What is Agency Theory? Agency theory is a concept used to explain the important relationships between principals and their relative agent. In the most basic sense, the principal is someone who heavily relies on an agent to execute specific financial decisions and transactions that can result in fluctuating outcomes. Because the principal relies so heavily…
What is a Financial Instrument? Financial instruments are contracts for monetary assets that can be purchased, traded, created, modified, or settled for. In terms of contracts, there is a contractual obligation between involved parties during a financial instrument transaction. For example, if a company were to pay cash for a bond, another party is obligated…
What is Financial Literacy? Financial literacy is the cognitive understanding of financial components and skills such as budgeting, investing, borrowing, taxation, and personal financial management. The absence of such skills is referred to as being financially illiterate. According to the Financial Industry Regulatory Authority (FINRA), about 66% of the American population is considered financially illiterate. Being…
What is the Code of Ethics? Code of ethics refers to the official standards of conduct or guiding principles that a professional is expected to follow in an individual or combined capacity. A code of ethics can exist at various levels and across different functions. There is a corporate code of ethics (CCE), as well…
Although technology is rapidly changing how organizations do business, finance professionals continue to play a critical role. While you should certainly invest in technology, you also need to focus on building an expert financial workforce. Embracing training for financial professionals is one of the best ways to accomplish that goal. The development of financial skills…
What is a High-Yield Investment Program (HYIP)? A high-yield investment program (HYIP) is an unregistered investment vehicle that promises significantly higher returns with little or no risk. They are typically run by unlicensed individuals and are scams, taking money from new investors to pay existing investors. HYIP can also be referred to as a prime…
What is a High-Yield Bond Spread? A high-yield bond spread, also known as a credit spread, is the difference in yields between multiple high-yield bonds, expressed in basis points or percentage points. A high-yield bond is a term that also refers to a junk bond. For example, if bond A and bond B offer a…
What is a Non-Operating Expense? A non-operating expense is a business expense that is not related to a company’s core business operations. The most common items that fall under the category include interest expense and loss on the sale of assets. Other types of non-operating expenses include asset write-downs and one-time restructuring or legal expenses…
What are Non-Marginable Securities? Non-marginable securities cannot be purchased on margin at a particular investment brokerage or financial institution. If purchasing the securities, investors must fund their full order with cash. Financial institutions will almost always maintain an internal list of non-marginable securities, which retail investors can find online or by contacting their broker. The…
What is a Non-Marketable Security? Non-marketable security refers to a security that is not traded on any major securities exchange. As a result, it is difficult to buy and sell such securities. Non-marketable securities are mainly traded as part of a private transaction. Attributes of a Non-Marketable Security 1. Highly Illiquid One of the most…
