What is Commercial Paper? Commercial paper refers to a short-term, unsecured debt obligation that is issued by financial institutions and large corporations as an alternative to costlier methods of funding. It is a money market instrument that generally comes with a maturity of up to 270 days. Commercial paper is sold at a discount to…
What is Bad Debt Expense? Bad debt expense is the way businesses account for a receivable account that will not be paid. Bad debt arises when a customer either cannot pay because of financial difficulties or chooses not to pay due to a disagreement over the product or service they were sold. Reporting Bad Debts…
What are Agency Bonds? Agency bonds, also known as agency debt, is the debt issued by a government-sponsored enterprise (GSE) or a federal agency. The key difference between a GSE and a federal agency is that a GSE’s obligations are not guaranteed by the government, whereas a federal agency’s debt is backed up by a…
What is a Balanced Fund? A balanced fund, also known as a hybrid fund, is characterized by diversification among two or more asset classes. A balanced fund usually combines stock and bond components in a diversified portfolio. Balanced funds typically follow a 60% stock and 40% bond asset allocation, as seen below: Asset allocation in…
What is the Prime Rate? The term “prime rate” (also known as the prime lending rate or prime interest rate) refers to the interest rate that large commercial banks charge on loans and products held by their customers with the highest credit rating. Typically, the customers with high creditworthiness are large corporations that are borrowing…
What is Bank Credit Analysis? In bank credit analysis, banks consider and evaluate every loan application based on merits. They check the creditworthiness of every individual or entity to determine the level of risk that they subject themself by lending to an entity or individual. Clients with a high level of risk are less desirable…
What is a Credit Analyst Description? Individuals seeking to join the credit industry look at a credit analyst description to find out if they are qualified for the job. A credit analyst is a credit professional specialized in financial risk analysis. Credit analysts are employed in commercial banks, credit card companies, and investment banks. The main…
What is Debt? Debt is the money borrowed by one party from another to serve a financial need that otherwise cannot be met outright. Many organizations use debt to procure goods and services that they can’t manage to pay for with cash. Under a debt agreement, the borrower obtains authorization to get whatever amount of…
What is an Activist Shareholder? An activist shareholder is a shareholder of a corporation who attempts to use his or her equity stake in a company to achieve certain goals. The main goal of activist shareholders is bringing change within or for the company. They intend to affect the behavior of a company by exercising…
What is Throughput? Throughput (also known as the flow rate) is a measure of a business process flow rate. Essentially, it measures the movements of inputs and outputs within the production process. It is an important metric in the operations management of a company. This variable primarily indicates the efficiency of operations that are vital to…
