflect the true costs associated with furnishing those services.

Other capital

In the balance of payments, other capital is a residual category that groups all the capital
transactions that have not been included in direct investment, portfolio investment, and reserves categories. It
is divided into long-term capital and short-term capital and, because of its residual status, can differ from
country to country. Generally speaking, other long-term capital includes most non-negotiable instruments of a
year or more like bank loans and mortgages. other short-term capital includes financial assets of less than a
year such as currency, deposits, and bills.

Other current assets

Value of non-cash assets, including prepaid expenses and accounts receivable, due
within 1 year.

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.

Other sources

Amount of funds generated during the period from operations by sources other than
depreciation or deferred taxes. Part of Free cash flow calculation.

Precautionary demand (for money)

The need to meet unexpected or extraordinary contingencies with a
buffer stock of cash.

Prepayment speed

Also called speed, the estimated rate at which mortgagors pay off their loans ahead of
schedule, critical in assessing the value of mortgage pass-through securities.

Price discovery process

The process of determining the prices of the assets in the marketplace through the
interactions of buyers and sellers.

Price-volume relationship

A relationship espoused by some technical analysts that signals continuing rises
and falls in security prices based on accompanying changes in volume traded.

Production payment financing

A method of nonrecourse asset-based financing in which a specified
percentage of revenue realized from the sale of the project's output is used to pay debt service.

Production-flow commitment

An agreement by the loan purchaser to allow the monthly loan quota to be
delivered in batches.

Real time

A real time stock or bond quote is one that states a security's most recent offer to sell or bid (buy).
A delayed quote shows the same bid and ask prices 15 minutes and sometimes 20 minutes after a trade takes place.

Required reserves

The dollar amounts based on reserve ratios that banks are required to keep on deposit at a Federal Reserve Bank.

Required return

The minimum expected return you would require to be willing to purchase the asset, that is,
to make the investment.

Required yield

Generally referring to bonds, the yield required by the marketplace to match available returns
for financial instruments with comparable risk.

Resistance level

A price level above which it is supposedly difficult for a security or market to rise.

Short-term investment services

services that assist firms in making short-term investments.

Speculative demand (for money)

The need for cash to take advantage of investment opportunities that may arise.

Speed

Related:prepayment speed

Support level

A price level below which it is supposedly difficult for a security or market to fall.

Swingline facility

Bank borrowing facility to provide finance while the firm replaces U.S. commercial paper
with eurocommercial paper.

Symmetric cash matching

An extension of cash flow matching that allows for the short-term borrowing of
funds to satisfy a liability prior to the liability due date, resulting in a reduction in the cost of funding liabilities.

Time decay

Related: theta.

Time deposit

Interest-bearing deposit at a savings institution that has a specific maturity.
Related: certificate of deposit.

Time draft

demand for payment at a stated future date.

Time premium

Also called time value, the amount by which the option price exceeds its intrinsic value. The
value of an option beyond its current exercise value representing the optionholder's control until expiration,
the risk of the underlying asset, and the riskless return.

Time until expiration

The time remaining until a financial contract expires. Also called time to maturity.

Time to maturity

The time remaining until a financial contract expires. Also called time until expiration.

Time value of an option

The portion of an option's premium that is based on the amount of time remaining
until the expiration date of the option contract, and that the underlying components that determine the value of
the option may change during that time. time value is generally equal to the difference between the premium
and the intrinsic value. Related: in-the-money.

Time value of money

The idea that a dollar today is worth more than a dollar in the future, because the dollar
received today can earn interest up until the time the future dollar is received.

Time-weighted rate of return

Related: Geometric mean return.

Times-interest-earned ratio

Earnings before interest and tax, divided by interest payments.

Transaction demand (for money)

The need to accommodate a firm's expected cash transactions.

Turnaround time

time available or needed to effect a turnaround.

Unleveraged required return

The required return on an investment when the investment is financed entirely
by equity (i.e. no debt).

Unmatched book

If the average maturity of a bank's liabilities is less than that of its assets, it is said to be
running an unmatched book. The term is commonly used with the Euromarket. Term also refers to the
condition when a firm enters into OTC derivatives contracts and chooses to hedge that risk by not making
trades in the opposite direction to another financial intermediary. In this case, the firm with an unmatched
book hedges its net market risk with futures and options, usually.
Related expressions: open book and short book.

Variable rated demand bond (VRDB)

Floating rate bond that can be sold back periodically to the issuer.

Volume

This is the daily number of shares of a security that change hands between a buyer and a seller.

CASH FLOWS FROM OPERATIONS

A section on the cash-flow Stockholders’ equity statement that shows how much cash came into a company and how much went out during the normal course of business.

UNITS OF PRODUCTION

A depreciation method that relates a machine’s depreciation to the number of units it makes each
accounting period. The method requires that someone record the machine’s output each year.

Allocation base A measure of activity or volume such as labour

hours, machine hours or volume of production
used to apportion overheads to products and
services.

Capacity

The maximum volume of products or services that can be produced given limitations of space,
people, equipment or financial resources.

Capacity utilization

The proportion of capacity that is able to be utilized to fulfil customer demand for products
or services.

Cost object

anything for which a measurement of cost is required – inputs, processes, outputs or responsibility centres.

Cost–volume–profit analysis (CVP)

A method for understanding the relationship between revenue, cost and sales volume.

Matching

See accruals accounting.

Non-production overhead

A general term referring to period costs, such as selling, administration and financial expenses.

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