Functional Currency
What is a functional currency and how does it work A functional currency is the currency of a country in which a company primarily earns and spends its income. In most cases, this will be the same as the company's home currency. However, if a company earns a significant portion of its income in another country, that country's currency may...
Operating Cash Flow Ratio
What is the operating cash flow ratio and what does it measure The operating cash flow ratio is a financial metric that measures a company's ability to generate cash flow from its operations. The ratio is calculated by dividing a company's operating cash flow by its total debt. A high ratio indicates that a company is generate sufficient cash flow...
Golden Handshake Clauses – Costs and Benefits
A golden handshake clause is a clause in an executive employment contract that provides a significant severance package if an executive is terminated due to restructuring, scheduled retirement, or other reasons. These agreements are commonplace in corporate America. While there are pros and cons to each arrangement, there are also some key benefits to consider. This article also explores...
Bearer Bond
What are bearer bonds and how do they work Bearer bonds are a type of debt security in which the owner, or "bearer," is entitled to the bond's interest payments and principal. Unlike most other types of bonds, which are registered with a financial institution, bearer bonds do not have the owner's name imprinted on them. This makes them more...
Three Tips to Avoid Becoming Overleveraged
Overleveraged means to borrow more money than you can afford to repay. The nation of Greece is an example of a country that has become overly leveraged. Its economy is suffering and many are wondering how they can get out of the debt. Here are three tips to avoid becoming overleveraged: Accounting leverage is 1 to 1 To understand economic and...
Loan Constant
What is a loan constant A loan constant, also known as a mortgage constant, is the percentage of your loan's monthly payment that is devoted to paying off the principal. The loan constant is an important tool for evaluating a mortgage loan, as it allows you to compare different loans based on the amount of your monthly payment that goes...
Bullet bond
What is a bullet bond A bullet bond is a type of corporate bond that is typically issued by companies with below-investment-grade credit ratings. As the name suggests, bullet bonds have a single maturity date, meaning that the entire principal amount is due at the bond's maturity. Bullet bonds are often used by corporations to finance long-term projects, such as...
Uniform Securities Act
What is the Uniform Securities Act and what does it do The Uniform Securities Act is a set of laws that governs the offer and sale of securities. These laws are designed to protect investors from fraud and misrepresentation, and to ensure that securities are traded in a fair and orderly fashion. The Uniform Securities Act is administered by the...
The Risks of Investing in Hot Money
What is hot money? Basically, hot money is the flow of funds from one country to another. It is supposed to generate a profit on short-term interest rate differentials and exchange rate shifts. The goal of hot money is to generate a profit by taking advantage of sudden changes in currency rates. However, there are certain risks associated with this...
Asset Valuation
What is asset valuation and why is it important Asset valuation is the process of determining the worth of an asset. The value may be determined for different purposes, such as insurance, resale, or tax assessment. Importantly, the value of an asset is not always the same as its price. For example, two houses may be identical in terms of...