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…
What is C Corp vs S Corp? Potential or existing business owners often face the choice of setting up either as a C Corp vs S Corp when starting a new business or changing their business structure. For everyone’s guidance, business goals primarily determine whether to incorporate as a C Corp vs S Corp. Both…
What are the Best Organizational Structures for a Business? Organizational structures are essentially blueprints that reveal how companies are run and managed and how information is passed within the organization. An organizational structure is literally a chart or diagram that depicts the logistical organization of a company. Finding the most appropriate organizational structure for a…
What is Attrition? Attrition, in a general sense, is a gradual reduction or dwindling of a thing or item. From a business perspective, there are two ways to define attrition. Attrition for a business can be described as either employee attrition or customer attrition – both being very important to understand as a business owner….
What is a Corporate Action? A corporate action is a move – enacted by a publicly-traded company – that encourages or furthers processes that have a direct impact on whatever assets the company issues. In other words, any actions (conducted by a company) that materially alter or otherwise change the company can be considered corporate…
What is a Corporate Reorganization Clause? A corporate reorganization clause is a provision contained in a company’s charter. The provision guides mergers and acquisitions, changes in assets or ownership structure, as well as changes in corporate control. The most common forms of corporate reorganization include mergers and acquisitions, financial restructuring, corporate buyouts, and divestitures. While many companies…
