Definition of sales value at split-off allocation

sales value at split-off allocation

a method of assigning joint cost to joint products that uses the relative sales values of the products at the split-off point as the proration basis; use of this method requires that all joint products
are salable at the split-off point

NPV (net present value of cash flows)

Same as PV, but usually includes a subtraction for an initial cash outlay.

PV (present value of cash flows)

the value in today’s dollars of cash flows that occur in different time periods.
present value factor equal to the formula 1/(1 - r)n, where n is the number of years from the valuation date to the cash flow and r is the discount rate.
For business valuation, n should usually be midyear, i.e., n = 0.5, 1.5, . . .

Adjusted present value (APV)

The net present value analysis of an asset if financed solely by equity
(present value of un-levered cash flows), plus the present value of any financing decisions (levered cash
flows). In other words, the various tax shields provided by the deductibility of interest and the benefits of
other investment tax credits are calculated separately. This analysis is often used for highly leveraged
transactions such as a leverage buy-out.

Asset allocation decision

The decision regarding how an institution's funds should be distributed among the
major classes of assets in which it may invest.

Bond value

With respect to convertible bonds, the value the security would have if it were not convertible
apart from the conversion option.

Book value

A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
company's book value might be more or less than its market value.

Book value per share

The ratio of stockholder equity to the average number of common shares. Book value
per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation
(and not necessarily market valuation).

Capital allocation

decision allocation of invested funds between risk-free assets versus the risky portfolio.

Carrying value

Book value.

Cash-surrender value

An amount the insurance company will pay if the policyholder ends a whole life
insurance policy.

Conditional sales contracts

Similar to equipment trust certificates except that the lender is either the
equipment manufacturer or a bank or finance company to whom the manufacturer has sold the conditional
sales contract.

Contingent deferred sales charge (CDSC)

The formal name for the load of a back-end load fund.

Conversion value

Also called parity value, the value of a convertible security if it is converted immediately.

Days' sales in inventory ratio

The average number of days' worth of sales that is held in inventory.

Days' sales outstanding

Average collection period.

Domestic International Sales Corporation (DISC)

A U.S. corporation that receives a tax incentive for
export activities.

Dynamic asset allocation

An asset allocation strategy in which the asset mix is mechanistically shifted in
response to -changing market conditions, as in a portfolio insurance strategy, for example.

Exercise value

The amount of advantage over a current market transaction provided by an in-the-money
option.

Expected value

The weighted average of a probability distribution.

Expected value of perfect information

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

Extraordinary positive value

A positive net present value.

Face value

See: Par value.

Firm's net value of debt

Total firm value minus total firm debt.

Foreign Sales Corporation (FSC)

A special type of corporation created by the Tax Reform Act of 1984 that
is designed to provide a tax incentive for exporting U.S.-produced goods.

Future value

The amount of cash at a specified date in the future that is equivalent in value to a specified
sum today.

Intrinsic value of an option

The amount by which an option is in-the-money. An option which is not in-themoney
has no intrinsic value. Related: in-the-money.

Intrinsic value of a firm

The present value of a firm's expected future net cash flows discounted by the
required rate of return.

Investment value

Related:straight value.

Last split

After a stock split, the number of shares distributed for each share held and the date of the
distribution.

Liquidation value

Net amount that could be realized by selling the assets of a firm after paying the debt.

Loan value

The amount a policyholder may borrow against a whole life insurance policy at the interest rate
specified in the policy.

Market value

1) The price at which a security is trading and could presumably be purchased or sold.
2) The value investors believe a firm is worth; calculated by multiplying the number of shares outstanding by the
current market price of a firm's shares.

Market value ratios

Ratios that relate the market price of the firm's common stock to selected financial
statement items.

Market value-weighted index

An index of a group of securities computed by calculating a weighted average
of the returns on each security in the index, with the weights proportional to outstanding market value.

Maturity value

Related: par value.

Net adjusted present value

The adjusted present value minus the initial cost of an investment.

Net asset value (NAV)

The value of a fund's investments. For a mutual fund, the net asset value per share
usually represents the fund's market price, subject to a possible sales or redemption charge. For a closed end
fund, the market price may vary significantly from the net asset value.

