A bond issued by an entity on behalf of a second party, guaranteeing that the second party will fulfill an obligation or / series of obligations to a third party. In the event that the obligations are not met, the 3rd party will recover its losses via the bond. A fee that i…
Showing posts with label Terminology - Finance. Show all posts
Showing posts with label Terminology - Finance. Show all posts
Term of the Day fiscal year - Definition
A 12 month period over which a firm budgets its spending. A fiscal year does not always begin in January and end in December; it may run over any period of 12 months. The fiscal year is referred to by the date in which it ends. For example, if a company's fiscal year end…
What is Quick Ratio?
A measure of a firm's liquidity & ability to meet its obligations. Quick ratio, often referred to as acid-test ratio, is obtained by subtracting inventories from current assets & then dividing by current liabilities. Quick ratio is viewed as a sign of company…
What is Debt to Income Ratio?
This ratio determines the proportion of debt as compared to the income an individual generates. Ideally, your debt to income ratio should not be higher than 30 % as you would then be straining your income. You see, this means you should not be spending more than 30 % of you…
Terminology Finance : Tax Definition
A fee charged (levied) by a government on a product, income, or / activity. If tax is levied directly on personal or / corporate income, then it is a direct tax. If tax is levied on the price of a good or / service, then it is called an indirect tax. The purpose of taxati…
Financial Term - Interest Rate
The fee charged by a lender (like Bank) to a borrower for the use of borrowed money, usually expressed as an annual percentage of the principal; the rate is dependent upon the time value of money, the credit risk of the borrower, and the inflation rate. Here, interest per ye…
Terminology of Finance - Credit..!
The Five C's of credit..! The 5 key elements a borrower should have to obtain credit: 1. Character (Integrity) 2. Capacity (Sufficient cash flow to service the obligation) 3. Capital (Net worth) 4. Collateral (Assets to secure the debt), and 5. Conditions (Of the borrower &…
