Definition of W-type bottom

W-type bottom

A double bottom where the price or indicator chart has the appearance of a W.
See: technical analysis.

Bottom-up equity management style

A management style that de-emphasizes the significance of economic
and market cycles, focusing instead on the analysis of individual stocks.

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.

Type

The classification of an option contract as either a put or a call.

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.

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.

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.

markup

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).

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.

All equity rate

The discount rate that reflects only the business risks of a project and abstracts from the
effects of financing.

American-style option

An option contract that can be exercised at any time between the date of purchase and
the expiration date. Most exchange-traded options are American style.

Asset/equity ratio

The ratio of total assets to stockholder equity.

Asset/liability management

Also called surplus management, the task of managing funds of a financial
institution to accomplish the two goals of a financial institution:
1) to earn an adequate return on funds invested, and
2) to maintain a comfortable surplus of assets beyond liabilities.

Back-up

1) When bond yields and prices fall, the market is said to back-up.
2) When an investor swaps out of one security into another of shorter current maturity he is said to back up.

Bankruptcy

State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from
the stockholders to the bondholders.

Bankruptcy cost view

The argument that expected indirect and direct bankruptcy costs offset the other
benefits from leverage so that the optimal amount of leverage is less than 100% debt finaning.

Bankruptcy risk

The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.

Bankruptcy view

The argument that expected bankruptcy costs preclude firms from being financed entirely
with debt.

Break-even lease payment

The lease payment at which a party to a prospective lease is indifferent between
entering and not entering into the lease arrangement.

Capital lease

A lease obligation that has to be capitalized on the balance sheet.

Cash management bill

Very short maturity bills that the Treasury occasionally sells because its cash
balances are down and it needs money for a few days.

Common stock/other equity

Value of outstanding common shares at par, plus accumulated retained
earnings. Also called shareholders' equity.

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.

Corporate financial management

The application of financial principals within a corporation to create and
maintain value through decision making and proper resource management.

Cost of lease financing

A lease's internal rate of return.

Coupon

The periodic interest payment made to the bondholders during the life of the bond.

Coupon equivalent yield

True interest cost expressed on the basis of a 365-day year.

Coupon payments

A bond's interest payments.

Coupon rate

In bonds, notes or other fixed income securities, the stated percentage rate of interest, usually
paid twice a year.

Current coupon

A bond selling at or close to par, that is, a bond with a coupon close to the yields currently
offered on new bonds of a similar maturity and credit risk.

Current-coupon issues

Related: Benchmark issues

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/equity ratio

Indicator of financial leverage. Compares assets provided by creditors to assets provided
by shareholders. Determined by dividing long-term debt by common stockholder equity.

Deferred equity

A common term for convertible bonds because of their equity component and the
expectation that the bond will ultimately be converted into shares of common stock.

Direct lease

lease in which the lessor purchases new equipment from the manufacturer and leases it to the
lessee.

Domestic International Sales Corporation (DISC)

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

Double-dip lease

A cross-border lease in which the disparate rules of the lessor's and lessee's countries let
both parties be treated as the owner of the leased equipment for tax purposes.

Dual syndicate equity offering

An international equity placement where the offering is split into two
tranches - domestic and foreign - and each tranche is handled by a separate lead manager.

Dupont system of financial control

Highlights the fact that return on assets (ROA) can be expressed in terms
of the profit margin and asset turnover.

Equity

Represents ownership interest in a firm. Also the residual dollar value of a futures trading account,
assuming its liquidation at the going market price.

Equity cap

An agreement in which one party, for an upfront premium, agrees to compensate the other at
specific time periods if a designated stock market benchmark is greater than a predetermined level.

Equity claim

Also called a residual claim, a claim to a share of earnings after debt obligation have been
satisfied.

Equity collar

The simultaneous purchase of an equity floor and sale of an equity cap.

Equity contribution agreement

An agreement to contribute equity to a project under certain specified
conditions.

Equity floor

An agreement in which one party agrees to pay the other at specific time periods if a specific
stock market benchmark is less than a predetermined level.

Equity kicker

Used to refer to warrants because they are usually issued attached to privately placed bonds.

Equity market

Related:Stock market

Equity multiplier

Total assets divided by total common stockholders' equity; the amount of total assets per
dollar of stockholders' equity.

Equity options

Securities that give the holder the right to buy or sell a specified number of shares of stock, at
a specified price for a certain (limited) time period. Typically one option equals 100 shares of stock.

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.

Equity-linked policies

Related: Variable life

Equityholders

Those holding shares of the firm's equity.

Euroequity issues

Securities sold in the Euromarket. That is, securities initially sold to investors
simultaneously in several national markets by an international syndicate. Euromarket.
Related: external market

European-style option

An option contract that can only be exercised on the expiration date.

Evening up

Buying or selling to offset an existing market position.

Financial lease

Long-term, non-cancelable lease.

Floating supply

The amount of securities believed to be available for immediate purchase, that is, in the
hands of dealers and investors wanting to sell.

Foreign equity market

That portion of the domestic equity market that represents issues floated by foreign companies.

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.

Full coupon bond

A bond with a coupon equal to the going market rate, thereby, the bond is selling at par.

Full-payout lease

See: financial lease.

