What is a Laddered Bond Portfolio? A laddered bond portfolio is an investment portfolio strategy that is composed of fixed income securities with different maturity dates. It is also referred to as a “bond ladder” portfolio. Why use a Bond Ladder? A bond ladder allows an investor to mitigate risks through diversification. It comes with…
What is a Barbell Bond Portfolio? A barbell bond portfolio is an investment portfolio that comprises both short-term and long-term bonds wherein one half of the portfolio consists of short-term bonds and the other half consists of long-term bonds. The investment portfolio is called the barbell bond portfolio because it can be graphically described using…
What is a Fixed Income Portfolio? A fixed income portfolio comprises investment securities that pay a fixed interest until their maturity date. Upon maturity, the principal amount of the security is paid back to the investor. Some examples of fixed income securities are: Certificates of deposit (CDs) Government-issued bonds Corporate-issued bonds Treasury bills Bond mutual…
What is Variable Overhead Spending Variance? Spending variance is a term used to describe the difference between the real amount associated with a certain expense and the expected amount associated with the same expense. It is the relation of the budgeted costs as calculated by the cost accountants of a company versus the real cost….
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…
What Is Return on Assets? Return on assets (ROA) is a profitability ratio that measures how efficiently a company generates profit from its total assets, calculated by dividing net income by total assets. A higher ROA indicates a company is more effective at converting its asset investments into earnings. For example, an ROA ratio of…
