Definition of Kit

Kit

A group of components needed to assemble a finished product that has been
clustered together for delivery to the shop floor.

economic components model

Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
This model consists of four components: the measure of the economic impact of the delay-to-sale, monopsony power to buyers, and incremental transactions costs to both buyers and sellers.

Bargain-purchase-price option

Gives the lessee the option to purchase the asset at a price below fair market
value when the lease expires.

Cash delivery

The provision of some futures contracts that requires not delivery of underlying assets but
settlement according to the cash value of the asset.

Closing purchase

A transaction in which the purchaser's intention is to reduce or eliminate a short position in
a stock, or in a given series of options.

Delivery

The tender and receipt of an actual commodity or financial instrument in settlement of a futures contract.

Delivery notice

The written notice given by the seller of his intention to make delivery against an open, short
futures position on a particular date. Related: notice day

Delivery options

The options available to the seller of an interest rate futures contract, including the quality
option, the timing option, and the wild card option. delivery options make the buyer uncertain of which
Treasury Bond will be delivered or when it will be delivered.

Delivery points

Those points designated by futures exchanges at which the financial instrument or
commodity covered by a futures contract may be delivered in fulfillment of such contract.

Delivery price

The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the
price at which the futures contract is settled when deliveries are made.

Delivery versus payment

A transaction in which the buyer's payment for securities is due at the time of
delivery (usually to a bank acting as agent for the buyer) upon receipt of the securities. The payment may be
made by bank wire, check, or direct credit to an account.

Direct stock-purchase programs

The purchase by investors of securities directly from the issuer.

Equity floor

An agreement in which one party agrees to pay the other at specific time periods if a specific
stock market benchmark is less than a predetermined level.

Floor broker

A member who is paid a fee for executing orders for clearing members or their customers. A
floor broker executing customer orders must be licensed by the CFTC.

Floor planning

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

Floor trader

A member who generally trades only for his own account, for an account controlled by him or
who has such a trade made for him. Also referred to as a "local".

Forward delivery

A transaction in which the settlement will occur on a specified date in the future at a price
agreed upon on the trade date.

Good delivery

A delivery in which everything - endorsement, any necessary attached legal papers, etc. - is in
order.

Good delivery and settlement procedures

Refers to PSA Uniform Practices such as cutoff times on delivery
of securities and notification, allocation, and proper endorsement.

Gross domestic product (GDP)

The market value of goods and services produced over time including the
income of foreign corporations and foreign residents working in the U.S., but excluding the income of U.S.
residents and corporations overseas.

Gross national product (GNP)

Measures and economy's total income. It is equal to GDP plus the income
abroad accruing to domestic residents minus income generated in domestic market accruing to non-residents.

Group of five (G5/G-5)

The five leading countries (France, Germany, Japan, United Kingdom, and the U.S.) that
meet periodically to achieve some cooperative effort on international economic issues. When currency issues
are discussed, the monetary authorities of these nations hold the meeting.

Group of seven (G7/G-7)

The G-5 countries plus Canada and Italy.

Group rotation manager

A top-down manager who infers the phases of the business cycle and allocates
assets accordingly.

Growth phase

A phase of development in which a company experiences rapid earnings growth as it produces
new products and expands market share.

Interest rate floor

An interest rate agreement in which payments are made when the reference rate falls
below the strike rate.

Investment product line (IPML)

The line of required returns for investment projects as a function of beta
(nondiversifiable risk).

Making delivery

Refers to the seller's actually turning over to the buyer the asset agreed upon in a forward contract.

Maturity phase

A phase of company development in which earnings continue to grow at the rate of the
general economy. Related: Three-phase DDM.

Minimum purchases

For mutual funds, the amount required to open a new account (Minimum Initial
Purchase) or to deposit into an existing account (Minimum Additional Purchase). These minimums may be
lowered for buyers participating in an automatic purchase plan

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.

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.

Opening purchase

A transaction in which the purchaser's intention is to create or increase a long position in
a given series of options.

