Definition of Credit period

Credit period

The length of time for which the customer is granted credit.

Full Credit Period

The period of trade credit given by a supplier to its customer.

Waiting Period (Credit Insurance)

A specific time that must pass following the onset of a covered disability before any benefits will be paid under a creditor disability policy. (Also known as an elimination period).

PPF (periodic perpetuity factor)

a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity.

Annualized holding period return

The annual rate of return that when compounded t times, would have
given the same t-period holding return as actually occurred from period 1 to period t.

Average collection period, or days' receivables

The ratio of accounts receivables to sales, or the total
amount of credit extended per dollar of daily sales (average AR/sales * 365).

Best-interests-of-creditors test

The requirement that a claim holder voting against a plan of reorganization
must receive at least as much as he would have if the debtor were liquidated.

Comparative credit analysis

A method of analysis in which a firm is compared to others that have a desired
target debt rating in order to infer an appropriate financial ratio target.

Compounding period

The length of the time period (for example, a quarter in the case of quarterly
compounding) that elapses before interest compounds.

Consumer credit

credit granted by a firm to consumers for the purchase of goods or services. Also called
retail credit.

Credit

Money loaned.

Credit analysis

The process of analyzing information on companies and bond issues in order to estimate the
ability of the issuer to live up to its future contractual obligations. Related: default risk

Credit enhancement

Purchase of the financial guarantee of a large insurance company to raise funds.

Credit risk

The risk that an issuer of debt securities or a borrower may default on his obligations, or that the
payment may not be made on a negotiable instrument. Related: Default risk

Credit scoring

A statistical technique wherein several financial characteristics are combined to form a single
score to represent a customer's creditworthiness.

Credit spread

Related:Quality spread

Crediting rate

The interest rate offered on an investment type insurance policy.

Creditor

Lender of money.

Demand line of credit

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

Discount period

The period during which a customer can deduct the discount from the net amount of the bill
when making payment.

Discounted payback period rule

An investment decision rule in which the cash flows are discounted at an
interest rate and the payback rule is applied on these discounted cash flows.

Eurocredits

Intermediate-term loans of Eurocurrencies made by banking syndicates to corporate and
government borrowers.

Evaluation period

The time interval over which a money manager's performance is evaluated.

Evergreen credit

Revolving credit without maturity.

Federal credit agencies

Agencies of the federal government set up to supply credit to various classes of
institutions and individuals, e.g. S&Ls, small business firms, students, farmers, and exporters.

Five Cs of credit

Five characteristics that are used to form a judgement about a customer's creditworthiness:
character, capacity, capital, collateral, and conditions.

Foreign tax credit

Home country credit against domestic income tax for foreign taxes paid on foreign
derived earnings.

Full faith-and-credit obligations

The security pledges for larger municipal bond issuers, such as states and
large cities which have diverse funding sources.

Holding period

Length of time that an individual holds a security.

Holding period return

The rate of return over a given period.

Investment tax credit

Proportion of new capital investment that can be used to reduce a company's tax bill
(abolished in 1986).

Letter of credit (L/C)

A form of guarantee of payment issued by a bank used to guarantee the payment of
interest and repayment of principal on bond issues.

Line of credit

An informal arrangement between a bank and a customer establishing a maximum loan
balance that the bank will permit the borrower to maintain.

Line of credit

An informal arrangement between a bank and a customer establishing a maximum loan
balance that the bank will permit the borrower to maintain.

Multiperiod immunization

A portfolio strategy in which a portfolio is created that will be capable of
satisfying more than one predetermined future liability regardless if interest rates change.

Net period

The period of time between the end of the discount period and the date payment is due.

Neutral period

In the Euromarket, a period over which Eurodollars are sold is said to be neutral if it does not
start or end on either a Friday or the day before a holiday.

Retail credit

credit granted by a firm to consumers for the purchase of goods or services.
See: consumer credit.

