eFinancialCareers

E
Fifth letter of a Nasdaq stock symbol specifying that an issue has not met the reporting date for the company's SEC regulatory filing requirements.

Each way
A broker's commission from his or her involvement on both the purchase and the sale side of a security.

EAFE index
See: European Australian and Far East index

Early distribution
See: Premature distribution

Early Exercise (assignment)
The exercise or assignment of an option contract before its expiration date.

Early withdrawal
See: Premature distribution

Early withdrawal penalty
Penalty paid by the holder of a fixed-term investment penalizing an investor who withdraws money before the agreed-upon maturity date.

Earn-out
Refers to an additional payment in a merger or acquisition that is not part of the original acquisition cost, which is based on the acquired company's future earnings relative to a level determined by the merger agreement.

Earned income
Compensation earned from employment, which includes wages, salary, tips, and compensation.

Earned income credit
A tax credit for taxpayers with children.

Earned surplus
See: Retained earnings

Earnest money
Money given to a seller by a buyer to demonstrate the buyer's good faith. If the deal falls through, the deposit is usually forfeited.

Earning asset
An asset that generates income, e.g., income from rental property.

Earning power
Earnings before interest and taxes (EBIT) divided by total assets.

Earnings
Net income for the company during a period.

Earnings before interest after taxes (EBIAT)
A financial measure defined as revenues less cost of goods sold and selling, general and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest plus cash income taxes. Equivalent to EBIT minus cash taxes.

Earnings before interest and, taxes (EBIT)
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes.

Earnings before interest, taxes, and depreciation (EBITD)
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Depreciation expenses are not included in the costs.

Earnings before interest, taxes, depreciation, and amortization (EBITDA)
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Depreciation and amortization expenses are not included in the costs.

Earnings before taxes (EBT)
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of income taxes.

Earnings momentum
An increase in the earnings per share growth rate from one reporting period to the next.

Earnings per share (EPS)
A company's profit divided by its number of common outstanding shares. If a company earning $2 million in one year had 2 million common shares of stock outstanding, its EPS would be $1 per share. In calculating EPS, the company often uses a weighted average of shares outstanding over the reporting term. The one-year (historical or trailing) EPS growth rate is calculated as the percentage change in earnings per share. The prospective EPS growth rate is calculated as the percentage change in this year's earnings and the consensus forecast earnings for next year.

Earnings response coefficient
A measure of relation of stock returns to earnings surprises around the time of corporate earnings announcements.

Earnings retention ratio
Plowback rate.

Earnings surprises
Positive or negative differences from the consensus forecast of earnings by institutions such as First Call or IBES. Negative earnings surprises generally have a greater adverse effect on stock prices than a reciprocal positive earnings surprise.

Earnings yield
The ratio of earnings per share, after allowing for tax and interest payments on fixed interest

Earnings-price ratio
See: Earnings yield

EASD
See: European Association of Securities Dealers

Easy money
See: Tight money

Eating stock
When an underwriter can't find buyers for a stock and therefore has to buy them for his own account.

EBIAT
See: Earnings Before Interest after Taxes

EBIT
See: Earnings Before Interest and Taxes

EBITD
See: Earnings Before Interest, Taxes and Depreciation

EBITDA
See: Earnings Before Interest, Taxes, Depreciation, and Amortization

EBRD
See: European Bank for Reconstruction and Development

EBT
See: Earnings Before Taxes

EC
The two-character ISO 3166 country code for ECUADOR.

ECA
See: Export Credit Agency

ECGD
See: Export Credit Guarantee Department

Eclectic paradigm
A theory that posits three types of advantages benefiting a multinational corporation: ownership-specific, location-specific, and market internalization advantages.

ECN
See: Emerging company marketplace

ECN
Electronic Communications Network. Defined under Rule 11Ac1- 1(a)(8) under the U.S. Securities Exchange Act of 1934.

Econometrics
The quantitative science of modelling the economy. Econometric models help explain and predict variables of interest.

Economic assumptions
General market environment a firm expects to operate in over the life of a financial plan.

Economic defeasance
See: In-substance defeasance

Economic dependence
When the costs and/or revenues of one project depend on those of another.

Economic earnings
The real flow of cash that a firm could pay out forever in the absence of any change in the firm's productive capacity.

Economic exposure
The extent to which the value of a firm will change because of an exchange rate change.

