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Preauthorized checks (PACs)

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Definition of Preauthorized checks (PACs)

Preauthorized Checks (PACs) Image 1

Preauthorized checks (PACs)

hecks that are authorized by the payer in advance and are written either by
the payee or by the payee's bank and then deposited in the payee's bank account.



Related Terms:

Preauthorized electronic debits (PADs)

Debits to its bank account in advance by the payer. The payer's
bank sends payment to the payee's bank through the _ACH)Automated Clearing House (ACH) system.


Electronic data interchange (EDI)

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


Electronic depository transfers

The transfer of funds between bank accounts through the Automated
Clearing House (ACH) system.


e-commerce (electronic commerce)

any business activity that uses the Internet and World Wide Web to engage in financial transactions


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


Electronic Federal Tax Payment Systems (EFTPS)

An electronic funds transfer system used by businesses to remit taxes to the government.


EFT (electronic funds transfer)

Funds which are electronically credited to your account (e.g. direct deposit), or electronically debited from your account on an ongoing basis (e.g. a pre-authorized monthly bill payment, or a monthly loan or mortgage payment). A wire transfer is a form of EFT.


Preauthorized Checks (PACs) Image 1

Accelerated cost recovery system (ACRS)

Schedule of depreciation rates allowed for tax purposes.


Accounting exposure

The change in the value of a firm's foreign currency denominated accounts due to a
change in exchange rates.


Accounting earnings

Earnings of a firm as reported on its income statement.


Accounting insolvency

Total liabilities exceed total assets. A firm with a negative net worth is insolvent on
the books.


Accounting liquidity

The ease and quickness with which assets can be converted to cash.


Accounts payable

Money owed to suppliers.


Accounts receivable

Money owed by customers.


Accounts receivable turnover

The ratio of net credit sales to average accounts receivable, a measure of how
quickly customers pay their bills.


Advance commitment

A promise to sell an asset before the seller has lined up purchase of the asset. This
seller can offset risk by purchasing a futures contract to fix the sales price.


Preauthorized Checks (PACs) Image 2

Agency bank

A form of organization commonly used by foreign banks to enter the U.S. market. An agency
bank cannot accept deposits or extend loans in its own name; it acts as agent for the parent bank.


Agency pass-throughs

Mortgage pass-through securities whose principal and interest payments are
guaranteed by government agencies, such as the Government National Mortgage Association ("Ginnie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac") and Federal National Mortgage Association ("Fannie Mae").


Authorized shares

Number of shares authorized for issuance by a firm's corporate charter.


Automated Clearing House (ACH)

A collection of 32 regional electronic interbank networks used to
process transactions electronically with a guaranteed one-day bank collection float.


Average accounting return

The average project earnings after taxes and depreciation divided by the average
book value of the investment during its life.


Average age of accounts receivable

The weighted-average age of all of the firm's outstanding invoices.


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.


BAN (Bank anticipation notes)

Notes issued by states and municipalities to obtain interim financing for
projects that will eventually be funded long term through the sale of a bond issue.


Bank collection float

The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank.


Bank discount basis

A convention used for quoting bids and offers for treasury bills in terms of annualized
yield , based on a 360-day year.


Bank draft

A draft addressed to a bank.


Preauthorized Checks (PACs) Image 3

Bank line

Line of credit granted by a bank to a customer.


Bank wire

A computer message system linking major banks. It is used not for effecting payments, but as a
mechanism to advise the receiving bank of some action that has occurred, e.g. the payment by a customer of
funds into that bank's account.


Banker's acceptance

A short-term credit investment created by a non-financial firm and guaranteed by a
bank as to payment. Acceptances are traded at discounts from face value in the secondary market. These
instruments have been a popular investment for money market funds. They are commonly used in
international transactions.


Bank for International Settlements (BIS)

An international bank headquartered in Basel, Switzerland, which
serves as a forum for monetary cooperation among several European central banks, the bank of Japan, and the
U.S. Federal Reserve system. Founded in 1930 to handle the German payment of World War I reparations, it
now monitors and collects data on international banking activity and promulgates rules concerning
international bank regulation.


Bankruptcy

State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from
the stockholders to the bondholders.


Bankruptcy cost view

The argument that expected indirect and direct bankruptcy costs offset the other
benefits from leverage so that the optimal amount of leverage is less than 100% debt finaning.


Bankruptcy risk

The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.


Bankruptcy view

The argument that expected bankruptcy costs preclude firms from being financed entirely
with debt.


Block house

Brokerage firms that help to find potential buyers or sellers of large block trades.


Break-even lease payment

The lease payment at which a party to a prospective lease is indifferent between
entering and not entering into the lease arrangement.


Break-even payment rate

The prepayment rate of a MBS coupon that will produce the same CFY as that of
a predetermined benchmark MBS coupon. Used to identify for coupons higher than the benchmark coupon
the prepayment rate that will produce the same CFY as that of the benchmark coupon; and for coupons lower
than the benchmark coupon the lowest prepayment rate that will do so.


