What are Credit Risk Analysis Models? Financial institutions used credit risk analysis models to determine the probability of default of a potential borrower. The models provide information on the level of a borrower’s credit risk at any particular time. If the lender fails to detect the credit risk in advance, it exposes them to the…
What is Defeasance? Defeasance is a provision in business law that renders an agreement void under certain conditions. In the case of a debt agreement, defeasance provisions outline the needs that are to be fulfilled by the lender before the borrower is required to release their interest in a particular asset or property. Defeasance accounts…
What is Vertical Equity? Vertical equity is a method of taxation wherein the personal income tax liability of an individual increases as their income increases. It is based on the principle that individuals with higher incomes and more assets must pay a higher income tax than others. The opposite of the vertical equity system is…
What is the Compound Growth Rate? The compound growth rate is a measure used specifically in business and investing contexts, that indicates the growth rate over multiple time periods. It is a measure of the constant growth of a data series. The biggest advantage of the compound growth rate is that the metric takes into…
What is the Dividend Growth Rate? The dividend growth rate (DGR) is the percentage growth rate of a company’s dividend achieved during a certain period of time. Frequently, the DGR is calculated on an annual basis. However, if necessary, it can also be calculated on a quarterly or monthly basis. The dividend growth rate is…
What is the Advertising to Sales Ratio? The advertising to sales ratio, also called the “A to S” for short, measures the effectiveness, or how successful, a company’s advertising strategies are. The advertising to sales ratio is used to determine how helpful the company’s resources and investments in advertising are in generating new sales. A…
What is Segment Margin? Segment margin is a profitability measure that assesses the profit or loss generated by a particular product line of a business, or a particular geographic location. The segment margin is mainly used to compare the profitability of different components of a company. The measure is extremely helpful for large companies with several…
What is the Cost Approach (Real Estate)? The cost approach of evaluating real estate properties is based on the assumption that the cost of a property should be equal to the cost of building a similar property from scratch. The cost of building a real estate property includes the value of the underlying land and…
What are Funds Available for Distribution (FAD)? Funds available for distribution (FAD), also known as cash available for distribution, is used in reference to REIT investing. It shows the amount of net earnings of a REIT that will be distributed to stockholders and unitholders as dividends. REITs own and manage a portfolio of real estate…
What is an Accelerated Dividend? An accelerated dividend is a dividend that is paid out ahead of a change in the way the dividends are treated, such as a change in the tax rate of dividends. The dividend payments are made early in order to protect shareholders and mitigate the negative impact that a change…
