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 investments permitted under Sharia. The common practices of Islamic finance and banking emerged alongside the foundation of Islam. However, formal Islamic finance did not emerge until the 20th century. Nowadays,…
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…
Earnest Money
Billing Cycle
What is the Billing Cycle? The billing cycle is the period between the last billing date and the current billing date for any sale of goods or provision of services. The length of billing cycles varies depending on the lender or service provider, but usually, it lasts from 20 to 45 days. To attract as…
