What is the Financial Accounting Standards Board (FASB)? The Financial Accounting Standards Board (FASB) is an independent organization that exists in the private sector. It is responsible for establishing accounting standards for financial reporting within the U.S. and follows FASB Standards, also known as Generally Accepted Accounting Principles (GAAP). In order to establish universal accounting…
What is a Family Limited Partnership (FLP)? A Family Limited Partnership (FLP) is a type of limited partnership where family members pool money into a family business. In doing so, each family member owns shares in a business, which means they assume ownership of the business. The partnership divides profits, dividends, and/or interest between two…
What are Factors of Production? Factors of production is an economic concept that refers to the inputs needed to produce goods and services. The factors are land, labor, capital, and entrepreneurship. The four factors consist of resources required to create a good or service, which is measured by a country’s gross domestic product (GDP). In…
What Does Annualize Mean? To annualize is to convert a short-term or partial period result into an annual basis. Annualization is helpful when comparing the returns of two or more investments or if a borrower wants to know how much interest they would need to pay for taking a loan. A return of a short-term…
What are Equity Derivatives? Equity derivatives are financial contracts whose value is derived from the value of an underlying stock assets in the secondary market. Equity derivative contracts are complex financial instruments that are used for speculation, hedging and getting access to stocks or markets that would otherwise not be accessible. These contracts are agreements…
What is a Eurodollar? A Eurodollar refers to funds that are denominated in U.S. dollars and held in foreign banks or overseas branches of American banks. The funds can be in the form of cash deposits or term deposits. These deposits were originally held in Europe, hence the name “Eurodollar” (i.e., U.S. dollars held in…
What is Margin Debt? Margin debt represents the amount that an investor owes a broker in their margin account. When a broker approves a margin account for an investor, the margin account is granted a line of credit that can be used to purchase securities. The brokerage charges an interest rate on the margin debt,…
