Overview of LBO Buy-Side This article is specifically about LBOs on the buy-side of corporate finance. In a leveraged buyout (LBO), a private equity firm uses as much leverage as possible to acquire a business and maximize the internal rate of return (IRR) to equity investors. LBO buy-side entities include private equity firms, life insurance companies,…
What is Working Capital vs Investing Capital? In the performance of their duties, financial analysts often need to distinguish between working capital vs investing capital. Working capital, also referred to as net-working capital or NWC, represents the difference between an organization’s current assets (e.g., cash, inventory, accounts receivable) and its current liabilities (e.g., accounts payable). Working…
What are Bond Tranches? Bond tranches are usually portions of mortgage-backed securities that are offered at the same time and that typically carry different risk levels, rewards, and maturities. For example, collateralized mortgage obligations (CMOs) are structured with a number of tranches that mature on different dates, carry varying levels of risk, and pay different interest…
What is a Real Estate Investment Trust (REIT)? A real estate investment trust (REIT) is an investment fund or security that invests in income-generating real estate properties. The fund is operated and owned by a company of shareholders who contribute money to invest in commercial properties, such as office and apartment buildings, warehouses, hospitals, shopping…
What is Corporate Venturing? Corporate venturing – also known as corporate venture capital – is the practice of directly investing corporate funds into external startup companies. This is usually done by large companies who wish to invest small, but innovative, startup firms. They do so through joint venture agreements and the acquisition of equity stakes….
What is Standard & Poor’s Fundamentals of Corporate Credit Analysis? Standard & Poor’s Fundamentals of Corporate Credit Analysis is an in-depth guide authored by experts at Standard & Poor’s, a US-based financial services company that provides credit ratings on countries, bonds, commodities, and other investments. S&P’s guide provides credit professionals with the knowledge that they…
What are the Types of Credit Certifications? Credit professionals often work to obtain different types of credit certifications to boost their job prospects and chances of getting a promotion at work. Financial institutions, credit bureaus, and investment banks employ credit professionals, such as credit analysts and credit managers, and getting a credit certification provides an additional…
What is a Balanced Budget? A balanced budget is a budget (i.e., a financial plan) in which revenues are equal to expenditures, such that there is no budget deficit or surplus. Although the concept of a balanced budget applies to any organization that generates operating revenues and incurs operating expenses, it is most commonly applied…
What is Normalization? Financial statement normalization involves adjusting non-recurring expenses or revenues in financial statements or metrics so that they only reflect the usual transactions of a company. Financial statements often contain expenses that do not constitute a company’s normal business operations and that may hurt the company’s earnings. The purpose of normalization is to…
What is a Personal Guarantee? A personal guarantee is a type of unsecured loan agreement that allows the lender to acquire the guarantor’s personal assets if the associated debtor defaults on a loan. A guarantor is someone who promises to pay the debtor’s debt in case of default. Personal guarantees are categorized as unsecured debt…
