Copy of `New York Times - Business and Finance Glossary`

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New York Times - Business and Finance Glossary Category: Economy and Finance Date & country: 11/09/2007, USA Words: 2680

Realized return
The return that is actually earned over a given time period.

Rebalancing
Realigning the proportions of assets in a portfolio as needed.

Receivables balance fractions
The percentage of a month's sales that remain uncollected (and part of accounts receivable) at the end of succeeding months.

Receivables turnover ratio
Total operating revenues divided by average receivables. Used to measure how effectively a firm is managing its accounts receivable.

Receiver
A bankruptcy practitioner appointed by secured creditors in the United Kingdom to oversee the repayment of debts.

Reclamation
A claim for the right to return or the right to demand the return of a security that has been previously accepted as a result of bad delivery or other irregularities in the delivery and settlement process.

Record date
(1) Date by which a shareholder must officially own shares in order to be entitled to a dividend. For example, a firm might declare a dividend on Nov 1, payable Dec 1 to holders of record Nov 15. Once a trade is executed an investor becomes the 'owner of record' on settlement, which currently takes 5 business days for securities, and one business day for mutual funds. Stocks trade ex-dividend the fourth day before the record date, since the seller will still be the owner of record and is thus en…

Recourse
Term describing a type of loan. If a loan is with recourse, the lender has a general claim against the parent company if the collateral is insufficient to repay the debt.

Red herring
A preliminary prospectus containing information required by the SEC. It excludes the offering price and the coupon of the new issue.

Redeemable
Eligible for redemption under the terms of the indenture.

Redemption charge
The commission charged by a mutual fund when redeeming shares. For example, a 2% redemption charge (also called a 'back end load') on the sale of shares valued at $1000 will result in payment of $980 (or 98% of the value) to the investor. This charge may decrease or be eliminated as shares are held for longer time periods.

Redemption cushion
The percentage by which the conversion value of a convertible security exceeds the redemption price (strike price).

Reference rate
A benchmark 'interest rate (such as LIBOR), used to specify conditions of an interest rate swap or an interest rate agreement.

Refundable
Eligible for refunding under the terms of indenture.

Refunded bond
Also called a prerefunded bond, one that originally may have been issued as a general obligation or revenue bond but that is now secured by an 'escrow fund' consisting entirely of direct U.S. government obligations that are sufficient for paying the bondholders.

Refunding
The redemption of a bond with proceeds received from issuing lower-cost debt obligations ranking equal to or superior to the debt to be redeemed.

Regional fund
A mutual fund that invests in a specific geographical area overseas, such as Asia or Europe.

Registered bond
A bond whose issuer records ownership and interest payments. Differs from a bearer bond which is traded without record of ownership and whose possession is the only evidence of ownership.

Registered representative
A person registered with the CFTC who is employed by, and soliciting business for, a commission house or futures commission merchant.

Registered trader
A member of the exchange who executes frequent trades for his or her own account.

Registrar
Financial institution appointed to record issue and ownership of company securities.

Registration statement
A legal document that is filed with the SEC to register securities for public offering.

Regression analysis
A statistical technique that can be used to estimate relationships between variables.

Regression equation
An equation that describes the average relationship between a dependent variable and a set of explanatory variables.

Regression toward the mean
The tendency for subsequent observations of a random variable to be closer to its mean.

Regular way settlement
In the money and bond markets, the regular basis on which some security trades are settled is that the delivery of the securities purchased is made against payment in Fed funds on the day following the transaction.

Regulation A
The securities regulation that exempts small public offerings, those valued at less than $1.5MM, from most registration requirements with the SEC.

Regulation D
Fed regulation currently that required member banks to hold reserves against their net borrowings from foreign offices of other banks over a 28-day averaging period. Regulation D has been merged with Regulation M.

Regulation M
Fed regulation currently requiring member banks to hold reserves against their net borrowings from their foreign branches over a 28-day averaging period. Reg M has also required member banks to hold reserves against Eurodollars lent by their foreign branches to domestic corporations for domestic purposes.

Regulation Q
Fed regulation imposing caps on the rates that banks may pay on savings and time deposits. Currently time deposits with a denomination of $100,000 or more are exempt from Reg Q.