Full-service lease

Also called rental lease. lease in which the lessor promises to maintain and insure the
equipment leased.

GEMs (growing-equity mortgages)

Mortgages in which annual increases in monthly payments are used to
reduce outstanding principal and to shorten the term of the loan.

Give up

The loss in yield that occurs when a block of bonds is swapped for another block of lower-coupon
bonds. Can also be referred to as "after-tax give up" when the implications of the profit or loss on taxes are
considered.

Group of five (G5/G-5)

The five leading countries (France, Germany, Japan, United Kingdom, and the U.S.) that
meet periodically to achieve some cooperative effort on international economic issues. When currency issues
are discussed, the monetary authorities of these nations hold the meeting.

Group of seven (G7/G-7)

The G-5 countries plus Canada and Italy.

Group rotation manager

A top-down manager who infers the phases of the business cycle and allocates
assets accordingly.

High-coupon bond refunding

Refunding of a high-coupon bond with a new, lower coupon bond.

Investor's equity

The balance of a margin account. Related: buying on margin, initial margin requirement.

Lease

A long-term rental agreement, and a form of secured long-term debt.

Lease Rate

The payment per period stated in a lease contract.

Legal bankruptcy

A legal proceeding for liquidating or reorganizing a business.

Level-coupon bond

Bond with a stream of coupon payments that are the same throughout the life of the bond.

Leveraged equity

Stock in a firm that relies on financial leverage. Holders of leveraged equity face the
benefits and costs of using debt.

Leveraged lease

A lease arrangement under which the lessor borrows a large proportion of the funds needed
to purchase the asset and grants the lender a lien on the assets and a pledge of the lease payments to secure the
borrowing.

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.

Lock-up CDs

CDs that are issued with the tacit understanding that the buyer will not trade the certificate.
Quite often, the issuing bank will insist that the certificate be safekept by it to ensure that the understanding is
honored by the buyer.

Long coupons

1) Bonds or notes with a long current maturity.
2) A bond on which one of the coupon periods, usually the first, is longer than the other periods or the standard period.

Long-term debt to equity ratio

A capitalization ratio comparing long-term debt to shareholders' equity.

Low-coupon bond refunding

Refunding of a low coupon bond with a new, higher coupon bond.

Lease Rate

The payment per period stated in a lease contract.

Long coupons

1) Bonds or notes with a long current maturity.
2) A bond on which one of the coupon
periods, usually the first, is longer than the other periods or the standard period.

Management/closely held shares

Percentage of shares held by persons closely related to a company, as
defined by the Securities and exchange commission. Part of these percentages often is included in
Institutional Holdings -- making the combined total of these percentages over 100. There is overlap as
institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company.

Management buyout (MBO)

Leveraged buyout whereby the acquiring group is led by the firm's management.

Management fee

An investment advisory fee charged by the financial advisor to a fund based on the fund's
average assets, but sometimes determined on a sliding scale that declines as the dollar amount of the fund increases.

Money management

Related: Investment management.

Money supply

M1-A: Currency plus demand deposits
M1-B: M1-A plus other checkable deposits.
M2: M1-B plus overnight repos, money market funds, savings, and small (less than $100M) time deposits.
M3: M-2 plus large time deposits and term repos.
L: M-3 plus other liquid assets.

Net lease

A lease arrangement under which the lessee is responsible for all property taxes, maintenance
expenses, insurance, and other costs associated with keeping the asset in good working condition.

Operating lease

Short-term, cancelable lease. A type of lease in which the period of contract is less than the
life of the equipment and the lessor pays all maintenance and servicing costs.

Pass-through coupon rate

The interest rate paid on a securitized pool of assets, which is less than the rate
paid on the underlying loans by an amount equal to the servicing and guaranteeing fees.

Passive investment management

Buying a well-diversified portfolio to represent a broad-based market
index without attempting to search out mispriced securities.

Pay-up

The loss of cash resulting from a swap into higher price bonds or the need/willingness of a bank or
other borrower to pay a higher rate of interest to get funds.

Pickup

The gain in yield that occurs when a block of bonds is swapped for another block of higher-coupon bonds.

Portfolio management

Related: Investment management

Preferred equity redemption stock (PERC)

Preferred stock that converts automatically into equity at a
stated date. A limit is placed on the value of the shares the investor receives.

Prepackaged bankruptcy

A bankruptcy in which a debtor and its creditors pre-negotiate a plan or
reorganization and then file it along with the bankruptcy petition.

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.

Pure yield pickup swap

Moving to higher yield bonds.

Raw material supply agreement

As used in connection with project financing, an agreement to furnish a
specified amount per period of a specified raw material.

Rental lease

See:full-service lease.

Return on equity (ROE)

Indicator of profitability. Determined by dividing net income for the past 12
months by common stockholder equity (adjusted for stock splits). Result is shown as a percentage. Investors
use ROE as a measure of how a company is using its money. ROE may be decomposed into return on assets
(ROA) multiplied by financial leverage (total assets/total equity).

Risk management

The process of identifying and evaluating risks and selecting and managing techniques to
adapt to risk exposures.

Safe harbor lease

A lease to transfer tax benefits of ownership (depreciation and debt tax shield) from the
lessee, if the lessee could not use them, to a lessor that could use them.

Sale and lease-back

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

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