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Ace Manager 2014
Glossary
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ACID-‐TEST RATIO: (Current assets – Inventories)/ Current liabilities
ANNUAL PAYMENT: In a loan, amount to be annually cashed-‐out by the borrower when the loan is annually amortized. The amount includes principal payment and interests.
ANNUITANT: person entitled to receive benefits from an annuity
ANNUITY: Insurance contract designed to provide payments to the holder at predefined intervals.
AVERAGE: An average is a statistic measure of the "middle" value of a data set. See also Moving Average.
BALANCE SHEET: The balance sheet is one the three basic financial statements of a company. The balance sheet summarizes the company’s assets, equity and liabilities at a given point in time.
BBL: Barrel
BETA: Coefficient measuring the marginal contribution of a financial asset to the risk of the market portfolio and equal to COV (RA,RM) / V(RM) where RA is the financial asset return and RM the market portfolio return. This coefficient reflects the sensitivity degree of the financial asset return to the variations of the market portfolio return.
BRENT: originally name of an oil field off the coast of Scotland. Brent is the acronym of Broom, Rannock, Etive, Ness and Tarbert, main oil fields in the North Sea. One of the standards used to fix oil price in the World.
BS: Black-‐Scholes
BOOSTRAPPING (or BOOSTRAP METHOD): Method used to construct a fixed-‐income yield curve from the prices of a set of coupon-‐bearing products by forward substitution
BUNDLING: Combination of services in a PPP, typically embedding the design, the construction, the maintenance and the financing of the infrastructure
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CALL OPTION: Derivative product providing the buyer with the right (and not the obligation) to buy a financial asset at a specified price (and called the strike price)
CAPEX: Capital Expenditures
CAPITAL STRUCTURE: The capital structure is the mix of debt and equity used by the company to finance its operating activities
CAPM: Capital Asset Pricing Model
CASH RATIO: Cash/Current liabilities
CDO: Collateralized Debt Obligation
CEO: Chief Executive Officer
CERTIFICATE OF DEPOSIT (CD): Promissory note issued by a bank
CIB: Corporate and Investment Banking
COMPLIANCE: Act of adhering to and of enforcing a standard or a regulation
COST OF DEBT: The cost of debt is the minimum interest rate at which the company could raise new funds on the debt market
COST OF EQUITY: The cost of equity is the minimum required rate of return expected by the company’s shareholders
COST TO INCOME RATIO: General Expenses / NBI
COST-‐VOLUME-‐PROFIT ANALYSIS: Cost-‐volume-‐profit analysis is a simple but flexible tool for exploring potential profit based on cost strategies and pricing decisions
CUSTOMER SEGMENTATION: Subdivision of a market into discrete customer groups sharing similar characteristics
CURRENT RATIO: Current assets/current liabilities
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D&A: Depreciation and Amortization
D/E Ratio: Debt Equity Ratio
DCF: Discounted Cash Flows
DILUTION/ACCRETION: Decrease/Increase in the financial participation held by a shareholder as a result of a capital increase.
DISCOUNT RATE: Rate at which FCF are discounted to compute Present Value
DSCR: Debt Service Coverage Ratio
EBIT: Earnings before Interests and Taxes
EBITDA: Earnings before Interests, Taxes, Depreciations and Amortizations
EONIA: Euro Overnight Index Average
EQUITY RISK PREMIUM: The equity risk premium is the excess return of a given stock when compared to the risk free rate, it is also known as the equity premium
EUROPEAN OPTION: Option contract where the right can be exercised at a specified date only
EXCHANGE RATIO: Number of shares of the acquiring company a shareholder receives for one share of the acquired company
EPS: Earnings per Share
EV: Enterprise Value. Corresponds to the market value of the operating assets of a company and usually equal to the equity value increased by the value of the net financial debts
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FCF: Free Cash Flows
FORWARD CONTRACT: Commitment to trade a specific asset at a specified price at a future date
FREE CASH FLOWS: The cash that remain available for distribution among all the securities holders of a company. There are different ways of calculating the FCF depending on whether one is interested in the value of the firm’s equity or the value of the entire firm.
FUTURES: Standardized contract between two parties which agree to exchange in the future a fixed quantity of a specified asset at a price agreed today.
GARP: Growth at Reasonable Price
GEARING: Net debt to Shareholder’s Equity ratio
IFRS: International Financial Reporting Standards
INSTALLMENT: Regular payment a borrower agreed to make to a lender
INTEREST COVERAGE RATIO: EBIT/ Interest Expenses
IPO: Initial Public Offering.
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JENSEN’S ALPHA: Jensen’s alpha is a measure of a security’s excess return with respect to the expected return given by the Capital Asset Pricing Model
LIBOR (London Interbank Offered Rate): Money market observed rate in London. Libor is the arithmetic mean of interest rate offered by banks on deposits from other banks for a given maturity and a given currency.
LONG POSITION: Investment strategy on a financial asset (stock security, fixed income security, option, etc.) where the investor is exposed to a downside risk of the asset value. Investors taking a long position on one particular asset are buyers who become owners of that asset. In the context of option contracts, investors taking long positions are therefore the buyers of the option and as such, are exposed to a risk of decrease in the option value.
