Introduction to Finance

f
Consumer Price Index (CPI), 209
f
Consumer price index (CPI), exclusion, 209
Consumption spending, GDP proportion, 288
Contractual savings
defined, 175
Contractual savings organization
careers, 16
defined, 47–48
role of, 48–50, 59
f
Contribution margin, defined, 446
Controller, defined, 409
Control of the firm, 593
Control phase, 546
Conversion ratio, defined, 263
Conversion value, defined, 263
Convertible bond, defined, 263
Convertible preferred stock, defined, 269
Corporate bond
default risk premium (DRP), 213
t
defined, 182
yields, 577
f
statistical data, 577
t
Corporate debt
GDP percentage, 568
f
markets, orientation, 257
Corporate equity capital, 266–270
defined, 266
Corporate governance, 405–409
agency problems, reduction, 407–409
principal-agent problem, 406–407
Corporate responsibilities, enhancement, 
408
Corporate rtention rate, 176
Corporate savings, 176–177
Corporate stockholders, advantages, 387
Corporate tax rate, changes, 112
Corporations, 384, 387–388
defined, 387
equity securities, classes, 266
financial instruments/securities, issuance, 
181–182
life stages, 180–181
profits, production, 176
savings process, 176–177
security analyst study, 408–409
taxable income, payment (example), 
418–419
Correlation, defined, 360
Cost analyst, career, 16
Cost of capital, 569–574
business use, 576–578
calculations, current data (usage), 577
defined, 528, 566
requirement, 569–570
Cost of common equity, 572–573
Cost of debt, 571
Cost of going public, 308–311
Cost of goods sold (COGS), 392
increase, 460–461
sales increase, impact, 462
t
usage, 459
Cost of new common stock, 573–574
Cost of preferred stock, 572

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INDEX
623
Drexel Burnham Lambert, bankruptcy, 214
DRP. 
See
Default risk premium
Dual banking system, defined, 61
Dual-listed stocks, 314
Due diligence, defined, 300
Dun & Bradstreet (D&B), 480, 509
information, 25
DuPont analysis, defined, 440
Dutch auction, defined, 307
Dynamic actions, defined, 86
E
Early chartered banks, 55
Earning power, 166, 179
Earnings before income and taxes (EBIT), 585
Earnings per share (EPS), 286, 393
example, 584
f
EBIT/eps analysis, 582–584
defined, 582
example, 583
t
EBIT/TA, 583
Economic activity
constraint, 204
fiscal policy, impact, 111–112
money supply, relationship, 37–39
restraint, 112
stimulation, legislative efforts (usage), 107
Economic cycles, 179
Economic decisions, making, 7
Economic expansion, 193
development capital, impact, 174
Economic expectations, 178
Economic growth, 98, 104
variability, 141
Economic policy objectives, 106
f
Economic risk, 141
defined, 141
Economic Stabilization Act of 2008, 112
Economic units, balance, 23
Economic unit savings, 174
Economic value (reduction), depreciation 
(representation), 392
Economies of scale, 523
Economy
cyclical movements, 179
government, impact, 107–108
yield curves, relationship, 205
Effective annual rate (EAR)
annual percentage rate (APR), difference, 
243
calculation, 501
defined, 243
Effective cost (EC), calculation, 504–505
Efficient capital markets, 355–357
Efficient market (informationally efficient 
market)
defined, 355
price reaction, 355
f
Electronic check clearing mechanisms, 
usage, 54
Electronic communications networks 
(ECNs), 321
Electronic data interchange
defined, 477
Electronic exchange rate quotes, usage, 137
Electronic funds transfers (ETFs), 94
Discounted loan, defined, 501
Discounting
defined, 225
financial calculator solution, 227
frequency (increase), 241–242
spreadsheet solution, 227–228
table-based solution, 228
usage, 225–228
Discount loan, calculation, 65
Discount operations, open-market operations 
(differences), 91
Discount rate, 570
defined, 89
net present value (NPV), relationship, 531
f
policy, intention, 89
Discount rate policy, 89–90
Discount window borrowing, 89
Discretaionary spending, defined, 171
Dispersion, measures, 352
Dissaving, defined, 178
Distribution channels, access (differences), 
524
Distribution (normal distribution), 347