CFA #4 Flashcards Preview

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Flashcards in CFA #4 Deck (45)
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1
Q

Utilitarianism

A

A principle that states that we should strive to achieve “the greatest happiness for the greatest number of people.”

2
Q

Validity instructions

A

Instructions which indicate when the order may be filled.

3
Q

Valuation

A

The process of determining the value of an asset of service.

4
Q

Valuation allowance

A

A reserve created against deferred tax asset, based on the liklihood of realizing the deferred tax assets in future accounting periods.

5
Q

Valuation ratios

A

Ratios that measure the quantity of an asset or flow (e.g., earnings) in relation to the price associated with a specified claim (e.g., a share or ownership of the enterprise).

6
Q

Value

A

The amount for which one can sell something, or the amount one must pay to acquire something.

7
Q

Value (market-capitalization) weighted index

A

An index in which the weight on each constituent security is determined by dividing its market capitalization by the total market capitalization (the sum fo the market capitalization) of all the securities in the index.

8
Q

Value at risk (VAR)

A

A money measure of the minimum value of losses expected during a specified time period at a given level of probability.

9
Q

Value investors

A

With reference to equity investors, investors who are focused on paying a relatively low share price in relation to earnings or assets per share.

10
Q

Value stocks

A

Stocks that appear to be undervalued for reasons besides earnings growth potential. These stocks are usually identified based on high dividend yields, low P/E ratios, or low price-to-book ratios.

11
Q

Variable costs

A

Costs the fluctuate with the level of production and sales.

12
Q

Variance

A

The expected value (the probability weighted average) of squared deviations from a random variable’s expected value.

13
Q

Variation margin

A

Additional margin that must be deposited in an amount sufficient to bring the balance up to the initial margin requirement.

14
Q

Vega

A

The relationship between option price and volatility.

15
Q

Velocity of circulation

A

The average number of times a dollar of money is used anually to buy the goods and services that make up GDP.

16
Q

Venture capital

A

Investments that provide “seed” or start-up capital, early-stage financing, or mezzanine financing to companies that are in the early stages of development and require additional capital for expansion.

17
Q

Venture capital fund

A

A fund for private equiy investors that provides financing for development-stage companies.

18
Q

Ventures

A

The owners of a joint venture. Each is active in the management and shares control of the joint venture.

19
Q

Vertical analysis

A

Common-size analysis using only one reporting period or one base financial statement; for example, an income statement in which all items are stated as percentages of sales.

20
Q

Vertical common-size analysis

A

The most commmon type of common-size analysis, in which accounts in a given period are compared to a benchmark item in the same year.

21
Q

Vertical merger

A

A merger involving companies at different positions of the same production chain; for example, a supplier or distributor.

22
Q

Vested benefit obligation

A

Under U.S. GAAP, a measure used in estimating a defined-benefit pension plan’s liabilities, defined as the “actuarial present value of vested benefits.”

23
Q

Vested benefits

A

Future benefits promised to the employee regardless of continuing service. Benefits typically vest after a specified period of service or a specified period of service combined with age.

24
Q

Vesting date

A

The date that employees can first exercise stock options; vesting can be immediate or over a future period.

25
Q

Volatility

A

As used in option pricing, the standard deviation of the continuously compounded returns on the underlying asset.

26
Q

Vote by proxy

A

A mechanism that allows a designated party–such as another shareholder, a shareholder representative, or management–to vote on the shareholder’s behalf.

27
Q

Warehouse receipt arrangement

A

The use of inventory as collateral for a loan; similar to a trust receipt arrangement except there is a third party (i.e., a warehouse compay) that supervises the inventory.

28
Q

Weak-form effficient market hypothesis

A

The belief that security prices fully reflect all past market data, which refers to all historical price and volume trading information.

29
Q

Weighted average cost method

A

An inventory accounting method that averages the total cost of availabe inventory items over the total units available for sale.

30
Q

Weighted mean

A

An average in which each ovservation is weighted by an index of its relative importance.

31
Q

Weighted-average cost of capital

A

A weighted average of the after-tax required rates of return on a company’s common stock, preferred stock, and long-term debt, where the weights are the fraction of each source of financing in the company’s target capital structure.

32
Q

White knight

A

A third party that is sought out by the target company’s board to purchase the target in lieu of a hostile bidder.

33
Q

White squire

A

A third party that is sought out by the target company’s board to purchase a substantial minority stake in the target–enough to block a hostile takeover without selling the entire company.

34
Q

White-corrected standard errors

A

A synonym for robust standard errors.

35
Q

Winner’s curse

A

The tendency for the winner in certain competitive bidding situations to overpay, whether because of the overestimation of intrinsic alue, emotion, or information asymmetries.

36
Q

Winsorized mean

A

A mean computed after assigning a stated percent of the lowest values equal to one specified low value, and a stated percent of the highest values equal to one specified high value.

37
Q

Working capital

A

The difference between current assets and current liabilities.

38
Q

Working capital management

A

The management of a company’s short-term assets (such as inventory) and short-term liabilities (such as money owed to suppliers).

39
Q

Working capital turnover

A

A comparison of revenues with working capital to produce a measure that shows how efficiently working capital is employed.

40
Q

Working-age population

A

The total number of people aged 15 years and over.

41
Q

Yield

A

The actual return on a debt security if it is held to maturity.

42
Q

Yield beta

A

A measure of the sensitivity of a bond’s yield to a general measure of bond yields in the market that is used to refine the hedge ratio.

43
Q

Yield spread

A

The difference between the yield on a bond and the yield on a default-free security, usually a government note, of the same maturity. The yield spread is primarily determined by the market’s perception of the credit risk on the bond.

44
Q

Yield to maturity

A

The annual return that an investor earns on a bond if the investor purchases the bond today and holds it until maturity.

45
Q

Zero-cost collar

A

A transaction in which a position in the underlying is protected by buying a put and selling a call with the premium from the sale of the call offsetting the premium from the purchase of the put. It can also be used to protect a floating-rate borrower against interest rate increases with the premium on a long cap offsetting the premium on a short floor.