Definition of intranet

intranet

a mechanism for sharing information and delivering data from corporate databases to the local-area network (LAN) desktops

Asymmetric information

information that is known to some people but not to other people.

Baker Plan

A pLAN by U.S. Treasury Secretary James Baker under which 15 principal middle-income debtor
countries (the Baker 15) would undertake growth-oriented structural reforms, to be supported by increased
financing from the World Bank and continued lending from commercial banks.

Balance of payments

A statistical compilation formulated by a sovereign nation of all economic transactions
between residents of that nation and residents of all other nations during a stipulated period of time, usually a
calendar year.

Balance of trade

Net flow of goods (exports minus imports) between countries.

Balance sheet

Also called the statement of financial condition, it is a summary of the assets, liabilities, and
owners' equity.

Balance sheet exposure

See:accounting exposure.

Balance sheet identity

Total Assets = Total Liabilities + Total Stockholders' Equity

Balanced fund

An investment company that invests in stocks and bonds. The same as a baLANced mutual fund.

Balanced mutual fund

This is a fund that buys common stock, preferred stock and bonds. The same as a
baLANced fund.

Basic balance

In a baLANce of payments, the basic baLANce is the net baLANce of the combination of the current
account and the capital account.

Blanket inventory lien

A secured loan that gives the lender a lien against all the borrower's inventories.

Compensating balance

An excess baLANce that is left in a bank to provide indirect compensation for loans
extended or services provided.

Corporate acquisition

The acquisition of one firm by anther firm.

Corporate bonds

Debt obligations issued by corporations.

Corporate charter

A legal document creating a corporation.

Corporate finance

One of the three areas of the discipline of finance. It deals with the operation of the firm
(both the investment decision and the financing decision) from that firm's point of view.

Corporate financial management

The application of financial principals within a corporation to create and
maintain value through decision making and proper resource management.

Corporate financial planning

Financial pLANning conducted by a firm that encompasses preparation of both
long- and short-term financial pLANs.

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.

Corporate tax view

The argument that double (corporate and individual) taxation of equity returns makes
debt a cheaper financing method.

Corporate taxable equivalent

Rate of return required on a par bond to produce the same after-tax yield to
maturity that the premium or discount bond quoted would.

Currency risk sharing

An agreement by the parties to a transaction to share the currency risk associated with
the transaction. The arrangement involves a customized hedge contract embedded in the underlying
transaction.

Defined benefit plan

A pension pLAN in which the sponsor agrees to make specified dollar payments to
qualifying employees. The pension obligations are effectively the debt obligation of the pLAN sponsor.
Related: defined contribution pLAN

Defined contribution plan

A pension pLAN in which the sponsor is responsible only for making specified
contributions into the pLAN on behalf of qualifying participants. Related: defined benefit pLAN
Delayed issuance pool Refers to MBSs that at the time of issuance were collateralized by seasoned loans
originated prior to the MBS pool issue date.

Dividend reinvestment plan (DRP)

Automatic reinvestment of shareholder dividends in more shares of a
company's stock, often without commissions. Some pLANs provide for the purchase of additional shares at a
discount to market price. Dividend reinvestment pLANs allow shareholders to accumulate stock over the Long
term using dollar cost averaging. The DRP is usually administered by the company without charges to the
holder.

Double-declining-balance depreciation

Method of accelerated depreciation.

Electronic data interchange (EDI)

The exchange of information electronically, directly from one firm's
computer to another firm's computer, in a structured format.

Employee stock ownership plan (ESOP)

A company contributes to a trust fund that buys stock on behalf of
employees.

Exchange Rate Mechanism (ERM)

The methodology by which members of the EMS maintain their
currency exchange rates within an agreed upon range with respect to other member countries.

Expected value of perfect information

The expected value if the future uncertain outcomes could be known
minus the expected value with no additional information.

Financial plan

A financial blueprint for the financial future of a firm.

Financial planning

The process of evaluating the investing and financing options available to a firm. It
includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in
the form of a financial pLAN, and then comparing future performance against that pLAN.

Floor planning

Arrangement used to finance inventory. A finance company buys the inventory, which is then
held in trust by the user.

Information asymmetry

A situation involving information that is known to some, but not all, participants.

Information Coefficient (IC)

The correlation between predicted and actual stock returns, sometimes used to
measure the value of a financial analyst. An IC of 1.0 indicates a perfect linear relationship between predicted
and actual returns, while an IC of 0.0 indicates no linear relationship.

