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 the cash conversion rate, is a financial management tool that measures a company’s cash flows relative to its net profit. In other words, it is a comparison of the cash flow a company generates with its accounting profit. Understanding Cash…
What is Common Size Analysis? Common size analysis, also referred to as vertical analysis, is a tool that financial managers use to analyze financial statements. It evaluates financial statements by expressing each line item as a percentage of a base amount for that period. The analysis helps to understand the impact of each item in…
What is the Bank for International Settlements (BIS)? The Bank for International Settlements (BIS) started in 1930 and is owned by the central banks of different countries. It serves as a bank for member central banks, and its role is to foster international monetary and financial stability and financial corporation. The Bank for International Settlements…
What is the NASDAQ-100 Index? The NASDAQ-100 Index is a stock market index that includes 100 of the largest, most actively traded, non-financial companies that are listed on the Nasdaq Stock Market. A stock market index helps investors compare current and past price levels in order to calculate the overall market’s performance. The NASDAQ-100 Index…
What is an Auditor? An auditor is a person or a firm assigned to perform an audit on an organization. An audit is a structured, methodical process that includes an examination of books, accounts, records, or various documents. The audit can be on any topic. However, from a financial perspective, an auditor will examine the…
What is an Activist Investor? An activist investor is an individual or institutional investor that seeks to acquire a controlling interest in a target company by gaining seats on the company’s board of directors. Activist investors are looking to make significant changes to the target company and unlock perceived hidden value within the target company….