Regulatory accounting procedures
Accounting principals required by the FHLB that allow S&Ls to elect annually to defer gains and losses on the sale of assets and amortize these deferrals over the average life of the asset sold.

Regulatory pricing risk
Risk that arises when regulators restrict the premium rates that insurance companies can charge.

Regulatory surplus
The surplus as measured using regulatory accounting principles (RAP) which may allow the non-market valuation of assets or liabilities and which may be materially different from economic surplus.

Reinvestment rate
The rate at which an investor assumes interest payments made on a debt security can be reinvested over the life of that security.

Reinvestment risk
The risk that proceeds received in the future will have to be reinvested at a lower potential interest rate.

Reinvoicing center
A central financial subsidiary used by an MNC to reduce transaction exposure by having all home country exports billed in the home currency and then reinvoiced to each operating affililate in that affiliate's local currency. It can also be used as a netting center.

REIT (real estate investment trust)
Real estate investment trust, which is similar to a closed-end mutual fund. REITs invest in real estate or loans secured by real estate and issue shares in such investments.

Relative strength
A stock's price movement over the past year as compared to a market index (the S&P 500). Value below 1.0 means the stock shows relative weakness in price movement (underperformed the market); a value above 1.0 means the stock shows relative strength over the 1-year period. Equation for Relative Strength: [current stock price/year-ago stock price] [current S&P 500/year-ago S&P 500]

Relative value
The attractiveness measured in terms of risk, liquidity, and return of one instrument relative to another, or for a given instrument, of one maturity relative to another.

Relative yield spread
The ratio of the yield spread to the yield level.

Remainderman
One who receives the principal of a trust when it is dissolved.

Remaining maturity
The length of time remaining until a bond's maturity.

Remaining principal balance
The amount of principal dollars remaining to be paid under the mortgage as of a given point in time.

Rembrandt market
The foreign market in the Netherlands.

Remote disbursement
Technique that involves writing checks drawn on banks in remote locations so as to increase disbursement float.

Rental lease
See:full-service lease.

Reoffering yield
In a purchase and sale, the yield to maturity at which the underwriter offers to sell the bonds to investors.

Reopen an issue
The Treasury, when it wants to sell additional securities, will occasionally sell more of an existing issue (reopen it) rather than offer a new issue.

Reorganization
Creating a plan to restructure a debtor's business and restore its financial health.

Replacement cost
Cost to replace a firm's assets.

Replacement cycle
The frequency with which an asset is replaced by an equivalent asset.

Replacement value
Current cost of replacing the firm's assets.

Replacement-chain problem
Idea that future replacement decisions must be taken into account in selecting among projects.

Replicating portfolio
A portfolio constructed to match an index or benchmark.

Repo
A agreement in which one party sells a security to another party and agrees to repurchase it on a specified date for a specified price. See: repurchase agreement.

Reported factor
The pool factor as reported by the bond buyer for a given amortization period.

Reporting currency
The currency in which the parent firm prepares its own financial statements; that is, U.S. dollars for a U.S. company.

Reproducible assets
A tangible asset with physical properties that can be reproduced, such as a building or machinery.

Repurchase agreement
An agreement with a commitment by the seller (dealer) to buy a security back from the purchaser (customer) at a specified price at a designated future date. Also called a repo, it represents a collateralized short-term loan, where the collateral may be a Treasury security, money market instrument, federal agency security, or mortgage-backed security. From the purchaser (customer) perspective, the deal is reported as a reverse Repo.

Repurchase of stock
Device to pay cash to firm's shareholders that provides more preferable tax treatment for shareholders than dividends. Treasury stock is the name given to previously issued stock that has been repurchased by the firm. A repurchase is achieved through either a dutch auction, open market, or tender offer.

Required reserves
The dollar amounts based on reserve ratios that banks are required to keep on deposit at a Federal Reserve Bank.

Required return
The minimum expected return you would require to be willing to purchase the asset, that is, to make the investment.

Required yield
Generally referring to bonds, the yield required by the marketplace to match available returns for financial instruments with comparable risk.

Reserve
An accounting entry that properly reflects the contingent liabilities.