Information costs

Transaction costs that include the assessment of the investment merits of a financial asset.
Related: search costs.

Information services

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

Information-content effect

The rise in the stock price following the dividend signal.

Informational efficiency

The speed and accuracy with which prices reflect new information.

Informationless trades

Trades that are the result of either a reallocation of wealth or an implementation of an
investment strategy that only utilizes existing information.

Information-motivated trades

Trades in which an investor believes he or she possesses pertinent
information not currently reflected in the stock's price.

Insider information

Relevant information about a company that has not yet been made public. It is illegal for
holders of this information to make trades based on it, however received.

Insured plans

Defined benefit pension pLANs that are guaranteed by life insurance products. Related: noninsured pLANs

Leverage rebalancing

Making transactions to adjust (rebaLANce) a firm's leverage ratio back to its target.

Local expectations theory

A form of the pure expectations theory which suggests that the returns on bonds
of different maturities will be the same over a short-term investment horizon.

Long-term financial plan

Financial pLAN covering two or more years of future operations.

Materials requirement planning

Computer-based systems that pLAN backward from the production schedule
to make purchases in order to manage inventory levels.

Money purchase plan

A defined benefit contribution pLAN in which the participant contributes some part and
the firm contributes at the same or a different rate. Also called and individual account pLAN.

Net cash balance

Beginning cash baLANce plus cash receipts minus cash disbursements.

Non-insured plans

Defined benefit pension pLANs that are not guaranteed by life insurance products. Related:
insured pLANs

Off-balance-sheet financing

Financing that is not shown as a liability in a company's baLANce sheet.

Overfunded pension plan

A pension pLAN that has a positive surplus (i.e., assets exceed liabilities).

Pension plan

A fund that is established for the payment of retirement benefits.

Plan for reorganization

A pLAN for reorganizing a firm during the Chapter 11 bankruptcy process.

Plan sponsors

The entities that establish pension pLANs, including private business entities acting for their
employees; state and local entities operating on behalf of their employees; unions acting on behalf of their
members; and individuals representing themselves.

Planned amortization class CMO

1) One class of CMO that carries the most stable cash flows and the
lowest prepayement risk of any class of CMO. Because of that stable cash flow, it is considered the least risky CMO.
2) A CMO bond class that stipulates cash-flow contributions to a sinking fund. With the PAC,
principal payments are directed to the sinking fund on a priority basis in accordance with a predetermined
payment schedule, with prior claim to the cash flows before other CMO classes. Similarly, cash flows
received by the trust in excess of the sinking fund requirement are also allocated to other bond classes. The
prepayment experience of the PAC is therefore very stable over a wide range of prepayment experience.

Planned capital expenditure program

Capital expenditure program as outlined in the corporate financial pLAN.

Planned financing program

Program of short-term and long-term financing as outlined in the corporate
financial pLAN.

Planning horizon

The length of time a model projects into the future.

Price-specie-flow mechanism

Adjustment mechanism under the classical gold standard whereby
disturbances in the price level in one country would be wholly or partly offset by a countervailing flow of
specie (gold coins) that would act to equalize prices across countries and automatically bring international
payments back in baLANce.

Rebalancing

Realigning the proportions of assets in a portfolio as needed.

Receivables balance fractions

The percentage of a month's sales that remain uncollected (and part of
accounts receivable) at the end of succeeding months.

Remaining principal balance

The amount of principal dollars remaining to be paid under the mortgage as of
a given point in time.

Shark repellant

Amendment to company charter intended to protect it against takeover.

Short-term financial plan

A financial pLAN that covers the coming fiscal year.

Synchronous data

data available at the same time. In testing option-pricing models, the price of the option
and of the underlying should be synchronous, representing the same moment in the market.

Target cash balance

Optimal amount of cash for a firm to hold, considering the trade-off between the
opportunity costs of holding too much cash and the trading costs of holding too little cash.

Tax-deferred retirement plans

Employer-sponsored and other pLANs that allow contributions and earnings to
be made and accumulate tax-free until they are paid out as benefits.

Underfunded pension plan

A pension pLAN that has a negative surplus (i.e., liabilities exceed assets).

Withdrawal plan

The ability to establish automatic periodic mutual fund redemptions and have proceeds
mailed directly to the investor.

Zero-balance account (ZBA)

A checking account in which zero baLANce is maintained by transfers of funds
from a master account in an amount only large enough to cover checks presented.

