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Test

[test]

What is the definition of Test?
In finance, a test refers to a criterion used to measure compliance with financial ratio requirements of indentures and other loan agreements, or an event of a price movement that approaches a support level or a resistance level established earlier by the market. A test is passed if prices do not go below the support or resistance level, and it is failed if prices go on to new lows or highs.
Using Test in an Example

In a loan agreement, a financial test might require the borrower to maintain a certain debt-to-equity ratio. If the borrower's financial reports indicate compliance with this ratio, the test is passed. Alternatively, in technical analysis, if a stock price approaches a previously established low (support level) and does not fall below it, the price movement is said to have 'passed the test,' suggesting that the support level is strong.

Using Test in a sentence

The company's quarterly financials are due next week, and we'll see if they pass the leverage ratio test set by our creditors.

Related Terms

T Account

A T Account is a visual representation of an account in accounting, shaped like the letter 'T', used to record and track the increases and decreases in a particular financial account.
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Takeover

A takeover refers to the transfer of control of a company from one group of shareholders to another, characterized by a change in the controlling interest of the corporation. This can occur through a friendly acquisition or a hostile bid, where the latter often involves a public tender offer with the intention of replacing the current management.
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Tangible Asset

Assets having a physical existence that can be seen and touched, such as cash, land, buildings, machinery, and other physical properties.
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Target Costing

A pricing method that identifies the competitive market price of a product, determines the desired profit, and calculates the target cost by subtracting the desired profit from the market price.
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Tax

A charge levied by a governmental unit on income, consumption, wealth, or other basis to fund public services and governmental activities.
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Tax Basis

The original cost of an asset, adjusted for factors such as depreciation, that is used to calculate capital gains or losses for tax purposes.
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Tax Court

The U.S. Tax Court is a federal court that specializes in handling disputes between taxpayers and the Internal Revenue Service (IRS) related to the assessment of income, gift, estate, certain excise taxes, and other tax-related issues. It does not have jurisdiction over matters such as employment taxes or certain other types of taxes.
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Tax Credit for the Elderly and Disabled

A tax benefit available to taxpayers aged 65 or older, or those under 65 who are retired due to permanent and total disability, designed to reduce their tax liability. The credit amount is determined based on the taxpayer's filing status and is adjusted by subtracting any nontaxable income. The credit phases out for individuals whose adjusted gross income exceeds specified levels.
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Tax Lien

An encumbrance placed on property as security for unpaid taxes, giving the taxing authority a legal claim against the property until the debt is paid.
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Tax Shelter

A tax shelter is a legal arrangement where certain investments or financial decisions are made to reduce, defer, or eliminate tax liabilities.
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Tax Year

The annual accounting period for which a taxpayer calculates their taxable income. This can be a calendar year, a fiscal year, or a fractional part of a year if the return is made for a portion of the year.
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Taxable Earnings

The portion of an individual's or entity's income that is subject to taxation, according to the laws and regulations of the tax jurisdiction.
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Taxable Income

Taxable income is the amount of a taxpayer's income that is subject to taxation, calculated by subtracting allowable exemptions and deductions from the adjusted gross income during the tax year.
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Taxable Municipal Bond

A debt obligation issued by state or local government entities that is subject to federal income tax, unlike traditional municipal bonds. These bonds arose from the Tax Reform Act of 1986.
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Taxpayer Identification Number (TIN)

A unique identification number that is required to be used by an individual or entity in any tax-related documents filed with the IRS. For individuals, this is typically their Social Security Number (SSN), while other entities such as businesses may use an Employer Identification Number (EIN) or other federally assigned ID.
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Tenancy-in-Common

A form of co-ownership where each owner holds an undivided interest in property, and upon death, their share passes to their heirs or beneficiaries rather than to the other co-owners.
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Term

The period of time during which the conditions of a contract are to be executed or are in effect.
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Term Loan

A loan from a bank for a specific amount that has a specified repayment schedule and a fixed or floating interest rate.
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Time Value

The value of money with respect to the time it is available, reflecting the concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.
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Time Value of Money

The principle that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received.
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Timing of Tests of Control

The period during which an auditor evaluates the operational effectiveness of controls as specified in management's report to determine if they are sufficient for achieving the objectives of the control criteria up to a certain date.
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Title

The legal evidence, such as a deed, that establishes one's right to ownership or control of a particular property or asset.
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Ton

In bond trading jargon, 'ton' refers to $100 million.
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Total Capitalization

The total value of a company's capital structure, including all forms of equity and long-term debt.
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Total Cost

