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Ace  Manager  2014    

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ACID-­‐TEST  RATIO:  (Current  assets  –  Inventories)/  Current  liabilities  

ANNUAL  PAYMENT:  In  a  loan,  amount  to  be  annually  cashed-­‐out  by  the  borrower  when  the  loan  is  annually  amortized.  The  amount  includes  principal  payment  and  interests.  

ANNUITANT:  person  entitled  to  receive  benefits  from  an  annuity  

ANNUITY:  Insurance  contract  designed  to  provide  payments  to  the  holder  at  predefined  intervals.    

AVERAGE:  An  average  is  a  statistic  measure  of  the  "middle"  value  of  a  data  set.  See  also  Moving  Average.  

 

 

 

BALANCE   SHEET:   The   balance   sheet   is   one   the   three   basic   financial   statements   of   a   company.   The   balance   sheet  summarizes  the  company’s  assets,  equity  and  liabilities  at  a  given  point  in  time.  

BBL:  Barrel    

BETA:  Coefficient  measuring  the  marginal  contribution  of  a  financial  asset  to  the  risk  of  the  market  portfolio  and  equal  to  COV  (RA,RM)  /  V(RM)  where  RA  is  the  financial  asset  return  and  RM  the  market  portfolio  return.  This  coefficient  reflects  the  sensitivity  degree  of  the  financial  asset  return  to  the  variations  of  the  market  portfolio  return.    

BRENT:  originally  name  of  an  oil  field  off  the  coast  of  Scotland.  Brent  is  the  acronym  of  Broom,  Rannock,  Etive,  Ness  and  Tarbert,  main  oil  fields  in  the  North  Sea.  One  of  the  standards  used  to  fix  oil  price  in  the  World.  

BS:  Black-­‐Scholes  

BOOSTRAPPING  (or  BOOSTRAP  METHOD):  Method  used  to  construct  a  fixed-­‐income  yield  curve  from  the  prices  of  a  set  of  coupon-­‐bearing  products  by  forward  substitution  

BUNDLING:  Combination  of  services   in  a  PPP,   typically  embedding   the  design,   the  construction,   the  maintenance  and  the  financing  of  the  infrastructure  

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CALL  OPTION:  Derivative  product  providing  the  buyer  with  the  right  (and  not  the  obligation)  to  buy  a  financial  asset  at  a  specified  price  (and  called  the  strike  price)  

CAPEX:  Capital  Expenditures  

CAPITAL  STRUCTURE:  The  capital  structure  is  the  mix  of  debt  and  equity  used  by  the  company  to  finance  its  operating  activities  

CAPM:  Capital  Asset  Pricing  Model  

CASH  RATIO:  Cash/Current  liabilities  

CDO:  Collateralized  Debt  Obligation  

CEO:  Chief  Executive  Officer  

CERTIFICATE  OF  DEPOSIT  (CD):  Promissory  note  issued  by  a  bank  

CIB:  Corporate  and  Investment  Banking  

COMPLIANCE:  Act  of  adhering  to  and  of  enforcing  a  standard  or  a  regulation  

COST  OF  DEBT:  The  cost  of  debt  is  the  minimum  interest  rate  at  which  the  company  could  raise  new  funds  on  the  debt  market  

COST  OF  EQUITY:  The  cost  of  equity  is  the  minimum  required  rate  of  return  expected  by  the  company’s  shareholders  

COST  TO  INCOME  RATIO:  General  Expenses  /  NBI  

COST-­‐VOLUME-­‐PROFIT  ANALYSIS:  Cost-­‐volume-­‐profit  analysis  is  a  simple  but  flexible  tool  for  exploring  potential  profit  based  on  cost  strategies  and  pricing  decisions  

CUSTOMER  SEGMENTATION:  Subdivision  of  a  market  into  discrete  customer  groups  sharing  similar  characteristics  

CURRENT  RATIO:  Current  assets/current  liabilities  

 

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D&A:  Depreciation  and  Amortization  

D/E  Ratio:  Debt  Equity  Ratio  

DCF:  Discounted  Cash  Flows  

DILUTION/ACCRETION:   Decrease/Increase   in   the   financial   participation   held   by   a   shareholder   as   a   result   of   a   capital  increase.    

DISCOUNT  RATE:  Rate  at  which  FCF  are  discounted  to  compute  Present  Value  

DSCR:  Debt  Service  Coverage  Ratio  

 

 

 

EBIT:  Earnings  before  Interests  and  Taxes  

EBITDA:  Earnings  before  Interests,  Taxes,  Depreciations  and  Amortizations  

EONIA:  Euro  Overnight  Index  Average  

EQUITY  RISK  PREMIUM:  The  equity  risk  premium  is  the  excess  return  of  a  given  stock  when  compared  to  the  risk  free  rate,  it  is  also  known  as  the  equity  premium    

EUROPEAN  OPTION:  Option  contract  where  the  right  can  be  exercised  at  a  specified  date  only  

EXCHANGE   RATIO:   Number  of  shares  of   the   acquiring  company     a   shareholder     receives   for   one  share  of   the   acquired  company  

EPS:  Earnings  per  Share  

EV:  Enterprise  Value.  Corresponds  to  the  market  value  of   the  operating  assets  of  a  company  and  usually  equal   to  the  equity  value  increased  by  the  value  of  the  net  financial  debts  

 

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FCF:  Free  Cash  Flows  

FORWARD  CONTRACT:  Commitment  to  trade  a  specific  asset  at  a  specified  price  at  a  future  date  

FREE  CASH  FLOWS:  The  cash  that  remain  available  for  distribution  among  all  the  securities  holders  of  a  company.  There  are  different  ways  of  calculating  the  FCF  depending  on  whether  one  is  interested  in  the  value  of  the  firm’s  equity  or  the  value  of  the  entire  firm.  

