Definition of Internal measure
Internal measure
The number of days that a firm can finance operations without additional cash income.
Related Terms:
An estimation of price that uses the average or representative price of a
large number of trades.
Performance measure invented by John Graham and Campbell Harvey. The
idea is to lever a fund's portfolio to exactly match the volatility of the S and P 500. The difference between the
fund's levered return and the S&P 500 return is the performance measure.
Performance measure invented by John Graham and Campbell Harvey. The
idea is to lever the S&P 500 portfolio to exactly match the volatility of the fund. The difference between the
fund's return and the levered S&P 500 return is the performance measure.
IRR on the incremental investment from choosing a large project
instead of a smaller project.
Finance generated within a firm by retained earnings and depreciation.
Maximum rate a firm can expand without outside source of funding. Growth generated
by cash flows retained by company.
The mechanisms for issuing and trading securities within a nation, including its domestic
market and foreign market.
Compare: external market.
Dollar-weighted rate of return. Discount rate at which net present value (NPV)
investment is zero. The rate at which a bond's future cash flows, discounted back to today, equals its price.
Operationally efficient market.
Errors in measuring an explanatory variable in a regression that leads to biases in
estimated parameters.
The calculation of the return realized by a money manager over some time interval.
The rate of return computed by first determining the cash flows for all the
bonds in the portfolio and then finding the interest rate that will make the present value of the cash flows
equal to the market value of the portfolio.
hours, machine hours or volume of production
used to apportion overheads to products and
services.
A discounted cash flow technique used for investment appraisal that calculates the effective cost of capital that produces a net present value of zero from a series of future cash flows and an
initial capital investment.
Refers to forms used and procedures
established by a business—beyond what would be required for the
record-keeping function of accounting—that are designed to prevent
errors and fraud. Two examples of internal controls are (1) requiring a
second signature by someone higher in the organization to approve a
transaction in excess of a certain dollar amount and (2) giving customers
printed receipts as proof of sale. Other examples of internal
control procedures are restricting entry and exit routes of employees,
requiring all employees to take their vacations and assigning another
person to do their jobs while they are away, surveillance cameras, surprise
counts of cash and inventory, and rotation of duties. internal controls
should be cost-effective; the cost of a control should be less than
the potential loss that is prevented. The guiding principle for designing
internal accounting controls is to deter and detect errors and dishonesty.
The best internal controls in the world cannot prevent most fraud
by high-level managers who take advantage of their positions of trust
and authority.
internal rate of return (IRR)
The precise discount rate that makes the
present value (PV) of the future cash returns from a capital investment
exactly equal to the initial amount of capital invested. If IRR is higher
than the company’s cost-of-capital rate, the investment is an attractive
opportunity; if less, the investment is substandard from the cost-ofcapital
point of view.
Internal Rate of Return (IRR)
The discount rate that equates the present value of the net cash
inflows with the present value of the net cash outflows
(investments). The IRR measures the profitability (rate of return) of
an investment in a project or security.
internal control
any measure used by management to protect
assets, promote the accuracy of records, ensure adherence
to company policies, or promote operational efficiency;
the totality of all internal controls represents the
internal control system
internal rate of return (IRR)
the expected or actual rate of
return from a project based on, respectively, the assumed
or actual cash flows; the discount rate at which the net
present value of the cash flows equals zero
physical measurement allocation
a method of allocating a joint cost to products that uses a common physical characteristic as the proration base
Internal rate of return
a. The average annual yield earned by an investment during the period held.
b. The effective rate of interest on a loan.
c. The discount rate in discounted cash flow analysis.
d. The rate that adjusts the value of future cash receipts earned by an investment so that interest earned equals the original cost.
See Yield to maturity.
Internal rate of return
The rate of return at which the present value of a series of future
cash flows equals the present value of all associated costs. This measure is most
commonly used in capital budgeting.
internal growth rate
Maximum rate of growth without external financing.
internal rate of return (IRR)
Discount rate at which project NPV = 0.
internally generated funds
Cash reinvested in the firm; depreciation plus earnings not paid out as dividends.
Internal Revenue Code
Refers to all federal tax laws as a group.
Internal Revenue Service
A federal agency empowered by Congress to interpret and enforce tax-related laws.
Unit of measure (UOM, UofM)
The summarization unit by which an item is tracked, such as a
box of 100 or an each of 1.
financial reports and statements
Financial means having to do with
money and economic wealth. Statement means a formal presentation.
Financial reports are printed and a copy is sent to each owner and each
major lender of the business. Most public corporations make their financial
reports available on a web site, so all or part of the financial report
can be downloaded by anyone. Businesses prepare three primary financial
statements: the statement of financial condition, or balance sheet;
the statement of cash flows; and the income statement. These three key
financial statements constitute the core of the periodic financial reports
that are distributed outside a business to its shareowners and lenders.
Financial reports also include footnotes to the financial statements and
much other information. Financial statements are prepared according to
generally accepted accounting principles (GAAP), which are the authoritative
rules that govern the measurement of net income and the reporting
of profit-making activities, financial condition, and cash flows.
internal financial statements, although based on the same profit
accounting methods, report more information to managers for decision
making and control. Sometimes, financial statements are called simply
financials.
income statement
Financial statement that summarizes sales revenue
and expenses for a period and reports one or more profit lines for the
period. It’s one of the three primary financial statements of a business.
The bottom-line profit figure is labeled net income or net earnings by
most businesses. Externally reported income statements disclose less
information than do internal management profit reports—but both are
based on the same profit accounting principles and methods. Keep in
mind that profit is not known until accountants complete the recording
of sales revenue and expenses for the period (as well as determining any
extraordinary gains and losses that should be recorded in the period).
Profit measurement depends on the reliability of a business’s accounting
system and the choices of accounting methods by the business. Caution:
A business may engage in certain manipulations of its accounting methods,
and managers may intervene in the normal course of operations for
the purpose of improving the amount of profit recorded in the period,
which is called earnings management, income smoothing, cooking the
books, and other pejorative terms.
balanced scorecard (BSC)
an approach to performance
measurement that weighs performance measures from four
perspectives: financial performance, an internal business
perspective, a customer perspective, and an innovation and
learning perspective
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