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…
What is NOPLAT? NOPLAT stands for Net Operating Profit Less Adjusted Taxes. It represents a company’s operating profit after adjusting to normalize for the impact of capital structure and deferred taxes. The NOPLAT metric represents the earnings generated by a company after subtracting income taxes related to core operations and adding back overpaid taxes over…
What is Asset Stripping? Asset stripping refers to the process of purchasing an undervalued company and then separately selling its assets. The premise of asset stripping is to sell the individual assets of the acquired company at an aggregate higher price than selling the whole company by itself. How It Works Asset stripping…
What is the Portfolio Turnover Ratio? The portfolio turnover ratio is the rate of which assets in a fund are bought and sold by the portfolio managers. In other words, the portfolio turnover ratio refers to the percentage change of the assets in a fund over a one-year period. Formula for the Portfolio Turnover Ratio…
What is a Cyclical Industry? A cyclical industry refers to an industry whose revenue generation capabilities are tied to the business cycle. In other words, a cyclical industry is an industry whose performance is correlated to the business cycle. Understanding the Business Cycle To understand a cyclical industry, an understanding of the business cycle is…
What is a Corporate Raider? A corporate raider is an individual or a party that purchases a substantial position (enough to gain a controlling position) in a company that is deemed undervalued. In other words, a corporate raider is an individual that takes control (commonly through a hostile takeover) of an undervalued company. …
What is the CAPEX to Operating Cash Ratio? The CAPEX to Operating Cash Ratio assesses how much of a company’s cash flow from operations is being devoted to capital expenditure. Such investments entail engaging in capital-intensive projects such as expanding a production facility, launching a new product line, or restructuring a division. The CAPEX to Operating…