FUTURES:   Standardized   contract   between   two   parties   which   agree   to   exchange   in   the   future   a   fixed   quantity   of   a  specified  asset  at  a  price  agreed  today.  

 

 

 

GARP:  Growth  at  Reasonable  Price  

GEARING:  Net  debt  to  Shareholder’s  Equity  ratio  

 

 

 

 

 

IFRS:  International  Financial  Reporting  Standards  

INSTALLMENT:  Regular  payment  a  borrower  agreed  to  make  to  a  lender  

INTEREST  COVERAGE  RATIO:  EBIT/  Interest  Expenses  

IPO:  Initial  Public  Offering.    

 

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JENSEN’S  ALPHA:  Jensen’s  alpha  is  a  measure  of  a  security’s  excess  return  with  respect  to  the  expected  return  given  by  the  Capital  Asset  Pricing  Model  

 

 

 

 

 

LIBOR   (London   Interbank   Offered   Rate):   Money   market   observed   rate   in   London.   Libor   is   the   arithmetic   mean   of  interest  rate  offered  by  banks  on  deposits  from  other  banks  for  a  given  maturity  and  a  given  currency.  

LONG  POSITION:   Investment  strategy  on  a  financial  asset  (stock  security,  fixed  income  security,  option,  etc.)  where  the  investor   is  exposed   to  a  downside   risk  of   the  asset  value.   Investors   taking  a   long  position  on  one  particular  asset  are  buyers   who   become   owners   of   that   asset.   In   the   context   of   option   contracts,   investors   taking   long   positions   are  therefore  the  buyers  of  the  option  and  as  such,  are  exposed  to  a  risk  of  decrease  in  the  option  value.  

 

 

 

M&A:  Mergers  and  Acquisitions  

MARKET-­‐TO-­‐BOOK  RATIO  (MTB):  Market  value  per  share/Book  value  per  share  

MARKETABLE  SECURITIES:  Very  liquid  securities  with  a  typical  maturity  of  less  than  one  year.  

MARKET  CAPITALIZATION:  Share  price  multiplied  by  the  total  number  of  shares  

MARKETING  MIX:  Marketing  concept  the  objective  of  which  is  to  create  awareness  and  customer  loyalty.  Mix  relies  on  4  variables  (the  four  P's):  price,  promotion,  product,  and  placement.  

MFI:  Microfinance  Institutions  

MICROFINANCE:  Financial  services  offer  dedicated  to  people  who  usually  are  excluded  from  the  financial  system.  

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MM:  Modigliani-­‐Miller  

MOU:  Memorandum  of  Understanding  

MOVING  AVERAGE:   In  finance,  a  moving  average   is  usually  defined  as  the  unweighted  mean  of  the  previous  n  datum  points.  A  10-­‐days  moving  average  of  a  stock  price  is  for  instance  computed  as  the  unweighted  mean  of  the  stock  price  during  the  most  recent  10  days,  and  each  day,  the  oldest  value  is  removed  from  the  sample  and  replaced  by  the  most  recent  one.  

 

 

 

 

NBI:  Net  banking  Income  

NET  DEBT:  Financial  debt  –  Cash  and  Cash  equivalents  

NET  WORKING  CAPITAL  TO  ASSETS  RATIO  (NWCTA  or  NWTC  RATIO):  Net  working  capital/Assets  

NW:  Net  Worth    

NWC:  Net  Working  Capital    

NET  WORKING  CAPITAL:  Current  assets  –  current  liabilities  

NET  WORTH  RATIO:  Total  assets  divided  by  book  value  of  stockholders’  equity  

NPV:  Net  Present  Value  

NOPAT:  Net  Operating  profit  After  Taxes  

 

 

 

OPERATIONAL  SELF-­‐SUFFICIENCY:  Income/Charges  

OPEX:  Operating  Expenses  

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OPTION:  Contract  or  agreement  to  buy  or  sell  an  asset  (called  underlying  asset)  at  a  certain  future  price.  There  are  two  basic   types  of   options.  A  Call   option   gives   the  holder   the   right   but   not   the  obligation   to  buy   the  underlying   asset   by  maturity.  A  Put  option  gives  the  holder  the  right  but  not  the  obligation  to  sell  the  underlying  asset  by  maturity.  

OVERDRAFT:   It   is   the   fact   of   overdrawing   a   bank   account,   resulting   in   a   negative   cash   balance.   Overdraft   is   often  associated  with  overdraft  fees.    