Economic growth
An increase in the nation's capacity to produce goods and services. Usually refers to real GDP growth.

Economic growth rate
The annual percentage rate of change in the Gross National Product.

Economic income
Cash flow plus change in present value.

Economic indicators
The key statistics of the economy that reveal the direction the economy is heading in; for example, the unemployment rate and the inflation rate.

Economic Life
The time period over which an asset's NPV is maximized. Economic life can be less than absolute physical life for reasons of technological obsolescence, physical deterioration, or product life cycle.

Economic order quantity (EOQ)
The order quantity that minimizes total inventory costs.

Economic rents
Profits in excess of the competitive level.

Economic risk
In project financing, the risk that the project's output will not be salable at a price that will cover the project's operating and maintenance costs and its debt service requirements.

Economic shock
Events that impact the economy which originate from outside it. They are unexpected and unpredictable (e.g., Hurricane Andrew in 1991, the rise in oil prices by OPEC).

Economic surplus
For any entity, the difference between the market value of all its assets and the market value of its liabilities.

Economic union
An agreement between two or more countries that allows the free movement of capital, labor, and all goods and services, and involves the harmonization and unification of social, fiscal, and monetary policies.

Economic value added (EVA)
A method of performance evaluation that adjusts accounting performance for investors' required return on investment. Suppose a division produces a 12% return on capital invested. Given the risk of the division's business line, if investors would usually require 14% on capital invested for this level of risk, the division destroyed shareholder value by the EVA metric. This Stern-Stewart has a trade mark on this term.

Economics
The study of the economy. See also: Macroeconomics; microeconomics; Keynesian economics, monetarism, and supply-side economics.

Economies of scale
Achievement of lower average cost per unit through increased production.

Economies of scale
The decrease in the marginal cost of production as a firm's extent of operations expands.

Economies of scope
Scope economies exist whenever the same investment can support multiple profitable activities less expensively in combination than separately.

Economies of vertical integration
Produced by achieving lower operating costs by owning all components of production and sometimes sales outlets rather than contracting with companies in the outside marketplace.

ECS
The ISO 4217 currency code for the Ecuadorian Sucre.

ECU
See: European Currency Unit

EDC
See: Export Development Corp.

EDGAR (Electronic Data Gathering and Retrieval)
The Securities & Exchange Commission uses Electronic Data Gathering and Retrieval to transmit company documents such as 10-Ks, 10-Qs, quarterly reports, and other SEC filings, to investors.

EDGAR Electronic Data Gathering, Analysis and Retrieval System
The system through which companies electronically file reports and registration statements with the SEC. This requires converting the paper or word-processing document to be filed into a universal ASCII format, a process known as EDGAR-izing the document. The filings can then be accessed by the public through the SEC's Web site on the Internet.

Edge Act corporation
Corporation chartered by the Federal Reserve to engage in international banking. The Board of Governors acts on applications to establish Edge Act corporations and also examines the corporations and their subsidiaries. Named after Senator Walter Edge of New Jersey, who sponsored the original legislation to permit formation of such organizations. See also: agreement corporation.

Edge corporations
Specialized banking institutions, authorized and chartered by the Federal Reserve Board of Governors in the U.S., that are allowed to engage in transactions of a foreign or international character. They are not subject to restrictions on interstate banking. Foreign banks operating in the U.S. are permitted to organize and own an edge corporation.

EDI
See: Electronic Data Interchange

Education IRA
A type of individual retirement account enabling the contribution of up to $500 per year tax free for each child up to the age of 18 by the parents in the family.

EE
The two-character ISO 3166 country code for ESTONIA.

EEK
The ISO 4217 currency code for the Estonian Kroon.

Effective annual interest rate
An annual measure of the time value of money that fully reflects the effects of compounding.

Effective annual yield
Annualized interest rate on a security computed using compound interest techniques.

Effective call price
The strike price in a

Effective convexity
The convexity of a bond calculated using cash flows that change with yields.

Effective date
In an interest rate swap, the date the swap begins accruing interest.

Effective debt
The total debt owed by a firm to its creditors.

Effective duration
The duration calculated using the approximate duration formula for a bond with an embedded option, reflecting the expected change in the cash flow caused by the option. Measures the responsiveness of a bond's price - taking into account that expected cash flows will change as interest rates change due to the embedded option.

Effective Interest Rate
The annual rate at which an investment grows in value when interest is credited more often than once a year.

