What is Profit Before Tax (PBT)? Profit before tax (PBT) is a measure of a company’s profitability that looks at the profits made before any tax is paid. It matches all the company’s expenses, which include operating and interest expenses, against its revenues, but excludes the payment of income tax. A majority of entrepreneurs start…
What is Double Gearing? Double gearing refers to the practice of borrowing money against an asset, with the money being used to buy shares of stock. Then, more money is borrowed against the shares to establish a margin loan that can be used to purchase even more shares. In short, double gearing is a form…
What is a Credit Event? A credit event refers to a negative change in the credit standing of a borrower that triggers a contingent payment in a credit default swap (CDS). It occurs when an individual or organization defaults on its debt and is unable to comply with the terms of the contract entered, triggering…
What is a Constant Dividend Payout Ratio Policy? A constant dividend payout ratio policy is a dividend policy in which the percentage of earnings paid in the form of dividends is held constant. In other words, a constant dividend payout ratio policy maintains the same proportion of earnings paid out as dividends to shareholders. Dividend…
What is Budget Variance? Budget variance deals with a company’s accounting discrepancies. The term is most often used in conjunction with a negative scenario. An example is when a company fails to accurately budget for their expenses – either for a given project or for total quarterly or annual expenses. (The negative variance can also…
What is a Supermajority Voting Provision? A supermajority voting provision, an amendment to a company’s corporate charter, is a provision that states that certain corporate actions require much more than a mere majority, typically 67%-90%, approval from its shareholders to pass. In other words, a supermajority voting provision requires greater than a majority shareholder approval…
What is EBITDAL (Earnings Before Interest, Tax, Depreciation, Amortization, and Special Losses)? EBITDAL stands for Earnings Before Interest, Taxes, Depreciation, Amortization and Special Losses. It is a non-GAAP measure of a company’s earnings that also accounts for special losses that it usually does not expect to incur on a regular basis. EBITDAL is a variation…
What is the Overnight Rate? The overnight rate refers to the interest rate that depository institutions (e.g., banks or credit unions) charge each other for overnight lending. Note that the overnight rate is called something different in different countries. For example, in the United States, it is known as the Federal Funds rate, while in…
What are Long-Term Investments? Long-term investments are assets that an individual or company intends to hold for a period of more than three years. Instruments facilitating long-term investments include stocks, real estate, cash, etc. Long-term investors take on a substantial degree of risk in pursuit of higher returns. Long-term investments are not subject…
