What is Look-ahead Bias? Look-ahead bias is a type of bias that occurs when a study or simulation relies on data or information that was not yet available or known during the time period being studied. It generally leads to inaccurate results from a study or simulation. The incorporation of fundamental data that wasn’t available…
What is Retention Ratio? The retention ratio (also known as the net income retention ratio or plowback ratio) is the ratio of a company’s retained income to its net income. The retention ratio measures the percentage of a company’s profits that are reinvested into the company in some way, rather than being paid out to investors…
What is a Share Repurchase? A share repurchase refers to the management of a public company buying back company shares that were previously sold to the public. There are several reasons why a company may decide to repurchase its shares. For instance, a company may choose to repurchase shares to send a market signal that…
What is the Degree of Operating Leverage? The degree of operating leverage (DOL) is a financial ratio that measures the sensitivity of a company’s operating income to its sales. This financial metric shows how a change in the company’s sales will affect its operating income. Breaking Down Degree of Operating Leverage The degree of operating…
What is the Degree of Financial Leverage? The degree of financial leverage is a financial ratio that measures the sensitivity in fluctuations of a company’s overall profitability to the volatility of its operating income caused by changes in its capital structure. The degree of financial leverage is one of the methods used to quantify a…
What is Foreign Exchange? Foreign exchange (Forex or FX) is the conversion of one currency into another at a specific rate known as the foreign exchange rate. The conversion rates for almost all currencies are constantly floating as they are driven by the market forces of supply and demand. The most traded currencies in the…
What is UpREIT vs DownREIT? The terms UpREIT vs DownREIT describe the differences that exist in the corporate structure of REITs. The concept of UpREIT, which stands for “Umbrella Partnership Real Estate Investment Trusts,” was introduced in 1992. An UpREIT allows long-established REITs to pool all the real estate properties that they own under a…
What is the Common Size Ratio? The Common Size Ratio refers to any number on a business’ financial statements that is expressed as a percentage of a base. Global Common Size Ratios Global common size ratios express a number on a business’ financial statement as a percentage of a denominating relevant number on the statement….
