What is a Distribution Waterfall? A distribution waterfall is a popular term in equity investing that refers to how capital gains from a fund are allocated among participants, typically the limited partners (LPs) and the general partner (GP). The capital of limited partners is managed by the general partner in a private equity fund. The general partner…
What is a Merger vs Acquisition? Mergers and acquisitions both refer to the joining of two or more business entities that entail a restructuring of their corporate order. They are aimed at achieving better synergies within the organization in order to increase their competence and efficiency. However, there are key differences between a merger vs….
What is the Durbin Watson Statistic? The Durbin Watson statistic is a test statistic to detect autocorrelation in the residuals from a regression analysis. It is named after professor James Durbin, a British statistician and econometrician, and Geoffrey Stuart Watson, an Australian statistician. What is Autocorrelation? Serial correlation, also called autocorrelation, refers to the degree…
What is the Durable Goods Orders Report? The durable goods orders report is a monthly report released by the U.S. government. The report encapsulates the sales of durable goods over the preceding month. It is keenly followed by financial analysts and economists as the purchases require large amounts of funds and are directly proportional to…
What is Automatic Bill Payment? Automatic bill payments are recurring money transfers authorized by a customer to pay certain vendors on a regular basis. The payments are often scheduled by users to pay various types of bills on a monthly basis, such as mortgage, credit card bills, installment loans, cell phone bills, electricity and water…
What are Fixed Income Portfolio Mandates? Fixed-income portfolio mandates refer to the set of rules that should be followed while investing in a variety of fixed-income securities. A fixed-income security is one that gives the investor a fixed amount of interest payment every year until maturity. Some examples of fixed-income securities include certificates of deposit,…
What is Volumetric Production Payment (VPP)? A volumetric production payment (VPP) is a means of financing used predominantly in the oil and gas industry in which the owner of an oil or gas property sells a percentage of the total production of hydrocarbons for an upfront cash payment. The VPP deal includes an overriding royalty interest, i.e., a…
What is Variability? Variability is a term used to describe how much data points in any statistical distribution differ from each other and from their mean value. The statistical tools used to measure variability are range, standard deviation, and variance. It is a useful metric in finance when applied to measure the variability of investment…
What is Effective Yield? Effective yield is a financial metric that measures the interest rate – also known as the coupon rate – return on a bond. The effective yield metric is that it takes compounding into consideration. It is important because bonds typically pay interest more than once a year. It makes effective yield…
