What are Defensive Industries? Defensive industries comprise businesses that are relatively stable or relatively immune to economic fluctuations, i.e., economic expansions and recessions. Defensive businesses remain relatively unaffected in the event of an economic boom or recession in the sense that their earnings are uninfluenced by the economic fluctuations. The industry usually consists of businesses…
What is Volume vs Liquidity? Investors need to differentiate between volume vs liquidity, as both terms are widely used in stock trading. Volume and liquidity are correlated; however, the two terms are also very different from each other. The term “volume” in trading refers to the total quantity or the total number of shares that…
What are Payment Processing Fees? Payment processing fees are the costs that business owners incur when processing payments from customers. The amount of payment fees charged to a merchant depends on various factors such as the level of risk of the transaction, the type of card (reward, business, corporate, etc.), and the pricing model preferred…
What is Prepayment Risk? Prepayment risk refers to the risk that the principal amount (or a portion of the principal amount) outstanding on a loan is prematurely paid back. In other words, prepayment risk is the risk of early repayment of a loan by a borrower. Understanding Prepayment Risk Prepayment risk may sound counter-intuitive in…
What is the Delinquency Rate? The delinquency rate refers to the percentage of loans that are past due. It indicates the quality of a lending company’s or a bank’s loan portfolio. Understanding the Delinquency Rate The delinquency rate is commonly used by analysts to determine the quality of the loan portfolio of lending companies or…
What is the Debt-to-Income Ratio? The debt-to-income (DTI) ratio is a metric used by creditors to determine the ability of a borrower to pay their debts and make interest payments. The DTI ratio compares an individual’s monthly debt payments to his or her monthly gross income. It is a key indicator that lenders use to measure…
What is a Debt Settlement? A debt settlement refers to an agreement reached between a creditor and a borrower in which a reduced payment from the borrower is regarded as full payment. In other words, a debt settlement is a debt reduction agreement reached between a creditor and borrower. Understanding a Debt Settlement A debt…
What are Growth Stocks? Growth stocks are stocks that offer a substantially higher growth rate as opposed to the mean growth rate prevailing in the market. It means that a growth stock grows at a faster rate than the average stock in the market and consequently, generates earnings more rapidly. Characteristics of Growth Stocks 1….
What is Debt Refinancing? Debt refinancing is the replacement of an existing debt by means of another debt with terms and/or conditions that are more favorable. In other words, debt refinancing refers to the replacement of existing debt with new debt. How Debt Refinancing Works Debt refinancing is commonly used to take advantage of new…
What are Pooled Funds? Pooled funds is a term used to collectively refer to a set of money from individual investors combined, i.e., “pooled” together for investment purposes. The funds are combined with the intention of benefiting from economies of scale through cost minimization. Some examples of pooled funds include, but are not limited to,…
