Definition of Take
Take
1) A dealer or customer who agrees to buy at another dealer's offered price is said to take that offer.
2) Also, Euro bankers speak of taking deposits rather than buying money.
Related Terms:
Individuals who respond to rates and prices by acting as though they have no influence on them.
All parties that have an interest, financial or otherwise, in a firm - stockholders, creditors,
bondholders, employees, customers, management, the community, and the government.
To buy or sell short; that is, to have some amount that is owned or owed on an asset or
derivative security.
A contract that obligates the purchaser to take any product that is offered to it (and pay
the cash purchase price) or pay a specified amount if it refuses to take the product.
A cash surplus generated by the sale of one block of securities and the purchase of another, e.g.
selling a block of bonds at 99 and buying another block at 95. Also, a bid made to a seller of a security that is
designed (and generally agreed) to take him out of the market.
A fee paid to an underwriter in connection with an underwritten rights offering or an
underwritten forced conversion as compensation for each share of common stock he underwriter obtains and
must resell upon the exercise of rights or conversion of bonds.
General term referring to transfer of control of a firm from one group of shareholder's to another
group of shareholders.
the acquisition of managerial control of the corporation
by an outside or inside investor; control is achieved
by acquiring enough stock and stockholder votes to control
the board of directors and management
Anyone with a financial interest in the firm.
a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock.
This is typically used in control and takeover studies, where stockholders are paid a premium for being taken over. Starting some time period before the takeover (often five days before the first announced bid, but sometimes a longer period), the researchers calculate the actual daily stock returns for the target firm and subtract out the expected market returns (usually calculated using the firm’s beta and applying it to overall market movements during the time period under observation).
The excess actual return over the capital asset pricing model-determined expected return market is called an ‘‘abnormal return.’’ The cumulation of the daily abnormal returns over the time period under observation is the CAR. The term CAR(-5, 0) means the CAR calculated from five days before the
announcement to the day of announcement. The CAR(-1, 0) is a control premium, although Mergerstat generally uses the stock price five days before announcement rather than one day before announcement as the denominator in its control premium calculation. However, the CAR for any period other than (-1, 0) is not mathematically equivalent to a control premium.
the period after an announcement of a takeover bid in which stock prices typically rise until a merger or acquisition is made (or until it falls through).
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.
A bond covenant that specifies certain actions the firm must take.
A plan by U.S. Treasury Secretary James Baker under which 15 principal middle-income debtor
countries (the Baker 15) would undertake growth-oriented structural reforms, to be supported by increased
financing from the World Bank and continued lending from commercial banks.
An option pricing model in which the underlying asset can take on only two
possible, discrete values in the next time period for each value that it can take on in the preceding time period.
Breakout
A rise in a security's price above a resistance level (commonly its previous high price) or drop
below a level of support (commonly the former lowest price.) A breakout is taken to signify a continuing
move in the same direction. Can be used by technical analysts as a buy or sell indicator.
Capital rationing
Placing one or more limits on the amount of new investment undertaken by a firm, either
by using a higher cost of capital, or by setting a maximum on parts of, and/or the entirety of, the capital
budget.
Continuous random variable
A random value that can take any fractional value within specified ranges, as
contrasted with a discrete variable.
Covenants
Provisions in a bond indenture or preferred stock agreement that require the bond or preferred
stock issuer to take certain specified actions (affirmative covenants) or to refrain from taking certain specified
actions (negative covenants).
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.
Cumulative probability distribution
A function that shows the probability that the random variable will
attain a value less than or equal to each value that the random variable can take on.
Diffusion process
A conception of the way a stock's price changes that assumes that the price takes on all
intermediate values. dirty price. Related: full price
Discrete random variable
A random variable that can take only a certain specified set of discrete possible
values - for example, the positive integers 1, 2, 3, . . .
Embedded option
An option that is part of the structure of a bond that provides either the bondholder or
issuer the right to take some action against the other party, as opposed to a bare option, which trades
separately from any underlying security.
Event risk
The risk that the ability of an issuer to make interest and principal payments will change because
of rare, discontinuous, and very large, unanticipated changes in the market environment such as (1) a natural
or industrial accident or some regulatory change or (2) a takeover or corporate restructuring.
Float
The number of shares that are actively tradable in the market, excluding shares that are held by officers
and major stakeholders that have agreements not to sell until someone else is offered the stock.