Opinion shopping

A practice prohibited by the SEC which involves attempts by a corporation to obtain
reporting objectives by following questionable accounting principles with the help of a pliable auditor willing
to go along with the desired treatment.

Overnight delivery risk

A risk brought about because differences in time zones between settlement centers
require that payment or delivery on one side of a transaction be made without knowing until the next day
whether the funds have been received in an account on the other side. Particularly apparent where delivery
takes place in Europe for payment in dollars in New York.

Product cycle

The time it takes to bring new and/or improved products to market.

Product risk

A type of mortgage-pipeline risk that occurs when a lender has an unusual loan in production or
inventory but does not have a sale commitment at a prearranged price.

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.

Purchase

To buy, to be long, to have an ownership position.

Purchase accounting

Method of accounting for a merger in which the acquirer is treated as having purchased
the assets and assumed liabilities of the acquiree, which are all written up or down to their respective fair
market values, the difference between the purchase price and the net assets acquired being attributed to goodwill.

Purchase agreement

As used in connection with project financing, an agreement to purchase a specific
amount of project output per period.

Purchase and sale

A method of securities distribution in which the securities firm purchases the securities
from the issuer for its own account at a stated price and then resells them, as contrasted with a best-efforts sale.

Purchase fund

Resembles a sinking fund except that money is used only to purchase bonds if they are selling
below their par value.

Purchase method

Accounting for an acquisition using market value for the consolidation of the two entities'
net assets on the balance sheet. Generally, depreciation/amortization will increase for this method compared
with pooling and will result in lower net income.

Purchasing power parity

The notion that the ratio between domestic and foreign price levels should equal
the equilibrium exchange rate between domestic and foreign currencies.

Purchasing-power risk

Related: inflation risk

Relative purchasing power parity (RPPP)

Idea that the rate of change in the price level of commodities in
one country relative to the price level in another determines the rate of change of the exchange rate between
the two countries' currencies.

Repurchase agreement

An agreement with a commitment by the seller (dealer) to buy a security back from
the purchaser (customer) at a specified price at a designated future date. Also called a repo, it represents a
collateralized short-term loan, where the collateral may be a Treasury security, money market instrument,
federal agency security, or mortgage-backed security. From the purchaser (customer) perspective, the deal is
reported as a reverse Repo.

Repurchase of stock

Device to pay cash to firm's shareholders that provides more preferable tax treatment
for shareholders than dividends. Treasury stock is the name given to previously issued stock that has been
repurchased by the firm. A repurchase is achieved through either a dutch auction, open market, or tender offer.

Selling group

All banks involved in selling or marketing a new issue of stock or bonds

Share repurchase

Program by which a corporation buys back its own shares in the open market. It is usually
done when shares are undervalued. Since it reduces the number of shares outstanding and thus increases
earnings per share, it tends to elevate the market value of the remaining shares held by stockholders.

Shop

Wall Street jargon for a firm.

Shopping

Seeking to obtain the best bid or offer available by calling a number of dealers and/or brokers.

Stochastic models

Liability-matching models that assume that the liability payments and the asset cash flows
are uncertain. Related: Deterministic models.

Stock repurchase

A firm's repurchase of outstanding shares of its common stock.

Taking delivery

Refers to the buyer's actually assuming possession from the seller of the asset agreed upon
in a forward contract or a futures contract.

Targeted repurchase

The firm buys back its own stock from a potential bidder, usually at a substantial
premium, to forestall a takeover attempt.

Three-phase DDM

A version of the dividend discount model which applies a different expected dividend
rate depending on a company's life-cycle phase, growth phase, transition phase, or maturity phase.

Transition phase

A phase of development in which the company's earnings begin to mature and decelerate to
the rate of growth of the economy as a whole. Related: three-phase DDM.

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.

Non-production overhead

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

Product cost

The cost of goods or services produced.

Product market

A business’s investment in technology, people and materials in order to make, buy and sell products or services to customers.

Product/service mix

See sales mix.

Production overhead

A general term referring to indirect costs.

Purchase discounts

A contra account that reduces purchases by the amount of the discounts taken for early payment.

