Definition of Run

Run

A run consists of a series of bid and offer quotes for different securities or maturities. Dealers give to and
ask for runs from each other.

runup

the period before a formal announcement of a takeover bid in which one or more bidders are either preparing to make an announcement or speculating that someone else will.

Book runner

The managing underwriter for a new issue. The book runner maintains the book of securities sold.

Long run

A period of time in which all costs are variable; greater than one year.
Long straddle A straddle in which a long position is taken in both a put and call option.

Long run

A period of time in which all costs are variable; greater than one year.

On the run

The most recently issued (and, therefore, typically the most liquid) government bond in a
particular maturity range.

Short-run operating activities

Events and decisions concerning the short-term finance of a firm, such as
how much inventory to order and whether to offer cash terms or credit terms to customers.

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

Credit Crunch

A decline in the ability or willingness of banks to lend.

Overrun

A manufactured or received quantity exceeding the planned amount.

Bane

In the words of Warren Buffet, Bill Bane Sr., is, "a great American and one of the last real traders
around. I like to call him 'Salvo.'" His wife, Carol, is a huge NASCAR fan, and in her own words "delights in
pulling the legs off central bankers." Cooper Bane, son number two, is a thriving artiste who specializes in
making art that is much better than the stuff most folks are doing. Jackson, son number three, is a world
renowned master chef and plans on opening a restaurant. Bill Bane Jr., son number one, plans on giving Mr.
Monroe Trout a run for his money. [Bill Bane, Jr. helped Professor Harvey put the hypertextual glossary
together while an MBA student at Duke University.]

Benchmark interest rate

Also called the base interest rate, it is the minimum interest rate investors will
demand for investing in a non-Treasury security. It is also tied to the yield to maturity offered on a
comparable-maturity Treasury security that was most recently issued ("on-the-run").

Benchmark issues

Also called on-the-run or current coupon issues or bellwether issues. In the secondary
market, it's the most recently auctioned Treasury issues for each maturity.

Cashout

Refers to a situation where a firm runs out of cash and cannot readily sell marketable securities.

Current issue

In Treasury securities, the most recently auctioned issue. Trading is more active in current
issues than in off-the-run issues.

Expense ratio

The percentage of the assets that were spent to run a mutual fund (as of the last annual
statement). This includes expenses such as management and advisory fees, overhead costs and 12b-1
(distribution and advertising ) fees. The expense ratio does not include brokerage costs for trading the
portfolio, although these are reported as a percentage of assets to the SEC by the funds in a Statement of
Additional Information (SAI). the SAI is available to shareholders on request. Neither the expense ratio or the
SAI includes the transaction costs of spreads, normally incurred in unlisted securities and foreign stocks.
These two costs can add significantly to the reported expenses of a fund. The expense ratio is often termed an
Operating Expense Ratio (OER).

Forward looking multiple

A truncated expression for a P/E ratio that is based on forward (expected)
earnings rather than on trailing earnings.

J-curve

Theory that says a country's trade deficit will initially worsen after its currency depreciates because
higher prices on foreign imports will more than offset the reduced volume of imports in the short-run.

Matched book

A bank runs a matched book when the distribution of maturities of its assets and liabilities are equal.

Monte Carlo simulation

An analytical technique for solving a problem by performing a large number of trail
runs, called simulations, and inferring a solution from the collective results of the trial runs. Method for
calculating the probability distribution of possible outcomes.

Privatization

The act of returning state-owned or state-run companies back to the private sector, usually by
selling them.

Stockout

running out of inventory.

Target payout ratio

A firm's long-run dividend-to-earnings ratio. The firm's policy is to attempt to pay out a
certain percentage of earnings, but it pays a stated dollar dividend and adjusts it to the target as base-line
increases in earnings occur.

Unmatched book

If the average maturity of a bank's liabilities is less than that of its assets, it is said to be
running an unmatched book. The term is commonly used with the Euromarket. Term also refers to the
condition when a firm enters into OTC derivatives contracts and chooses to hedge that risk by not making
trades in the opposite direction to another financial intermediary. In this case, the firm with an unmatched
book hedges its net market risk with futures and options, usually.
Related expressions: open book and short book.

GENERAL-AND-ADMINISTRATIVE EXPENSES

What was spent to run the non-sales and non-manufacturing part of a company, such as office salaries and interest paid on loans.

OPERATING EXPENSES

The total amount that was spent to run a company this year.

SELLING EXPENSES

What was spent to run the sales part of a company, such as sales salaries, travel, meals, and lodging for salespeople, and advertising.

Expenses

Costs involved in running the company.