Net book value

The current book value of an asset or liability; that is, its original book value net of any
accounting adjustments such as depreciation.

Net present value (NPV)

The present value of the expected future cash flows minus the cost.

Net present value of growth opportunities

A model valuing a firm in which net present value of new
investment opportunities is explicitly examined.

Net present value of future investments

The present value of the total sum of NPVs expected to result from
all of the firm's future investments.

Net present value rule

An investment is worth making if it has a positive NPV. Projects with negative NPVs
should be rejected.

Net salvage value

The after-tax net cash flow for terminating the project.

Original face value

The principal amount of the mortgage as of its issue date.

Par value

Also called the maturity value or face value, the amount that the issuer agrees to pay at the maturity date.

Parity value

Related:conversion value

Policy asset allocation

A long-term asset allocation method, in which the investor seeks to assess an
appropriate long-term "normal" asset mix that represents an ideal blend of controlled risk and enhanced
return.

Present value

The amount of cash today that is equivalent in value to a payment, or to a stream of payments,
to be received in the future.

Present value factor

Factor used to calculate an estimate of the present value of an amount to be received in
a future period.

Present value of growth opportunities (NPV)

Net present value of investments the firm is expected to make
in the future.

Price/sales ratio (PS Ratio)

Determined by dividing current stock price by revenue per share (adjusted for stock splits).
Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares
outstanding.

Price value of a basis point (PVBP)

Also called the dollar value of a basis point, a measure of the change in
the price of the bond if the required yield changes by one basis point.

Relative value

The attractiveness measured in terms of risk, liquidity, and return of one instrument relative to
another, or for a given instrument, of one maturity relative to another.

Replacement value

Current cost of replacing the firm's assets.

Residual value

Usually refers to the value of a lessor's property at the time the lease expires.

Reverse stock split

A proportionate decrease in the number of shares, but not the value of shares of stock
held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a
1-for-3 split would result in stockholders owning 1 share for every 3 shares owned before the split. After the
reverse split, the firm's stock price is, in this example, worth three times the pre-reverse split price. A firm
generally institutes a reverse split to boost its stock's market price and attract investors.

Sales charge

The fee charged by a mutual fund when purchasing shares, usually payable as a commission to
marketing agent, such as a financial advisor, who is thus compensated for his assistance to a purchaser. It
represents the difference, if any, between the share purchase price and the share net asset value.

Sales forecast

A key input to a firm's financial planning process. External sales forecasts are based on
historical experience, statistical analysis, and consideration of various macroeconomic factors.

Sales-type lease

An arrangement whereby a firm leases its own equipment, such as IBM leasing its own
computers, thereby competing with an independent leasing company.

Salvage value

Scrap value of plant and equipment.

Split

Sometimes, companies split their outstanding shares into a larger number of shares. If a company with 1
million shares did a two-for-one split, the company would have 2 million shares. An investor with 100 shares
before the split would hold 200 shares after the split. The investor's percentage of equity in the company
remains the same, and the price of the stock he owns is one-half the price of the stock on the day prior to the split.

Split-fee option

An option on an option. The buyer generally executes the split fee with first an initial fee,
with a window period at the end of which upon payment of a second fee the original terms of the option may
be extended to a later predetermined final notification date.

Split-rate tax system

A tax system that taxes retained earnings at a higher rate than earnings that are
distributed as dividends.

Standardized value

Also called the normal deviate, the distance of one data point from the mean, divided by
the standard deviation of the distribution.

Stock split

Occurs when a firm issues new shares of stock but in turn lowers the current market price of its
stock to a level that is proportionate to pre-split prices. For example, if IBM trades at $100 before a 2-for-1
split, after the split it will trade at $50 and holders of the stock will have twice as many shares than they had
before the split. See: split.

Straight value

Also called investment value, the value of a convertible security without the con-version option.

Tactical Asset Allocation (TAA)

An asset allocation strategy that allows active departures from the normal
asset mix based upon rigorous objective measures of value. Often called active management. It involves
forecasting asset returns, volatilities and correlations. The forecasted variables may be functions of
fundamental variables, economic variables or even technical variables.

Terminal value

The value of a bond at maturity, typically its par value, or the value of an asset (or an entire
firm) on some specified future valuation date.

