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HARD ASSETS
are physical assets (land,
buildings, equipment) and financial assets (cash, credit, financial instruments).
Hard assets are usually on the records of account in an organization
and subjected to inventory and/or custodial safeguards. See also SOFT
ASSETS.
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HARD COSTS
is the purchase price of
actual assets. For example, the purchase price of a new printing press
would be the hard cost. The soft costs are additional fees for items like
factoring-invoiced installation, prepaid and extended warranties, or service
contracts for the new equipment.
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HARMONIZED SYSTEM
is an internationally agreed
upon classification system for trade. It provides code numbers to specify
a goods classification; thereby making customs duty determination more
predictable.
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HEADCOUNT
is the act of counting people
in a certain way or in a particular group.
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HEALTHY
, from a corporate perspective, usually means
that the subject entity is financially secure, positioned well within
the market and functioning well.
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HEDGE
, in securities,
is a transaction that reduces the risk of an investment.
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HEDGE FUND
is a special type of investment
fund with fewer restrictions on the types of investments it can make.
Of note is a hedge fund's ability to sell short. In exchange for the ability
to use more aggressive strategies, hedge funds are more exclusive, i.e.,
fewer people, usually only the wealthy, are allowed to invest in hedge
funds.
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HEDGING
is strategy focused upon reducing
exposure to risk of loss resulting from fluctuations in exchange rates,
commodity prices, interest rates etc. Hedging in securities
is taking two positions that will offset each other if prices change,
thereby limiting
financial risk.
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HELD TO MATURITY
normally refers to
a long term security (note or bond held for more than one year) that has
a predetermined maturation event.
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HI
is Health Insurance.
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HIDDEN ASSET
is any valued asset that
is not included in the book value of a company. Companies have hidden
assets such as intellectual property, or customer lists which are of great
value, but not reflected in the book value.
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HIGH CREDIT
is the most a debtor has
ever charged with any one creditor.
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HIGH-LOW METHOD
of approximating cost
behavior considers only two points of data, the highest and lowest, for
activity within the relevant range.
The method first focuses on cost changes, allowing an analyst to determine
the presence of any variable cost. Next, fixed costs are determined by subtracting
variable cost from the total cost at either of the two data points. The calculation
is an algebraic procedure used to separate a semi-variable cost into
the
variable
and
fixed components.
The method calls for using the extreme data points (highest and lowest
x - y pairs) in the COST-VOLUME FORMULA y = a + bx; where a = fixed
cost
portion and b = the variable rate.
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HIGH-YIELD DEBT
is a business term
referring to a corporate debt instrument (non-investment grade or junk
bond), that has a higher yield (compared to investment grade debt) because
of a high perceived credit risk (default risk). See also JUNK BOND.
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HIRE AND PURCHASE AGREEMENT
is a contract
(more fully called contract of hire with an option of purchase) in which
a person hires goods for a specified period and at a fixed rent, with
the added condition that if he shall retain the goods for the full period
and pay all the installments of rent as they become due the contract shall
determine and the title vest absolutely in him, and that if he chooses
he may at any time during the term surrender the goods and be quit of
any liability for future installments upon the contract. In the United
States such a contract is generally treated as a conditional sale, and
the term hire purchase is also sometimes applied to a contract in which
the hirer is not free to avoid future liability by surrender of the goods.
In England, however, if the hirer does not have this right the contract
is a sale.
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HISTORICAL COST
ACCOUNTING is an accounting
principle requiring all financial statement items to be based on original
cost. It is usually based upon the dollar amount originally exchanged
in an arm's-length transaction; an amount assumed to reflect the fair
market value of an item at the transaction date.
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HISTORICAL COST CONVENTION
is that
assets are recorded at their initial cost and are not subsequently revalued
upwards, and liabilities valued at the amount initially received in exchange
for the obligation. The relevance of the convention is that figures remain
objectively based on verifiable figures, but in times of high inflation
historical cost can become a dubious convention to follow.
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HISTORICAL EXCHANGE RATES
are just
that: The historical data on currency exchange rates.
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HOLDBACK
is a portion of a construction
loan that is not funded until the subject project is nearing completion,
or the borrower has satisfied certain contractual performance requirements,
such as leasing a majority of the space in the building. The amount held
back is often equal to the construction firm's projected profit when
the building is completed.
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HORIZONTAL FINANCIAL ANALYSIS
allows
comparison of one company's ratios to the ratios of other companies as
well as to average industrial ratios and internal industrial deviation
of these ratios.
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HOSTILE TAKEOVER
occurs when a company
attempts to buy out another whether they like it or not. A hostile takeover
can occur only through publicly traded shares, as it requires the acquirer
to bypass the board of directors and purchase the shares from other sources.
This is difficult unless the shares of the target company are widely available
and easily purchased (i.e., they have high liquidity). A hostile takeover
may presage a corporate raid.
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HUMAN CAPITAL
is the unique capabilities
and expertise of individuals that are productive in some economic context.
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HYBRID INSTRUMENT
is a package containing
two or more different kinds of risk management instruments that are usually
interactive.
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