Definition of Swap sale

Swap sale

Also called a swap assignment, a transaction that ends one counterparty's role in an interest rate
swap by substituting a new counterparty whose credit is acceptable to the other original counterparty.

Swap assignment

Related: swap sale.

Amortizing interest rate swap

swap in which the principal or national amount rises (falls) as interest rates
rise (decline).

Asset for asset swap

Creditors exchange the debt of one defaulting borrower for the debt of another
defaulting borrower.

Asset swap

An interest rate swap used to alter the cash flow characteristics of an institution's assets so as to
provide a better match with its iabilities.

Best-efforts sale

A method of securities distribution/ underwriting in which the securities firm agrees to sell
as much of the offering as possible and return any unsold shares to the issuer. As opposed to a guaranteed or
fixed price sale, where the underwriter agrees to sell a specific number of shares (with the securities firm
holding any unsold shares in its own account if necessary).

Call swaption

A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The
writer therefore becomes the fixed-rate receiver/floating rate payer.

Circus swap

A fixed rate currency swap against floating U.S. dollar LIBOR payments.

Closing sale

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

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.

Currency swap

An agreement to swap a series of specified payment obligations denominated in one currency
for a series of specified payment obligations denominated in a different currency.

Days' sales in inventory ratio

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

Days' sales outstanding

Average collection period.

Debt swap

A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank
debt at a discount and swaps this debt with the central bank for local currency that it can use to acquire local
equity.

Differential swap

swap between two LIBO rates of interest, e.g. yen LIBOR for dollar LIBOR. Payments are
in one currency.

Domestic International Sales Corporation (DISC)

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

Equity swap

A swap in which the cash flows that are exchanged are based on the total return on some stock
market index and an interest rate (either a fixed rate or a floating rate). Related: interest rate swap.

Extension swap

Extending maturity through a swap, e.g. selling a 2-year note and buying one with a slightly
longer current maturity.

Foreign exchange swap

An agreement to exchange stipulated amounts of one currency for another currency
at one or more future dates.

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.

Forward sale

A method for hedging price risk which involves an agreement between a lender and an investor
to sell particular kinds of loans at a specified price and future time.

Installment sale

The sale of an asset in exchange for a specified series of payments (the installments).

Interest rate swap

A binding agreement between counterparties to exchange periodic interest payments on
some predetermined dollar principal, which is called the notional principal amount. For example, one party
will pay fixed and receive variable.

Intermarket spread swaps

An exchange of one bond for another based on the manager's projection of a
realignment of spreads between sectors of the bond market.

Liability swap

An interest rate swap used to alter the cash flow characteristics of an institution's liabilities so
as to provide a better match with its assets.

Limitation on merger, consolidation, or sale

A bond covenant that restricts in some way a firm's ability to
merge or consolidate with another firm.

Limitation on sale-and-leaseback

A bond covenant that restricts in some way a firm's ability to enter into
sale and lease-back transactions.

Negotiated sale

Situation in which the terms of an offering are determined by negotiation between the issuer
and the underwriter rather than through competitive bidding by underwriting groups.

Opening sale

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

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.

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.

Pure yield pickup swap

Moving to higher yield bonds.

Put swaption

A financial tool in which the buyer has the right, or option, to enter into a swap as a floatingrate
payer. The writer of the swaption therefore becomes the floating-rate receiver/fixed-rate payer.

Quanto swap

See: differential swap.

Rate anticipation swaps

An exchange of bonds in a portfolio for new bonds that will achieve the target
portfolio duration, based on the investor's assumptions about future changes in interest rates.

Sale and lease-back

sale of an existing asset to a financial institution that then leases it back to the user.
Related: lease.

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.

Short sale

Selling a security that the seller does not own but is committed to repurchasing eventually. It is
used to capitalize on an expected decline in the security's price.

Substitute sale

A method for hedging price risk that utilizes debt-market instruments, such as interest rate
futures, or that involves selling borrowed securities as the primary assets.

Substitution swap

A swap in which a money manager exchanges one bond for another bond that is similar in
terms of coupon, maturity, and credit quality, but offers a higher yield.

