Definition of Roll over

Roll over

Reinvest funds received from a maturing security in a new issue of the same or a similar security.

Rollover

Most term loans in the Euromarket are made on a rollover basis, which means that the loan is
periodically repriced at an agreed spread over the appropriate, currently prevailing LIBO rate.

Rollover IRA

An IRA that an individual sets up for the express purpose of receiving
funds from a qualified retirement plan.

acid test ratio (also called the quick ratio)

The sum of cash, accounts receivable, and short-term marketable
investments (if any) is divided by
total current liabilities to compute this ratio. Suppose that the short-term
creditors were to pounce on a business and not agree to roll over the
debts owed to them by the business. In this rather extreme scenario, the
acid test ratio reveals whether its cash and near-cash assets are enough
to pay its short-term current liabilities. This ratio is an extreme test that
is not likely to be imposed on a business unless it is in financial straits.
This ratio is quite relevant when a business is in a liquidation situation
or bankruptcy proceedings.

current liabilities

Current means that these liabilities require payment in
the near term. Generally, these include accounts payable, accrued
expenses payable, income tax payable, short-term notes payable, and
the portion of long-term debt that will come due during the coming year.
Keep in mind that a business may roll over its debt; the old, maturing
debt may be replaced in part or in whole by new borrowing.

Payroll Stabilization

This calculation is used by states to determine the unemployment
contribution rate to charge employers and links the contribution rate
to fluctuations in a company’s total payroll over time.

Accelerated cost recovery system (ACRS)

Schedule of depreciation rates allowed for tax purposes.

Accounts receivable turnover

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

Asset-coverage test

A bond indenture restriction that permits additional borrowing on if the ratio of assets to
debt does not fall below a specified minimum.

Asset turnover

The ratio of net sales to total assets.

Cash flow coverage ratio

The number of times that financial obligations (for interest, principal payments,
preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental
payments, and depreciation.

Controlled disbursement

A service that provides for a single presentation of checks each day (typically in
the early part of the day).

Controlled foreign corporation (CFC)

A foreign corporation whose voting stock is more than 50% owned
by U.S. stockholders, each of whom owns at least 10% of the voting power.

Controller

The corporate manager responsible for the firm's accounting activities.

Cover

The purchase of a contract to offset a previously established short position.

Coverage ratios

Ratios used to test the adequacy of cash flows generated through earnings for purposes of
meeting debt and lease obligations, including the interest coverage ratio and the fixed charge coverage ratio.

Covered call

A short call option position in which the writer owns the number of shares of the underlying
stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the
stock does not have to be bought at the market price, if the holder of that option decides to exercise it.

Covered call writing strategy

A strategy that involves writing a call option on securities that the investor
owns in his or her portfolio. See covered or hedge option strategies.

Covered interest arbitrage

A portfolio manager invests dollars in an instrument denominated in a foreign
currency and hedges his resulting foreign exchange risk by selling the proceeds of the investment forward for
dollars.

Covered or hedge option strategies

Strategies that involve a position in an option as well as a position in the
underlying stock, designed so that one position will help offset any unfavorable price movement in the other,
including covered call writing and protective put buying. Related: naked strategies

Covered Put

A put option position in which the option writer also is short the corresponding stock or has
deposited, in a cash account, cash or cash equivalents equal to the exercise of the option. This limits the
option writer's risk because money or stock is already set aside. In the event that the holder of the put option
decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put
option.

Crossover rate

The return at which two alternative projects have the same net present value.

Debt-service coverage ratio

Earnings before interest and income taxes plus one-third rental charges, divided
by interest expense plus one-third rental charges plus the quantity of principal repayments divided by one
minus the tax rate.

Doctrine of sovereign immunity

Doctrine that says a nation may not be tried in the courts of another country
without its consent.

Dollar roll

Similar to the reverse repurchase agreement - a simultaneous agreement to sell a security held in a
portfolio with purchase of a similar security at a future date at an agreed-upon price.

