What is a Non-Performing Loan (NPL)? A non-performing loan (NPL) is a loan in which the borrower is in default and has not paid the monthly principal and interest repayments for a specified period. Non-performing loans occur when borrowers run out of money to make repayments or get into situations that make it difficult for…
What is Natural Unemployment? Natural unemployment, or natural rate of unemployment, is the unemployment rate that persists in a well-functioning, healthy economy that is considered to be at “full employment.” It is a hypothetical rate of unemployment and suggests that there is never zero unemployment in an economy. Natural unemployment refers to the unemployment that…
What is a Non-Current Liability? A non-current liability refers to the financial obligations in a company’s balance sheet that are not expected to be paid within one year. Non-current liabilities are due in the long term, compared to short-term liabilities, which are due within one year. Analysts use various financial ratios to evaluate non-current liabilities…
What are Non-Current Assets? Assets that are cash – or that will be converted to cash within the current fiscal period (like accounts receivable and inventory) – are classified as current assets. Non-current assets, on the other hand, will not be converted to cash in the current period. Non-current assets may also be characterized as…
What is a Non-Financial Asset? A non-financial asset refers to an asset that is not traded on the financial markets, and its value is derived from its physical characteristics rather than from contractual claims. Examples of non-financial assets include tangible assets, such as land, buildings, motor vehicles, and equipment, as well as intangible assets, such…
What is a Breach of Covenant? A breach of covenant occurs when the issuer of a debt instrument violates a covenant, which is one of the terms and conditions the debtor committed to as part of the lending agreement. Depending on the type of covenant involved, there can be two types of breaches: Breach of…
What are Assurance Services? Assurance services are an independent examination of a company’s processes and controls. Assurance aims to reduce information risk by improving the quality or context of the information. Accounting professionals are qualified independent practitioners who can perform such services. Reducing risk allows intended users to refrain from making impaired decisions. Thus, assurance…
What is Aggregate Demand? Aggregate demand refers to the total demand for finished goods and services in an economy. Finished products are goods and services that have been fully manufactured – not including intermediate goods that are used as inputs in the production process. Aggregate demand also refers to the demand for the country’s gross…
What is Assets Under Management (AUM)? Assets under management (AUM), also called funds under management, is the total market value of the securities a financial institution (such as a bank, mutual fund, or hedge fund) owns or manages on behalf of its clients. Example of AUM for a Mutual Fund Let’s take the example of a…
What is a Non-Interest Expense? A non-interest expense is an operating expense incurred by a bank, and it is separate from the interest expense on customer deposits. It includes the bank’s operating and overhead expenses, such as employee salaries and bonuses, unemployment tax, operating and maintenance of facilities, equipment rental, marketing, insurance, furniture, and amortization…
