Quiz 1 Jargon Flashcards
(47 cards)
Liquidity
A measure of cash and other assets that are available to quickly meet financial obligations
Securitization
Pooling of certain types of assets so they can be repackaged into interest-bearing financial vehicles and sold on a market
Capital structure
The distribution of debt and equity that a bank has that makes up its finances
Leverage
The level of borrowed money used as a funding source relative to the amount of equity the bank holds ie: the level of assets to equity in the case of banks because they fund loans using deposits
Collateral
Backing a loan with an asset that can be converted for cash
Priority
Which groups get paid out first
1) first lien — secured
2) second lien — secured
3) senior — secured
4) subordinate — unsecured
5) preferred equity
6) shareholders equity
First lien debt
First person paid out by sale of the collateral and assets given a default
Second lien
Second person to be paid out by asset sale and collateral given a default
Debt — bonds
Debt security similar to an IOU, investors issue bonds to raise money from investors willing to lend them money for a set amount of time
Equity
The value that would be returned to a company’s shareholders if all the assets were liquidated and all the debt was paid off
Preferred equity
Different type of equity that represents ownership of a company and the right to claim income from the company’s operations. Get paid out more than regular equity holders
Dividends
Money paid out to investors from business operations
Interest — Coupon payments
A percentage paid out to an investor on a bond or security of debt based on the value of that debt
Fire sale
When a bank sells its assets quickly to raise equity during a bank run
Book equity — tangible book value of equity
Value of equity on the company’s balance sheet. Total assets minus total liabilities. Tells you the firms net asset value
Market equity
The price of shares of the company traded on the stock exchange times the number of shares outstanding. Or in other words the market value of the company’s equity
Market-to-book ratio
The value of the market value of equity relative to the book value of equity. Or the price per share * shares outstanding over the net asset value
Return on assets
How profitable a company is relative to its total assets. Net income / total assets
Return on equity
The profitability of a company relative to its level of equity. Net income / shareholders’ equity
Net interest margin
The amount of cash earned or lost on loans and debt. Interest income - interest expense
Delinquent loans
Borrower is behind on the interest payments on a loan
Provision for loan losses
Capital deployed by banks to absorb losses on their loan portfolio
Charge off
Debt that is deemed unlikely to be collected by the creditor but the debt is not necessarily forgiven or written off entirely. Similar to writing down an asset but it applies specifically to loans
Cash flow
Total amount of money being transferred into and out of business