Fixed asset turnover ratio

The ratio of sales to fixed assets.

Fixed-charge coverage ratio

A measure of a firm's ability to meet its fixed-charge obligations: the ratio of
(net earnings before taxes plus interest charges paid plus long-term lease payments) to (interest charges paid
plus long-term lease payments).

Forward cover

Purchase or sale of forward foreign currency in order to offset a known future cash flow.

Government bond

See: Government securities.

Government National Mortgage Association (Ginnie Mae)

A wholly owned U.S. government corporation
within the Department of Housing & Urban Development. Ginnie Mae guarantees the timely payment of
principal and interest on securities issued by approved servicers that are collateralized by FHA-issued, VAguaranteed,
or Farmers Home Administration (FmHA)-guaranteed mortgages.

Government sponsored enterprises

Privately owned, publicly chartered entities, such as the Student Loan
Marketing Association, created by Congress to reduce the cost of capital for certain borrowing sectors of the
economy including farmers, homeowners, and students.

Government securities

Negotiable U.S. Treasury securities.

Interest coverage ratio

The ratio of the earnings before interest and taxes to the annual interest expense. This
ratio measures a firm's ability to pay interest.

Interest coverage test

A debt limitation that prohibits the issuance of additional long-term debt if the issuer's
interest coverage would, as a result of the issue, fall below some specified minimum.

Inventory turnover

The ratio of annual sales to average inventory which measures the speed that inventory
is produced and sold. Low turnover is an unhealthy sign, indicating excess stocks and/or poor sales.

Market overhang

The theory that in certain situations, institutions wish to sell their shares but postpone the
share sales because large orders under current market conditions would drive down the share price and that
the consequent threat of securities sales will tend to retard the rate of share price appreciation. Support for this
theory is largely anecdotal.

Overbought/oversold indicator

An indicator that attempts to define when prices have moved too far and too
fast in either direction and thus are vulnerable to reaction.

Overfunded pension plan

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

Overlay strategy

A strategy of using futures for asset allocation by pension sponsors to avoid disrupting the
activities of money managers.

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.

Overnight repo

A repurchase agreement with a term of one day.

Overperform

When a security is expected to appreciate at a rate faster than the overall market.

Overreaction hypothesis

The supposition that investors overreact to unanticipated news, resulting in
exaggerated movement in stock prices followed by corrections.

Overshooting

The tendency of a pool of MBSs to reflect an especially high rate or prepayments the first time
it crosses the threshold for refinancing, especially if two or more years have passed since the date of issue
without the WAC of the pool having crossed the refinancing threshold.

Oversubscribed issue

Investors are not able to buy all of the shares or bonds they want, so underwriters must
allocate the shares or bonds among investors. This occurs when a new issue is underpriced or in great demand
because of growth prospects.

Oversubscription privilege

In a rights issue, arrangement by which shareholders are given the right to apply
for any shares that are not taken up.

Over-the-counter market (OTC)

A decentralized market (as opposed to an exchange market) where
geographically dispersed dealers are linked together by telephones and computer screens. The market is for
securities not listed on a stock or bond exchange. The NASDAQ market is an OTC market for U.S. stocks.

Portfolio turnover rate

For an investment company, an annualized rate found by dividing the lesser of
purchases and sales by the average of portfolio assets.

Price discovery process

The process of determining the prices of the assets in the marketplace through the
interactions of buyers and sellers.

Rally (recovery)

An upward movement of prices. Opposite of reaction.

Receivables turnover ratio

Total operating revenues divided by average receivables. Used to measure how
effectively a firm is managing its accounts receivable.

Risk controlled arbitrage

A self-funding, self-hedged series of transactions that generally utilize mortgage
securities as the primary assets.

Risk lover

A person willing to accept lower expected returns on prospects with higher amounts of risk.