The aggregate of all costs, including fixed costs, semi-variable costs, and variable costs, incurred in the production of goods or services.
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Total Direct Labor Cost Variance

The difference between the actual labor costs incurred and the standard labor costs for the actual production achieved.
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Total Direct Materials Cost Variance

The difference between the actual materials costs incurred and the standard costs of those items, used to assess efficiency in material usage during production.
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Total Gain

The excess of the proceeds realized on the sale of assets, including both inventory and noninventory goods, over their original purchase costs.
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Total Inventory Method

A lower-of-cost-or-market method of valuing inventory, which requires that inventory be reported at the lower of its historical cost or current market value.
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Total Quality Management

A comprehensive and structured approach to organizational management that seeks to improve the quality of products and services through ongoing refinements in response to continuous feedback.
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Trade

The activity of buying or selling goods and services among companies, states, or countries, often referred to as commerce.
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Trade Date

The date on which a security transaction is agreed upon, to be settled at a later date. It is the date when the obligation to buy or sell a financial instrument is legally established.
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Trademark

A distinctive name, symbol, motto, or emblem that legally identifies a product, service, or company, distinguishing it from others in the marketplace.
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Trader

An individual or entity that buys and sells goods, services, or financial instruments with the intention of making a profit.
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Transaction

The act of conducting a business agreement or exchange that is recorded as an entry in accounting books.
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Transfer Agent

A transfer agent is an entity, typically a commercial bank, appointed by a corporation to maintain records of investors and account balances, handle issues of lost, stolen, or destroyed certificates, and manage the issuance and cancellation of company stock and bond certificates.
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Transfer Price

The price charged by individual entities within a multi-entity corporation on transactions among themselves, often used to allocate revenues and expenses among different divisions of the corporation.
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Transfer Tax

A tax imposed by the government on the transfer of ownership of property, including gifts and estates, as transactions occur.
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Transferee Liability

Transferee liability refers to the legal responsibility where an individual or entity may be held liable for another taxpayer's unpaid taxes due to the transfer of assets or property from the delinquent taxpayer to the transferee.
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Transferred Basis

Transferred basis is the carryover of the basis of property from one entity to another, such as from a donor to a recipient, or from one business structure to another. This occurs in various transactions including gifts, transfers in trusts, transfers to controlled corporations, contributions to partnerships, and liquidating distributions from a corporation.
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Treasurer

A company officer responsible for the management of the organization's finances, including the receipt, custody, investment, and disbursement of funds. In public companies, the treasurer also oversees the maintenance of a market for its securities and manages corporate borrowings.
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Treasury

A place or department where the funds and revenues of a government, corporation, or institution are managed and safeguarded.
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Treasury Bill

A short-term government debt obligation issued at a discount from its face value, but pays no interest. It matures in a year or less and is used to finance the national debt.
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Treasury Bond

A long-term government debt security issued by the U.S. Treasury, with a maturity period typically exceeding five years, and which pays periodic interest to the holder until maturity.
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Treasury Instruments

Direct financial obligations issued by the United States government to finance national debt and other government-related activities.
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Treasury Note

A government debt security issued by the U.S. Treasury that matures between one and ten years from issuance and earns periodic interest payments until maturity.
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Treasury Stock

Stock that has been issued and subsequently reacquired by the issuing company. It may be held indefinitely, retired, reissued upon the exercise of stock options, or resold.
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Trend

A long-term direction in which a market, commodity, or security is observed to move, which can be upward, downward, or sideways.
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Trend Analysis

Trend Analysis is a form of horizontal analysis where percentage changes in related financial statement items are calculated over multiple periods to identify patterns of growth, decline, or stability.
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Trial Balance

A financial statement that lists the balances of all ledgers' debit and credit accounts to ensure that the total debits equal the total credits, indicating that the accounts are accurately balanced.
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Troubled Debt Restructuring

An agreement between a debtor and creditor that modifies the terms of a debt that is unlikely to be repaid under the original terms. The restructuring may include alterations to payment schedules, interest rates, or the transfer of assets as partial or full settlement of the debt.
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Trust

A fiduciary relationship in which one party, known as the grantor, transfers the legal title of an asset to another party, called the trustee, who is entrusted with managing and disposing of the asset according to specific instructions for the benefit of a third party, the beneficiary.
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Trustee

A trustee is a person or entity legally appointed to manage and hold title to the assets in a trust on behalf of the beneficiaries, according to the terms of the trust document.
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Turnover

The rate at which inventory or assets of a business are replaced or sold within a given period.
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