Revolving credit agreement

A legal commitment wherein a bank promises to lend a customer up to a
specified maximum amount during a specified period.

Revolving line of credit

A bank line of credit on which the customer pays a commitment fee and can take
down and repay funds according to his needs. Normally the line involves a firm commitment from the bank
for a period of several years.

Subperiod return

The return of a portfolio over a shorter period of time than the evaluation period.

T-period holding-period return

The percentage return over the T-year period an investment lasts.

Trade credit

credit granted by a firm to another firm for the purchase of goods or services.

Waiting period

Time during which the SEC studies a firm's registration statement. During this time the firm
may distribute a preliminary prospectus.

Workout period

Realignment period of a temporary misaligned yield relationship that sometimes occurs in
fixed income markets.

Accounting period

The period of time for which financial statements are produced – see also financial year.

Credit

Buying or selling goods or services now with the intention of payment following at some time in
the future (as opposed to buying or selling goods or services for cash).

Creditors

Purchases of goods or services from suppliers on credit to whom the debt is not yet paid. Or a
term used in the Balance Sheet to denote current liabilities.

Period costs

The costs that relate to a period of time.

Credit

One side of a journal entry, usually depicted as the right side.

Periodic inventory system

An inventory system in which the balance in the Inventory account is adjusted for the units sold only at the end of the period.

Average Collection Period

Average number of days necessary to receive cash for the sale of
a company's products. It is calculated by dividing the value of the
accounts receivable by the average daily sales for the period.

Payback Period

The number of years necessary for the net cash flows of an
investment to equal the initial cash outlay

compounding period

the time between each interest computation

payback period

the time it takes an investor to recoup an
original investment through cash flows from a project

period cost

cost other than one associated with making or acquiring inventory

periodic compensation

a pay plan based on the time spent on the task rather than the work accomplished

Odd first or last period

Fixed-income securities may be purchased on dates
that do not coincide with coupon or payment dates. The length of the first and
last periods may differ from the regular period between coupons, and thus the
bond owner is not entitled to the full value of the coupon for that period.
Instead, the coupon is pro-rated according to how long the bond is held during
that period.

Reporting period

The time period for which transactions are compiled into a set of financial statements.

credit analysis

Procedure to determine the likelihood a customer will pay its bills.

credit policy

Standards set to determine the amount and nature of credit to extend to customers.

line of credit

Agreement by a bank that a company may borrow at any time up to an established limit.

payback period

Time until cash flows recover the initial investment of the project.

Credit Crunch

A decline in the ability or willingness of banks to lend.

Credit Rationing

Restriction of loans by lenders so that not all borrowers willing to pay the current interest rate are able to obtain loans.

Investment Tax Credit

A reduction in taxes offered to firms to induce them to increase investment spending.

Consumer Credit Protection Act

A federal Act specifying the proportion of
total pay that may be garnished.

Average Amortization Period

The average useful life of a company's collective amortizable asset base.

Extended Amortization Period

An amortization period that continues beyond a long-lived asset's economic useful life.

Extended Amortization Periods

Amortizing capitalized expenditures over estimated useful lives that are unduly optimistic.

Periodic inventory

A physical inventory count taken on a repetitive basis.

Creditor Proof Protection

The creditor proof status of such things as life insurance, non-registered life insurance investments, life insurance RRSPs and life insurance RRIFs make these attractive products for high net worth individuals, professionals and business owners who may have creditor concerns. Under most circumstances the creditor proof rules of the different provincial insurance acts take priority over the federal bankruptcy rules.
The provincial insurance acts protect life insurance products which have a family class beneficiary. Family class beneficiaries include the spouse, parent, child or grandchild of the life insured, except in Quebec, where creditor protection rules apply to spouse, ascendants and descendants of the insured. Investments sold by other financial institutions do not offer the same security should the holder go bankrupt. There are also circumstances under which the creditor proof protections do not hold for life insurance products. Federal bankruptcy law disallows the protection for any transfers made within one year of bankruptcy. In addition, should it be found that a person shifted money to an insurance company fund in bad faith for the specific purpose of avoiding creditors, these funds will not be creditor proof.

