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Finance 4830 Final
Terms in this set (78)
Chapter 7 US Bankruptcy Code
This chapter of the Bankruptcy Code provides for "liquidation" - the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors.
Chapter 11 US Bankruptcy Code
This chapter of the Bankruptcy Code generally provides for reorganization, usually involving a corporation or partnership. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11.
An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.
plan of reorganization
debtor in possession
an individual or corporation that has filed for Chapter 11 bankruptcy protection and remains in control of property that a creditor has a lien against, or retains the power to operate a business.
a special form of financing provided for companies in financial distress, typically during restructuring under corporate bankruptcy law chapter 11
A debt payment made to a creditor in the 90-day period before a debtor files bankruptcy (or within one year if the creditor was an insider) that gives the creditor more than the creditor would receive in the debtor's chapter 7 case.
A group of people who represent a company's creditors in a bankruptcy proceeding. The creditors' committee is usually further divided between secured and unsecured creditors.
first day cash order
emergency motions for immediate cash collaterals that are used to pay certain creditors first in order to continue to operate as a business
deadline for filing the proof of claim
a bankruptcy concept that is often employed to obtain a Chapter 11 bankruptcy reorganization plan while there are still objections from one or more creditors. Cramdown allows the bankruptcy courts to modify loan terms subject to certain conditions in an attempt to have all parties come out better than they would have without such modifications.
The value of equity in bankruptcy
In Chapter 11 bankruptcy, the value of equity for shareholders is not zero, but is hard to determine because the company is delisted but shares can still be traded over the counter. Stock is frozen
In chapter 7 bankruptcy creditors are paid in order starting with secured creditors, unsecured creditors, and then shareholders. Shareholder typically don't get much back.
The principle that requires a company to match expenses with related revenues in order to report a company's profitability during a specified time interval.
a branch of accounting that requires a high degree of verification before making a legal claim to any profit as it requires recognition of all probable losses as they are discovered and most expenditures as they are incurred.
discounted cash flow
a method of valuing a project, company, or asset using the concepts of the time value of money. All future cash flows are estimated and discounted by using cost of capital to give their present values
discretionary cash flow
any money left over once all possible capital projects with positive net present values have been financed, and all mandatory payments have been paid.
free cash flow (FCF)
a measure of how much cash a business generates after accounting for capital expenditures such as buildings or equipment. This cash can be used for expansion, dividends, reducing debt, or other purposes.
Dow Jones Industrial Average DJIA
a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ.
earnings before interest and taxes, is a measure of a firm's profit that includes all expenses except interest and income tax expenses
earnings before interest, taxes, depreciation, and amortization, an accounting measure calculated using a company's net earnings, before interest expenses, taxes, depreciation, and amortization are subtracted, as a proxy for a company's current operating profitability
Secured v. Unsecured Loans
Secured loans are those loans that are protected by an asset or collateral of some sort.
a legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.
the original sum of money lent
final payment date of a loan or other financial instrument
A fee that is charged by a lender to a borrower for the right to use the borrowed funds
Amortization schedule of a loan
a table detailing each periodic payment on an amortizing loan
A long-term loan, often a mortgage, that has one large payment (the balloon payment) due upon maturity
a loan where a payment of the entire principal of the loan and sometimes the principal and interest is due at the end of the loan term
a contract between a borrower and a lender which regulates the mutual promises made by each party.
Material Change Clause (MAC clause)
a contingency provision specifically inserted in venture finance contracts, merger and acquisition agreements, and lending agreements that gives the acquiring or funding parties, buyers or sellers, the right to back out from implementing the agreement, or seek a change of conditions when there is a substantial adverse change in the company or its prospects or business condition affecting the parties to the agreement.
a promise a company makes to not exceed certain financial ratios or not conduct certain activities
a type of promise or contract which requires a party to do something
Definitions in loan agreement
a contract that governs the relationship between the parties to a kind of financial transaction known as a secured transaction
what it is and how its valued
something pledged as security for repayment of a loan, to be forfeited in the event of a default.
perfecting or filing a security interest in collateral
relates to the additional steps required to be taken in relation to a security interest in order to make it effective against third parties or to retain its effectiveness in the event of default by the grantor of the security interest
Fixed Rate Loans
a loan where the interest rate doesn't fluctuate during the fixed rate period of the loan.
Variable Rate Loans
a loan in which the interest rate charged on the outstanding balance varies as market interest rates change.
what is it, how its used and why
a benchmark rate that some of the world's leading banks charge each other for short-term loans. It stands for IntercontinentalExchange London Interbank Offered Rate and serves as the first step to calculating interest rates on various loans throughout the world.
Basis Points (bps)
one hundredth of one percent, used chiefly in expressing differences of interest rates.
Working Capital Loan
a loan that has the purpose of financing the everyday operations of a company. Working capital loans are not used to buy long-term assets or investments and are instead used to cover accounts payable, wages, etc.
