What is the Compound Interest Formula? To start, it’s important to understand first what compound interest is. Compound interest is taken from the initial – or principal – amount on a loan or a deposit, plus any interest that already accrued. The compound interest formula is the way that such compound interest is determined. Compound…
What is the Fisher Equation? The Fisher equation is a concept in economics that describes the relationship between nominal and real interest rates under the effect of inflation. The equation states that the nominal interest rate is equal to the sum of the real interest rate plus inflation. The Fisher equation is often used in…
What is Managerial Finance? Managerial finance is concerned more with the assessment of financial techniques versus the financial techniques themselves. It differs from the technical approach, which essentially only concerns itself with measurement and whether money’s been assigned to the correct categories. The managerial approach aims to determine the significance of data, figures, and numbers….
What is the Average Cost of Production? Average cost of production refers to the per-unit cost incurred by a business to produce a product or provide a service. Production costs may include things such as labor, raw materials, or consumable supplies. In economics, the cost of production is defined as the expenditures incurred to obtain…
What are Efficiency Ratios? Efficiency ratios are metrics that are used in analyzing a company’s ability to effectively employ its resources, such as capital and assets, to produce income. The ratios serve as a comparison of expenses made to revenues generated, essentially reflecting what kind of return in revenue or profit a company can make…
What are Registration Rights? Registration rights are a form of control provision that enables investors to force companies to file a registration document, for the purposes of both transparency and audit. The document must be filed with the Securities and Exchange Commission (SEC), complying with the Securities Act of 1933. According to this law, all…
What is Forward Dividend Yield? Forward dividend yield refers to the projection of a company’s yearly dividend. It’s calculated as a percentage of the current share price. For many investors, the dividends paid out by companies are one of their primary sources of income, with another being an appreciation in the stock price. When stock…
What is the PRAT Model? The PRAT model, also known as the sustainable growth rate (SGR) model, is used to describe the optimal rate of growth a company can achieve without borrowing more debt or using equity. The PRAT model aims to help companies boost their sales and revenues without increasing their financial leverage. Companies…
What are Outstanding Shares? Outstanding shares represent the number of a company’s shares that are traded on the secondary market and, therefore, are available to investors. Outstanding shares include all restricted shares held by the company’s officers and insiders (senior employees), as well as the equity portion owned by institutional investors such as mutual funds,…
