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…
What is a Negative Interest Rate Environment? A negative interest rate environment occurs when the central bank of a specific economic zone sets the nominal interest rate to zero. Such a move, in effect, makes banks charge money to deposit holders (individuals and businesses) to hold their funds. The charge occurs instead of the regular…
What is a Multilateral Trading Facility (MTF)? A multilateral trading facility (MTF) is a financial trading venue that serves as an alternative to a traditional trading exchange, such as the New York Stock Exchange (NYSE). MTFs connect multiple buyers and sellers through computerized systems in accordance with rules prescribed by Europe’s Markets in Financial Instruments…
What is Net National Product (NNP)? Net national product (NNP) is a term that is often used to represent the difference between gross national product and depreciation. In numerical terms, the NNP is the total market value of the goods and services produced by a nation during a specified period (generally a year) with depreciation…
What is Freight On Board (FOB)? Freight on Board (FOB), also referred to as Free on Board, is an international commercial law term published by the International Chamber of Commerce (ICC). It indicates the point at which the costs and risks of shipped goods shift from the seller to the buyer. In modern domestic shipping,…
