What is Settlement Date? Settlement date is an industry term that refers to the date when a trade or derivative contract is deemed final, and the seller must transfer the ownership of the security to the buyer against the appropriate payment for the asset. It is the actual date when the seller completes the transfer…
What is Sales Risk? Sales risk refers to the uncertainty relating to the price and quantity of goods that are available for sale to consumers. Usually, sales risk may result in sales failures, and it can significantly affect the reported financial performance. Protecting the business against the sales risk can help build resilience in a…
What is a Hurdle Rate? A hurdle rate, also known as the minimum acceptable rate of return (MARR), is the minimum required or target rate of return that investors expect to receive on an investment. The hurdle rate is determined by assessing the cost of capital, the risks involved, current business expansion opportunities, rates of…
What is a Spin-Off? A corporate spin-off is an operational strategy used by a company to create a new business subsidiary from its parent company. A spin-off occurs when a parent corporation separates part of its business operations into a second publicly traded entity and distributes shares of the new entity to its current shareholders….
Overview of Revolving Debt A revolving debt (a “revolver,” also sometimes known as a line of credit, or LOC) does not feature fixed monthly payments. It differs from a fixed payment or term loan that has a guaranteed balance and payment structure. Instead, the payments of revolving debt are based on the balance of credit…
What is Contribution Analysis? Contribution analysis is used in estimating how direct and variable costs of a product affect the net income of a company. It addresses the issue of identifying simple or overhead costs related to several production projects. Contribution analysis aids a company in evaluating how individual business lines or products are performing…
What is a Management Buyout (MBO)? A management buyout (MBO) is a corporate finance transaction where the management team of an operating company acquires the business by borrowing money to buy out the current owner(s). An MBO transaction is a type of leveraged buyout (LBO) and can sometimes be referred to as a leveraged management…
What is Cash Earnings per Share (Cash EPS)? Cash earnings per share (cash EPS) is the operating cash flow generated by a company divided by the number of shares outstanding. Cash earnings per share (Cash EPS) is different from traditional earnings per share (EPS), which takes the company’s net income and divides it by the number…