 

 

 

PaR:  Portfolio  at  Risk  

PAY-­‐OFF:  Final  benefit  generated  by  a  financial  contract  

PAY-­‐OUT  POLICY:   the   financial  policy  of  a  company  regarding  the  transfer  of  cash  to  shareholders   (dividend  payment  and/or  share  repurchase).  

PEG:  Price  Earning  Growth  equal  to  PER  divided  by  annual  EPS  growth.    

PER:  Price  Earnings  Ratio.  Equity  Value  multiple  equal  to  the  equity  market  value  divided  by  the  net  income.    

PERPETUAL   GROWTH   RATE:   Annual   rate   of   growth   at   which   cash-­‐flows   are   supposed   to   grow   for   ever   after   the  investment  horizon.  

PERPETUITY  FACTOR:  see  PERPETUAL  GROWTH  RATE  

PPE  or  PP&E:  Property  Plant  and  Equipment  

PPP:  Public  Private  Partnership,  public  service  funded  and  operated  through  a  partnership  between  a  public  authority  and  a  private  operator  

PRINCIPAL  PAYMENT:  In  a  loan,  the  principal  payment  is  the  amount  of  borrowed  capital  reimbursed  at  each  period  by  the  borrower  to  the  lender.  

PRINCIPAL   AGENT   PROBLEM:   Issues   arising   in   the   relations  between  a  Principal   and  an  Agent   in   case  of   information  asymmetry,  and  /  or  moral  hazard  mainly  because  the  agent’s  actions  are  not  observable  by  the  Principal.  

PROFIT  MARGIN:  Net  income/  total  Sales    

PSB:  Public  Sector  Benchmak,  in  a  PPP  pattern  that  enables  to  compute  the  NPV  of  costs  as  if  the  infrastructure  was  built  through  a  public  authority’s  procurement.  

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PSDR:  public-­‐sector  discount  rate  

PUT  OPTION:  Derivative  product  providing  the  buyer  with  the  right  (and  not  the  obligation)  to  sell  a  financial  asset  at  a  specified  price    

 

 

 

 

 

RETURN  ON  ASSETS:  Net  income/Total  assets  

RETURN  ON  EQUITY:  Net  income/Total  equity    

RISK   FREE  ASSET:  Asset   the  actual   return  of  which   is  always  equal   to   its  expected   return.  Risk   free  assets  exhibits  no  default  risk.  

RISK  FREE  RATE:  Interest  paid  on  a  risk  free  asset  

ROCE:  Return  on  Capital  Employed  

ROA:  Return  on  assets  

ROE:  Return  on  Equity  

 

 

 

SHARPE  RATIO:  The  Sharpe  ratio  is  a  measure  of  stock  or  fund  performance,  it  measures  the  reward  per  unit  of  risk  

SHORT  POSITION:  Investment  strategy  on  a  financial  asset  (stock  security,  fixed  income  security,  option,  etc.)  where  the  investor   is   exposed   to   an   upside   risk   of   the   asset   value.   Investors   taking   a   short   position   on  one  particular   asset   are  vendors   who   committed   to   sell   that   asset.   In   the   context   of   option   contracts,   investors   taking   short   positions   are  therefore  the  vendors  of  the  option  and  as  such,  are  exposed  to  a  risk  of  increase  in  the  option  value.  

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SPREAD  /  CREDIT  SPREAD:  Difference  between  the  interest  rate  at  which  the  debt  is  issued  and  the  risk  free  rate.  The  credit  spread  reflects  the  level  of  risk  of  a  given  debt  security  and  normally  depends  on  the  degree  of  solvability  of   its  issuer.  

SPV:  Special  Purpose  Vehicle  

STRIKE  PRICE:  Price  at  which  the  right  provided  by  the  option  contract  can  be  exercised  

STRUCTURED  PRODUCT:  Pre-­‐packaged  investment  strategy  based  on  derivatives.  

SWAP:  Contract  specifying  an  exchange  of  financial  assets  or  flows  between  two  entities  during  a  certain  period  of  time  

 

 

 

TERMINAL  VALUE:  the  terminal  value  measures  the  value  of  the  firm  at  the  end  of  the  explicit  investment  horizon  

TOTAL  ASSET  TURNOVER:  Total  sales  divided  by  total  book  value  of  assets  

TREYNOR   RATIO:   The   Treynor   ratio   is   a   measure   of   stock   performance.   It   measures   the   performance   of   an   asset  compared  to  a  risk  free  asset  (typically  Treasury  bills)  per  unit  of  assumed  market  risk  

TV:  Terminal  Value  

 

 

 

UNPAID  BALANCE:  In  a  loan,  amount  due  to  the  lender  once  the  principal  of  the  period  has  been  paid.  

US  OPTION:  American  option.  Option  contract  where  the  right  can  be  exercised  for  as  long  as  the  option  remains  valid  

UTILITY  FUNCTION:  Satisfaction  level  of  an  investor  

 

 

 

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WACC:  Weighted  Average  Cost  of  Capital.    

WC  (or  NWC):  Working  Capital  (also  called  Net  Working  Capital).    

 

 

 

 

 

 

 

 

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