Dr. Harvey's Financial Glossary

Saturday, July 04, 2009

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A: Fifth letter of a Nasdaq stock symbol specifying Class A shares.
AAA+ Bank: Refers to banks that are rated AAA by IBCA, Moodys Investor Service and Standard & Poors.
AAII: See Also: American Association of Individual Investors
Abandonment: Controlling party giving up rights to property voluntarily.
Abandonment option: The option of terminating an investment earlier than originally planned.
ABC agreement: A contract between an employee and a brokerage firm outlining the rights of the firm purchasing an NYSE membership for that employee.
Ability to pay: Refers to the borrower's ability to make interest and principal payments on debts. See: Fixed charge coverage ratio.
In context of municipal_bond, refers to the issuer's present and future ability to create sufficient tax revenue to fulfill its contractual obligations, accounting for municipal income and property values.
In context of taxation, notion that tax rates should be determined according to income or wealth.
Abnormal returns: The component of the return that is not due to systematic influences (market-wide influences). In other words, the abnormal returns is the difference between the actual return and that is expected to result from market movements (normal return). Related: excess returns.
ABO: See Also: Accumulated Benefit Obligation
Above par: See Also: Par
ABS: See Also: Automated bond system
Absolute advantage: A person, company or country has an absolute advantage if its output per unit of input of all goods and services produced is higher than that of another person, company or country.
Absolute form of purchasing power parity: A theory that prices of products of two different countries should be equal when measured by a common currency. Also called the "law of one price."
Absolute Physical Life: The period of use after which an asset has deteriorated to such an extent that it can no longer be used.
Absolute priority: Rule in bankruptcy proceedings requiring senior creditors to be paid in full before junior creditors receive any payment.
Absorbed: Used in context of general equities. Securities are "absorbed" as long as there are corresponding orders to buy and sell. The market has reached the absorption point when further assimilation is impossible without an adjustment in price. See Also: Sell the book
Abusive tax shelter: A limited partnership that the IRS judges to be claiming tax deductions illegally.
ACAT: See Also: Automated Customer Account Transfer
Accelerated cost recovery system: Schedule of depreciation rates allowed for tax purposes.
Accelerated depreciation: Any depreciation method that produces larger deductions for depreciation in the early years of an asset''s life. ACRS, which is a depreciation schedule allowed for tax purposes, is one such example.
Acceleration clause: A contract stating that the unpaid balance becomes due and payable if specific actions transpire, such as failure to make interests payments on time.
Acceptance: Contractual agreement instigated when the drawee of a time draft "accepts" the draft by writing the word "accepted" thereon. The drawee assumes responsibility as the acceptor and for payment at maturity. See: Letter of credit and banker''s acceptance.
Accommodative monetary policy: Federal Reserve System policy to increase the amount of money available to banks for lending. See Also: Monetary policy
Account: In the context of bookkeeping, refers to the ledger pages upon which various assets, liabilities, income, and expenses are represented.
In the context of investment_bank, refers to the status of securities sold and owned or the relationship between parties to an underwriting syndicate. In the context of securities, the relationship between a client and a broker /dealer firm allowing the firm's employee to be the client's buying and selling agent. See: Account executive ;account statement.
Account Ad Valorem Duty: An imported merchandise tax expressed as a percentage.

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