Golden parachute
Compensation paid to top-level management by a target firm if a takeover occurs.
Greenmail
Situation in which a large block of stock is held by an unfriendly company, forcing the target
company to repurchase the stock at a substantial premium to prevent a takeover.
Incremental costs and benefits
Costs and benefits that would occur if a particular course of action were
taken compared to those that would occur if that course of action were not taken.
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.
Last trading day
The final day under an exchange's rules during which trading may take place in a particular
futures or options contract. Contracts outstanding at the end of the last trading day must be settled by delivery
of underlying physical commodities or financial instruments, or by agreement for monetary settlement
depending upon futures contract specifications.
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 straddle
A straddle in which a long position is taken in both a put and call option.
Monetary policy
Actions taken by the Board of Governors of the Federal Reserve System to influence the
money supply or interest rates.
Moral hazard
The risk that the existence of a contract will change the behavior of one or both parties to the
contract, e.g. an insured firm will take fewer fire precautions.
Nationalization
A government takeover of a private company.
Net operating losses
Losses that a firm can take advantage of to reduce taxes.
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.
Oversubscription privilege
In a rights issue, arrangement by which shareholders are given the right to apply
for any shares that are not taken up.
Pac-Man
strategy takeover defense strategy in which the prospective acquiree retaliates against the
acquirer's tender offer by launching its own tender offer for the other firm.
Payback
The length of time it takes to recover the initial cost of a project, without regard to the time value of money.
Point and figure chart
A price-only chart that takes into account only whole integer changes in price, i.e., a
2-point change. Point and figure charting disregards the element of time and is solely used to record changes
in price.
Poison pill
Anit-takeover device that gives a prospective acquiree's shareholders the right to buy shares of the
firm or shares of anyone who acquires the firm at a deep discount to their fair market value. Named after the
cyanide pill that secret agents are instructed to swallow if capture is imminent.
Positive covenant (of a bond)
A bond covenant that specifies certain actions the firm must take. Also called
and affirmative covenant.
Premium
1) Amount paid for a bond above the par value.
2) The price of an option contract; also, in futures
trading, the amount the futures price exceeds the price of the spot commodity. Related: inverted market premium payback period. Also called break-even time, the time it takes to recover the premium per share of a
convertible security.
Probability distribution
Also called a probability function, a function that describes all the values that the random variable can
take and the probability associated with each.
Product cycle
The time it takes to bring new and/or improved products to market.
Protective covenant
A part of the indenture or loan agreement that limits certain actions a company takes
during the term of the loan to protect the lender's interests.
Real time
A real time stock or bond quote is one that states a security's most recent offer to sell or bid (buy).
A delayed quote shows the same bid and ask prices 15 minutes and sometimes 20 minutes after a trade takes place.
Record date
1) Date by which a shareholder must officially own shares in order to be entitled to a dividend.
For example, a firm might declare a dividend on Nov 1, payable Dec 1 to holders of record Nov 15. Once a
trade is executed an investor becomes the "owner of record" on settlement, which currently takes 5 business
days for securities, and one business day for mutual funds. Stocks trade ex-dividend the fourth day before the
record date, since the seller will still be the owner of record and is thus entitled to the dividend.
2) The date that determines who is entitled to payment of principal and interest due to be paid on a security. The record
date for most MBSs is the last day of the month, however the last day on which they may be presented for the
transfer is the last business day of the month. The record date for CMOs and asset-backed securities vary with each issue.
Replacement-chain problem
Idea that future replacement decisions must be taken into account in selecting
among projects.
Revolving line of credit
A bank line of credit on which the customer pays a commitment fee and can take
down and repay funds according to his needs. Normally the line involves a firm commitment from the bank
for a period of several years.
Scale in
When a trader or investor gradually takes a position in a security or market over time.
Shark repellant
Amendment to company charter intended to protect it against takeover.
Speculative demand (for money)
The need for cash to take advantage of investment opportunities that may arise.
Spot lending
The origination of mortgages by processing applications taken directly from prospective borrowers.
Standstill agreements
Contracts where the bidding firm in a takeover attempt agrees to limit its holdings
another firm.
Subordinated debt
Debt over which senior debt takes priority. In the event of bankruptcy, subordinated
debtholders receive payment only after senior debt claims are paid in full.
Sweep account
Account in which the bank takes all of the excess available funds at the close of each business
day and invests them for the firm.
