Dry Powder
What is Dry Powder? Dry powder refers to cash reserves that corporations and private equity funds have available to deploy when an attractive investment opportunity arises, or to weather a downturn. The cash reserves give their holders an advantage over other firms that do not keep reserves since they can be used to capitalize on...
Behavioral Finance Glossary
Behavioral Finance Glossary This behavioral finance glossary is a helpful preparation guide to CFI’s behavioral finance course. Anchoring bias Relying on the first piece of information that’s encountered as a reference point (or anchor). Confirmation bias Our natural tendency is to listen to people who agree with us. It feels good to hear our own opinions...
Capital Structure
What is Capital Structure? Capital structure refers to the amount of debt and/or equity employed by a firm to fund its operations and finance its assets. A firm’s capital structure is typically expressed as a debt-to-equity or debt-to-capital ratio. Debt and equity capital are used to fund a business’s operations, capital expenditures, acquisitions, and other...
Debt Covenants
What are Debt Covenants? Debt covenants are restrictions that lenders (creditors, debt holders, investors) put on lending agreements to limit the actions of the borrower (debtor). In other words, debt covenants are agreements between a company and its lenders that the company will operate within certain rules set by the lenders. They are also called...
Vertical Spread
What is Vertical Spread? Vertical spread is a trading strategy that involves trading two options at the same time. It is the most basic option spread. A combination of a long option and a short option at different strike prices, albeit with the same expiration or maturity dates, are executed, and the trade is collectively...
