What is Capital Preservation? Capital preservation is an investment strategy that promotes saving, i.e., preserving capital and avoiding loss of value. The strategy adopts a conservative approach towards investing specifically in “safe” short-term instruments such as savings accounts, FDIC-insured checking accounts, Treasury bills, and certificates of deposits (CDs). Key Factors in Capital Preservation 1. Levels…
What are Financial Covenants? Financial covenants are the promises or agreements entered into by a borrowing party that are financial in nature. An example of a financial covenant is when a borrowing company agrees to maintain (staying above or below) an agreed ratio, typically financial ratios such as the interest coverage ratio, total assets to…
What is All Risks Yield (ARY)? All Risks Yield (ARY) is a conventional real estate metric that uses annual rental revenue to determine the capital value of an investment. ARY comprises both gross and net yields. The net yield includes the deduction of some expenses – surveyors’ fees, management fees, repairs, running costs – which…
What are Banking Fundamentals? Banking fundamentals refer to the concepts and principles relating to the practice of banking. Banking is an industry that deals with credit facilities, storage for cash, investments, and other financial transactions. The banking industry is one of the key drivers of most economies because it channels funds to borrowers with productive investments….
What is Equity Ratio? The equity ratio is a financial metric that measures the amount of leverage used by a company. It uses investments in assets and the amount of equity to determine how well a company manages its debts and funds its asset requirements. Formula for Equity Ratio The formula for Equity Ratio is:…
What is Simple Interest vs Compound Interest? In this article, we will discuss simple interest vs compound interest and illustrate the major differences that can arise between them. Interest payments can be thought of as the price of borrowing funds in the market. They are paid by the borrower to the lender with the payment…
What are Residential Properties REITs? Residential properties REITs are REITs that own and manage residential units for renting out to tenants. Residential REITs may be categorized into either single-family or multi-family structures that are available for occupation for non-business purposes. They may include condominiums, vacation homes, student housing, apartment buildings, etc. Residential real estate REITs…
What is MJSD (March, June, September, and December)? MJSD is an acronym that stands for the months of March, June, September, and December. The months are the final months of the four annual quarters for releasing financial earnings and declaring dividends. Public companies operating in the United States are required to file quarterly earnings reports…
What is Ethical Banking? Ethical banking involves consciousness of how banking practices affect society and the environment. Financial institutions that emphasize ethical practices seek profit like any other financial institution. However, they strive to generate earnings without sacrificing principles or causing harm. The term is a fairly broad one, which means it covers a wide…
What are Adjusted Funds From Operations (AFFO)? Adjusted Funds From Operations (AFFO) is a measure of the financial performance of a REIT, and it is used as an alternative to Funds From Operations (FFO). AFFO is a superior measure compared to FFO because the former considers the maintenance costs of the real estate property over…
