Dr. Harvey's Financial Glossary

Thursday, March 18, 2010

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Income statement (statement of operations): A statement showing the revenues, expenses, and income (the difference between revenues and expenses) of a corporation over some period of time.
Income stock: Common stock with a high dividend yield and few profitable investment opportunities.
Income tax: A state or federal government's levy on individuals as personal income tax and on the earnings of corporations as corporate income tax.
Incontestability clause: Clause in a life insurance contract preventing the insurer from revoking the policy after it has been in force for a year or two. If the life insurance company discovers any important facts that the policyholder may have concealed, such as experiencing a stroke.
Inconvertibility: The inability of a local currency to be exchanged for another currency. Often includes transfer risk.
Incorporated joint venture: A joint venture in which the legal means of dividing the project's equity by shareholdings in a company.
Incorporation: A legal process through which a company receives a charter and the state in which it is based allows it to operate as a corporation.
Incoterms: Trade terms used worldwide to specify seller and buyer obligations in shipments against international sales contracts. These terms are adopted by the International Chamber of Commerce (ICC) for international movement of merchandise. Since they in themselves are not law, they must be specified if desired in quotations, sales contracts, purchase orders and commercial invoices.
Incremental cash flows: Difference between the firm's cash flows with and without a project.
Incremental cost of capital: Average cost applicable to the issue of each additional unit of debt and equity.
Incremental costs and benefits: Costs and benefits that would occur if a particular course of action is taken, compared to those that would have obtained if that course of action had not been taken.
Incremental internal rate of return: Internal rate of return (I.R.R.) on the incremental investment from choosing a larger instead of a smaller project.
Indemnification: Used in insurance policy agreements as to compensation for damage or loss. In the context of corporate governance, Director Indemnification uses the bylaws and/or charter to indemnify officers and directors from certain legal expenses and judgements resulting from lawsuits pertaining to their conduct.
Indemnify: Used in insurance policy agreements as to compensation for damage or loss. Hold harmless
Indemnity: A legal obligation to cover a liability, however arising.
Indenture: Agreement between lender and borrower that details specific terms of the bond issuance. Specifies legal obligations of bond issuer and rights of bondholders. An indenture spells out the specific terms of a bond, as well as the rights and responsibilities of both the issuer of the security and the holder.
Independent auditor: A certified public accountant operating outside the company who can provide an accountant's opinion.
Independent broker: NYSE member who executes orders for floor_broker and firms other than its own.
Independent investments: Investments available to a firm that may be selected individually or in groups because each investment is different in its nature and purpose.
Independent project: A project whose acceptance or rejection is independent of the acceptance or rejection of other projects.
Independent variable: Term used in regression analysis to represent the element or condition that is expected to influence another (so-called dependent) variable.
Index: Statistical composite that measures changes in the economy or in financial_market, often expressed in percentage changes from a base year or from the previous month. Indexes measure the ups and downs of stock, bond, and some commodities markets, in terms of market prices and weighting of companies in the index.
Index and Option Market (IOM): A division of the CME established in 1982 for trading stock index products and options.
Index arbitrage: An investment trading strategy that exploits divergences between actual and theoretical_futures_price An example is the simultaneous buying (selling) of stock index futures (i.e., S&P 500) while selling (buying) the underlying stocks of that index, capturing as profit the temporarily inflated basis between these two baskets. Often, the point at which profitability exists is expressed at the block call as the number of points the future must be over or under the underlying basket for an arbitrage opportunity to exist. See: Program trading.
Index fund: Investment fund designed to match the returns on a stock market index. Mutual fund whose portfolio matches that of a broad-based index such as the S&P 500 and whose performance therefore mirrors the market as represented by that index.

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