W/C Loan Collateral
Merger and Acquisition Loan
A loan given to a company to purchase a specific asset or to be used for purposes that are laid out before the loan is granted. The acquisition loan is typically only able to be used for a short window of time, and only for specific purposes
Leveraged Buyout Loans (LBO)
the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company.
A transaction where a company's management team purchases the assets and operations of the business they manage
the process of business expansion by increased output, customer base expansion, or new product development, as opposed to mergers and acquisitions, which is inorganic growth.
Financial Acquisitions v Strategic Acquisitions
Strategic buyers look for businesses that can complement their existing companies, seeking synergies by merging operations. Financial buyers typically intend to run an acquired business independently for the purpose of improving its internal operations, and then selling it at a profit.
Accretive v Dilutive Acquisitions
A merger and acquisition (M&A) deal is said to be accretive if the acquiring firm's earnings per share (EPS) increases after the deal goes through. If the resulting deal causes the acquiring firm's EPS to decline, the deal is considered to be dilutive.
a characteristic of a time series in which the data experiences regular and predictable changes that recur every calendar year. Any predictable change or pattern in a time series that recurs or repeats over a one-year period can be said to be seasonal.
the negative impact of a company's new product on the sales performance of its existing and related products.
a reorganization of a company in order to increase its efficiency
the concept that the value and performance of two companies combined will be greater than the sum of the separate individual parts.
Initial Public Offering IPO
the first time that the stock of a private company is offered to the public.
Secondary Offering SEO
a registered offering of a large block of a security that has been previously issued to the public.
Highly Leveraged Company
A company or other institution with a high level of debt.
an individual or company that acquires a corporation on the verge of being taken over by a force deemed undesirable by company officials
he acquisition of one company (called the target company) by another (called the acquirer) that is accomplished by going directly to the company's shareholders or fighting to replace management to get the acquisition approved.
the U.S. Securities and Exchange Commission's (SEC) requirement that publicly traded companies release and provide for the free exchange of all material facts that are relevant to their ongoing business operations
Statutory Federal Corporate Tax Rate v Effective Tax Rate
The statutory tax rate is the tax imposed by law. 35% The effective tax rate is what percentage a company actually pay in taxes.
the ratio for valuing a company that measures its current share price relative to its per-share earnings.
what is it and how is it used
A stock's multiple is its price-to-earnings ratio (P/E).Investors use the multiple as a way to assess whether the price they are paying for the stock is justified by its earnings potential.
Performance v Multiple
additional information attached to an entity's financial statements, usually as explanation for activities which have significantly influenced the entity's financial results.
A proxy statement is a document containing the information the Securities and Exchange Commission (SEC) requires companies to provide to shareholders so shareholders can make informed decisions about matters that will be brought up at an annual or special stockholder meeting. Issues covered in a proxy statement can include proposals for new additions to the board of directors, information on directors' salaries, information on bonus and options plans for directors, and any declarations made by the company's management.
a document that must be filed with the Securities and Exchange Commission (SEC) whenever there is a material change in the holdings of company insiders. Insiders required to submit a Form 4 include directors and officers of the company as well as any shareholders owning 10% or more of the company's outstanding stock.
a report of unscheduled material events or corporate changes at a company that could be of importance to the shareholders or the Securities and Exchange Commission (SEC). Also known as a Form 8-K, the report notifies the public of events reported including acquisition, bankruptcy, resignation of directors or a change in the fiscal year.
the initial registration form for new securities required by the SEC for public companies. Any security that meets the criteria must have an S-1 filing before shares can be listed on a national exchange. Form S-1 requires companies to provide information on the planned use of capital proceeds, detail the current business model and competition, and provide a brief prospectus of the planned security itself, offering price methodology and any dilution that will occur to other listed securities.
simplified security registration form utilized by businesses that have already met other reporting requirements. The form registers securities under the Securities Act of 1933 for U.S.-based companies only. Companies looking to use the S-3 must have satisfied all reporting requirements of the Securities Exchange Act of 1934 from sections 12 or 15(d) that follows the assumption that companies seeking to register have some form of security filed with the SEC.
is a comprehensive report of a company's performance that must be submitted quarterly by all public companies to the Securities and Exchange Commission.
a comprehensive summary report of a company's performance that must be submitted annually to the Securities and Exchange Commission.
the revision and publication of one or more of a company's previous financial statements; it is necessary when it is determined a previous statement contains a material inaccuracy.
An annual publication that public corporations must provide to shareholders to describe their operations and financial conditions.
the term used to describe how easy it is to convert assets to cash.
refers to the state of a security or other asset that cannot easily be sold or exchanged for cash without a substantial loss in value
the fluctuation in economic activity that an economy experiences over a period of time.
Types of Stock investments
Cyclical-an equity security whose price is affected by ups and downs in the overall economy
non-cyclical-also called defensive stocks, experience profit regardless of economic gyrations because they produce or distribute goods and services we always need
defensive-provides a constant dividend and stable earnings regardless of the state of the overall stock market
momentum-investment strategy that aims to capitalize on the continuance of existing trends in the market.
a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole
Daily Market Activity Data
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