What is the Friedman Doctrine? The Friedman Doctrine is also referred to as the Shareholder Theory. American economist Milton Friedman developed the doctrine as a theory of business ethics that states that “an entity’s greatest responsibility lies in the satisfaction of the shareholders.” Therefore, the business should always endeavor to maximize its revenues to increase…
What is the Treynor Ratio? The Treynor Ratio is a portfolio performance measure that adjusts for systematic risk. In contrast to the Sharpe Ratio, which adjusts return with the standard deviation of the portfolio, the Treynor Ratio uses the Portfolio Beta, which is a measure of systematic risk. These ratios are concerned with the risk…
What is Basis Point (Beep)? A Basis Point, often referred to as a Beep (using the notation bp), is a measurement of one-hundredth of a percent or one ten-thousandth and is a term commonly used in finance. Basis points are commonly used in situations where differences of less than 1% are noteworthy. This is most…
What is the Foreign Exchange Spread? The foreign exchange spread (or bid-ask spread) refers to the difference in the bid and ask prices for a given currency pair. The bid price refers to the maximum amount that a foreign exchange trader is willing to pay to buy a certain currency, and the ask price is…
What is Public Finance? Public finance is the management of a country’s revenue, expenditures, and debt load through various government and quasi-government institutions. This guide provides an overview of how public finances are managed, what the various components of public finance are, and how to easily understand what all the numbers mean. A country’s financial…
What are Exchange Rates? Foreign currency exchange rates measure one currency’s strength relative to another. A strong currency is considered to be one that is valuable, and this manifests itself when comparing its value to another currency. The strength of a currency depends on a number of factors such as its inflation rate, prevailing interest rates…
What are the Different Retail Bank Types? Broadly speaking, there are three main retail bank types. They are commercial banks, credit unions, and certain investment funds that offer retail banking services. All three retail bank types work toward providing similar banking services. These include checking accounts, savings accounts, mortgages, debit cards, credit cards, and personal loans….
What is an FHA Loan? FHA stands for the Federal Housing Administration. An FHA loan is a mortgage that is insured – or backed – by the federal agency. In other words, an FHA loan is a government-guaranteed mortgage. The loan enables individuals with lower credit scores to secure money to purchase a home. It…
What is a Mortgage? A mortgage is a type of loan secured by real property. Most people think of a mortgage as being drawn to purchase a property, but mortgage loans are also used to refinance properties that are already owned by the borrower. A mortgage drawn to support the acquisition or the refinancing of…
What Is Finance? Finance is defined as the management of money and includes activities such as investing, borrowing, lending, budgeting, saving, and forecasting. The financial system includes the circulation of money, the management of investments, and money lending. In businesses, the finance team is responsible for ensuring the company’s capital is adequate, that appropriate investments are made,…