Swap

An arrangement whereby two companies lend to each other on different terms, e.g. in different
currencies, and/or at different interest rates, fixed or floating.

Swap buy-back

The sale of an interest rate swap by one counterparty to the other, effectively ending the swap.

Swap optio

See: swaption.
Related: Quality option.

Swap rate

The difference between spot and forward rates expressed in points, e.g., $0.0001 per pound sterling.

Swap reversal

An interest rate swap designed to end a counterparty's role in another interest rate swap,
accomplished by counterbalancing the original swap in maturity, reference rate, and notional amount.

Swaption

Options on interest rate swaps. The buyer of a swaption has the right to enter into an interest rate
swap agreement by some specified date in the future. The swaption agreement will specify whether the buyer
of the swaption will be a fixed-rate receiver or a fixed-rate payer. The writer of the swaption becomes the
counterparty to the swap if the buyer exercises.

Tax swap

swapping two similar bonds to receive a tax benefit.

Terms of sale

Conditions on which a firm proposes to sell its goods services for cash or credit.

Wholesale mortgage banking

The purchasing of loans originated by others, with the servicing rights
released to the buyer.

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.

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)

Cost of sales

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

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.

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.

Sales journal

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

Sales returns

A contra account that offsets revenue. It represents the amount of sales made that were later returned.

return on sales

This ratio equals net income divided by sales revenue.

Swap

An exchange of cash flows between two counterparties. The
counterparties may exchange flows in different currencies
(currency swap) or exchange floating interest rate payments for
fixed rate payments (interest rate swap).

sales mix

the relative combination of quantities of sales of the various products that make up the total sales of a company

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

Short sale, short position

The sale of a security or financial instrument not
owned, in anticipation of a price decline and making a profit by purchasing the
instrument later at a lower price, and then delivering the instrument to
complete the sale. See Long position.

Swap

A contract between two parties to exchange cash flows in the future
according to some formula.

Swaption

A swap option; an option on an interest-rate swap. The option gives
the holder the right to enter into a contracted interest-rate swap at a specified
future date. See swap.

Gross sales

The total sales recorded prior to sales discounts and returns.

Net sales

Total revenue, less the cost of sales returns, allowances, and discounts.

Sales allowance

A reduction in a price that is allowed by the seller, due to a problem
with the sold product or service.

Sales discount

A reduction in the price of a product or service that is offered by the
seller in exchange for early payment by the buyer.

Sales value at split-off

A cost allocation methodology that allocates joint costs to joint
products in proportion to their relative sales values at the split-off point.

percentage of sales models

Planning model in which sales forecasts are the driving variables and most other variables are
proportional to sales.

swap

Arrangement by two counterparties to exchange one stream of cash flows for another.

terms of sale

Credit, discount, and payment terms offered on a sale.

Sales Tax

A tax levied as a percentage of retail sales.

Available-for-Sale Security

A debt or equity security not classified as a held-to-maturity security or a trading security. Can be classified as a current or noncurrent investment depending on the intended holding period.

Gain-on-Sale Accounting

Up-front gain recognized from the securitization and sale of a pool
of loans. Profit is recorded for the excess of the sales price and the present value of the estimated
interest income that is expected to be received on the loans above the amounts funded on the loans
and the present value of the interest agreed to be paid to the buyers of the loan-backed securities.

Sales Revenue Revenue recognized from the sales of products as opposed to the provision of

services.

Sales-type Lease

Lease accounting used by a manufacturer who is also a lessor. Up-front gross
profit is recorded for the excess of the present value of the lease payments to be received across
a lease term over the cost to manufacture the leased equipment. Interest income also is recognized
on the lease receivable as it is earned over the lease term.

Conditional Sale

A type of agreement to sell whereby a seller retains title to goods sold and delivered to a purchaser until full payment has been made.

Conditional Sale Agreement

An agreement entered into between a conditional buyer and a conditional seller setting out the terms under which goods change hands.

Sale and Leaseback

An agreement in which the owner of a property sells that property to a person or institution and then leases it back again for an agreed period and rental.

point of sale (POS)

The terminal at which a customer uses his/her debit card to make a direct payment transaction. See also Interac Direct Payment.

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