Sovereign risk

The risk that a central bank will impose foreign exchange regulations that will reduce or
negate the value of FX contracts. Also refers to the risk of government default on a loan made to it or
guaranteed by it.

Takeover

General term referring to transfer of control of a firm from one group of shareholder's to another
group of shareholders.

Total asset turnover

The ratio of net sales to total assets.

Turnover

Mutual Funds: A measure of trading activity during the previous year, expressed as a percentage of
the average total assets of the fund. A turnover ratio of 25% means that the value of trades represented onefourth
of the assets of the fund. Finance: The number of times a given asset, such as inventory, is replaced
during the accounting period, usually a year. Corporate: The ratio of annual sales to net worth, representing
the extent to which a company can growth without outside capital. Markets: The volume of shares traded as a
percent of total shares listed during a specified period, usually a day or a year. Great Britain: total revenue.

Uncovered call

A short call option position in which the writer does not own shares of underlying stock
represented by his option contracts. Also called a "naked" call, it is much riskier for the writer than a covered
call, where the writer owns the underlying stock. If the buyer of a call exercises the option to call, the writer
would be forced to buy the stock at market price.

Uncovered put

A short put option position in which the writer does not have a corresponding short stock
position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the
put. Also called "naked" puts, the writer has pledged to buy the stock at a certain price if the buyer of the
options chooses to exercise it. The nature of uncovered options means the writer's risk is unlimited.

INVENTORY TURNOVER

The number of times a company sold out and replaced its average stock of goods in a year. The formula is:
(Cost of goods sold) / (Average inventory (beginning inventory + ending)/2 )

MACRS (Modified Accelerated Cost Recovery System)

A depreciation method created by the IRS under the Tax Reform Act of 1986. Companies must use it to depreciate all plant and equipment assets installed after December 31, 1986 (for tax purposes).

Bank overdraft

Money owed to the bank in a cheque account where payments exceed receipts.

Controllable profit

The profit made by a division after deducting only those expenses that can be controlled by the
divisional manager and ignoring those expenses that are outside the divisional manager’s control.

Non-production overhead

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

Overhead

Any cost other than a direct cost – may refer to an indirect production cost and/or to a non-production expense.

Overhead allocation

The process of spreading production overhead equitably over the volume of production of goods or services.

Overhead rate

The rate (often expressed per hour) applied to the time taken to produce a product/service, used to allocate production overheads to particular products/services based on the time taken. May be calculated on a business-wide or cost centre basis.

Production overhead

A general term referring to indirect costs.

Rolling budgets

A method of budgeting in which as each month passes, an additional budget month is added such that there is always a 12-month budget.

Turnover

The business income or sales of goods and services.

Payroll expense

The amount paid to employees for services rendered; synonymous with salary expense and wage expense.

Payroll journal

A journal used to record the payroll of a company.

Payroll tax expense

The amount of tax associated with salaries that an employer pays to governments (federal, state, and local).

Payroll taxes payable

The amount of payroll taxes owed to the various governments at the end of a period.

accounts receivable turnover ratio

A ratio computed by dividing annual
sales revenue by the year-end balance of accounts receivable. Technically
speaking, to calculate this ratio the amount of annual credit sales should
be divided by the average accounts receivable balance, but this information
is not readily available from external financial statements. For
reporting internally to managers, this ratio should be refined and finetuned
to be as accurate as possible.

asset turnover ratio

A broad-gauge ratio computed by dividing annual
sales revenue by total assets. It is a rough measure of the sales-generating
power of assets. The idea is that assets are used to make sales, and the
sales should lead to profit. The ultimate test is not sales revenue on
assets, but the profit earned on assets as measured by the return on
assets (ROA) ratio.

