GLOSSARY
Abandonment option The ability to terminate a project at some future time if the financial results are disappointing.
Accounts receivable turnover Ratio of sales on credit to the average balance in accounts receivable.
Acid test ratio See Quick ratio.
Acquiring company or acquirer The company in a merger or acquisition that is acquiring the target.
Acquisition The purchase of some portion of one company by another; the purchase may be for assets, a definable segment of another entity, or the purchase of an entire company.
Active strategy In reference to short-term cash management, an investment strategy characterized by monitoring and attempting to capitalize on market conditions to optimize the risk and return relationship of short-term investments.
Activity ratios Measure how efficiently a company performs day-to-day tasks, such as the collection of receivables and management of inventory.
Agency costs Costs associated with the conflict of interest present when a company is managed by nonowners. Agency costs result from the inherent conflicts of interest between managers and equity owners.
Agency costs of equity The smaller the stake that managers have in the company, the less is their share in bearing the cost of excessive perquisite consumption or not giving their best efforts in running the company.
Agency problem A conflict of interest that arises when the agent in an agency relationship has goals and incentives that differ from the principal to whom the agent owes ...