Target firm
A firm that is the object of a takeover by another firm.
Targeted repurchase
The firm buys back its own stock from a potential bidder, usually at a substantial
premium, to forestall a takeover attempt.
Traders
Persons who take positions in securities and their derivatives with the objective of making profits.
Traders can make markets by trading the flow. When they do that, their objective is to earn the bid/ask spread.
Traders can also be of the sort who take proprietary positions whereby they seek to profit from the directional
movement of prices or spread positions.
12b-1 funds
Mutual funds that do not charge an upfront or back-end commission, but instead take out up to
1.25% of average daily fund assets each year to cover the costs of selling and marketing shares, an
arrangement allowed by the SEC's Rule 12b-I (passed in 1980).
Two-state option pricing model
An option pricing model in which the underlying asset can take on only two
possible (discrete) values in the next time period for each value it can take on in the preceding time period.
Also called the binomial option pricing model.
Unsecured debt
Debt that does not identify specific assets that can be taken over by the debtholder in case of default.
Watch list
A list of securities selected for special surveillance by a brokerage, exchange or regulatory
organization; firms on the list are often takeover targets, companies planning to issue new securities or stocks
showing unusual activity.
GROSS PROFIT
The profit a company makes before expenses and taxes are taken away.
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.)
RATIO OF DEBT TO STOCKHOLDERS’ EQUITY
A ratio that shows which group—creditors or stockholders—has the biggest stake in or the most control of a company:
(Total liabilities) / (Stockholders’ equity)
Accountability
The process of satisfying stakeholders in the organization that managers have acted in the best interests of the stakeholders, a result of the stewardship function of managers, which takes place through accounting.
Incremental budget
A budget that takes the previous year as a base and adds (or deducts) a percentage to arrive at
the budget for the current year.
Optimum selling price
The price at which profit is maximized, which takes into account the cost behaviour of fixed and variable costs and the relationship between price and demand for a product/service.
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.
Payback
A method of investment appraisal that calculates the number of years taken for the cash flows from an investment to cover the initial capital outlay.
Profiling
A method of budgeting that takes into account seasonal fluctuations and estimates of when revenues will be earned and costs will be incurred over each month in the budget period.
Variance analysis
A method of budgetary control that compares actual performance against plan, investigates the causes of the variance and takes corrective action to ensure that targets are achieved.
Intangible assets
Assets owned by the company that do not possess physical substance; they usually take the form of rights and privileges such as patents, copyrights, and franchises.
Purchase discounts
A contra account that reduces purchases by the amount of the discounts taken for early payment.
Statement Retained Earnings
One of the basic financial statements; it takes the beginning balance of retained earnings and adds net income, then subtracts dividends. The Statement of Retained Earnings is prepared for a specified period of time.
basic earnings per share (EPS)
This important ratio equals the net
income for a period (usually one year) divided by the number capital
stock shares issued by a business corporation. This ratio is so important
for publicly owned business corporations that it is included in the daily
stock trading tables published by the Wall Street Journal, the New York
Times, and other major newspapers. Despite being a rather straightforward
concept, there are several technical problems in calculating
earnings per share. Actually, two EPS ratios are needed for many businesses—
basic EPS, which uses the actual number of capital shares outstanding,
and diluted EPS, which takes into account additional shares of
stock that may be issued for stock options granted by a business and
other stock shares that a business is obligated to issue in the future.
Also, many businesses report not one but two net income figures—one
before extraordinary gains and losses were recorded in the period and a
second after deducting these nonrecurring gains and losses. Many business
corporations issue more than one class of capital stock, which
makes the calculation of their earnings per share even more complicated.
bottom line
A commonly used term that refers to the net income (profit)
reported by a business, which is the last, or bottom line, in its income
statement. As you undoubtedly know, the term has taken on a much
broader meaning in everyday use, referring to the ultimate or most important
effect or result of something. Not many accounting-based terms have
found their way into everyday language, but this is one that has.
current ratio
Calculated to assess the short-term solvency, or debt-paying
ability of a business, it equals total current assets divided by total current
liabilities. Some businesses remain solvent with a relatively low current
ratio; others could be in trouble with an apparently good current ratio.