capital recovery

Refers to recouping, or regaining, invested capital over
the life of an investment. The pattern of period-by-period capital recovery
is very important. In brief, capital recovery is the return of capital—
not the return on capital, which refers to the rate of earnings on the
amount of capital invested during the period. The returns from an
investment have to be sufficient to provide for both recovery of capital
and an adequate rate of earnings on unrecovered capital period by
period. Sorting out how much capital is recovered each period is relatively
easy if you use a spreadsheet model for capital investment analysis.
In contrast, using a mathematical method of analysis does not
provide this period-by-period capital recovery information, which is a
major disadvantage.

inventory turnover ratio

The cost-of-goods-sold expense for a given
period (usually one year) divided by the cost of inventories. The ratio
depends on how long products are held in stock on average before they
are sold. Managers should closely monitor this ratio.

overhead costs

overhead generally refers to indirect, in contrast to direct,
costs. Indirect means that a cost cannot be matched or coupled in any
obvious or objective manner with particular products, specific revenue
sources, or a particular organizational unit. Manufacturing overhead
costs are the indirect costs in making products, which are in addition to
the direct costs of raw materials and labor. Manufacturing overhead
costs include both variable costs (electricity, gas, water, etc.), which vary
with total production output, and fixed costs, which do not vary with
increases or decreases in actual production output.

Fixed Assets Turnover Ratio

A measure of the utilization of a company's fixed assets to
generate sales. It is calculated by dividing the sales for the period
by the book value of the net fixed assets.

Fixed Charge Coverage Ratio

A measure of how well a company is able to meet its fixed
charges (interest and lease payments) based on the cash
generated by its operations. It is calculated by dividing the
earnings before interest and taxes by the total interest charges
and lease payments incurred by the firm.

Inventory Turnover Ratio

Provides a measure of how often a company's inventory is sold or
"turned over" during a period. It is calculated by dividing the sales
figure for the period by the book value of the inventory at the end of
the period.

Total Asset Turnover Ratio

A measure of the utilization of all of a company's assets to
generate sales. It is calculated by dividing the sales figure for the
period by the book value of the net fixed assets.

applied overhead

the amount of overhead that has been assigned to Work in Process Inventory as a result of productive activity; credits for this amount are to an overhead account

asset turnover

a ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets

controllable cost

a cost over which a manager has the ability to authorize incurrence or directly influence magnitude

controllable variance

the budget variance of the two variance approach to analyzing overhead variances

controller

the chief accountant (in a corporation) who is responsible
for maintaining and reporting on both the cost
and financial sets of accounts but does not handle or negotiate
changes in actual resources

controlling

the process of exerting managerial influence on
operations so that they conform to previously prepared plans

fixed overhead spending variance

the difference between the total actual fixed overhead and budgeted fixed overhead;
it is computed as part of the four-variance overhead analysis

fixed overhead volume variance

see volume variance

noncontrollable variance

the fixed overhead volume variance;
it is computed as part of the two-variance approach to overhead analysis

overapplied overhead

a credit balance in the overhead account
at the end of a period; when the applied overhead
amount is greater than the actual overhead that was incurred

overhead

any factory or production cost that is indirect to
the product or service; it does not include direct material
or direct labor; any production cost that cannot be directly
traced to the product

overhead application rate

see predetermined overhead rate

overhead efficiency variance

the difference between total budgeted overhead at actual hours and total budgeted
overhead at standard hours allowed for the production
achieved; it is computed as part of a three-variance analysis;
it is the same as variable overhead efficiency variance

overhead spending variance

the difference between total actual overhead and total budgeted overhead at actual
hours; it is computed as part of three-variance analysis; it
is equal to the sum of the variable and fixed overhead
spending variances

predetermined overhead rate

an estimated constant charge per unit of activity used to assign overhead cost to production or services of the period; it is calculated by dividing total budgeted annual overhead at a selected level of volume or activity by that selected measure of volume or activity; it is also the standard overhead application rate

rolling budget

see continuous budgeting

standard overhead application rate

a predetermined overhead rate used in a standard cost system; it can be a separate variable or fixed rate or a combined overhead rate

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