BALANCE SHEET

A “snapshot” statement that freezes a company on a particular day, like the last day of the year, and shows the baLANces in its asset, liability, and stockholders’ equity accounts. It’s governed by the formula:
Assets = Liabilities + Stockholders’ Equity.

Declining balance

An accelerated depreciation method that calculates depreciation each year by applying a fixed rate to the asset’s book (cost–accumulated depreciation) value. Depreciation stops when the asset’s book value reaches its salvage value.

Balanced Scorecard

A system of non-financial performance measurement that links innovation, customer and process measures to financial performance.

Balance Sheet

A financial statement showing the financial position of a business – its assets, liabilities and
capital – at the end of an accounting period.

Planning, programming and budgeting system (PPBS)

A method of budgeting in which budgets are allocated to projects or programmes rather than to responsibility centres.

Balance Sheet

One of the basic financial statements; it lists the assets, liabilities, and equity accounts of the company. The BaLANce Sheet is prepared using the baLANces at the end of a specific day.

Declining-balance

A method of depreciation.

Land

The cost of LANd owned by the company.

Land improvements

The cost of improvements to LANd owned by the company, such as fencing and outdoor lighting.

Trial balance

A listing of all the accounts and their baLANces on a specified day.

balance sheet

A term often used instead of the more formal and correct
term—statement of financial condition. This financial statement summarizes
the assets, liabilities, and owners’ equity sources of a business at a
given moment in time. It is prepared at the end of each profit period and
whenever else it is needed. It is one of the three primary financial statements
of a business, the other two being the income statement and the
statement of cash flows. The values reported in the baLANce sheet are the
amounts used to determine book value per share of capital stock. Also,
the book value of an asset is the amount reported in a business’s most
recent baLANce sheet.

property, plant, and equipment

This label is generally used in financial
reports to describe the long-term assets of a business, which include
LANd, buildings, machinery, equipment, tools, vehicles, computers, furniture
and fixtures, and other tangible long-lived resources that are not
held for sale but are used in the operations of a business. The less formal
name for these assets is fixed assets, which see.

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

cafeteria plan a “menu” of fringe benefit options that include

cash or nontaxable benefits

data

bits of knowledge or facts that have not been summarized
or categorized in a manner useful to a decision maker

data mining

a form of analysis in which statistical techniques
are used to uncover answers to important questions about
business operations

electronic data interchange (EDI)

the computer-to-computer transfer of information in virtual real time using standardized formats developed by the American National Standards Institute

Employee Stock Ownership Plan (ESOP)

a profit-sharing compensation program in which investments are made in
the securities of the employer

enterprise resource planning (ERP) system

a packaged software program that allows a company to
(1) automate and integrate the majority of its business processes,
(2) share common data and practices across the entire enterprise, and
(3) produce and access information in a realtime environment

information

bits of knowledge or fact that have been carefully
chosen from a body of data and arranged in a meaningful way

management information system (MIS)

a structure of interrelated elements that collects, organizes, and communicates
data to managers so they may pLAN, control, evaluate
performance, and make decisions; the emphasis of the
MIS is on internal demands for information rather than external
demands; some or all of the MIS may be computerized
for ease of access to information, reliability of input
and processing, and ability to simulate outcomes of
alternative situations

manufacturing resource planning (MRP II)

a fully integrated materials requirement pLANning system that involves
top management and provides a basis for both strategic
and tactical pLANning

materials requirements planning (MRP)

a computerbased information system that simulates the ordering and
scheduling of demand-dependent inventories; a simulation
of the parts fabrication and subassembly activities that are
required, in an appropriate time sequence, to meet a production
master schedule

network organization

a flexible organization structure that
establishes a working relationship among multiple entities,
usually to pursue a single function

operational plan

a formulation of the details of implementing
and maintaining an organization’s strategic pLAN;
it is typically formalized in the master budget

planning

the process of creating the goals and objectives for
an organization and developing a strategy for achieving
them in a systematic manner

profit sharing

an incentive payment to employees that is
contingent on organizational or individual performance

strategic planning

the process of developing a statement of
long-range (5–10 years) goals for the organization and
defining the strategies and policies that will help the organization
achieve those goals

tactical planning

the process of determining the specific
means or objectives by which the strategic pLANs of the
organization will be achieved; it is short-range in nature
(usually 1–18 months)

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