CFA #1 Flashcards
A priori probability
A probability based on logical analysis rather than on observation or personal judgement.
Abandonment option
The ability to terminate a project at some future time if the finaicial results are dissapointing.
Abnormal return
The amount by which a security’s actual return differs from its expected return, given the security’s risk and market’s return.
Above full-employment equilibrium
A macroeconomic equilibrium in which real GDP exceeds potential GDP.
Absolute dispersion
The amount of variability present without comparison to any reference point of benchmark.
Absolute frequency
The number of observations in a given interval (for grouped data).
Accelerated book build
An offering of securities by an investment bank acting as principal that is accomplished in only one or two ways.
Accelerated methods of depreciation
Depreciation methods that allocate a relatively large proportion of the cost of an asset to the early years of the asset’s useful life.
Account
With the accounting systems, a formal record of increases and decreases in a specific asset, liability, component of owners’ equity, revenue, or expense.
Account format
A method of presentation of accounting transactions in which effects on assets appear at the left and effects on liablities and equity appear at the right of a central dividing line; also known as T-account format.
Accounting profit (income before taxes or pretax income)
Income as reported on the income statement, in accordance with prevailing accounting standards, before the provisions for income tax expense.
Accounting risk
The risk associated with accounting standards that vary from country to country or with any uncertainty about how certain transactions should be recorded.
Accounts payable
Amounts that a business owes to it’s vendors for goods and sevices that were purchases from them but which have not yet been paid.
Accounts receivable turnover
Ratio of sales on credit to the average balance in accounts receivable.
Accrual basis
Method of accounting in which the effect of transactions on financial condition and income are recorded when they occur, not when they are settled in cash.
Accrued expenses (accrued liabilities)
Liabilities related to expenses that have been incurred but not yet paid as of the end of an accounting period–an example of an accrued expense is rent that has been incurred but not yet paid, resulting in a liability “rent payable.”
Accrued interest
Interested earned but not yet paid.
Accumulated benefit obligation
Under U.S. GAAP, a measure used in estimating a defined-benefit pension plan’s liabitlies, defined as “the actuarial present value of benefits (whether vested or non-vested) attributed by the pension benefit formula to employee service rendered before a specified date and based on employee service and compensation (if aplicable) prior to that date.”
Accumulated depreciation
An offset to property, plant, and equipment (PPE) reflecting the amount of the cost of PPE that has been allocated to current and previous accounting periods.
Acquiring company, or acquirer
The company in a merger or acquisition that is acquiring the target.
Acquisition
The purchase of some portion of one company by another; the purchase may be for asssets, a definable segment of another entity, or the puchase of an entire company.
Acquisition method
A method of accoounting for a business combination where the acquirer is required to measure each identifiable asset and liability at fair value. This method was the result of a joint project of the IASB and FASB aiming at convergence in standards for the accounting of business combinations.
Active factor risk
The contribution to active risk squared resulting from the portfolio’s different-than-benchmark exposures relative to factors specified in the risk model.
Active investment
An approach to investing in which the investor seeks to outperform a given benchmark.