Thursday, September 22, 2011

Dictionary of Financial and Business Terms (Part 6)

Auction markets Markets in which the prevailing price is determined through the free interaction of prospective buyers and sellers, as on the floor of the stock exchange.

Auditor's report A section of an annual report containing the auditor's opinion about the veracity of the financial statements.

Authorized shares Number of shares authorized for issuance by a firm's corporate charter.

Autocorrelation The correlation of a variable with itself over successive time intervals.

Automated Clearing House (ACH) A collection of 32 regional electronic interbank networks used to process transactions electronically with a guaranteed one-day bank collection float.

Automatic stay The restricting of liability holders from collection efforts of collateral seizure, which is automatically imposed when a firm files for bankruptcy under Chapter 11.

Autoregressive Using past data to predict future data.

Availability float Checks deposited by a company that have not yet been cleared.

Average An arithmetic mean of selected stocks intended to represent the behavior of the market or some component of it. One good example is the widely quoted Dow Jones Industrial Average, which adds the current prices of the 30 DJIA's stocks, and divides the results by a predetermined number, the divisor.

Average accounting return The average project earnings after taxes and depreciation divided by the average book value of the investment during its life.

Average age of accounts receivable The weighted-average age of all of the firm's outstanding invoices.

Average collection period, or days' receivables The ratio of accounts receivables to sales, or the total amount of credit extended per dollar of daily sales (average AR/sales * 365).

Average cost of capital A firm's required payout to the bondholders and to the stockholders expressed as a percentage of capital contributed to the firm. Average cost of capital is computed by dividing the total required cost of capital by the total amount of contributed capital.

Average life Also referred to as the weighted-average life (WAL). The average number of years that each dollar of unpaid principal due on the mortgage remains outstanding. Average life is computed as the weighted average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal paydowns.

Average maturity The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater impact on funds with longer average life.

Average (across-day) measures An estimation of price that uses the average or representative price of a large number of trades.

Average rate of return (ARR) The ratio of the average cash inflow to the amount invested.

Average tax rate Taxes as a fraction of income; total taxes divided by total taxable income.

Away A trade, quote, or market that does not originate with the dealer in question, e.g., "the bid is 98-10 away from me."

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