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…
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…
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,…
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…
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…
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…
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…
What is a Brokerage? A brokerage provides intermediary services in various areas, e.g., investing, obtaining a loan, or purchasing real estate. A broker is an intermediary who connects a seller and a buyer to facilitate a transaction. Individuals or legal entities can act as brokers. The broker performs its actions according to the client’s instructions….
What is an Institutional Investor? An institutional investor is a legal entity that accumulates the funds of numerous investors (which may be private investors or other legal entities) to invest in various financial instruments and profit from the process. In other words, an institutional investor is an organization that invests on behalf of its members….
