Money vs. Time-Weighted Return
What are Money and Time-Weighted Returns? Money and time-weighted returns are rates of return typically used to assess the performance of a managed investment portfolio. Today, the time-weighted rate of return is the industry standard since it provides a fairer assessment of an investment manager’s performance. Money-Weighted Return When it comes to monitoring investment performance, money-weighted…
FICO Score
Continuously Compounded Interest
What is Continuously Compounded Interest? Continuously compounded interest is interest that is computed on the initial principal, as well as all interest other interest earned. The idea is that the principal will receive interest at all points in time, rather than in a discrete way at certain points in time. The continuous payment of interest…
M&M Theorem
What is the M&M Theorem? The M&M Theorem, or the Modigliani-Miller Theorem, is one of the most important theorems in corporate finance. The theorem was developed by economists Franco Modigliani and Merton Miller in 1958. The main idea of the M&M theory is that the capital structure of a company does not affect its overall…
Calculating Yield on Debt
How Can We Calculate Yield on Debt? Debt yield refers to the rate of return an investor can expect to earn if he/she holds a debt instrument until maturity. Such instruments include government-backed T-bills, corporate bonds, private debt agreements, and other fixed income securities. In this article, we will explore the four different types of…
Islamic Finance
What is Islamic Finance? Islamic finance is a type of financing activity that must comply with Sharia (Islamic Law). The concept can also refer to the investments that are permissible under Sharia. The common practices of Islamic finance and banking came into existence along with the foundation of Islam. However, the establishment of formal Islamic…
Limitations of Ratio Analysis
What is Ratio Analysis? Ratio analysis is a popular technique of financial analysis. It is used to visualize and extract information from financial statements. It focuses on ratios that reflect profitability, efficiency, financing leverage, and other vital information about a business. The ratios can be used for both horizontal analysis and vertical analysis. While they…
EBITDARM
What is EBITDARM? EBITDARM stands for Earnings Before Interest, Taxes, Depreciation, Amortization, Rent, and Management Fees. It is a financial metric for the evaluation of a company’s operating performance. In most aspects, EBTIDARM is similar to EBITDA. It is appropriate to use when rent and management fees represent a substantial percentage of the company’s operating…
Embargo
What is an Embargo? An embargo is a government restriction placed on the import or export of goods, services, currency, and other values to any other country or state. It can be imposed both in war and peacetime, covering all aspects of trade and economic activity. Embargoes can be placed on specific categories of goods, scientific…
