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Short-run operating activities Events and decisions concerning the short-term finance of a firm, such as
how much inventory to order and whether to offer cash terms or credit terms to customers.

Short-term financial plan A financial plan that covers the coming fiscal year.

Short-term investment services Services that assist firms in making short-term investments.

Short-term solvency ratios Ratios used to judge the adequacy of liquid assets for meeting short-term
obligations as they come due, including (1) the current ratio, (2) the acid-test ratio, (3) the inventory turnover
ratio, and (4) the accounts receivable turnover ratio.

Short-term tax exempts Short-term securities issued by states, municipalities, local housing agencies, and
urban renewal agencies.

SIC Abbreviation for Standard Industrial Classification. Each 4-digit code represents a unique business
activity.

Side effects Effects of a proposed project on other parts of the firm.

Sight draft Demand for immediate payment.

SIMEX (Singapore International Monetary Exchange) A leading futures and options exchange in
Singapore.

Simple prospect An investment opportunity where a certain initial wealth is placed at risk and only two
outcomes are possible.

Single country fund A mutual fund that invests in individual countries outside the United States.

Single factor model A model of security returns that acknowledges only one common factor. See: factor
model.

Single index model A model of stock returns that decomposes influences on returns into a systematic factor,
as measured by the return on the broad market index, and firm specific factors.

Signal The process of conveying information through a firm's actions.
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Signaling approach Approach to the determination of the optimal capital structure asserting that insiders in a
firm have information that the market does not have; therefore, the choice of capital structure by insiders can
signal information to outsiders and change the value of the firm. This theory is also called the asymmetric
information approach.

Signaling view (on dividend policy) The argument that dividend changes are important signals to investors
about changes in management's expectation about future earnings.

Simple compound growth method A method of calculating the growth rate by relating the terminal value to
the initial value and assuming a constant percentage annual rate of growth between these two values.

Simple interest Interest calculated only on the initial investment. Related:compound interest.

Simple linear regression A regression analysis between only two variables, one dependent and the other
explanatory.

Simple linear trend model An extrapolative statistical model that asserts that earnings have a base level and
grow at a constant amount each period.

Simple moving average The mean, calculated at any time over a past period of fixed length.

Simulation The use of a mathematical model to imitate a situation many times in order to estimate the
likelihood of various possible outcomes. See: Monte Carlo simulation.

Single-index model Related: market model

Single-payment bond A bond that will make only one payment of principal and interest.

Single-premium deferred annuity An insurance policy bought by the sponsor of a pension plan for a single
premium. In return, the insurance company agrees to make lifelong payments to the employee (the
policyholder) when that employee retires.

Sinker Sinking fund.

Sinking fund requirement A condition included in some corporate bond indentures that requires the issuer to
retire a specified portion of debt each year. Any principal due at maturity is called the balloon maturity.

Size Large in size, as in the size of an offering, the size of an order, or the size of a trade. Size is relative from
market to market and security to security. Context: "I can buy size at 102-22," means that a trader can buy a
significant amount at 102-22.

Skewed distribution Probability distribution in which an unequal number of observations lie below and
above the mean.

Skip-day settlement The trade is settled one business day beyond what is normal.

Slippage The difference between estimated transaction costs and actual transaction costs. The difference is
usually composed of revisions to price difference or spread and commission costs.

Small-firm effect The tendency of small firms (in terms of total market capitalization) to outperform the
stock market (consisting of both large and small firms).

Small issues exemption Securities issues that involve less than $1.5 million are not required to file a
registration statement with the SEC. Instead, they are governed by Regulation A, for which only a brief
offering statement is needed.
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Smithsonian agreement A revision to the Bretton Woods international monetary system which was signed at
the Smithsonian Institution in Washington, D.C., U.S.A., in December 1971. Included were a new set of par
values, widened bands to +/- 2.25% of par, and an increase in the official value of gold to US$38.00 per
ounce.

Society for Worldwide Interbank Financial Telecommunications (SWIFT) A dedicated computer
network to support funds transfer messages internationally between over 900 member banks worldwide.

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

Soft currency A currency that is expected to drop in value relative to other currencies.

Soft dollars The value of research services that brokerage houses supply to investment managers "free of
charge" in exchange for the investment manager's business/commissions.

Sole proprietorship A business owned by a single individual. The sole proprietorship pays no corporate
income tax but has unlimited liability for business debts and obligations.

Sovereign risk The risk that a central bank will impose foreign exchange regulations that will reduce or
negate the value of FX contracts. Also refers to the risk of government default on a loan made to it or
guaranteed by it.

Span To cover all contingencies within a specified range.

Special dividend Also referred to as an extra dividend. Dividend that is unlikely to be repeated.

Special drawing rights (SDR) A form of international reserve assets, created by the IMF in 1967, whose
value is based on a portfolio of widely used currencies.

Specialist On an exchange, the member firm that is designated as the market maker (or dealer for a listed
common stock). Only one specialist can be designated for a given stock, but dealers may be specialists for
several stocks. In contrast, there can be multiple market makers in the OTC market.

Specific issues market The market in which dealers reverse in securities they wish to short.

Specific risk See:unique risk.

