Corporate Finance Glossary
25 essential terms — because precise language is the foundation of clear thinking in Corporate Finance.
Showing 25 of 25 terms
The cost arising from conflicts of interest between a firm's managers, shareholders, and creditors.
A measure of a stock's systematic risk relative to the overall market.
The process of evaluating and selecting long-term investments that are consistent with the firm's goal of maximizing value.
The combination of debt and equity used to finance a firm's assets and operations.
Capital Asset Pricing Model; a model that describes the relationship between systematic risk and expected return for assets.
The required return necessary to make a capital budgeting project worthwhile.
The return that equity investors require for their investment in a company.
Discounted Cash Flow; a valuation method using projected future cash flows discounted to present value.
A leverage ratio comparing a company's total debt to its shareholders' equity.
A distribution of a portion of a company's earnings to its shareholders.
Earnings Before Interest, Taxes, Depreciation, and Amortization; a measure of operating performance.
The total value of a company, calculated as market capitalization plus debt minus cash.
Cash generated by operations minus capital expenditures, available for distribution to investors.
The minimum rate of return a project must earn to be accepted.
Internal Rate of Return; the discount rate at which a project's NPV equals zero.
The use of borrowed funds to amplify potential returns from an investment.
The estimated amount of money that an asset or company would bring if sold immediately.
Net Present Value; the difference between the present value of cash inflows and outflows of a project.
The value of the next best alternative foregone when a decision is made.
The length of time required to recover the initial cost of an investment.
The additional value created by combining two firms, where the whole is greater than the sum of the parts.
The value of a business beyond the explicit forecast period in a DCF model.
The concept that money available today is worth more than the same amount in the future due to its earning potential.
Weighted Average Cost of Capital; the average rate of return a firm must earn to satisfy all capital providers.