Grace Period

A specific period of time after a premium payment is due during which the policy owner may make a payment, and during which, the protection of the policy continues. The grace period usually ends in 30 days.

Credit

A rating of a company's credit (ability to payback debt), usually by a third party credit agency.

Credit Loss

A loan receivable that has proven uncollectible and is written off.

Credit Risk

Financial and moral risk that an obligation will not be paid and a loss will result.

Credit Terms

Conditions under which credit is extended by a lender to a borrower.

Credit Union

credit unions are community based financial co-operatives and most offer a full range of services. All are owned and controlled by members who are also shareholders. credit unions are regulated provincially and insured by a stabilization fund, deposit insurance or guarantee corporation.
credit unions are supported by a system of provincial credit union Centrals, a national credit union Central and affiliated national financial co-operatives.

Creditor

Person or business that is owed money.

Critical Growth Periods

Times in a company's history when growth is essential and without which survival of the business might be in jeopardy.

Export Credit Insurance

The granting of insurance to cover the commercial and political risks of selling in foreign markets.

Formalized Line of Credit

A contractual commitment to make loans to a particular borrower up to a specified maximum during a specified period, usually one year.

Grace Period

Length of time during which repayments of loan principal are excused. Usually occurs at the start of the loan period.

Letters of Credit

A letter of credit is a guarantee of payment by a bank (issuing institution)to a third party for a specific amount of money, if certain conditions are met.

Line of Credit

An agreement negotiated between a borrower and a lender which establishes the maximum amount against which a borrower may draw. The agreement also sets out other conditions, such as how and when money borrowed against the line of credit is to be repaid.

Operating Line of Credit

A bank's commitment to make loans to a particular borrower up to a specified maximum for a specified period, usually one year.

Revolving Credit

Line of credit against which funds may be borrowed at any time, with regular scheduled repayments of a predetermined minimum amount.

Supplier Credit

period of delay allowed by a firm's supplier to pay its invoices. Frequently, the terms are : 2% discount on invoice if paid in 10 days or net if paid in 30 days.

credit

On your bank statement, 'credit' represents funds that you have deposited into your account. The opposite of a credit is a debit.
However, ‘credit’ also means money that you borrow from a financial lender, like a bank. A credit card, for example, is a card that allows you to access funds which you then have to repay.

credit bureau

An organization that provides financial institutions with credit information concerning existing or potential customers who are looking to obtain credit services.

credit card

A revolving source of credit with a pre-established limit. You have to pay interest on a credit card if you have an outstanding balance.

credit memo

A record of the funds which have been credited to your account.

line of credit

A revolving source of credit with a pre-established limit. You access the funds only as you need them, and any amount that you pay back becomes accessible to you again. Unlike a personal loan, a line of credit permits you to write cheques and make bank machine withdrawals, and requires you to pay interest only on the funds that you actually use.

personal line of credit (PLC)

A revolving source of credit with a pre-established limit. You access the funds only as you need them, and any amount that you pay back becomes accessible to you again. Unlike a personal loan, a PLC permits you to write cheques and make bank machine withdrawals, and requires you to pay interest only on the funds that you actually use.

secured loan or line of credit

A lump sum of funds (loan), or a revolving source of credit with a pre-established limit (line of credit), for which the customer must provide collateral.

Accidental Dismemberment: (Credit Insurance)

Provides additional financial security should an insured person be dismembered or lose the use of a limb as the result of an accident.

Amortization (Credit Insurance)

Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity.

Annuity Period

The time between each payment under an annuity.

Beneficiary (Credit Insurance)

The person or party designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event. In the case of credit insurance, the beneficiary will always be the creditor.

Borrower (Credit Insurance)

A consumer who borrows money from a lender.

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