Spectail A dealer that does business with retail but that concentrates more on acquiring and financing its own
speculative positions.

Speculative demand (for money) The need for cash to take advantage of investment opportunities that may
arise.

Speculative grade bond Bond rated Ba or lower by Moody's, or BB or lower by S&P, or an unrated bond.

Speculative motive A desire to hold cash for the purpose of being in a position to exploit any attractive
investment opportunity requiring a cash expenditure that might arise.

Speculator One, who attempts to anticipate price changes and, through buying and selling contracts, aims to
make profits. A speculator does not use the market in connection with the production, processing, marketing
or handling of a product.See: trader.

Speed Related:prepayment speed
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Spin-off A company can create an independent company from an existing part of the company by selling or
distributing new shares in the so-called spinoff.

Split Sometimes, companies split their outstanding shares into a larger number of shares. If a company with 1
million shares did a two-for-one split, the company would have 2 million shares. An investor with 100 shares
before the split would hold 200 shares after the split. The investor's percentage of equity in the company
remains the same, and the price of the stock he owns is one-half the price of the stock on the day prior to the
split.

Split-fee option An option on an option. The buyer generally executes the split fee with first an initial fee,
with a window period at the end of which upon payment of a second fee the original terms of the option may
be extended to a later predetermined final notification date.

Split-rate tax system A tax system that taxes retained earnings at a higher rate than earnings that are
distributed as dividends.

Spot exchange rates Exchange rate on currency for immediate delivery. Related: forward exchange rate.

Spot futures parity theorem Describes the theoretically correct relationship between spot and futures prices.
Violation of the parity relationship gives rise to arbitrage opportunities.

Spot interest rate Interest rate fixed today on a loan that is made today. Related: forward interest rates.

Spot lending The origination of mortgages by processing applications taken directly from prospective
borrowers.

Spot markets Related: cash markets

Spot month The nearest delivery month on a futures contract.

Spot price The current marketprice of the actual physical commodity. Also called cash price.

Spot rate The theoretical yield on a zero-coupon Treasury security.

Spot rate curve The graphical depiction of the relationship between the spot rates and maturity.

Spot trade The purchase and sale of a foreign currency, commodity, or other item for immediate delivery.

Spread (1) The gap between bid and ask prices of a stock or other security. (2) The simultaneous purchase
and sale of separate futures or options contracts for the same commodity for delivery in different months.
Also known as a straddle. (3) Difference between the price at which an underwriter buys an issue from a firm
and the price at which the underwriter sells it to the public. (4) The price an issuer pays above a benchmark
fixed-income yield to borrow money.

Spread income Also called margin income, the difference between income and cost. For a depository
institution, the difference between the assets it invests in (loans and securities) and the cost of its funds
(deposits and other sources).

Spread strategy A strategy that involves a position in one or more options so that the cost of buying an
option is funded entirely or in part by selling another option in the same underlying. Also called spreading.

Spreadsheet A computer program that organizes numerical data into rows and columns on a terminal screen,
for calculating and making adjustments based on new data.

Stakeholders All parties that have an interest, financial or otherwise, in a firm - stockholders, creditors,
bondholders, employees, customers, management, the community, and the government.
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Stand-alone principle Investment principle that states a firm should accept or reject a project by comparing it
with securities in the same risk class.

Standard deviation The square root of the variance. A measure of dispersion of a set of data from their
mean.

Standard error In statistics, a measure of the possible error in an estimate.

Standardized normal distribution A normal distribution with a mean of 0 and a standard deviation of 1.

Standardized value Also called the normal deviate, the distance of one data point from the mean, divided by
the standard deviation of the distribution.

Standby agreement In a rights issue, agreement that the underwriter will purchase any stock not purchased
by investors.

Standby fee Amount paid to an underwriter who agrees to purchase any stock that is not subscribed to the
public investor in a rights offering.

Standstill agreements Contracts where the bidding firm in a takeover attempt agrees to limit its holdings
another firm.

Stated annual interest rate The interest rate expressed as a per annum percentage, by which interest
payment is determined.

Stated conversion price At the time of issuance of a convertible security, the price the issuer effectively
grants the security holder to purchase the common stock, equal to the par value of the convertible security
divided by the conversion ratio.

Stated maturity For the CMO tranche, the date the last payment would occur at zero CPR.

Statement billing Billing method in which the sales for a period such as a month (for which a customer also
receives invoices) are collected into a single statement and the customer must pay all of the invoices
represented on the statement.

Statement of cash flows A financial statement showing a firm's cash receipts and cash payments during a
specified period.

Statement-of-cash-flows method A method of cash budgeting that is organized along the lines of the
statement of cash flows.

Statement of Financial Accounting Standards No. 8 This is a currency translation standard previously in
use by U.S. accounting firms. See: Statement of Accounting Standards No. 52.

Statement of Financial Accounting Standards No. 52 This is the currency translation standard currently
used by U.S. firms. It mandates the use of the current rate method. See: Statement of Financial Accounting
Standards No. 8.

Static theory of capital structure Theory that the firm's capital structure is determined by a trade-off of the
value of tax shields against the costs of bankruptcy.

Statutory surplus The surplus of an insurance company determined by the accounting treatment of both
assets and liabilities as established by state statutes.

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