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Expectations Theory

admin — Sun, 20 May 2012 02:29:09 +0000

The hypothesis that long-term interest rates contain a prediction of future short-term interest rates. Expectations theory postulates that you would earn the same amount of interest by investing in a one-year bond today and rolling that investment into a new one-year bond a year later compared to buying a two-year bond today.

Investopedia explains ‘Expectations Theory’

This theory is sometimes used to explain the yield curve but has proven inaccurate in practice as interest rates tend to remain flat when the yield curve is normal. In other words, expectations theory often overstates future short-term interest rates.

Another term-structure theory, preferred habitat theory, expands on expectations theory to explain why longer-term bonds tend to pay more interest than two shorter-term bonds that add up to the same maturity. It says that investors prefer short-term bonds and are only interested in longer-term bonds if they pay a risk premium. While expectations theory assumes that investors only care about yield, preferred habitat theory assumes they care about maturity as well as yield.

Periodic inventory

admin — Sun, 20 May 2012 01:59:26 +0000

Periodic inventory is a system of inventory in which updates are made on a periodic basis. This differs from perpetual inventory systems, where updates are made as seen fit.

In a periodic inventory system no effort is made to keep up-to-date records of either the inventory or the cost of goods sold. Instead, these amounts are determined only periodically - usually at the end of each year. This physical count determines the amount of inventory appearing in the balance sheet. The cost of goods sold for the entire year then is determined by a short computation.

http://en.wikipedia.org/wiki/Periodic_inventory

Perpetual inventory

admin — Sun, 20 May 2012 01:57:01 +0000

In business and accounting/accountancy, perpetual inventory or continuous inventory describes systems of inventory where information on inventory quantity and availability is updated on a continuous basis as a function of doing business. Generally this is accomplished by connecting the inventory system with order entry and in retail the point of sale system. In this case, book inventory would be exactly the same as, or almost the same, as the real inventory.

In earlier periods, non-continuous, or periodic inventory systems were more prevalent. Starting in the 1970’s digital computers made possible the ability to implement a perpetual inventory system. This has been facilitated by bar coding and lately radio frequency identification (RFID) labeling which allows computer systems to quickly read and process inventory information as part of transaction processing.

http://en.wikipedia.org/wiki/Perpetual_inventory

fiscal balance

admin — Sun, 20 May 2012 01:49:33 +0000

Amount of money government has from tax revenue and the proceeds of assets sold, minus any government spending. When the balance is negative, the government has a fiscal deficit. When the balance is positive, the government has a fiscal surplus.

Read more: http://www.businessdictionary.com/definition/fiscal-balance.html#ixzz1vNH0oLRe

barbary lion

admin — Fri, 18 May 2012 21:11:53 +0000

http://en.wikipedia.org/wiki/Barbary_lion

Protected: CFA mock exam

admin — Fri, 18 May 2012 01:32:14 +0000

Protected: CFA level 1 info

admin — Thu, 17 May 2012 05:25:39 +0000

Controlling Interest

admin — Wed, 16 May 2012 20:46:35 +0000

When one shareholder or a group acting in kind holds a high enough percentage of ownership in a company to enact changes at the highest level. By definition, this figure is 50% of the outstanding shares or voting shares, plus one. However, controlling interest can be achieved with less than 50% ownership of the stock if that person/group owns a significant proportion of the voting shares, because in many cases, not every share carries a vote in shareholder meetings.

Investopedia explains ‘Controlling Interest’

For the majority of large public companies (such as those that belong to the S&P 500), a shareholder with much less than 50% of the outstanding shares can still cause a lot of shake-up at the company. Single shareholders with as little as 5-10% ownership can push for their own seats on the board, or enact changes at shareholder meetings by publicly lobbying for them.

What is the amortization of discount on bonds payable?

admin — Wed, 16 May 2012 20:20:11 +0000

When a company issues bonds, investors may pay less than the face value of the bonds when the stated interest rate on the bonds is less than the market interest rate.

If so, the issuing company stores the amount of this discount in a contra liability account, and amortizes the amount of this reduced payment over the term of the bonds, which increases the amount that the business charges to interest expense. The net result is a total recognized amount of interest expense over the life of the bond than the amount of interest expense actually paid to investors.

Online PDF rotation

admin — Wed, 16 May 2012 18:42:54 +0000

http://www.rotatepdf.net