Terms and Concepts

Accelerated Depreciation - Is an accounting technique which provides larger than straight-line depreciation amounts in the early years and smaller than straight-line depreciation amounts in the later years. Abnormal returns - Part of the return that is not due to systematic influences. In other words, abnormal returns are above those predicted by the market movement alone. Accounts Payable - Amounts due from your business to your creditors. Generally these are short term liabilities (30-120 days), and are shown under the Current Liabilities section in the Balance Sheet. Accounts Receivable - Amounts due to your business from your customers. Generally these amounts are short term receivables (30-120 days), and are shown under Current Assets section in the Balance Sheet. Accounts Receivable Turnover - A measure used to determine a company's average collection period for receivables. Usually computed by dividing net sales (or net credit sales) by average accounts receivable. Accrual bond - A bond on which interest accrues, but is not paid to the investor during the time of accrual. The amount of accrued interest is added to the remaining principal of the bond and is paid at maturity. Accrued interest - The interest due on a bond since the last interest payment was made. Acid Test Ratio - A stringent test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory Adjusted present value (APV) - The net present value analysis of an asset if financed solely by equity (present value of un-levered cash flows), plus the present value of any financing decisions (levered cash flows). In other words, the various tax shields provided by the deductibility of interest and the benefits of other investment tax credits are calculated separately. This analysis is often used for highly leveraged transactions such as a leverage buy-out. Agency problem - Conflicts of interest among stockholders, bondholders, and managers. Agency theory - The analysis of principal-agent relationships, wherein one person, an agent, acts on behalf of another person, a principal. Aging Schedule - A schedule showing the length of time an invoice has been outstanding or held. Aging schedules are normally created for Accounts Payable and Accounts Receivable. For example, an aging schedule for accounts receivable can show how many days an invoice has been outstanding. Aging schedules can also be created for inventory. Alpha - Is a measure of the incremental reward (or loss) that an investor gained in relation to the market.