Office supplies

The cost of the supplies used in running an office.

accounts payable

Short-term, non-interest-bearing liabilities of a business
that arise in the course of its activities and operations from purchases on
credit. A business buys many things on credit, whereby the purchase
cost of goods and services are not paid for immediately. This liability
account records the amounts owed for credit purchases that will be paid
in the short run, which generally means about one month.

accounts receivable

Short-term, non-interest-bearing debts owed to a
business by its customers who bought goods and services from the business
on credit. Generally, these debts should be collected within a month
or so. In a balance sheet, this asset is listed immediately after cash.
(Actually the amount of short-term marketable investments, if the business
has any, is listed after cash and before accounts receivable.)
Accounts receivable are viewed as a near-cash type of asset that will be
turned into cash in the short run. A business may not collect all of its
accounts receivable. See also bad debts.

current assets

Current refers to cash and those assets that will be turned
into cash in the short run. Five types of assets are classified as current:
cash, short-term marketable investments, accounts receivable, inventories,
and prepaid expenses—and they are generally listed in this order in
the balance sheet.

fixed expenses (costs)

Expenses or costs that remain the same in amount,
or fixed, over the short run and do not vary with changes in sales volume
or sales revenue or other measures of business activity. Over the
longer run, however, these costs increase or decrease as the business
grows or declines. Fixed operating costs provide capacity to carry on
operations and make sales. Fixed manufacturing overhead costs provide
production capacity. Fixed expenses are a key pivot point for the analysis
of profit behavior, especially for determining the breakeven point and for
analyzing strategies to improve profit performance.

variable expenses

Expenses that change with changes in either sales volume
or sales revenue, in contrast to fixed expenses that remain the same
over the short run and do not fluctuate in response to changes in sales
volume or sales revenue. See also revenue-driven expenses and unitdriven
expenses.

committed cost

a cost related either to the long-term investment
in plant and equipment of a business or to the
organizational personnel whom top management deem
permanent; a cost that cannot be changed without longrun
detriment to the organization

discretionary cost

a cost that is periodically reviewed by a
decision maker in a process of determining whether it continues
to be in accord with ongoing policies; a cost that
arises from a management decision to fund an activity at
a specified cost amount for a specified period of time, generally
one year; a cost that can be reduced to zero in the
short run if necessity so dictates

environmental constraint

any limitation on strategy options
caused by external cultural, fiscal, legal/regulatory,
or political situations; a limiting factor that is not under the
direct control of an organization’s management; tend to be
fairly long-run in nature

expected capacity

a short-run concept that represents the
anticipated level of capacity to be used by a firm in the
upcoming period, based on projected product demand

normal capacity

the long-run (5–10 years) average production
or service volume of a firm; it takes into consideration
cyclical and seasonal fluctuations

setup cost

the direct or indirect cost of getting equipment
ready for each new production run

vision statement

a written expression about the organization’s
future upon which all company personnel can base
their decisions and behavior so that everyone is working
toward the same long-run results

Monte-Carlo simulation

A mathematical modeling process. For a model that
has several parameters with statistical properties, pick a set of random values
for the parameters and run a simulation. Then pick another set of values, and
run it again. run it many times (often 10,000 times) and build up a statistical
distribution of outcomes of the simulation. This distribution of outcomes is
then used to answer whatever question you are asking.

Fixed cost

A cost that does not vary in the short run, irrespective of changes in any
cost drivers. For example, the rent on a building will not change until the lease
runs out or is re-negotiated, irrespective of the level of business activity within
that building.

Perpetual inventory

A system that continually tracks all additions to and deletions
from inventory, resulting in more accurate inventory records and a running total for
the cost of goods sold in each period.

Setup cost

The cluster of one-time costs incurred whenever a production batch is run,
which includes the cost to configure a machine for new production and all batchrelated
paperwork.

Aggregate Supply Curve

Combinations of price level and income for which the labor market is in equilibrium. The short-run aggregate supply curve incorporates information and price/wage inflexibilities in the labor market, whereas the long-run aggregate supply curve does not.

Business Cycle

Fluctuations of GDP around its long-run trend, consisting of recession, trough, expansion, and peak.

Natural Rate of Unemployment (NRU)

The level of unemployment characterizing the economy in long-run equilibrium, determined by the levels of frictional, structural, and institutionally induced unemployment. At this rate of unemployment, inflation should be constant, so it is sometimes called the nonaccelerating inflation rate of unemployment, or NAIRU.

Neutrality of Money

The doctrine that the money supply affects only the price level, with no long-run impact on real variables.

Permanent Income Hypothesis

Theory that individuals base current consumption spending on their perceived long-run average income rather than their current income.

Purchasing Power Parity

Theory that says that over the long run exchange rate changes offset any difference between foreign and domestic inflation. This result assumes that the real exchange rate remains constant, something that is not true even in the long run.

Structural Deficit

The budget deficit in excess of the deficit that in the long run keeps constant the ratio of the publically held national debt to GDP.

Mass customization

High-volume production runs of a product, while still offering
high variability in the end product offered to customers.

Requirements explosion

The component-level requirements for a production run,
derived by multiplying the number of parent-level requirements by the component
requirements for each parent, as specified in the bill of materials.

Scrap factor

An anticipated loss percentage included in the bill of material and
used to order extra materials for a production run, in anticipation of scrap losses.

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