What is a Principal Payment? A principal payment is a payment toward the original amount of a loan that is owed. In other words, a principal payment is a payment made on a loan that reduces the remaining loan amount due, rather than applying to the payment of interest charged on the loan. In accounting…
What is the Operating Cash to Debt Ratio? The Operating Cash to Debt Ratio measures the percentage of a company’s total debt that is covered by its operating cash flow for a given accounting period. The operating cash flow refers to the cash that a company generates through its core operating activities. This usually represents the…
What is the Accounts Receivable to Sales Ratio? The Accounts Receivable to Sales Ratio is a business liquidity ratio that measures how much of a company’s sales occur on credit. When a company has a larger percentage of its sales happening on a credit basis, it may run into short-term liquidity problems. Such a scenario…
What is an Open Market? An open market is an economic system with no trade barriers to free market activities. In an open market, buyers and sellers can do business freely without common market barriers, such as unfair licensing agreements, arbitrary taxes, unionization, subsidies, and other regulations that affect regular market operations. Understanding the Open…
What is Equivalisation? Equivalisation is a standard methodology in economics in which the household income is modified to account for the different financial needs of different household sizes and composition. The incomes of different household types are made comparable by accounting for shared consumption benefits. Considering the household size is important because the larger the…
What is Open Credit? Open credit is a pre-approved loan between a lender and a borrower. It allows the borrower to make repeated withdrawals up to a certain limit and then make subsequent repayments before the payments become due. Borrowers prefer open-end credit because it gives them greater control over the amount they can borrow…
What is OIBDA? OIBDA is an abbreviation for Operating Income Before Depreciation and Amortization. It is a non-GAAP measure of the financial performance of a company during a specific period of time while excluding the effects of capital spending and capital structure. It considers the incomes and expenses from the core activities of the company…
What is Swap Spread? A swap spread is the difference between the fixed rate on an interest rate swap (the swap rate) and the yield on a government bond of similar maturity. It reflects differences in credit risk, funding costs, and liquidity conditions between the swap market and the government bond market. Swaps are frequently…
What is Days Deduction Outstanding (DDO)? Days Deduction Outstanding (DDO) is a key metric or performance indicator in deduction management that is used to demonstrate how effective a company is at resolving deductions. It refers to the number of days that account receivables practitioners will need to resolve an outstanding deduction. To calculate DDO, the…
What is the Swap Rate Curve? The swap rate curve is a chart that depicts the relationship between swap rates and all available corresponding maturities. Essentially, it indicates the expected returns of a swap on different maturity dates. The curve can be considered as the swap’s equivalent of a bond’s yield curve, and is a…
