What is Net Interest Rate Spread? Net interest rate spread refers to the difference between the interest rate a financial institution pays to depositors and the interest rate it receives from loans. In other words, it is the difference between the borrowing and lending interest rates of the bank. The interest rate spread is a…
What is After-Tax Contribution? After-tax contribution refers to the monetary contribution made to retirement systems after deducting taxes from the individual’s or corporation’s taxable income. After-tax contributions are extremely popular for investments, as they allow withdrawals made after retirement to be non-taxable since the tax’s already been paid previously. Understanding the entire process…
What is Form 4797? Form 4797 is a tax form required to be filed with the Internal Revenue Service (IRS) for any gains realized from the sale or transfer of business property, including but not limited to properties that generate rental income and properties that are used for industrial, agricultural, or extractive resources. Always consult…
What is Diversity Management? Diversity management refers to organizational actions that aim to promote greater inclusion of employees from different backgrounds into an organization’s structure through specific policies and programs. Organizations are adopting diversity management strategies as a response to the growing diversity of the workforce around the world. Advancements in technology now allow companies…
What is a Comfort Letter? A comfort letter is a document of assurance issued by a parent company or an accounting firm to reassure a subsidiary company of its willingness to provide financial support. It is an affirmation letter, not a confirmation letter, that offers backup when a customer requires a loan or a company…
What is a Zombie Company? A “zombie company” is a term used to describe an uncompetitive company that needs a bailout to operate successfully or an indebted company that is only able to repay interest on its debt (interest-coverage ratio of 1 or less). Such companies generate only enough cash flow to pay the interest…
What is Bankruptcy? Bankruptcy is the legal status of a human or a non-human entity (a firm or a government agency) that is unable to repay its outstanding debts to creditors. Generally, it is initiated by the debtor and imposed by a court. The word is derived from the Italian word banca rotta, which translates to…
What is a Safe Harbor? A Safe Harbor is a provision in law or regulation that affords protection from liability or penalty and reduces liability if certain conditions are met. Examples discussed in this article: Business Judgment Rule The Digital Millennium Copyright Act of 1998 (USA) Transfer Pricing (India) Business Judgment Rule Safe harbor provisions appear…
What is a Retainer Fee? A retainer fee is an upfront fee paid by a client for the professional services of an advisor, consultant, lawyer, freelancer, etc. The fee is commonly associated with attorneys who are hired to provide legal services. This fee is used to guarantee the commitment of the service provider but does…
What is a Negative Interest Rate Policy (NIRP)? A negative interest rate policy, or NIRP, is an uncommonly used monetary policy tool where a central bank will set target interest rates at a negative value. The negative interest rates break through the lower bound of zero percent, which results in a scenario where saving costs…
