Business Glossary: E

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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.

EAFE index See: European Australian and Far East index

EASD See: European Association of Securities Dealers

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

EDC See: Export Development Corp.

ECGD See: Export Credit Guarantee Department

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

ECS The ISO 4217 currency code for the Ecuadorian Sucre.

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.

EEK The ISO 4217 currency code for the Estonian Kroon.

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.

ECU See: European Currency Unit

EDI See: Electronic Data Interchange

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

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

EM See: Effective margin

EMS See: European Monetary System

EOE See: European Options Exchange

EOQ See: Economic Order Quantity

ER The two-character ISO 3166 country code for ERITREA.

ERM See: Exchange Rate Mechanism

ES The two-character ISO 3166 country code for SPAIN.

ESOP See: Employee Stock Ownership Plan

ESP The ISO 4217 currency code for the Spanish Peseta.

ET The two-character ISO 3166 country code for ETHIOPIA.

ETB The ISO 4217 currency code for the Ethiopian Birr.

EU See: European Union

EUR The ISO 4217 currency code for Euro.

EUREX The European derivatives exchange formed in 1998 by a merger of the Deutsche Terminbörse (DTB) and the Swiss Options and Financial Futures Exchange (SOFFEX).

EXDEC See: Shipper's Export Declaration.

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

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-price ratio See: Earnings yield

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 debt, to the current share price. The inverse of the price-earnings ratio. It is the total twelve months earnings divided by number of outstanding shares, divided by the recent price, multiplied by 100. The end result is shown in percentage terms. We often look at earnings yield because this avoids the problem of zero earnings in the denominator of the price-earning ratio.

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.

ECN See: Emerging company marketplace

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

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.

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.

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.

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.

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 market redemption provision plus the accrued interest to the redemption date.

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 market in which new information is very quickly reflected accurately in share prices.

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