Purchase returns

A contra account that reduces purchases by the amount of items purchased that were subsequently returned.

Purchases

Items purchased by the company for the purpose of resale.

Purchases journal

A journal used to record the transactions that result in a credit to accounts payable.

product cost

This is a key factor in the profit model of a business. product
cost is the same as purchase cost for a retailer or wholesaler (distributor).
A manufacturer has to accumulate three different types of production
costs to determine product cost: direct materials, direct labor, and
manufacturing overhead. The cost of products (goods) sold is deducted
from sales revenue to determine gross margin (also called gross profit),
which is the first profit line reported in an external income statement
and in an internal profit report to managers.

by-product

an incidental output of a joint process; it is salable,
but the sales value of by-products is not substantial enough
for management to justify undertaking the joint process; it
is viewed as having a higher sales value than scrap

cost of production report

a process costing document that
details all operating and cost information, shows the computation
of cost per equivalent unit, and indicates cost assignment
to goods produced during the period

economic production run (EPR)

an estimate of the number
of units to produce at one time that minimizes the total
costs of setting up production runs and carrying inventory

equivalent units of production (EUP)

an approximation of the number of whole units of output that could have been
produced during a period from the actual effort expended
during that period; used in process costing systems to assign
costs to production

grade (of product or service)

the addition or removal of product
or service characteristics to satisfy additional needs, especially price

open purchase ordering

a process by which a single purchase
order that expires at a set or determinable future
date is prepared to authorize a supplier to provide a large
quantity of one or more specified items on an as-requested
basis by the customer

process productivity

the total units produced during a period
using value-added processing time

product complexity

an assessment about the number of components in a product

product contribution margin

the difference between selling price and variable cost of goods sold

product cost

a cost associated with making or acquiring inventory

productive capacity

the number of total units that could be
produced during a period based on available equipment time
productive processing time the proportion of total time that
is value-added time; also known as manufacturing cycle
efficiency

product- (or process-) level cost

a cost that is caused by the development, production, or acquisition of specific products or services

product life cycle

a model depicting the stages through
which a product class (not necessarily each product) passes

product line margin

see segment margin

product variety

the number of different types of products
produced (or services rendered) by a firm

purchasing cost

the quoted price of inventory minus any
discounts allowed plus shipping charges

steady-state phase

the point at which the learning curve becomes flat and only minimal improvements in performance are achieved

Floor

Interest-rate option that guarantees that the rate on a floating-rate
loan will not fall below a certain level.
Forward curve
The curve of forward interest rates vs. maturity dates for bonds.

Purchase price

Price actually paid for a security. Typically the purchase
price of a bond is not the same as the redemption value.

Stochastic

Involving or containing a random variable or variables; involving
chance or probability.

By-product

A product that is an ancillary part of the primary production process, having
a minor resale value in comparison to the value of the primary product being
manufactured. Any proceeds from the sale of a by-product are typically offset
against the cost of the primary product, or recorded as miscellaneous revenue.

Finished goods inventory

Goods that have been completed by the manufacturing
process, or purchased in a complete form, but which have not yet been sold to
customers.

Joint product

A product that has the highest sales value from among a group of products
that are the result of a joint production process.

Product cost

The total of all costs assigned to a product, typically including direct
labor, materials (with normal spoilage included), and overhead.

Production yield variance

The difference between the actual and budgeted proportions
of product resulting from a production process, multiplied by the standard unit cost.

Purchase method

An accounting method used to combine the financial statements of
companies. This involves recording the acquired assets at fair market value, and the
excess of the purchase price over this value as goodwill, which will be amortized
over time.

purchasing power parity (PPP)

Theory that the cost of living in different countries is equal, and exchange rates adjust to offset inflation differentials across countries.

stock repurchase

Firm buys back stock from its shareholders.

Aggregate Production Function

An equation determining aggregate output as a function of aggregate inputs such as labor and capital.

Factor of Production

A resource used to produce a good or service. The main macroeconomic factors of production are capital and labor.

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