Capital account

Net result of public and private international investment and lending activities.


Clearing House Automated Payments System (CHAPS)

A computerized Clearing system for sterling funds
that began operations in 1984. It includes 14 member banks, nearly 450 participating banks, and is one of the
Clearing companies within the structure of the Association for payment Clearing Services (APACS).


Clearing House Interbank Payments System (CHIPS)

An international wire transfer system for high-value
payments operated by a group of major banks.


Clearing member

A member firm of a Clearing House. EACH Clearing member must also be a member of the
exchange. Not all members of the exchange, however, are members of the Clearing organization. All trades of
a non-Clearing member must be registered with, and eventually settled through, a Clearing member.


Clearing house / Clearinghouse

An adjunct to a futures exchange through which transactions executed its floor are settled by a
process of matching purchases and sales. A Clearing organization is also charged with the proper conduct of
delivery procedures and the adequate financing of the entire operation.


Commission house

A firm which buys and sells future contracts for customer accounts. Related: futures
commission merchant, omnibus account.


Concentration account

A single centralized account into which funds collected at regional locations
(lockboxes) are transferred.


Consortium banks

A merchant banking subsidiary set up by several banks that may or may not be of the
same nationality. Consortium banks are common in the Euromarket and are active in loan syndication.


Conventional pass-throughs

Also called private-label pass-throughs, any mortgage pass-through security not
guaranteed by government agencies. Compare agency pass-throughs.


Coupon payments

A bond's interest payments.


Cross-sectional approach

A statistical methodology applied to a set of firms at a particular point in time.


Cumulative Translation Adjustment (CTA) account

An entry in a translated balance sheet in which gains
and/or losses from translation have been accumulated over a period of years. The CTA account is required
under the FASB No. 52 rule.


Current account

Net flow of goods, services, and unilateral transactions (gifts) between countries.


Date of payment

Date dividend checks are mailed.


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).


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.


Detachable warrant

A warrant entitles the holder to buy a given number of shares of stock at a stipulated
price. A detACHable warrant is one that may be sold separately from the package it may have originally been
issued with (usually a bond).


Discretionary account

accounts over which an individual or organization, other than the person in whose
name the account is carried, exercises trading authority or control.


Dupont system of financial control

Highlights the fact that return on assets (ROA) can be expressed in terms
of the profit margin and asset turnover.


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.


Either-way market

In the interbank Eurodollar deposit market, an either-way market is one in which the bid
and offered rates are identical.


Eligible bankers' acceptances

In the BA market, an acceptance may be referred to as eligible because it is
acceptable by the Fed as collateral at the discount window and/or because the accepting bank can sell it
without incurring a reserve requirement.


Eurobank

A bank that regularly accepts foreign currency denominated deposits and makes foreign currency loans.


European Monetary System (EMS)

An exchange arrangement formed in 1979 that involves the currencies
of European Union member countries.


Export-Import Bank (Ex-Im Bank)

The U.S. federal government agency that extends trade credits to U.S.
companies to facilitate the financing of U.S. exports.


Federal Financing Bank

A federal institution that lends to a wide array of federal credit agencies funds it
obtains by borrowing from the U.S. Treasury.


Federal Home Loan Banks

The institutions that regulate and lend to savings and loan associations. The
Federal Home Loan banks play a role analogous to that played by the Federal Reserve banks vis-à-vis
member commercial banks.


Federal Reserve System

The central bank of the U.S., established in 1913, and governed by the Federal
Reserve Board located in Washington, D.C. The system includes 12 Federal Reserve banks and is authorized
to regulate monetary policy in the U.S. as well as to supervise Federal Reserve member banks, bank holding
companies, international operations of U.S.banks, and U.S.operations of foreign banks.


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.


Field warehouse

WareHouse rented by a wareHouse company on another firm's premises.


Fixed-rate payer

In an interest rate swap the counterparty who pays a fixed rate, usually in exchange for a
floating-rate payment.


Floating-rate payer

In an interest rate swap, the counterparty who pays a rate based on a reference rate,
usually in exchange for a fixed-rate payment


Flow-through basis

An account for the investment credit to show all income statement benefits of the credit
in the year of acquisition, rather than spreading them over the life of the asset acquired.


Flow-through method

The practice of reporting to shareholders using straight-line depreciation and
accelerated depreciation for tax purposes and "flowing through" the lower income taxes actually paid to the
financial statement prepared for shareholders.


Foreign banking market

That portion of domestic bank loans supplied to foreigners for use abroad.


Fully modified pass-throughs

Agency pass-throughs that guarantee the timely payment of both interest and
principal. Related: modified pass-throughs
Functional currency As defined by FASB No. 52, an affiliate's functional currency is the currency of the
primary economic environment in which the affiliate generates and expends cash.


Generally Accepted Accounting Principals (GAAP)

A technical accounting term that encompasses the
conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.


Golden parachute

Compensation paid to top-level management by a target firm if a takeover occurs.


