Guide to Analysing Companies

Exercise price
See strike price.
Expiry date
The last day on which a particular right (to buy shares at an ad-
vantageous price, for example) can be exercised.
Export credit
A loan to an exporter to tide it over the period between the
time when its goods are sent abroad and the time when it re-
ceives payment for them. With exports of large capital goods,
that time may be anything up to several years. Most western
governments have agencies which provide loans, often at sub-
sidised rates, to exporters. The UK’s Export Credit Guarantee
Department (ecgd) was originally set up in 1919 to help com-
panies rebuild trade after the disruption of the first world war.
In the early 1990s, the arm of the ecgd dealing with short-
term credit (up to two years) was sold off, and it now com-
petes with other insurers in the private sector. In recent years
the ecgd has helped exporters manufacturing things as diverse
as double-decker buses for Hong Kong, low-cost housing for
Romania, road improvements in Vanuatu and a pharmaceuti-
cals plant in Croatia. In underwriting such risks, the ecgd aims
to break even.
E
132
EXERCISE
02 Essential Finance 10/11/06 2:22 PM Page 132

---

External funds
sources of funds that are available to a company from
outside the company itself. Thus the proceeds of a bond issue
or a bank loan are external funds; retained profit is an inter-
nal source of funds. (See internal funds.)
Extrinsic value
When pricing options, the amount by which the premium
(the price the buyer has to pay) exceeds the intrinsic value
of the option. For example, if the premium is $20 and the exer-
cise price of the option is $410, then the extrinsic value (some-
times called time value) will be $10. This is also known as the
amount by which the option is in the money. In this case, the
option would not be worth exercising at $410, but it would be if
the price rose to, say, $425.