What is a Forward Contract? A forward contract, often shortened to just forward, is a contract agreement to buy or sell an asset at a specific price on a specified date in the future. Since the forward contract refers to the underlying asset that will be delivered on the specified date, it is considered a…
What is a Non-Performing Asset? A non-performing asset (NPA) is a classification used by financial institutions for loans and advances on which the principal is past due and on which no interest payments have been made for a period of time. In general, loans become NPAs when they are outstanding for 90 days or more,…
What is Basel II? Basel II is the second set of international banking regulations defined by the Basel Committee on Bank Supervision (BCBS). It is an extension of the regulations for minimum capital requirements as defined under Basel I. The Basel II framework operates under three pillars: Capital adequacy requirements Supervisory review Market discipline …
What is the Temporal Method? The temporal method is a currency exchange method used to convert the currency that a foreign subsidiary ordinarily does business in into the currency used by its parent company. The parent company’s commonly used currency is referred to as the subsidiary’s “functional currency.” It may also be referred to as…
What is Shadow Inventory? Shadow inventory is a term used to describe properties that are typically real estate owned (REO), which means they are in foreclosure, have been foreclosed on, and are being held by banks to be released back into the market at a later date. The “shadow” part of the term is used…
What is EBIAT? EBIAT, or Earnings Before Interest After Taxes, is a financial metric that measures a company’s profitability and operating efficiency. The calculation of EBIAT removes the tax benefits gained from debt financing. EBIAT gives a true financial picture of the company, eliminating all elements that can potentially boost or reduce its financial strength….
What are International Bonds? International bonds are bonds issued by a country or company that is not domestic for the investor. The international bond market is quickly expanding as companies continue to look for the cheapest way to borrow money. By issuing debt on an international scale, a company can reach more investors. It also…
What is the CAMELS Rating System? The CAMELS Rating System was developed in the United States as a supervisory rating system to assess a bank’s overall condition. CAMELS is an acronym that represents the six factors that are considered for the rating. Unlike other regulatory ratios or ratings, the CAMELS rating is not released to…
What is Netback? Netback is a calculation used to assess companies, specifically in the oil and gas industry. This benchmark considers the revenue generated from the sale of oil and gas, and nets it against specific costs required to bring the product to market. Often, netback is shown as a per-barrel measurement. It essentially shows how…
What are Fixed Income Risks? Fixed income risks occur based on the volatility of the bond market environment. Risks impact the market value of the security when it is sold, cash flow from the security while it is held, and additional income made by reinvesting cash flows. By understanding the risks involved, investors can be…
