"Soft" Capital Rationing

Capital rationing that under certain circumstances can be violated or even viewed as made up of targets rather than absolute constraints.

10-K

Annual report required by the SEC each year. Provides a comprehensive overview of a company's state of business. Must be filed within 90 days after fiscal year end. A 10Q report is filed quarterly.

12B-1 fees

The percent of a mutual fund's assets used to defray marketing and distribution expenses. The amount of the fee is stated in the fund's prospectus. The SEC has recently proposed that 12B-1 fees in excess of 0.25% be classed as a load. A true " no load" fund has neither a sales charge nor 12b-1 fee.

12b-1 funds

Mutual funds that do not charge an upfront or back-end commission, but instead take out up to 1.25% of average daily fund assets each year to cover the costs of selling and marketing shares, an arrangement allowed by the SEC's Rule 12b-I (passed in 1980).

48-hour rule

The requirement that all pool information, as specified under the PSA Uniform Practices, in a TBA transaction be communicated by the seller to the buyer before 3 p.m. EST on the business day 48-hours prior to the agreed upon trade date.

Abandonment option Abandonment option

The option of terminating an investment earlier than originally planned.

Abnormal returns

Part of the return that is not due to systematic influences (market wide influences). In other words, abnormal returns are above those predicted by the market movement alone. Related: excess returns.

Absolute priority

Rule in bankruptcy proceedings whereby senior creditors are required to be paid in full before junior creditors receive any payment.

Accelerated cost recovery system (ACRS)

Schedule of depreciation rates allowed for tax purposes. Accelerated depreciation

Accelerated depreciation

Any depreciation method that produces larger deductions for depreciation in the early years of a project's life. Accelerated cost recovery system (ACRS), which is a depreciation schedule allowed for tax purposes, is one such example.

Accounting earnings

Earnings of a firm as reported on its income statement.

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