Time value of an option

The portion of an option's premium that is based on the amount of time remaining
until the expiration date of the option contract, and that the underlying components that determine the value of
the option may change during that time. Time value is generally equal to the difference between the premium
and the intrinsic value. Related: in-the-money.

Time value of money

The idea that a dollar today is worth more than a dollar in the future, because the dollar
received today can earn interest up until the time the future dollar is received.

Utility value

The welfare a given investor assigns to an investment with a particular return and risk.

Value-added tax

Method of indirect taxation whereby a tax is levied at each stage of production on the value
added at that specific stage.

Value-at-Risk model (VAR)

Procedure for estimating the probability of portfolio losses exceeding some
specified proportion based on a statistical analysis of historical market price trends, correlations, and volatilities.

Value additivity principal

Prevails when the value of a whole group of assets exactly equals the sum of the
values of the individual assets that make up the group of assets. Stated differently, the principle that the net
present value of a set of independent projects is just the sum of the net present values of the individual projects.

Value date

In the market for Eurodollar deposits and foreign exchange, value date refers to the delivery date
of funds traded. Normally it is on spot transactions two days after a transaction is agreed upon and the future
date in the case of a forward foreign exchange trade.

Value dating

Refers to when value or credit is given for funds transferred between banks.

Value manager

A manager who seeks to buy stocks that are at a discount to their "fair value" and sell them at
or in excess of that value. Often a value stock is one with a low price to book value ratio.

BOOK VALUE

An asset’s cost basis minus accumulated depreciation.

BOOK VALUE OF COMMON STOCK

The theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. Book value equals:
(Stockholders’ equity) / (Common stock shares outstanding)

CAPITAL IN EXCESS OF PAR VALUE

What a company collected when it sold stock for more than the par value per share.

NET SALES (revenue)

The amount sold after customers’ returns, sales discounts, and other allowances are taken away from
gross sales. (Companies usually just show the net sales amount on their income statements, omitting returns, allowances, and the like.)

NUMBER OF DAYS SALES IN RECEIVABLES

(also called average collection period). The number of days of net sales that are tied up in credit sales (accounts receivable) that haven’t been collected yet.

PAR VALUE

An arbitrary value that a company may assign to its stock. Par value has no relationship to what the stock is selling for on the open market.

RATIO OF NET INCOME TO NET SALES

A ratio that shows how much net income (profit) a company made on each dollar of net sales. Here’s the formula:
(Net income) / (Net sales)

RATIO OF NET SALES TO NET INCOME

A ratio that shows how much a company had to collect in net sales to make a dollar of profit. Figure it this way:
(Net sales) / (Net income)

SALVAGE VALUE

The amount management estimates a piece of equipment will be worth at the end of its useful life, either as a trade-in or if it were sold for scrap.

Allocation base A measure of activity or volume such as labour

hours, machine hours or volume of production
used to apportion overheads to products and
services.

Cash value added (CVA)

A method of investment appraisal that calculates the ratio of the net present value of an
investment to the initial capital investment.

Cost of sales

The manufacture or purchase price of goods sold in a period or the cost of providing a service.

Economic Value Added (EVA)

Operating profit, adjusted to remove distortions caused by certain accounting rules, less a charge
to cover the cost of capital invested in the business.

Net present value (NPV)

A discounted cash flow technique used for investment appraisal that calculates the present value of future cash flows and deducts the initial capital investment.

Overhead allocation

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

Sales mix

The mix of product/services offered by the business, each of which may be aimed at different customers, with each product/service having different prices and costs.

Shareholder value

Increasing the value of the business to its shareholders, achieved through a combination of
dividend and capital growth in the value of the shares.

Value-based management

A variety of approaches that emphasize increasing shareholder value as the primary goal of every business.

No par value stock

Stock issued by the company that does not have an arbitrary value (par value) assigned to it.

Par value

An arbitrary value assigned by the company to each share of stock; it is used in the accounting for the sale of stock and in some jurisdictions for calculating taxes.

Sales

Amounts earned by the company from the sale of merchandise or services; often used interchangeably with the term revenue.

Sales discounts

A contra account that offsets revenue. It represents the amount of the discounts for early payment allowed on sales.

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