G-4 Flashcards
Bond equivalent yield
A calculation of yield that is annualized using the ratio of 365 to the number of days to maturity;
Allows for the restatement and comparison of securities with different compounding periods.
Bond indenture
The governing legal credit agreement, typically incorporated by reference in the prospectus;
Also called trust deed
Bond market vigilantes
Bond market participants who might reduce their demand for long-term bonds, thus pushing up their yields
Bond yield plus risk premium approach
An estimate of the cost of common equity that is produced by summing the before-tax cost of debt and a risk premium that captures the additional yield on a company’s stock relative to its bonds;
The additional yield is often estimated using historical spreads between bond yields and stock yields
Bonus issue of shares
A type of dividend in which a company distributes additional shares of its common stock to shareholders instead of cash
Book building
Investment bankers’ process of compiling a “book” or list of indications of interest to buy part of an offering
Book value
The net amount shown for an asset or liability on the balance sheets;
May also refer to the company’s excess of total assets over total liabilities;
Also called carrying value
Boom
An expansionary phase characterized by economic growth “testing the limits” of the economy
Bottom-up analysts
An investment selection approach that focuses on company-specific circumstances rather than emphasizing economic cycles or industry analysts
Break point
In the context of the weighted average cost of capital (WACC), this is the amount of capital changes, leading to a change in the WACC
Breakeven point
The number of units produced and sold at which the company’s net income is zero ( Revenues = Total cost );
In the case of perfect competition, the quantity at which price, average revenue, and marginal revenue equal average total cost
Bridge financing
Interim financing that provides funds until permanent financing can be arranged
Broad money
Encompasses narrow money plus the entire range of liquid assets that can be used to make purchases
Broker
an agent who executes orders to buy or sell securities on behalf of a client in exchange for a commission.
Broker-dealer
A financial intermediary (often a company) that may function as a principal (dealer) or as an agent (broker) depending on the type of trade
Brokered market
A market in which brokers arrange trades among their clients
Budget surplus / deficit
The difference between government revenue and expenditure for a stated fixed period of time
Bullet bond
Bond in which the principal repayment is made entirely at maturity
Business risk
The risk associated with operating earnings.
Operating earnings are uncertain because total revenues and many of the expenditures contributed to produce those revenues are uncertain
Buy-side firm
An investment management company or other investor that uses the services of brokers or dealers (i.e. the client of the sell side firm)
