What is Debt Capacity? Debt capacity refers to the total amount of debt a business can incur and repay according to the terms of a debt agreement. A business takes on debt for several reasons – such as boosting production or marketing, expanding capacity, or acquiring new businesses. However, incurring too much debt or taking…
What is Market Capitalization? Market Capitalization (Market Cap) is the most recent market value of a company’s outstanding shares. The Market Cap is equal to the current share price multiplied by the number of shares outstanding. The investing community often uses market capitalization value to rank companies and compare their relative sizes in a particular industry…
What is a Bridge Loan? A bridge loan is a short-term form of financing that is used to meet current obligations before securing permanent financing. It provides immediate cash flow when funding is needed but is not yet available. A bridge loan comes with relatively high interest rates and must be backed by some form…
What is an Expression of Interest (EOI)? An Expression of Interest (EOI) is one of the initial transaction documents shared by the buyer with the seller in a potential M&A deal. The EOI indicates a serious interest from the buyer that their company would be interested to pay a certain valuation and acquire the seller’s company…
What is Systematic Risk? Systematic risk is that part of the total risk that is caused by factors beyond the control of a specific company or individual. Systematic risk is caused by factors that are external to the organization. All investments or securities are subject to systematic risk and, therefore, it is a non-diversifiable risk….
What is Systemic Risk? Systemic risk can be defined as the risk associated with the collapse or failure of a company, industry, financial institution, or an entire economy. It is the risk of a major failure of a financial system, whereby a crisis occurs when providers of capital, i.e., depositors, investors, and capital markets, lose…
What is Prepayment? A prepayment is any payment that is made before its due date. Prepayments may be made for goods and services or toward settling a debt. They can be categorized into two groups: Complete Prepayments and Partial Prepayments. A complete prepayment involves payment for the full balance of a liability before its official…
What is Earnings Per Share (EPS)? Earnings per share (EPS) is a key metric used to determine the common shareholder’s portion of the company’s profit. EPS measures each common share’s profit allocation in relation to the company’s total profit. IFRS uses the term “ordinary shares” to refer to common shares. The EPS figure is important…
What is the Federal Reserve Central Bank (The Fed)? The Federal Reserve, more commonly referred to as “The Fed,” is the central bank of the United States of America and is the supreme financial authority behind the world’s largest free-market economy. Because of the magnitude of the US’ influence on the global economy, ‘the Fed’…
What is the Cash Conversion Ratio (CCR)? The Cash Conversion Ratio (CCR), also known as cash conversion rate, is a financial management tool used to determine the ratio of a company’s cash flows to its net profit. In other words, it is a comparison of how much cash flow a company generates compared to its accounting…
