NAA Definition

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NAA is National Association of Accountants.

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DEBT TO EQUITY measures the risk of the firms capital structure in terms of amounts of capital contributed by creditors and that contributed by owners. It expresses the protection provided by owners for the creditors. In addition, low Debt/Equity ratio implies ability to borrow. While using debt implies risk (required interest payments must be paid), it also introduces the potential for increased benefits to the firms owners. When debt is used successfully (operating earnings exceeding interest charges) the returns to shareholders are magnified through financial leverage. Depending on the industry, different ratios are acceptable. The company should be compared to the industry, but, generally, a 3:1 ratio is a general benchmark. Should a company have debt-to-equity ratio that exceeds this number; it will be a major impediment to obtaining additional financing. If the ratio is suspect and you find the companys working capital, and current / quick ratios drastically low, this is a sign of serious financial weakness. Formula: Total Liabilities / Stockholders Equity

FEDERAL OPEN MARKET COMMITTEE (FOMC) is a 12-member committee consisting of the seven members of the Federal Reserve Bank and five of the 12 Federal Reserve Bank presidents. The president of the Federal Reserve Bank of New York is a permanent member while the other Federal Reserve presidents serve on a rotating basis. The committee sets objectives for the growth of money and credit that are implemented through purchases and sales of U.S. Government securi­ties in the open market. The FOMC also establishes policy relating to Federal Reserve System operations in the foreign exchange markets.

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