Glossary Of Investment Terms

Since so many people use a mortgage to buy a home, mortgage rates (i.e. the interest rates on mortgages) have a huge impact on property prices. Interest is what you pay to borrow money – or what someone pays you to borrow money from you. So, when you take out a loan from a bank, you have to pay a set amount of money (like, say, 3% per year) for the privilege of borrowing that money.

Stock

An acquisition of a firm by its own managers or a private entity, financed primarily with debt. Cash flows generated by the existing assets of a firm that are reinvested back into the firm. It is the difference between the cash flow a firm would have had without the new investment and the cash flow with the new investment. Like a forward private equity glossary contract, it is an agreement to buy or sell an underlying asset at a specified time in the future. However, it differs from a forward because it is usually traded, requires daily settlement of differences and has no default risk. Bond with a coupon rate that is reset each period, depending upon a specified market interest rate .

The accounting approach used to show the income from ownership of securities in another firm, where it is a majority, active investment. The balance sheets of the two are merged and presented as one balance sheet. The income statements, likewise, represent the combined income statements of the two firms. A lease that shares characteristics with both operating and capital leases. Combination of excess cash and limited project opportunities in a firm.

Public Company Accounting Oversight Board (pcaob)

So, for example, I might borrow $1million from you, but you tell me that I can only borrow a maximum of 10x my underlying profit. So, effectively, if my profit declines below $100,000 and I still have $1 million in debt, then you can take control of the company. Conversely, private equity glossary if my profit goes up to $500,000, then I am able to borrow up to $5 million . A company that owns several businesses, usually providing different services. Conglomerates tend to be large, multinational companies with a parent company that owns several subsidiaries.

Any financing vehicle that has a residual claim on the firm, does not create a tax advantage from its payments, has an infinite life, does not have private equity glossary priority in bankruptcy, and provides management control to the owner. Portfolios that yield the highest expected return for each level of risk .

Management Fee

A financial statement that shows the movement of cash during an accounting period, as opposed to changes in accounting private equity glossary value. For example, depreciation is an accounting concept; it does not involve the movement of cash.

Resources For Modern Investors

It’s when one company is acquired by another against the wishes of the target’s board of directors and existing management. It is usually achieved by the acquiring company appealing directly to the target’s shareholders, who may vote in a new board of directors or otherwise take action to allow the takeover to go through.

Sortino Ratio is used to measure the level of risk in a portfolio. The higher the Sortino ratio, the better a portfolio has performed relative to the risk taken. It is often use to compare the risk take between different portfolios to achieve a certain return. A pure play is a company that invests its resources in only one line of business.

A portfolio with a beta less than 1 is less volatile than the market. Alpha is a measure of an investment’s performance compared to a benchmark, such as the S&P 500. A positive alpha of 1.0 means the fund or stock has outperformed its benchmark index by 1 percent. A similar negative alpha of 1.0 would indicate an underperformance of 1 percent.

A fee that some funds impose on shareholders if they exchange to another fund within the same fund group. Large blocks of shares in an ETF, typically 50,000 shares or more. Purchasing or owning shares of stock, with the expectation that the stock will rise in value. A beneficial owner holds stocks indirectly, private equity glossary for example, through a bank or broker-dealer. Beneficial owners are sometimes said to be holding shares in "street name." Standard Deviation is the square root of the variance of each data point relative to its mean. It measures the historical volatility of an investment relative to its annual rate of return.

Proving Securities Ownership

Difference between the price paid to acquire a firm and the market price prior to the acquisition. The total of a fund's annual fund operating expenses, expressed as a percentage of the fund's average net assets. An investor's ability and willingness to lose some or all of an investment in exchange for greater potential returns. A company that offers its securities through an offering and now has those securities traded on the open market. Markets in which newly issued securities are sold to investors and the issuer receives the proceeds. The risk that principal repayment will occur earlier than scheduled, forcing the investor to reinvest at lower prevailing rates.

• Capital distribution– These are the returns that an investor in a private equity fund receives.
• However, if the venture is successful, the venture capitalist’s return is correspondingly high.
• Early-stage finance is risky because it’s often unclear how the market will respond to a new company’s concept.
• The partnership agreement determines the timing of distributions to the limited partner.
• It will also determine how profits are divided among thelimited partnersandgeneral partner.
• Once a limited partner has had their cost of investment returned, further distributions are actual profit.

Stock repurchase negotiated with a stockholder who owns a substantial percentage of the shares. Difference between debt repaid and new debt issued by a firm during a period. Clause in a bond issue that specifies that the bond is backed only by the earning power of the firm, rather than specific assets. Categorization of ownership of securities by one firm in another firm are treated, if the securities private equity glossary represent between 20% and 50% of the overall ownership of that firm. A combination of two firms where the boards of directors of two firms agree to combine and seek stockholder approval for the combination. In most cases, at least 50% of the shareholders of the target and the bidding firm have to agree to the merger. The target firm ceases to exist and becomes part of the acquiring firm.