What is Business Strategy vs Business Model? Setting up and successfully running a business involves differentiating between business strategy vs business model. To reach their goals and achieve success, owners need to adopt the right strategy for their business. Strategic thinking involves selecting among several business models and, sometimes, switching to a new model whenever…
What is Borrower’s Capacity? A borrower’s capacity is the borrower’s ability to make its debt payments on time and in full amount. It is one of the 5 C’s of Credit analysis, together with collateral, covenant, character, and conditions. Factors that Affect a Borrower’s Capacity A borrower’s ability to pay its debt obligations on time…
What is the Advance-Decline (A/D) Line? The Advance-Decline (A/D) line is an indicator that is utilized by investors who want to measure the number of individual stocks. The A/D line can determine whether the stocks are participating in either a market fall or market rise. Understanding Advance-Decline (A/D) Lines To be explained further, the A/D…
What is Hax’s Delta Model? Hax’s Delta Model is a strategic framework with a pro-consumer approach toward the implementation of effective management and corporate business strategies in an organization. The Delta Model was developed by Arnoldo Hax (of the Sloan School of Management at MIT) and Dean Wilde. It is a relatively modern business strategy…
What is Accounts Receivable Financing? Accounts receivable financing is a means of short-term funding that a business can draw on using its receivables. It is very useful if a timing mismatch exists between the cash inflows and outflows of the business. AR financing can take various forms, but the three major types are: Accounts receivable…
What is an Adjustable-Rate Mortgage (ARM)? An adjustable-rate mortgage (ARM) comes with variable interest rates based on each period’s outstanding balance on the loan. Initially, an ARM would yield a fixed interest rate for a period of time. After the period’s passed, the interest rate resets yearly or monthly and adjusts in accordance with the…
What is Accounting Profit? Accounting profit is the net income for a company and is calculated by subtracting expenses from revenues, with guidance from the Generally Accepted Accounting Principles (GAAP). The expenses include the direct and indirect costs of running the business, such as depreciation, interest, taxes, labor wages, cost of goods sold, raw materials,…
What is Market Cannibalization? Market cannibalization refers to a phenomenon that happens when there’s a decreased demand for a company’s original product in favor of its new product. When cannibalization occurs, the business experiences losses not just in sales volume but also in revenue and market share. Due to cannibalization, some companies opt not to…
What is an Actuarial Life Table? An actuarial life table is a table that displays the probability that a person of specific age will die before their next birthday. The tables are in spreadsheet form and essentially demonstrate the probability of death for each age group within a population. In the long term, the table…
What is Working Capital Management? Working capital management refers to the set of activities performed by a company to ensure its resources are enough for day-to-day operating expenses while keeping resources invested in a productive way. Understanding Working Capital Working capital is the difference between a company’s current assets and its current liabilities. Current assets…