Reserve currency
A foreign currency held by a central bank or monetary authority for the purposes of exchange intervention and the settlement of inter-governmental claims.

Reserve ratios
Specified percentages of deposits, established by the Federal Reserve Board, that banks must keep in a non-interest-bearing account at one of the twelve Federal Reserve Banks.

Reserve requirements
The percentage of different types of deposits that member banks are required to hold on deposit at the Fed.

Reset frequency
The frequency with which the floating rate changes.

Residual assets
Assets that remain after sufficient assets are dedicated to meet all senior debtholder's claims in full.

Residual claim
Related: equity claim

Residual dividend approach
An approach that suggests that a firm pay dividends if and only if acceptable investment opportunities for those funds are currently unavailable.

Residual losses
Lost wealth of the shareholders due to divergent behavior of the managers.

Residual method
A method of allocating the purchase price for the acquisition of another firm among the acquired assets.

Residual risk
Related: unsystematic risk

Residual value
Usually refers to the value of a lessor's property at the time the lease expires.

Residuals
(1) Parts of stock returns not explained by the explanatory variable (the market-index return). They measure the impact of firm-specific events during a particular period. (2) Remainder cash flows generated by pool collateral and those needed to fund bonds supported by the collateral.

Resistance level
A price level above which it is supposedly difficult for a security or market to rise.

Restrictive covenants
Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividend.

Retail
Individual and institutional customers as opposed to dealers and brokers.

Retail credit
Credit granted by a firm to consumers for the purchase of goods or services. See: consumer credit.

Retained earnings
Accounting earnings that are retained by the firm for reinvestment in its operations; earnings that are not paid out as dividends.

Retention rate
The percentage of present earnings held back or retained by a corporation, or one minus the dividend payout rate. Also called the retention ratio.

Retire
To extinguish a security, as in paying off a debt.

Retracement
A price movement in the opposite direction of the previous trend.

Return
The change in the value of a portfolio over an evaluation period, including any distributions made from the portfolio during that period.

Return on assets (ROA)
Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets).

Return on equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12 months by common stockholder equity (adjusted for stock splits). Result is shown as a percentage. Investors use ROE as a measure of how a company is using its money. ROE may be decomposed into return on assets (ROA) multiplied by financial leverage (total assets/total equity).

Return on investment (ROI)
Generally, book income as a proportion of net book value.

Return on total assets
The ratio of earnings available to common stockholders to total assets.

Return-to-maturity expectations
A variant of pure expectations theory which suggests that the return that an investor will realize by rolling over short-term bonds to some investment horizon will be the same as holding a zero-coupon bond with a maturity that is the same as that investment horizon.

Revaluation
An increase in the foreign exchange value of a currency that is pegged to other currencies or gold.

Revenue bond
A bond issued by a municipality to finance either a project or an enterprise where the issuer pledges to the bondholders the revenues generated by the operating projects financed, for instance, hospital revenue bonds and sewer revenue bonds.

Revenue fund
A fund accounting for all revenues from an enterprise financed by a municipal revenue bond.

Reverse price risk
A type of mortgage-pipeline risk that occurs when a lender commits to sell loans to an investor at rates prevailing at application but sets the note rates when the borrowers close. The lender is thus exposed to the risk of falling rates.

Reverse repo
In essence, refers to a repurchase agreement. From the customer's perspective, the customer provides a collateralized loan to the seller.

Reverse stock split
A proportionate decrease in the number of shares, but not the value of shares of stock held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a 1-for-3 split would result in stockholders owning 1 share for every 3 shares owned before the split. After the reverse split, the firm's stock price is, in this example, worth three times the pre-reverse split price. A firm generally institutes a reverse split to boost its stock's market price and attr…

Reversing trade
Entering the opposite side of a currently held futures position to close out the position.

Revolving credit agreement
A legal commitment wherein a bank promises to lend a customer up to a specified maximum amount during a specified period.

Revolving line of credit
A bank line of credit on which the customer pays a commitment fee and can take down and repay funds according to his needs. Normally the line involves a firm commitment from the bank for a period of several years.

Reward-to-volatility ratio
Ratio of excess return to portfolio standard deviation.