What is Scenario Analysis vs Sensitivity Analysis? To understand scenario analysis vs sensitivity analysis, one should first understand that investment decisions are based on a set of assumptions and inputs. The lack of certainty in the premises and inputs brings about investment risk. Before making an investment, an individual assesses the magnitude of such risks…
What is Asset Coverage Ratio? The asset coverage ratio is a financial metric that indicates how a company can potentially settle its debts by selling its tangible assets. The ratio is used to evaluate the solvency of a company and helps lenders, investors, management, regulatory bodies, etc. determine how risky a particular company is. The…
What is Actuarial Science? Actuarial science deals with applying quantitative and statistical techniques to answer uncertainties pertaining to the future. It may relate to finance, insurance, or any other field where there is a possibility of loss or injury. Professionals skilled in this field are called actuaries. In other words, an actuary can be defined…
What is a Natural Gas ETF? Natural gas ETF is defined as an exchange-traded fund that helps investors obtain exposure to returns based on the performance of natural gas. Natural gas ETF falls under the broader universe of commodity ETFs. In theory, commodity ETFs should be easy to create. However, that’s not quite true. No…
What is Negative Income Tax? Negative income tax is a system where cash is given by the government to eligible tax residents who are earning below a certain threshold. We can consider negative income tax as a mirror image of regular income tax, where those individuals earning above the threshold pay tax to the government,…
What is Voluntary Compliance? Voluntary compliance is an assumption under which the U.S. tax system operates. It is the principle for which all the taxpayers will cooperate with the tax system, filing an honest and accurate annual return autonomously. Voluntary compliance does not mean that there are no tax-related laws or rules. It means that…
What Software is Used in Financial Modeling? Before we discuss Excel vs. automation in financial modeling, let’s take a look first at how software is used to build financial models. Financial modeling involves creating an abstract representation of an actual or projected financial event. Thus, a financial model is a mathematical tool that can be…
Top Time-saving Tricks for Financial Modeling Top time-saving tricks for financial modeling – Financial modeling is a very important financial activity and skill that every individual in finance should learn. It is the process of creating an illustration of a company’s performance, as well as a forecast of how it will likely perform in the…
CFI’s free Financial Modeling Guidelines is a thorough and complete resource covering model design, model building blocks, and common tips, tricks, and best practices for designing and building robust, world-class financial models. Many of the models we encounter today are poorly designed, difficult to maintain, and hard to follow. Given their central role in the…
What is a Capital Investment Model? Most companies make long-term investments that require a large amount of capital invested in the initial years, mostly in fixed assets such as property, machinery, or equipment. Due to the significant amount of cash outflows required, companies perform a capital investment analysis to evaluate the profitability of an investment…