M&A: Mergers and Acquisitions
MARKET-‐TO-‐BOOK RATIO (MTB): Market value per share/Book value per share
MARKETABLE SECURITIES: Very liquid securities with a typical maturity of less than one year.
MARKET CAPITALIZATION: Share price multiplied by the total number of shares
MARKETING MIX: Marketing concept the objective of which is to create awareness and customer loyalty. Mix relies on 4 variables (the four P's): price, promotion, product, and placement.
MFI: Microfinance Institutions
MICROFINANCE: Financial services offer dedicated to people who usually are excluded from the financial system.
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MM: Modigliani-‐Miller
MOU: Memorandum of Understanding
MOVING AVERAGE: In finance, a moving average is usually defined as the unweighted mean of the previous n datum points. A 10-‐days moving average of a stock price is for instance computed as the unweighted mean of the stock price during the most recent 10 days, and each day, the oldest value is removed from the sample and replaced by the most recent one.
NBI: Net banking Income
NET DEBT: Financial debt – Cash and Cash equivalents
NET WORKING CAPITAL TO ASSETS RATIO (NWCTA or NWTC RATIO): Net working capital/Assets
NW: Net Worth
NWC: Net Working Capital
NET WORKING CAPITAL: Current assets – current liabilities
NET WORTH RATIO: Total assets divided by book value of stockholders’ equity
NPV: Net Present Value
NOPAT: Net Operating profit After Taxes
OPERATIONAL SELF-‐SUFFICIENCY: Income/Charges
OPEX: Operating Expenses
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OPTION: Contract or agreement to buy or sell an asset (called underlying asset) at a certain future price. There are two basic types of options. A Call option gives the holder the right but not the obligation to buy the underlying asset by maturity. A Put option gives the holder the right but not the obligation to sell the underlying asset by maturity.
OVERDRAFT: It is the fact of overdrawing a bank account, resulting in a negative cash balance. Overdraft is often associated with overdraft fees.
PaR: Portfolio at Risk
PAY-‐OFF: Final benefit generated by a financial contract
PAY-‐OUT POLICY: the financial policy of a company regarding the transfer of cash to shareholders (dividend payment and/or share repurchase).
PEG: Price Earning Growth equal to PER divided by annual EPS growth.
PER: Price Earnings Ratio. Equity Value multiple equal to the equity market value divided by the net income.
PERPETUAL GROWTH RATE: Annual rate of growth at which cash-‐flows are supposed to grow for ever after the investment horizon.
PERPETUITY FACTOR: see PERPETUAL GROWTH RATE
PPE or PP&E: Property Plant and Equipment
PPP: Public Private Partnership, public service funded and operated through a partnership between a public authority and a private operator
PRINCIPAL PAYMENT: In a loan, the principal payment is the amount of borrowed capital reimbursed at each period by the borrower to the lender.
PRINCIPAL AGENT PROBLEM: Issues arising in the relations between a Principal and an Agent in case of information asymmetry, and / or moral hazard mainly because the agent’s actions are not observable by the Principal.
PROFIT MARGIN: Net income/ total Sales
PSB: Public Sector Benchmak, in a PPP pattern that enables to compute the NPV of costs as if the infrastructure was built through a public authority’s procurement.
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PSDR: public-‐sector discount rate
PUT OPTION: Derivative product providing the buyer with the right (and not the obligation) to sell a financial asset at a specified price
RETURN ON ASSETS: Net income/Total assets
RETURN ON EQUITY: Net income/Total equity
RISK FREE ASSET: Asset the actual return of which is always equal to its expected return. Risk free assets exhibits no default risk.
RISK FREE RATE: Interest paid on a risk free asset
ROCE: Return on Capital Employed
ROA: Return on assets
ROE: Return on Equity
SHARPE RATIO: The Sharpe ratio is a measure of stock or fund performance, it measures the reward per unit of risk
SHORT POSITION: Investment strategy on a financial asset (stock security, fixed income security, option, etc.) where the investor is exposed to an upside risk of the asset value. Investors taking a short position on one particular asset are vendors who committed to sell that asset. In the context of option contracts, investors taking short positions are therefore the vendors of the option and as such, are exposed to a risk of increase in the option value.
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SPREAD / CREDIT SPREAD: Difference between the interest rate at which the debt is issued and the risk free rate. The credit spread reflects the level of risk of a given debt security and normally depends on the degree of solvability of its issuer.
SPV: Special Purpose Vehicle
STRIKE PRICE: Price at which the right provided by the option contract can be exercised
STRUCTURED PRODUCT: Pre-‐packaged investment strategy based on derivatives.
SWAP: Contract specifying an exchange of financial assets or flows between two entities during a certain period of time
TERMINAL VALUE: the terminal value measures the value of the firm at the end of the explicit investment horizon
TOTAL ASSET TURNOVER: Total sales divided by total book value of assets
TREYNOR RATIO: The Treynor ratio is a measure of stock performance. It measures the performance of an asset compared to a risk free asset (typically Treasury bills) per unit of assumed market risk
TV: Terminal Value
UNPAID BALANCE: In a loan, amount due to the lender once the principal of the period has been paid.
US OPTION: American option. Option contract where the right can be exercised for as long as the option remains valid
UTILITY FUNCTION: Satisfaction level of an investor
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WACC: Weighted Average Cost of Capital.
WC (or NWC): Working Capital (also called Net Working Capital).
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