Effective margin (EM)
Used with SAT performance measures, the amount equal to the net earned spread, or margin of income, on assets in excess of financing costs for a given interest rate and prepayment rate scenario.

Effective net worth
Net worth plus subordinated debt.

Effective rate
A measure of the time value of money that fully reflects the effects of compounding.

Effective sale
A sale based on the most recent round-lot price, which determines the price of the next odd lot. The difference created between the last round-lot price and the odd-lot price is referred to as the odd-lot differential.

Effective spread
The gross underwriting spread adjusted for the impact that a common stock offering's announcement has on the firm's share price.

Effective tax rate
The net rate a taxpayer pays on income that includes all forms of taxes. It is calculated by dividing the total tax paid by taxable income.

Effective yield
Yield or return on a short-term investment after adjustment for the change in exchange rates over the period of concern.

Efficiency
The degree and speed with which a market accurately incorporates information into prices.

Efficient capital market
A

Efficient diversification
The organizing principle of portfolio theory, which maintains that any risk-averse investor will search for the highest expected return for any particular level of portfolio risk.

Efficient frontier
The combinations of securities portfolios that maximize expected return for any level of expected risk, or that minimizes expected risk for any level of expected return. Pioneered by Harry Markowitz.

Efficient market
Market in which prices correctly reflect all relevant information.

Efficient Market Hypothesis
States that all relevant information is fully and immediately reflected in a security's

Efficient markets theory (EMT)
Principle that all assets are correctly priced by the market, and that there are no bargains.

Efficient portfolio
A portfolio that provides the greatest expected return for a given level of risk (i.e., standard deviation), or, equivalently, the lowest risk for a given expected return.

Efficient set
Graph representing a set of portfolios that maximize expected return at each level of portfolio risk.

Efficient surface
In mean variance skewness analysis, the set of portfolios that result from investor's preference for higher means, lower variance and higher (positive) skewness. The efficient surface is analogous (in three dimensions, mean, variance and skewness) to the efficient frontier (in two dimensions, mean and variance).

EFIC
See: Export Finance Insurance Corp.

EFTPOS
Acronynm for Electronic Funds Transfer at Point of Sale. Payment is transferred usually from a checking account at the point of sale.

EG
The two-character ISO 3166 country code for EGYPT.

EGP
The ISO 4217 currency code for the Egyptian Pound.

EH
The two-character ISO 3166 country code for WESTERN SAHARA.

Eighth[-ed]
Historical term used in the context of general equities. A specialist or another broker is bidding higher or offering lower than we are, often topping or undercutting us by an eighth.

Either-or order
Used in the context of general equities. See: Alternative order.

Either-way market
In the interbank Eurodollar deposit

Either/or facility
An agreement permitting a bank customer to borrow either domestic dollars from the bank's head office or Eurodollars from one of its foreign branches.

Elasticity of an option
Percentage change in the value of an option given a 1% change in the value of the option's underlying stock. Related: delta.

Elasticity of demand
The degree of buyers' responsiveness to price changes. Elasticity is measured as the percent change in quantity divided by the percent change in price. A large value (greater than 1) of elasticity indicates sensitivity of demand to price, e.g., luxury goods, where a rise in price causes a decrease in demand. Goods with a small value of elasticity (less than 1) have a demand that is insensitive to price, e.g., food, where a rise in price has little or no effect on the quantity demanded by buyers.

Elasticity of supply
The degree of producers' responsiveness to price changes. Elasticity is measured as the percent change in quantity divided by the percent change in price. A large value (greater than 1) of elasticity indicates sensitivity of supply to price, e.g., luxury goods, where a rise in price causes an increase in supply. Goods with a small value of elasticity (less than 1) have a supply that is insensitive to price, e.g., food, where a rise in price has little or no effect on the amount that producers supply.

Elect
The conversion of a conditional order into a market order.

Election Period
The period of time during which the holder can elect to extend and extendible bond, or to retract a retractable bond.

Electronic data interchange (EDI)
The direct exchange of information electronically, from one firm's computer to another firm's computer in a structured format.

Electronic depository transfers
The transfer of funds between bank accounts through the Automated Clearing House (ACH) system.

Electronic funds transfer (EFT)
Transfer of funds electronically rather than by check or cash. The Federal Reserve's Fedwire and automated clearninghouse services are EFT systems.

