Financial Terms related to Financial

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FINANCIAL
Changes in financial position

• Sources of funds internally provided from operations that alter a company's cash
flow position: depreciation, deferred taxes, other sources, and capital expenditures.

Comprehensive annual financial report

• Abbreviated CAFR. The official annual report for the City of Los Angeles. It
includes combined statements for each individual fund and account group prepared
in conformity with GAAP. It also includes supporting schedules necessary to
demonstrate compliance with finance-related legal and contractual provisions,
extensive introductory material, and a detailed Statistical Section.

Consolidated financial statements

• A presentation of the financial position of a parent company and its subsidiaries as

one entity in a financial statement. See also: Annual Report.

Corporate financial management

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• The application of financial principals within a corporation to create and maintain

value through decision making and proper resource management.

Corporate financial planning

• Financial planning conducted by a firm that encompasses preparation of both long-

and short-term financial plans.

Country financial risk

• The ability of the national economy to generate enough foreign exchange to meet

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payments of interest and principal on its foreign debt.

Degree of financial leverage

• Abbreviated DFL. The numerical measure of the firm's financial leverage.

Measured at a base level of EBIT. Lowest value is 1. The higher the value of DFL
the greater the risk, but also the greater the potential return if EBIT increases.

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.

Financial accounting standards board

• Abbreviated FASB. The U.S. accounting profession's rule-setting body, which

authorizes generally accepted accounting principles (GAAP).

• Standard No. 52

• Is the industry organization which provides guidelines for the recording, reporting
and presentation of financial market transactions. Included in this work are the
requirements for listing off-balance sheet items and hedging transactions for
currencies, physicals, and financials.

Financial analyst

• Also called securities analysts and investment analysts, professionals who analyze
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financial statements, interview corporate executives, and attend trade shows, in

order to write reports recommending either purchasing, selling, or holding various
stocks.

• See Analyst.

Financial assets

• Claims on real assets.

Financial break even points

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• The level of EBIT necessary just to cover all fixed financial costs; the level of EBIT
for which EPS=$0.

Financial control

• The management of a firm's costs and expenses in order to control them in relation
to budgeted amounts.

Financial distress

• Events preceding and including bankruptcy, such as violation of loan contracts.

Financial distress costs

• Legal and administrative costs of liquidation or reorganization. Also includes

implied costs associated with impaired ability to do business (indirect costs).

Financial engineering

• Combining or dividing existing instruments to create new financial products.

• Designing new financial securities or processes due to changing market conditions

and/or investor preferences.

Financial forecasting

• The process used to estimate a company's requirement for financing for a future
time period.
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Financial formulas or formulae

• Are mathematical expressions to enable repeatable results or computations. Many

financial formulas are related to one another. Some of the standard computations
are: Interest Calculations

Financial future

• A contract entered into now that provides for the delivery of a specified asset in
exchange for the selling price at some specified future date.

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Financial institution

• An intermediary that allow for the efficient transfer of the savings of individuals,
businesses, and governments into loans or investments.

Financial intermediaries

• Institutions that provide the market function of matching borrowers and lenders or
traders.

Financial lease

• Long-term, non-cancelable lease.

Financial lever

• The use of fixed assets in the company's operation and/or use of debt financing in
the capital structure.

Financial leverage

• Use of debt to increase the expected return on equity. Financial leverage is

measured by the ratio of debt to debt plus equity.

• The magnification of risk and return introduced through the use of fixed-cost
financing such as debt and preferred stock. The potential use of fixed financial costs
to magnify the effects of changes in earning before interest and taxes (EBIT) on the
firm's earnings per share (EPS).
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Financial leverage clientele

• A group of investors who have a preference for investing in firms that adhere to a
particular financial leverage policy.

Financial leverage multiplier

• Abbreviated FLM. The ratio of the firm's total assets to shareholders' equity.

Financial leverage ratios

• Related: capitalization ratios.

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Financial manager

• Actively manages the financial affairs of any type of business, whether financial or
nonfinancial, private or public, large or small, profit-seeking or not-for-profit.

Financial market

• An organized institutional structure or mechanism for creating and exchanging

financial assets.

