How Do Banks Make Money? Diversified banks make money in a variety of different ways; however, at the core, banks are considered lenders. Banks generally make money by borrowing money from depositors and compensating them with a certain interest rate. The banks will lend the money out to borrowers, charging the borrowers a higher interest…
What is the Debt Sustainability Model? The debt sustainability model, or debt sustainability analysis, is a form of structured examination on a developing country based on the Debt Sustainability Framework. It is utilized by the World Bank and the International Monetary Fund (IMF) and measures the lending and borrowing decisions surrounding low-income and developing countries….
What is the Dividend Irrelevance Theory? Dividend Irrelevance Theory is a financial theory that claims that the issuing of dividends does not increase a company’s potential profitability or its stock price. It suggests that investors are not better off owning shares of companies that issue dividends than shares of those that do not. Stock Price and…
What is Derived Demand? In economics, derived demand happens when the demand for a resource or intermediate good is a result of the demand for the final good or service. It was first introduced by Alfred Marshall in 1890 in his book, “Principles of Economics.” The market price of the derived product can be significantly…
What is Deleveraging? Deleveraging is a process undertaken by a company to reduce the amount of total debt. It is an extreme measure carried out by an entity to pay off its obligations and existing debt on its balance sheet. If the company cannot deleverage in time, it may face the risk of defaulting on…
What is the De Minimis Tax Rule? The de minimis tax rule is a law that governs the treatment and accounting of small market discounts. Translated “about minimal things,” the de minimis amount determines whether the market discount on a bond is taxed as capital gain or ordinary income. The de minimis tax rule states…
What is a Decision Support System (DSS)? A decision support system (DSS) is an information system that aids a business in decision-making activities that require judgment, determination, and a sequence of actions. The information system assists the mid- and high-level management of an organization by analyzing huge volumes of unstructured data and accumulating information that…
What is Disability Insurance? Disability insurance is a type of insurance protecting workers when they lose employability and earned income due to becoming disabled. In the case of disability, the worker will be compensated by disability insurance. The main purpose of disability insurance is to protect workers against disability risk. Disability insurance is usually funded…
What is Development Economics? Development economics is a branch of economics that focuses on the economics of country development. It focuses on how people in a society can escape poverty and enjoy a better standard of living. Aspects of Development Economics Country development and development economics both involve a wide range of studies. Primarily, development…
What is a Dealer Market? A dealer market is a financial market where dealers post prices they would be willing to buy and sell specific securities on their own account. Dealers act as “market makers” by adding liquidity and are able to create a market by posting their offer price and bid price electronically. The…