Electronic Funds Transfer Systems
A variety of systems and technologies for transferring funds (money) electronically rather than by check. Includes Fedwire, automated clearringhouses (ACHs) and other automated systems.

Electronic Queriable Carrier
A transporter of goods which allows tracking of goods in transit electronically using a waybill number such as United Parcel, Federal Express, etc.

Elephants
A term used to refer to large institutional investors.

Eleven bond index
An index based on the average yield of 11 municipal bonds that mature in 20 years and carry an average AA rating. The eleven bonds used to calculate the index are also found in the 20 bond index, which serves as a benchmark in tracking municipal bond yields.

Eligible bankers' acceptances
In the BA market, an acceptance may be referred to as eligible because it is acceptable by the Fed as collateral at the discount window and/or because the accepting bank can sell it without incurring a reserve requirement.

Elliott Wave Theory
Technical

Elves
A term the host uses to refer to guests on the PBS television show, "Wall Street Week", who are technical analysts attempting to predict the direction of stock prices over the next six months.

EM
See: Effective margin

Embedded option
An option that is part of the structure of a bond that gives either the bondholder or the issuer the right to take some action against the other party, as opposed to a bare option, which

Emergency fund
A reserve of cash kept available to meet the costs of any unexpected financial emergencies.

Emergency Home Finance Act of 1970
The federal legislation creating the Federal Home Loan Mortgage Corporation, a partially government-run program initiated to stimulate the development of a secondary mortgage market and expand mortgages available to veterans and other groups.

Emerging Company Marketplace (ECM)
A service once offered by the American Stock Exchange to help small growth companies fulfill special listing requirements. The service is no longer available.

Emerging markets
The financial

Emerging Markets Free index (EMF)
A Morgan Stanley Capital International index created to track stock markets in selected emerging markets that are open to foreign investment like Argentina, Chile, Jordan, Malaysia, Mexico, Philippines, and Thailand.

Emerging markets fund
A mutual fund that invests primarily in countries with developing economies (that is, those that are becoming industrialized). Emerging markets funds tend to be more volatile than domestic stock funds due to currency fluctuation and political instability. Consequently, fund prices can fluctuate dramatically.

Employee contribution
An employee's own deposit to a company retirement plan.

Employee Retirement Income Security Act (ERISA)
The law that regulates the operation of private pensions and benefit plans.

Employee stock fund
A firm-sponsored program that enables employees to purchase shares of the firm's common stock on a preferential basis.

Employee stock ownership plan (ESOP)
A company contributes to a trust fund that buys

Employee Stock Purchase Plan (ESPP)
A plan usually linked to a corporation's payroll deduction system allowing employees to purchase shares at a discount from current market value.

Employer matching contribution
The amount, if any, a company contributes on an employee's behalf to the employee's retirement account, usually tied to the employee's own contribution.

Employment rate
The percentage of the labor force that is employed. The employment rate is one of the economic indicators that economists examine to help understand the state of the economy. See also: Unemployment rate.

Empty head and pure heart test
Securities and Exchange Commission rule that allows only the bidder of a tender offer to trade in the stock while possessing inside information.

EMS
See: European Monetary System

Encumbered
A property owned by one party on which a second party reserves the right to make a valid claim, e.g., a bank's holding of a home mortgage encumbers property.

End-of-year convention
Treating cash flows as if they occur at the end of a year as opposed to the date convention. Under the end-of-year convention, the present is time 0, the end of year 1 occurs one year hence; and so on.

Endogenous uncertainty
Describes factors within the control of the firm, such as a decision to reveal information about price or input costs. Converse of exogenous.

Endogenous variable
A value determined within the context of a model. Related: Exogenous variable.

Endorse
Transferring asset ownership by signing the back of the asset's certificate.

Endowment
Gift of money or property to a specified institution for a specified purpose.

Endowment funds
Investment funds established for the support of institutions such as colleges, private schools, museums, hospitals, and foundations. The investment income may be used for the operation of the institution and for capital expenditures.

Energy mutual fund
Mutual fund investing in energy stocks only, e.g., oil and gas companies.

Engineering risk
The risk associated with the impact on a project's cash flows from deficiencies in design or engineering. Also known as design risk.

Enhanced indexing
Also called indexing-plus, an indexing strategy whose objective is to exceed or replicate the total return performance of some predetermined index.

Enhancement
An innovation that has a positive impact on one or more of a firm's existing products.

