What does the S&P 500 index measure and how is it calculated?

July 9, 2024 No Comments

A: The S&P 500 measures the value of stocks of the 500 largest corporations by market capitalization listed on the New York Stock Exchange or Nasdaq Composite. Standard & Poor’s intention is to have a price that provides a quick look at the stock market

What does the term “stock-for-stock” mean?

July 9, 2024 No Comments

A: The term “stock-for-stock” is popularly used in two different contexts, and it regularly makes business news headlines in both. “Stock-for-stock” most commonly appears in headlines in reference to the stock-for-stock merger. In this type of merger, the acquiring company trades shareholders of the target

What exactly does EBITDA margin tell investors about a company?

July 9, 2024 No Comments

A: EBITDA stands for earnings before interest, taxes, depreciation and amortization. EBITDA margins provide investors a snapshot of short-term operational efficiency. This measure is similar to other profitability ratios, but it can be especially useful for comparing companies with different capital investment, debt and tax

What factors are taken into account to quantify credit risk?

July 9, 2024 No Comments

A: The quantification of credit risk, assigning measurable and comparable numbers to the likelihood of default or spread risk, is a major frontier in modern finance. The factors that affect credit risk range from borrower-specific criteria, such as debt ratios, to market-wide considerations such as

What factors go into calculating social return on investment (SROI)?

July 9, 2024 No Comments

A: Social return on investment (SROI) is a method for measuring values that are not traditionally reflected in financial statements, including social, economic and environmental factors, which can identify how effectively an organization uses its capital and other resources to create value for the community.

What industries use the loan to value ratio?

July 9, 2024 No Comments

A: The financial sector and mortgage investment industry use the loan-to-value ratio to assess the lending risk of mortgages. Calculate the loan-to-value ratio by dividing the mortgage amount by the property’s appraised value. Lenders evaluate a mortgage’s loan-to-value ratio before they underwrite the loan. Generally,

What is “leverage” as it is used in closed-end funds?

July 9, 2024 No Comments

A: A distinguishing feature of closed-end funds is their ability to use borrowing as a method to leverage their assets. An ideal opportunity exists for closed-end equity and bond funds to increase expected returns by leveraging their assets by borrowing during a low interest rate

What does financial accounting focus on?

July 9, 2024 No Comments

A: The focus of financial accounting is on summarizing and reporting a business’s financial position to entities outside the business with a vested interest, such as stockholders, creditors, government agencies and suppliers. The counterpoint to financial accounting is managerial accounting, which provides information to those

What does it mean to be “above water”?

July 9, 2024 No Comments

A: The term “above water” is used to describe any situation in which the ending or current value of a subject is higher than its beginning or opening price. In accounting, an asset with a value that has appreciated is said to be “above water”

What does it mean to capitalize accrued interest?

July 9, 2024 No Comments

A: When a company capitalizes accrued interest, it adds up the total amount of interest owed since the last debt payment made and adds the amount to the cost of the long-term asset or loan balance. There are two components to capitalizing accrued interest: Accrued

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