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…
Introduction In finance, understanding key metrics and concepts is crucial for investors navigating the market. Investors, both experienced and new, always aim to improve returns and manage risk. Abnormal returns, also known as excess returns, are a critical aspect. This article explores abnormal returns, detailing what excess returns involve, how they differ from risk-free rates,…
What is Senior Debt? Senior Debt, or a Senior Note, is money owed by a company that has first claims on the company’s cash flows. It is more secure than any other debt, such as subordinated debt (also known as junior debt), because senior debt is usually collateralized by assets. It means the lender is…