• Provide a forum in which suppliers of funds and demanders of loans and

investments can transact business directly.

Financial merger

• A merger transaction undertaken with the goal of restructuring the acquired

company to improve its cash flow and unlock its hidden value.

Financial objectives

• Objectives of a financial nature that the firm will strive to accomplish during the
period covered by its financial plan.

Financial or capital lease

• A longer-term lease than an operating lease that is noncancelable and obligates

the lessee to make payments for the use of an asset over a predefined period of
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time; the total payments over the term of the lease are greater than the lessor's initial
cost of the leased asset.

Financial plan

• A financial blueprint for the financial future of a firm.

Financial planner

• An investment professional generalist who helps individuals delineate financial

plans with specific objectives and helps coordinate various financial concerns.

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Financial planning

• The process of evaluating the investing and financing options available to a firm. It
includes attempting to make optimal decisions, projecting the consequences of
these decisions for the firm in the form of a financial plan, and then comparing future
performance against that plan.

Financial planning process

• Planning that begins with long-term (strategic) financial plans that in turn guide the
formulation of short-term (operating) plans and budgets.

Financial press

• That portion of the media devoted to reporting financial news.

Financial ratio

• The result of dividing one financial statement item by another. Ratios help analysts
interpret financial statements by focusing on specific relationships.

Financial risk

• The risk that the cash flow of an issuer will not be adequate to meet its financial
obligations. Also referred to as the additional risk that a firm's stockholder bears
when the firm utilizes debt and equity.

• The risk to the firm of being unable to cover required financial obligations (interest,
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lease payments, preferred share dividends).

Financial services

• The part of finance concerned with design and delivery of advice and financial
products to individuals, business, and government.

Financial statement

• generally refers to one of the primary accounting reports: Balance Sheet, Income
Statement and Cash Flow Statement

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Financial structure

• The entire right hand side of the balance. Refers to the mix of long-term and short-
term financing.

Financial supermarket

• An institution at which the customer can obtain a full array of the financial services
now allowed under federal bank, trust and insurance company legislation.

London international financial futures exchange

• Abbreviated LIFFE. A London exchange where Eurodollar futures as well as

futures-style options are traded.

Long term financial plan

• Financial plan covering two or more years of future operations.

Long term strategic financial plans

• Planned financial actions and the anticipated financial impact of those actions over
periods ranging from 2 to 10 years.

Non financial services

• Include such things as freight, insurance, passenger services, and travel.

Notes to the financial statements

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• A detailed set of notes immediately following the financial statements in an annual

report that explain and expand on the information in the financial statements.

Perfectly competitive financial markets

• Markets in which no trader has the power to change the price of goods or services.
Perfect capital markets are characterized by the following conditions: 1) trading is
costless, and access to the financial markets is free, 2) information about borrowing
and lending opportunities is freely available, 3) there are many traders, and no single
trader can have a significant impact on market prices.

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Pro forma financial statements

• Financial statements as adjusted to reflect a projected or planned transaction.

S&p financial strength

• See Standard & Poor's Financial Strength.

Short term financial management

• Management of current assets and current liabilities.

Short term financial plan

• A financial plan that covers the coming fiscal year.

Short term operating financial plans

• Planned short-term financial actions and the anticipated financial impact of those
actions.

Society for worldwide interbank financial telecommunications swift

• A dedicated computer network to support funds transfer messages internationally

between over 900 member banks worldwide.

Standard & poor's financial strength

• Abbreviated S&P Financial Strength. The ranking S&P uses to rate the company's
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growth, quality, and stability of earnings and dividends using 8 levels, from A+
(highest) to B+ (average) to C (lowest) to D (in reorganization).

Statement of financial accounting standards no. 52

• This is the currency translation standard currently used by U.S. firms. It mandates
the use of the current rate method. See: Statement of Financial Accounting
Standards No. 8.

Statement of financial accounting standards no. 8

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• This is a currency translation standard previously in use by U.S. accounting firms.
See: Statement of Accounting Standards No. 52.

Value line financial strength

• A ranking assigned by the Value Line Investment Survey which rates companies in
ten categories according to their financial strength, from A+ (excellent) to C
(poorest).