财务管理中的一些概念解释

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1. European option, American option
European option can only be exercised at expiration, whereas American option can be exercised any time prior to expiration.
2. Determinants of option values
?Exercise price
?The price of the underlying
?The time to expiration
?The interest rate
?The intrinsic and time value
3. Letter of credit
A financial institution(such as a bank) which issues a letter of credit is obliged to reimburse any losses incurred up to the required credit enhancement amount, in return for a fee. It represents a written undertaking given by a bank on behalf of an importer to pay a specified sum of money to the exporter within a certain time.
4. Pecking order theory
?Retained earnings
?Debt secured debt should be issued first, followed by unsecured debt.
?Equity-last resort
5. Degree of financial leverage
Earnings before interest and tax/(Earnings before interest and tax-Interest)
6. Expectation theory
It looks at the relationship between difference in forward and spot rates and the expected changes in spot rates.
7. EVA= Net operating profit after tax(NOPAT)－(WACC