What is the model that determines the current price of a stock as its dividend next period divided by the discount rate less the dividend growth rate |
Dividend Growth Model |
What is a stocks expected cash dividend divided by its current price? |
Dividend Yield |
What is the dividend growth rate or the rate at which the value of an investment grows called? |
Capital Gains Yield |
What is equity without priority for dividends or in bankruptcy called? |
Common Stock |
What is a produced in which a shareholder may cast all votes for each member of the board of directors called? |
Cumulative Voting |
What is a procedure in which a shareholder allowing another individual to vote his or her shares called? |
Straight Voting |
A grant of authority by a shareholder allowing another individual to vote his or her shares is called what? |
Proxy |
What is a payment made out of a firms earnings to its owners in the form of either cash or stock called? |
Dividend |
What is a stock with dividend priority over common stock, normally with a fixed dividend rate, sometimes without voting rights called? |
Preferred Stock |
What is the market in which new securities are originally sold to investors called? |
Primary Market |
What is the market in which previously issued securities are traded among investors called? |
Secondary Market |
What is an agent who buys and sells securities from inventory called? |
Dealer |
What is an agent who arranges security transactions among investors called? |
Broker |
What is the owner of a trading license on the New York Stock Exchange called? |
Member |
What is an NYSE member acting as a dealer in a small number of securities on the exchange floor; formerly known as a specialist called? |
Designed Market Maker (DMM) |
What are NYSE members who execute customer buy and sell orders; sometimes called $2 brokers called? |
Floor Brokers |
Investment firms that are active participants in stocks assigned to them. Their job is to make a one sided market i.e. offering to either buy or sell. They trade purely for their own accounts. These people are called? |
Supplemental Liquidity Providers (SLPs) |
The flow of customer orders to buy and sell securities is called? |
Order Flow |
A fixed place on the exchange floor where the DMM operates is called? |
DMM’s Post |
The highest bid quotes and the lowest ask quotes for a security is called? |
Inside Quote |
Websites that allow investors to trade directly with one another are called? |
Electronic Comminications Networks (ECNs) |
The difference between an investments market value an its cost is called what? |
Net Present Value |
A valuation calculating the present value of a future cash flow to determine is value today and the process of valuing an investment by discounting its future cash flow is called what? |
Discounted Cash Flow Valuation |
The amount of time required for an investment to generate cash flows sufficient to recover its initial cost is called what? |
Payback Period |
An investments average net income divided by its average book value is called what? |
Average Accounting Return (AAR) |
The discount rate that makes the net present value of an investment zero is called what? |
Internal Rate of Return (IRR) |
A graphical representation of the relationship between an investments net present values and various discount rates is called what? |
Net Present Value Profile |
The possibility that more than one discount rate will make the net present value of an investment zero is called what? |
Multiple Rates of Return |
A situation where taking one investment prevents the taking of another is called what? |
Mutually Exclusive Investment Decisions |
The present value of an investments future cash flows divided by its initial cost. Also called “benefit-cost ratio” |
Profitability Index (PI) |
The difference between a firms future cash flows with a project and those without the project is called what? |
Incremental Cash Flows |
The assumption that evaluation of a project may be based on the projects incremental cash flows is called what? |
Stand-Alone Principle |
A cost that has already been incurred and can’t be recouped and therefore should not be considered in an investment decision is called what? |
Sunk Cost |
The most valuable alternative that is given up if a particular investment is undertaken is called what? |
Opportunity Cost |
The cash flows of a new project that come at the expense of a firms existing project is called what? |
Erosion |
Financial statements projecting future years operations is called what? |
Pro Forma Financial Statements |
The tax saving that results from the depreciation deduction, calculated as depreciation multiplied by the corporate tax rate is called what? |
Depreciation Tax Shield |
The depreciation method under US tax law allowing for the accelerated write-off of property under various classifications is called what? |
Accelerated Cost Recovery System (ACRS) |
The possibility that errors in projected cash flows will lead to incorrect decisions also called an “estimation risk” is called what? |
Forecasting Risk |
The determination of what happens to net present value estimates when we ask what-if questions is called what? |
Scenario Analysis |
Investigation of what happens to net present value when only one variable is changed is called what? |
Sensitivity Analysis |
Opportunities that managers can exploit if certain things happen in the future also known as “real” options is called what? |
Managerial Options |
Taking into account the managerial options implicit in a project is called what? |
Contingency PLanning |
Options for future related business products or strategies is called what? |
Strategic Options |
The situation that exists if a firm has positive net present value projects but can’t obtain the necessary financings is called what? |
Capital Rationing |
The situation that occurs when units in a business are allocated a certain amount of financing for capital budgeting is called what? |
Soft Rationing |
The situation that occurs when a business can’t raise financing for a project under any circumstances is called what? |
Hard Rationing |