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After-tax profit margin
The ratio of net income to net sales.
After-tax real rate of return
The after-tax rate of return minus the inflation rate.
Agencies
See: Federal agency securities.
Agency
Used in context of general equities. Act of buying or selling for the account and risk of a customer.
Generally, an agent, or broker, acts as intermediary between buyer and seller, taking no financial risk
personally or as a firm, and charging a commission for the service. The broker represents a customer
buyer/seller to a customer seller/buyer and does not act as principal for the firms own trading account.
Antithesis of principal. See: dealer.
Agency bank
A form of organization commonly used by foreign banks to enter the U.S. market. An agency bank cannot
accept deposits or extend loans in its own name; it acts as agent for the parent bank. It is also the financial
institution that issues A.D.R.s to the general market.
Agency basis
A means of compensating the broker of a program trade solely on the basis of commission established
through bids submitted by various brokerage firms.
Agency costs
The incremental costs of having an agent make decisions for a principal.
Agency incentive arrangement
A means of compensating the broker of a program trade using benchmark prices for issues to be traded in
determining commissions or fees.
Agency pass-throughs
Mortgage pass-through securities whose principal and interest payments are guaranteed by government
agencies, such as the Government National Mortgage Association (Ginnie Mae), Federal Home Loan
Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association(Fannie Mae).
Agency problem
Conflicts of interest among stockholders, bondholders, and managers.
Agency theory
The analysis of principal-agent relationships, wherein one person, an agent, acts on behalf of another
person, a principal.
Agent
The decision-maker in a principal-agent relationship. |