The general rule is that the current ratio should be 2:1 or higher, but
please take this with a grain of salt, because current ratios vary widely
from industry to industry.
debt-to-equity ratio
A widely used financial statement ratio to assess the
overall debt load of a business and its capital structure, it equals total liabilities
divided by total owners’ equity. Both numbers for this ratio are
taken from a business’s latest balance sheet. There is no standard, or
generally agreed on, maximum ratio, such as 1:1 or 2:1. Every industry
is different in this regard. Some businesses, such as financial institutions,
have very high debt-to-equity ratios. In contrast, many businesses
use very little debt relative to their owners’ equity.
discounted cash flow (DCF)
Refers to a capital investment analysis technique
that discounts, or scales down, the future cash returns from an
investment based on the cost-of-capital rate for the business. In essence,
each future return is downsized to take into account the cost of capital
from the start of the investment until the future point in time when the
return is received. Present value (PV) is the amount resulting from discounting
the future returns. Present value is subtracted from the entry
cost of the investment to determine net present value (NPV). The net
present value is positive if the present value is more than the entry cost,
which signals that the investment would earn more than the cost-ofcapital
rate. If the entry cost is more than the present value, the net
present value is negative, which means that the investment would earn
less than the business’s cost-of-capital rate.
internal accounting controls
Refers to forms used and procedures
established by a business—beyond what would be required for the
record-keeping function of accounting—that are designed to prevent
errors and fraud. Two examples of internal controls are (1) requiring a
second signature by someone higher in the organization to approve a
transaction in excess of a certain dollar amount and (2) giving customers
printed receipts as proof of sale. Other examples of internal
control procedures are restricting entry and exit routes of employees,
requiring all employees to take their vacations and assigning another
person to do their jobs while they are away, surveillance cameras, surprise
counts of cash and inventory, and rotation of duties. Internal controls
should be cost-effective; the cost of a control should be less than
the potential loss that is prevented. The guiding principle for designing
internal accounting controls is to deter and detect errors and dishonesty.
The best internal controls in the world cannot prevent most fraud
by high-level managers who take advantage of their positions of trust
and authority.
net income (also called the bottom line, earnings, net earnings, and net
operating earnings)
This key figure equals sales revenue for a period
less all expenses for the period; also, any extraordinary gains and losses
for the period are included in this final profit figure. Everything is taken
into account to arrive at net income, which is popularly called the bottom
line. Net income is clearly the single most important number in business
financial reports.
return on equity (ROE)
This key ratio, expressed as a percent, equals net
income for the year divided by owners’ equity. ROE should be higher than
a business’s interest rate on debt because the owners take more risk.
sunk cost
A cost that has been paid and cannot be undone or reversed.
Once the cost has been paid, it is irretrievable, like water over the dam
or spilled milk. Usually, the term refers to the recorded value of an asset
that has lost its value in the operating activities of a business. Examples
are the costs of products in inventory that cannot be sold and fixed
assets that are no longer usable. The book value of these assets should
be written off to expense. These costs should be disregarded in making
decisions about what to do with the assets (except that the income tax
effects of disposing of the assets should be taken into account).
appraisal cost
a quality control cost incurred for monitoring
or inspection; compensates for mistakes not eliminated
through prevention activities
inspection time
the time taken to perform quality control activities
management style
the preference of a manager in how he/she interacts with other stakeholders in the organization;
it influences the way the firm engages in transactions and
is manifested in managerial decisions, interpersonal and
interorganizational relationships, and resource allocations
normal capacity
the long-run (5–10 years) average production
or service volume of a firm; it takes into consideration
cyclical and seasonal fluctuations
payback period
the time it takes an investor to recoup an
original investment through cash flows from a project
theory of constraints (TOC)
a method of analyzing the bottlenecks
(constraints) that keep a system from achieving
higher performance; it states that production cannot take
place at a rate faster than the slowest machine or person
in the process
Current cost
Under target costing concepts, this is the cost that would be applied to a
new product design if no additional steps were taken to reduce costs, such as
through value engineering or kaizen costing. Under traditional costing concepts, this
is the cost of manufacturing a product with work methods, materials, and specifications
currently in use.
Payback method
A capital budgeting analysis method that calculates the amount of
time it will take to recoup the investment in a capital asset, with no regard for the
time cost of money.
acquisition
takeover of a firm by purchase of that firm’s common
stock or assets.
poison pill
Measure taken by a target firm to avoid acquisition;
for example, the right for existing shareholders to buy additional
shares at an attractive price if a bidder acquires a large holding.
preferred stock
Stock that takes priority over common stock in regard to dividends.
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