What is VantageScore? VantageScore is a credit rating service that caters directly to individual consumers. It is a credit rating product that was jointly developed by three credit rating bureaus, i.e., Equifax, Experian, and TransUnion. The product was created as an alternative to the FICO score, which was developed by the Fair Isaac Corporation. What…
What is a Variable Coupon Renewable Note (VCR)? A variable coupon renewable note (VCR) is a type of fixed-income security that is renewable. Its distinguishing characteristic is that the return, which is known as the variable coupon rate, is subject to periodic revisions. Other features of VCRs include embedded put options. What is Coupon Rate?…
What are Interest Tax Shields? The term “interest tax shield” refers to the reduced income taxes brought about by deductions to taxable income from a company’s interest expense. For instance, there are cases where mortgages may have an interest tax shield for buyers since the mortgage interest is deductible against income. One of the main…
What is Revolver Debt? Revolver debt, also known as revolving debt, is a form of credit that can be accessed by corporations and individuals. What separates revolving debt from regular installment loans, then? In a regular loan, the borrower is given access to a fixed sum of money that must then be amortized and paid…
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…
