What is Variable Overhead Efficiency Variance? Variable overhead efficiency variance is a measure of the difference between the actual costs to manufacture a product and the costs that the business entity budgeted for it. Thus, it can arise from a difference in productive efficiency. The productivity efficiency variance is the difference between the actual number…
What is Structured Finance? Structured finance deals with financial lending instruments that work to mitigate serious risks related to complex assets. For most, traditional tools such as mortgages and small loans are sufficient. However, borrowers with greater needs, such as corporations, seek structured finance to deal with complex and unique financial instruments and arrangements to…
What is Variable Overhead? Variable overhead refers to the fluctuation in the manufacturing costs associated with the operation of businesses. To operate continuously, companies need to spend money on the production and sale of goods and services that generate revenue for their business. The overall operational costs usually include the salaries of managers, sales staff,…
What is Hedge Ratio? Hedge ratio is the ratio or comparative value of an open position’s hedge to the overall position. It is an important risk management statistic that is used to measure the extent of any potential risk that can be caused by a movement in the hedging instrument. Hedging is an investment practice…
What is the Justified Price to Earnings Ratio? The justified price to earnings ratio is the price to earnings ratio that is “justified” by using the Gordon Growth Model. This version of the popular P/E ratio uses a variety of underlying fundamental factors such as cost of equity and growth rate. Commonly shortened to “justified…
ROA Formula / Return on Assets Calculation Return on Assets (ROA) is a type of return on investment (ROI) metric that measures the profitability of a business in relation to its total assets. This ratio indicates how well a company is performing by comparing the profit (net income) it’s generating to the capital it’s invested in…
What is Risk Aversion? Risk aversion refers to the tendency of an economic agent to strictly prefer certainty to uncertainty. An economic agent exhibiting risk aversion is said to be risk averse. Formally, a risk averse agent strictly prefers the expected value of a gamble to the gamble itself. What is a Gamble? A gamble…
What is Capital Rationing? Capital rationing is a strategy used by companies or investors to limit the number of projects they take on at a time. If there is a pool of available investments that are all expected to be profitable, capital rationing helps the investor or business owner choose the most profitable ones to…
What is Unconventional Cash Flow? An unconventional cash flow profile is a series of cash flows that, over time, don’t go in only one direction. It is characterized by not just one, but several changes in the direction of the cash flow. Directional changes are usually represented by the positive (+) and negative (–) signs….
Every major financial choice begins with a simple question: Does this investment create value? Understanding ROI equips you to compare options, assess potential outcomes, and allocate capital with confidence. In this guide, you’ll learn how to determine ROI by analyzing scenarios that account for initial cost, risk appetite, and an investment’s projected performance. Join over…
