What is the Applicable Federal Rate? The applicable federal rate (AFR) is the interest rate that applies to personal loans. It is the minimum rate applicable to such loans under U.S. law. The AFR is implemented in the form of federal tax regulations that are enforced by the Internal Revenue Service (IRS). The applicable federal…
What are Administrative Expenses? Administrative expenses refer to the costs incurred by a company or organization that include, but are not limited to, the salaries and benefits of the administrative workers within the company or organization, as well as rent and managerial compensation. Also known as General and Administrative expenses, the costs are categorized separately…
What is an Accounting Information System (AIS)? An accounting information system (AIS) refers to tools and systems designed for the collection and display of accounting information so accountants and executives can make informed decisions. It is considered a pivotal component of finance offices throughout the world. The systems are largely software-based and can be deployed as…
What is Accretive? In the financial context, accretive refers to an incremental benefit that occurs after a financial transaction. Depending on how it is used financially, it can refer to capital gains, a corporate finance transaction, or an accounting expense. Knowing the difference is pivotal to being an informed finance professional to ensure the data…
What is an Economic Stimulus Package? An economic stimulus package is a combination of economic measures utilized by a government to stimulate a struggling economy. The stimulus package can be used as a preventive or reversing measure to stop or prevent a recession by lowering interest rates, increasing government spending, and quantitative easing, etc. aimed…
What is Unlevered Free Cash Flow? Unlevered Free Cash Flow (also known as Free Cash Flow to the Firm or FCFF for short) is a theoretical cash flow figure for a business. It is the cash flow available to all equity holders and debtholders after all operating expenses, capital expenditures, and investments in working capital…
What is APV (Adjusted Present Value)? APV (Adjusted Present Value) is a modified form of Net Present Value (NPV) that takes into account the present value of leverage effects separately. APV splits financing and non-financing cash flows and discounts them separately. It is a more flexible valuation tool to show benefits, such as tax shields,…
What is Corporate Bond Valuation? Corporate bond valuation is the process of determining a corporate bond’s fair value based on the present value of the bond’s coupon payments and the repayment of the principal. Corporate bond valuation also accounts for the probability of the bond defaulting and not paying back the principal in full. …
What is the Modified Dietz Return? In modern portfolio theory, the Modified Dietz Return or Modified Dietz Method (“MDM”) is a commonly used algebraic method used to calculate the rate of return of an investment portfolio that includes the cash flows of the portfolio. The method accounts for the timing of when the cash flows…