Enterprise
A business firm.

Enterprise Value
The market capitalization of a firm's equity plus the market value of the firm's debt. Often the value of assets that are non-core are excluded from the final calculation.

Entrepreneur
A person starting a new company who takes on the risks associated with starting the enterprise, which may require venture capital to cover start-up costs.

Entropy
The level of disorder in a system.

Environmental fund
A mutual fund that invests strictly in stocks of companies that are environmentally friendly and/or have the goal of environmental betterment. The investors are trying to support and profit from opportunities related to the environmental movement.

Environmental risk
The risk associated with economic or administrative consequences of slow or catastrophic environmental pollution.

EOE
See: European Options Exchange

EOQ
See: Economic Order Quantity

EPS
See: Earnings per share

Equal dollar swap
Selling common stock/convertibles in one company and reinvesting the proceeds in as many

Equal percentage contribution rule (EPCoR)
Principle that each asset contributes the same proportion to the equilibrium portfolio rate premium and risk.

Equal shares swap
Applies mainly to convertible securities. Selling the

Equalizing dividend
Special dividends received by investors of a firm for income the investor lost because the firm altered the dividends payment schedule.

Equilibrium
The stable state of the system. See: Attractor.

Equilibrium exchange rate
Exchange rate at which demand for a currency is equal to the supply of the currency in the economy.

Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the expected return offered to compensate for a perceived level of risk, each point on the line is a balanced market condition, or equilibrium. The slope of the line determines the additional expected return needed to compensate for a unit change in risk. The equation of the CML is defined by the capital asset pricing model.

Equilibrium price
The price at which the supply of goods matches demand.

Equilibrium rate of interest
The interest rate that clears the market. Also called the

Equipment leasing partnership
A limited partnership that receives income and tax benefits such as depreciation costs by purchasing equipment and leasing it to other parties.

Equipment trust certificates
Certificates issued by a trust that is formed to purchase an asset and lease it to a lessee. When the last of the certificates has been repaid, title and ownership of the asset transfers to the lessee.

Equitable owner
The beneficiary of a property held in a trust.

Equity
Ownership interest in a firm. Also, the residual dollar value of a futures trading account, assuming its liquidation is at the going

Equity cap
An agreement in which one party, for an up-front premium, agrees to pay the other at specific time periods if a designated stock market benchmark tops a predetermined level.

Equity carve out
Usually occurs when a company decides to IPO one of their subsidiaries or divisions. The company usually only offers a minority share to the equity market. Also known as carve out.

Equity claim
Also called a residual claim; a claim to a share of earnings after

Equity collar
The simultaneous purchase of an equity floor and sale of an equity cap.

Equity contribution agreement
An agreement to contribute equity to a project under certain specified conditions.

Equity floor
An agreement in which one party agrees to pay the other at specific time periods if a specific stock market benchmark falls below a predetermined level.

Equity funding
An investment consisting of a life insurance policy and a mutual fund. The insurance policy is paid by the collateral value of fund shares, giving the investor the advantages of insurance protection with the growth potential of a mutual fund.

Equity kicker
Stock warrants issued attached to a new debt, preferred or common stock issue to improve the salability of the issue.

Equity market
Related: stock market

Equity multiplier
Total assets divided by total common stockholders' equity; the total assets per dollar of stockholders' equity.

Equity options
Securities that give the holder the right (but not the obligation) to

Equity REIT
A Real Estate Investment Trust that assumes ownership status in the property it invests in enabling investors of the REIT to earn dividends on rental income from the property and appreciation in property resale. Antithesis of a Mortgage REIT.

Equity swap
A swap in which the cash flows exchanged are based on the total return on some stock market index and an interest rate (either a fixed rate or floating rate). Related: Interest rate swap.

Equity-linked Eurobonds
A Eurobond including a convertibility option or warrant.

Equity-linked policies
Related: Variable life

Equityholders
Stockholders; those holding

Equivalent annual annuity
The amount per year for some number of years that has a present value equal to a given amount.

Equivalent annual benefit
The annual annuity with the same value as the net present value of an investment project.

Equivalent annual cash flow
Annuity with the same net present value as the company's proposed investment.

Equivalent annual cost
The cost per year of owning an asset over its entire life.

Equivalent bond yield
Effective annual yield on a short-term, noninterest-bearing security calculated for comparison to yields quoted on coupon securities.

Equival