An arbitrage bond is a type of municipal bond issued to gain an interest rate advantage by refunding higher-rate bonds in advance of their call date. The proceeds from the lower-rate refunding issue are invested in higher-yielding treasuries until the first call date of the higher-rate issue being refunded.
Asset allocation is a strategic approach involving the distribution of investments among various asset classes to optimize returns while minimizing risk. Asset proportions can be adjusted based on market conditions.
A bonus issue is the issuance of additional shares to existing shareholders at no cost, based on the number of shares that a shareholder already owns. It's also known as a scrip issue.
A bridging loan is a short-term loan taken to bridge the gap between the purchase of one asset and the sale of another. It is commonly used in the property and housing market.
A capitalization issue, also known as a scrip issue, involves a company issuing new shares to existing shareholders, usually to bolster additional funds or to distribute reserves.
Carry trade is a financial strategy that involves borrowing funds in a low-interest-rate market and investing them in a higher return market. This practice capitalizes on the interest rate differential between two markets to generate profit.
Cash management involves the planning, monitoring, and execution of a firm's policy regarding liquidity to ensure adequate availability of cash for operational needs, investment opportunities, and unforeseen expenses.
A corporate acquisition involves one company purchasing most or all of another company's shares to gain control of that company, which can lead to significant structural and operational changes.
A financial strategy involving the purchase and sale of a position within the same trading day, often employed by traders to capitalize on short-term market movements.
Irrevocably committing specific assets to meet long-term obligations, providing a method to eliminate liabilities from a company's balance sheet that cannot be repaid early.
Deferral of taxes allows an individual or business to postpone the payment of taxes from the current year to a later year, providing financial flexibility and potentially reducing the overall tax burden.
A finance vehicle is a specialized financial entity that organizations use to achieve certain fiscal or operational advantages, such as minimizing tax liabilities or securing funding.
Financial adaptability refers to the ability of an accounting entity to take effective action to alter the amounts and timing of cash flows so that it can respond to unexpected needs or opportunities.
A risk management strategy utilized to balance positions of various business units or with unrelated third parties to mitigate exposure to financial risks.
Techniques often used at the end of a financial year to enhance a cash position and reduce borrowing by arranging for the settlement of outstanding obligations to be accelerated (leading) or delayed (lagging).
Legging-In refers to entering into a hedging contract after becoming the debtor or creditor under a debt instrument. Any gain or loss from legging-in is deferred until the qualifying debt instrument matures or is disposed of in the future.
Market Timing refers to the strategic decision-making process of buying or selling securities based on economic conditions, interest rates, stock price directions, and trading volumes.
Negative leverage, also referred to as reverse leverage, occurs when the cost of borrowing exceeds the returns generated from investments. This situation creates a net loss for the investor, contrasting with positive leverage where borrowed funds generate higher returns.
Financial planning for individuals, which involves analyzing their current financial position, predicting their short-term and long-term needs, and recommending a financial strategy. This may involve advice on pensions, the provision of independent school fees, mortgages, life assurance, and investments.
Ploughed-back profits, also known as retained earnings, are the portion of net income that is not distributed to shareholders as dividends but is kept within the company to reinvest in its core operations, pay off debt, or reserve for future use.
A Potentially Exempt Transfer (PET) refers to a gift that may not be immediately subject to inheritance tax, provided the donor survives for a period of seven years after making the transfer. PETs play a significant role in estate planning and gift tax strategies.
A real option is an investment embedded within a project or a business activity that provides the firm with the flexibility to make decisions that can have significant financial implications.
Recapitalization involves altering the mix of debt and equity financing in a company without changing the total amount of capital.
Refinancing involves obtaining new funding to pay off an existing obligation, typically done to secure a more favorable interest rate or reduce monthly payments.
Releveraging refers to the process of increasing the level of debt in the capital structure of a business. This financial strategy is often used to enhance returns on equity by leveraging borrowed funds.
Risk management is a process that aims to help organizations understand, evaluate, and take action on all their risks to maximize their value. This can include taking out insurance or hedging through derivatives.
A sale and leaseback transaction involves the owner of an asset selling it and then immediately leasing it back from the buyer. This allows the original owner to continue using the asset while freeing up capital.
A straddle is an options strategy involving the purchase of both a put and a call option on the same asset, with the same strike price and expiration date. This strategy capitalizes on significant price movements in either direction.
Strategic Financial Management is an approach that integrates financial techniques with strategic decision-making to optimize long-term business performance.
Tax planning involves the strategic structuring of a taxpayer's financial activities and affairs in accordance with relevant tax legislation to minimize tax liability. It is a legal and ethical means of reducing the overall charge to tax.
A treasurer is a key financial executive responsible for managing the financial assets and liabilities of an organization, ensuring sound financial practices, and maintaining strategic relationships with financial markets.
A vendor placing is a strategic financial maneuver used for acquiring another company or business, involving the placement of issued shares with prearranged investors as an alternative to direct cash transactions.
