What is Bank Rating? Bank rating is a measure of financial soundness for banks. Just like credit agencies such as Standard & Poor’s (S&P), Moody’s, and Fitch that give credit ratings to individual consumers and corporations, the Federal Deposit Insurance Corporation (FDIC) assigns credit ratings to banks and other financial institutions. Bank ratings are generally…
What is the Alternative Depreciation System (ADS)? The Alternative Depreciation System (ADS) is a method of calculating the depreciation of certain types of assets in special circumstances. The ADS system is required by the Internal Revenue Service (IRS), and it typically increases the number of years over which the asset is depreciated. Therefore, it reduces…
What is a Minimum Monthly Payment? A minimum monthly payment is the lowest amount that must be paid in a month regarding a revolving credit facility, such as a credit card. If the user of the revolving credit does not make the minimum monthly payment, they may be charged late fees and risk damaging their…
What is the Most-Favored-Nation Clause? The most-favored-nation clause is a stipulation that requires a country to provide concessions, privileges, or immunities that are to be granted to one nation in a trade agreement or to be granted to all other countries that are members of the World Trade Organization (WTO). In international economic relations, it…
What is the Arrow’s Impossibility Theorem? Arrow’s Impossibility Theorem is an important mathematical result in the field of collective choice and welfare economics. It is a sub-field of economics and deals with how decisions are made on a collective level. The theorem comes with some important consequences for democratic processes like voting. Arrow’s Impossibility Theorem…
What are Accounting Policies? Accounting policies are rules and guidelines that are selected by a company for use in preparing and presenting its financial statements. Accounting policies are important, as they set a framework, which all companies follow, and provide comparable and consistent standard financial statements across years and relative to other companies. Accounting policies…
What is a Backdoor Roth IRA? A backdoor Roth IRA is a legal method that allows individuals with incomes higher than the Roth limitation to fund Roth IRAs. It is also known as “Roth Conversion.” An individual can start by opening and funding a traditional IRA that does not contain any maximum income limitations, and…
What are Small and Medium-sized Enterprises (SMEs)? SMEs, or small and medium-sized enterprises, are defined differently around the world. The country a company operates in provides the specifics on the defined size of an SME. The sizing or categorization of a company as an SME, depending on the country, can be based on a number…
What are the Different Types of Customers? Customers play a significant role in any business. To understand customer behavior and better allocate resources to different customers to generate the highest profit, it is necessary to identify and segment different types of customers. By better understanding the different types of customers, businesses can be better equipped…
