OPERATING RATIO measures a firms operating efficiency; calculated: company operating expenses divided by its operating revenues.
LEVERAGE HYPOTHESIS is the theory that managers have incentive to avoid technical default of loan covenants because it could result in increases in the firm's cost of capital.
ADJUNCT ACCOUNT is an account that accumulates either additions or subtractions to another account. Thus the original account may retain its identity. Examples include premiums on bonds payable, which is a contra account to bonds payable; and accumulated depreciation, which is an offset to the fixed asset.
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