Graduated-payment mortgages (GPMs)

A type of stepped-payment loan in which the borrower's payments
are initially lower than those on a comparable level-rate mortgage. The payments are gradually increased over
a predetermined period (usually 3,5, or 7 years) and then are fixed at a level-pay schedule which will be
higher than the level-pay amortization of a level-pay mortgage originated at the same time. The difference
between what the borrower actually pays and the amount required to fully amortize the mortgage is added to
the unpaid principal balance.


Imputation tax system

Arrangement by which investors who receive a dividend also receive a tax credit for
corporate taxes that the firm has paid.


Interest payments

Contractual debt payments based on the coupon rate of interest and the principal amount.


International Bank for Reconstruction and Development - IBRD or World Bank

International bank for Reconstruction and Development makes loans at nearly conventional terms to countries for projects of high
economic priority.


International Banking Facility (IBF)

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


Investment bank

Financial intermediaries who perform a variety of services, including aiding in the sale of
securities, facilitating mergers and other corporate reorganizations, acting as brokers to both individual and
institutional clients, and trading for their own accounts. Underwriters.


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.


IRA/Keogh accounts

Special accounts where you can save and invest, and the taxes are deferred until money
is withdrawn. These plans are subject to frequent changes in law with respect to the deductibility of
contributions. Withdrawals of tax deferred contributions are taxed as income, including the capital gains from
such accounts.


Joint account

An agreement between two or more firms to share risk and financing responsibility in
purchasing or underwriting securities.


Joint clearing members

Firms that clear on more than one exchange.


Just-in-time inventory systems

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


Lag response of prepayments

There is typically a lag of about three months between the time the weighted
average coupon of an MBS pool has crossed the threshold for refinancing and an acceleration in prepayment
speed is observed.


Legal bankruptcy

A legal proceeding for liquidating or reorganizing a business.


Margin account (Stocks)

A leverageable account in which stocks can be purchased for a combination of
cash and a loan. The loan in the margin account is collateralized by the stock and, if the value of the stock
drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock. Margin
rules are federally regulated, but margin requirements and interest may vary among broker/dealers.


Market clearing

Total demand for loans by borrowers equals total supply of loans from lenders. The market,
any market, clears at the equilibrium rate of interest or price.


Merchant bank

A British term for a bank that specializes not in lending out its own funds, but in providing
various financial services such as accepting bills arising out of trade, underwriting new issues, and providing
advice on acquisitions, mergers, foreign exchange, portfolio management, etc.


Modified pass-throughs

Agency pass-throughs that guarantee (1) timely interest payments and (2) principal
payments as collected, but no later than a specified time after they are due. Related: fully modified passthroughs


Money center banks

banks that raise most of their funds from the domestic and international money markets, relying less on depositors for funds.


Money market demand account

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


Mortgage pass-through security

Also called a passthrough, a security created when one or more mortgage
holders form a collection (pool) of mortgages sells shares or participation certificates in the pool. The cash
flow from the collateral pool is "passed through" to the security holder as monthly payments of principal,
interest, and prepayments. This is the predominant type of MBS traded in the secondary market.


Mortgage-Backed Securities Clearing Corporation

A wholly owned subsidiary of the Midwest Stock
Exchange that operates a Clearing service for the comparison, netting, and margining of agency-guaranteed
MBSs transacted for forward delivery.


Multirule system

A technical trading strategy that combines mechanical rules, such as the CRISMA
(cumulative volume, relative strength, moving average) Trading system of Pruitt and White.


Nonsystematic risk

Nonmarket or firm-specific risk factors that can be eliminated by diversification. Also
called unique risk or diversifiable risk. systematic risk refers to risk factors common to the entire economy.


Omnibus account

An account carried by one futures commission merchant with another futures commission
merchant in which the transactions of two or more persons are combined and carried in the name of the
originating broker, rather than designated separately. Related: commission House.


Open account

Arrangement whereby sales are made with no formal debt contract. The buyer signs a receipt,
and the seller records the sale in the sales ledger.


Optimization approach to indexing

An approACH to indexing which seeks to Optimize some objective, such
as to maximize the portfolio yield, to maximize convexity, or to maximize expected total returns.


Pass-through rate

The net interest rate passed through to investors after deducting servicing, management,
and guarantee fees from the gross mortgage coupon.


Pass-through securities

A pool of fixed-income securities backed by a package of assets (i.e. mortgages)
where the holder receives the principal and interest payments. Related: mortgage pass-through security


Pass-through coupon rate

The interest rate paid on a securitized pool of assets, which is less than the rate
paid on the underlying loans by an amount equal to the servicing and guaranteeing fees.


Payable through drafts

A method of making payment that is used to maintain control over payments made
on behalf of the firm by personnel in noncentral locations. The payer's bank delivers the payable through draft
to the payer, which must approve it and return it to the bank before payment can be received.


Payment date

The date on which eACH shareholder of record will be sent a check for the declared dividend.


 

 

 

 

 

 

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