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Bond Indenture
a legal document that details all the conditions relating to a bond issue
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Budget
a financial statement that projects income and/or expenditures over a specified future period
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Capital Budget
a financial statement that estimates a firm’s expenditures for major assets and its long-term financing needs
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Cash Budget
a financial statement that estimates cash receipts and cash expenditures over a specified period
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Cash Flow
the movement of money into and out of an organization
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Chief Financial Officer (CFO)
a high-level corporate executive who manages a firm’s finances and reports directly to the company’s chief executive officer or president
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Commercial Paper
a short-term promissory note issued by a large corporation
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Common Stock
stock whose owners may vote on corporate matters but whose claims on profits and assets are subordinate to the claims of others
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Convertible Bond
a bond that can be exchanged, at the owner’s option, for a specified number of shares of the corporation’s common stock
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Convertible Preferred Stock
preferred stock that an owner may exchange for a specified number of shares of common stock
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Corporate Bond
a corporation’s written pledge that it will repay a specified amount of money with interest
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Debenture Bond
a bond backed only by the reputation of the issuing corporation
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Debt Capital
borrowed money obtained through loans of various types
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Equity Capital
money received from the owners or from the sale of shares of ownership in a business
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Factor
a firm that specializes in buying other firms’ accounts receivable
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Financial Leverage
the use of borrowed funds to increase the return on owners’ equity
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Financial Management
all the activities concerned with obtaining money and using it effectively
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Financial Plan
a plan for obtaining and using the money needed to implement an organization’s goals
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Floor Planning
method of financing in which title to merchandise is given to lenders in return for short-term financing
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Initial Public Offering (IPO)
when a corporation sells common stock to the general public for the first time
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Investment Banking Firm
an organization that assists corporations in raising funds, usually by helping to sell new issues of stocks, bonds, or other financial securities
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Lease
an agreement by which the right to use real estate, equipment, or other assets is transferred temporarily from the owner to the user
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Long-Term Financing
money that will be used for longer than one year
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Maturity Date
the date on which a corporation is to repay borrowed money
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Mortgage Bond
a corporate bond secured by various assets of the issuing firm
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Par Value
an assigned (and often arbitrary) dollar value printed on a stock certificate
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Preferred Stock
stock whose owners usually do not have voting rights but whose claims on dividends and assets are paid before those of common-stock owners
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Prime Interest Rate
the lowest rate charged by a bank for a short-term loan
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Private Placement
occurs when stock and other corporate securities are sold directly to insurance companies, pension funds, or large institutional investors
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Promissory Note
a written pledge by a borrower to pay a certain sum of money to a creditor at a specified future date
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Registered Bond
a bond registered in the owner’s name by the issuing company
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Retained Earnings
the portion of a corporation’s profits not distributed to stockholders
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Risk-Return Ratio
a ratio based on the principle that a high-risk decision should generate higher financial returns for a business and more conservative decisions often generate lesser returns
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Serial Bonds
bonds of a single issue that mature on different dates
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Short-Term Financing
money that will be used for one year or less
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Sinking Fund
a sum of money to which deposits are made each year for the purpose of redeeming a bond issue
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Speculative Production
the time lag between the actual production of goods and when the goods are sold
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Term-Loan Agreement
a promissory note that requires a borrower to repay a loan in monthly, quarterly, semiannual, or annual installments
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Trade Credit
a type of short-term financing extended by a seller who does not require immediate payment after delivery of merchandise
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Trustee
an individual or an independent firm that acts as a bond owners’ representative
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Unsecured Financing
financing that is not backed by collateral
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Zero-Base Budgeting
a budgeting approach in which every expense in every budget must be justified
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