Principles of Finance Glossary: Key Terms and Definitions
- Arithmetic mean return
- Asset-backed security (ABS)
- Bond-equivalent yield (BEY)
- Cash conversion cycle
- Continuous compounding
- Control premium
- Cost of preferred equity
- Delta hedging
- Diversification
- Face value
- Forward rate
- Free cash flow to the firm (FCFF)
- Gordon growth model
- Initial public offering (IPO)
- Interest tax shield
- Internal rate of return (IRR)
- Liquidating dividend
- Macaulay duration
- Mortgage-backed security (MBS)
- P/B ratio
- Price/Earnings-to-Growth (PEG) Ratio
- Accrued interest
- Annuity
- Behavioral finance
- Callable bond
- Capital budgeting
- Capital structure
- Cost of carry
- Days inventory outstanding (DIO)
- Dirty price
- Discount factor
- Effective duration
- European option
- Implied volatility
- In the money (ITM)
- Information ratio
- Intrinsic value
- London Interbank Offered Rate (LIBOR)
- Long position
- Margin call
- MOIC (Multiple on Invested Capital)
- Monte Carlo simulation
- P/E ratio
- Par value
- Precedent transaction analysis
- Real option
- Repurchase agreement (repo)
- Retention ratio (plowback)
- Return on assets (ROA)
- Risk-neutral probability
- Adjusted EBITDA
- Basis risk
- Bid-ask spread
- Call option
- Carhart four-factor model
- Clean price
- Comparable company analysis (comps)
- Cost of equity
- Coupon rate
- Day count convention
- Days payable outstanding (DPO)
- Degree of financial leverage (DFL)
- Degree of total leverage (DTL)
- Dividend discount model (DDM)
- Dividend yield
- Effective annual rate (EAR)
- Efficient market hypothesis (EMH)
- Equity multiplier
- Expected shortfall (ES)
- Modigliani-Miller (M&M) propositions
- Net present value (NPV)
- Operating margin
- Option
- Option-adjusted spread (OAS)
- Out of the money (OTM)
- Payback period
- Perpetuity
- Residual claim
- Sharpe ratio
- After-tax cost of debt
- Agency bond
- Allocation effect
- Basis point
- Binomial model
- Collateralized debt obligation (CDO)
- Common-size analysis
- Country risk premium
- Credit spread
- Delta
- Derivative
- Discounted cash flow (DCF)
- Earnings before interest, taxes, D&A (EBITDA)
- Interest rate swap
- Jensen's alpha
- Law of one price
- Mark-to-market
- Modified duration
- Premium bond
- Signaling
- Accretion / dilution (M&A)
- Annuity due
- Beta
- Business risk
- Capital asset pricing model (CAPM)
- Cash flow from operations (CFO)
- Convertible bond
- Days sales outstanding (DSO)
- Dollar-weighted return (IRR)
- Duration
- Free cash flow to equity (FCFE)
- Gamma
- Hedging
- Holding period return (HPR)
- Liquidity premium
- Marginal tax rate
- Maturity premium
- Modern portfolio theory (MPT)
- Notional principal
- Principal
- Protective put
- Put-call parity
- Return on invested capital (ROIC)
- Risk premium
- Short position
- Altman Z-score
- Arbitrage
- Asset turnover
- Bookrunner
- Bootstrapping
- Capital market line (CML)
- Credit default swap (CDS)
- Current ratio
- Debt-to-equity ratio
- Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) Margin
- Efficient frontier
- Financial leverage
- Fisher equation
- Forward contract
- Geometric mean return
- Hamada equation
- Leveraged buyout (LBO)
- Nominal spread
- Operating leverage (DOL)
- Payout ratio
- Pecking order theory
- Present value (PV)
- Realized return
- Security market line (SML)
- Active return
- Arbitrage pricing theory (APT)
- Basel III
- Basis
- Cash ratio
- Clientele effect
- Compounding
- Covenants
- Discount bond
- DuPont decomposition
- Enterprise risk management (ERM)
- Enterprise value (EV)
- Equity risk premium (ERP)
- Enterprise Value to EBITDA Multiple (EV/EBITDA)
- Fama-French three-factor model
- Futures contract
- Internal growth rate (IGR)
- Investment policy statement (IPS)
- Leverage ratio
- Minimum variance portfolio (MVP)
- NOPAT (Net Operating Profit After Tax)
- Preferred stock
- Profitability index (PI)
- Put option
- Quick ratio
- Risk-free rate
- Secondary market
- American option
- Amortization
- At the money (ATM)
- Benchmark
- Black-Scholes-Merton model
- Convexity
- Current yield
- Debt-to-capital ratio
- Diluted EPS
- Exchange-traded fund (ETF)
- Indenture
- Inventory turnover
- Market maker
- Market portfolio
- Net profit margin
- Primary market
- Relative valuation
- Return on equity (ROE)
- Share repurchase (buyback)
- Spot rate
- Structured finance
- Syndication
- Systematic risk
- Times interest earned (TIE)
- Trade-off theory
- Volatility smile
- Tangency portfolio
- Two-fund separation
- Variance
- Yield to call (YTC)
- Secured Overnight Financing Rate (SOFR)
- Sortino ratio
- Standard deviation
- Strike price
- Sustainable growth rate (SGR)
- Time value of money (TVM)
- Yield to maturity (YTM)
- Stock split
- Term premium
- Time-weighted return (TWR)
- Tracking error
- Zero curve (zero-coupon curve)
- Straddle
- Structural credit model
- Term structure of interest rates
- Theta
- Unlevering/relevering beta
- Value-at-risk (VaR)
- Vega
- Volatility
- Yield to worst (YTW)
- Treasury stock method (TSM)
- Subordinated debt
- Treynor ratio
- Underwriting
- Unsystematic (idiosyncratic) risk
- Z-spread
- Zero-coupon bond
- Terminal value (TV)
- Weighted average cost of capital (WACC)
- Yield curve
- Financial Statements Markets WC
- Yields Rates
- Stock Valuation
- Risk Return Measures
- Working Capital Management
- Portfolio Diversification
- Financial Statement Analysis
- Valuation
- Bond Valuation
- Financial Markets Environment