What Is Enterprise Value – EV?
Enterprise value (EV) is a measure of a company’s total value, often used as a more comprehensive alternative to equity market capitalization. EV includes in its calculation the market capitalization …
What Is Enterprise Resource Planning (ERP)?
Enterprise resource planning (ERP) is a process used by companies to manage and integrate the important parts of their businesses. Many ERP software applications are important to companies because they …
What Is an Endowment Fund?
An endowment fund is an investment fund established by a foundation that makes consistent withdrawals from invested capital. The capital or money in endowment funds is often used by universities, …
What Is an Employee Stock Ownership Plan (ESOP)?
An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company. ESOPs give the sponsoring company, the selling shareholder, and participants receive …
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What Are Economies of Scale?
Economies of scale are cost advantages reaped by companies when production becomes efficient. Companies can achieve economies of scale by increasing production and lowering costs. This happens because costs are …
What Is Economics?
Economics is a social science concerned with the production, distribution, and consumption of goods and services. It studies how individuals, businesses, governments, and nations make choices about how to allocate …
What Is Economic Growth?
Economic growth is an increase in the production of economic goods and services, compared from one period of time to another. It can be measured in nominal or real (adjusted …
What Is Earnings Per Share (EPS)?
Earnings per share (EPS) is calculated as a company’s profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company’s profitability. …
What Is Earnings Before Interest and Taxes (EBIT)?
Earnings before interest and taxes (EBIT) is an indicator of a company’s profitability. EBIT can be calculated as revenue minus expenses excluding tax and interest. EBIT is also referred to …
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What Is Earnest Money?
Earnest money is a deposit made to a seller that represents a buyer’s good faith to buy a home. The money gives the buyer extra time to get financing and …
What Is Due Diligence?
Due diligence is an investigation, audit, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial …
What Is the Dow Jones Industrial Average (DJIA)?
The Dow Jones Industrial Average (DJIA), also known as the Dow 30, is a stock market index that tracks 30 large, publicly-owned blue-chip companies trading on the New York Stock …
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What Is the Dividend Yield?
The dividend yield, expressed as a percentage, is a financial ratio (dividend/price) that shows how much a company pays out in dividends each year relative to its stock price. The …
What Is a Dividend Payout Ratio?
The dividend payout ratio is the ratio of the total amount of dividends paid out to shareholders relative to the net income of the company. It is the percentage of …
What Is a Dividend?
A dividend is the distribution of some of a company’s earnings to a class of its shareholders, as determined by the company’s board of directors. Common shareholders of dividend-paying companies …
What Is Diversification?
Diversification is a risk management strategy that mixes a wide variety of investments within a portfolio. A diversified portfolio contains a mix of distinct asset types and investment vehicles in …
What Is the Discount Rate?
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial …
What Is Disbursement?
Disbursement means paying out money. The term disbursement may be used to describe money paid into a business’ operating budget, the delivery of a loan amount to a borrower, or …
What Is Dilution?
Dilution occurs when a company issues new shares that result in a decrease in existing stockholders’ ownership percentage of that company. Stock dilution can also occur when holders of stock …
What Is a Derivative?
The term derivative refers to a type of financial contract whose value is dependent on an underlying asset, group of assets, or benchmark. A derivative is set between two or …
What Is Demonetization?
Demonetization is the act of stripping a currency unit of its status as legal tender. It occurs whenever there is a change of national currency. The current form or forms …
What Is Price Elasticity of Demand?
Price elasticity of demand is a measurement of the change in consumption of a product in relation to a change in its price. Expressed mathematically, it is: Price Elasticity of …
What is Demand?
Demand is an economic principle referring to a consumer’s desire to purchase goods and services and willingness to pay a price for a specific good or service. Holding all other …
What Is Deferred Compensation?
Deferred compensation is a portion of an employee’s compensation that is set aside to be paid at a later date. In most cases, taxes on this income are deferred until …
What Is the Debt-to-Equity (D/E) Ratio?
The debt-to-equity (D/E) ratio is used to evaluate a company’s financial leverage and is calculated by dividing a company’s total liabilities by its shareholder equity. The D/E ratio is an …
What Is a Debt Ratio?
The debt ratio is a financial ratio that measures the extent of a company’s leverage. The debt ratio is defined as the ratio of total debt to total assets, expressed …
What Is a Debenture?
A debenture is a type of bond or other debt instrument that is unsecured by collateral. Since debentures have no collateral backing, they must rely on the creditworthiness and reputation …
What Is Customer Service?
Customer service is the direct one-on-one interaction between a consumer making a purchase and a representative of the company that is selling it. Most retailers see this direct interaction as …
What Is the Current Ratio?
The current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations or those due within one year. It tells investors and analysts how a company …
What Is Creative Destruction?
Creative destruction is the dismantling of long-standing practices in order to make way for innovation and is seen as a driving force of capitalism.
What Is Cost of Goods Sold (COGS)?
Cost of goods sold (COGS) refers to the direct costs of producing the goods sold by a company. This amount includes the cost of the materials and labor directly used …
What Is Correlation?
Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio …
What Is the Contribution Margin?
The contribution margin can be stated on a gross or per-unit basis. It represents the incremental money generated for each product/unit sold after deducting the variable portion of the firm’s …
What Is Consumer Price Index (CPI)?
The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. …
What Is Compound Interest?
Compound interest (or compounding interest) is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. Thought to have …
What Is Compound Annual Growth Rate — CAGR?
Compound annual growth rate (CAGR) is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits …
What Is Comparative Advantage?
Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners. A comparative advantage gives a company the ability …
What Is a Command Economy?
A command economy is a system where the government, rather than the free market, determines what goods should be produced, how much should be produced, and the price at which …
What Is Collateral?
The term collateral refers to an asset that a lender accepts as security for a loan. Collateral may take the form of real estate or other kinds of assets, depending …
What Is a Code of Ethics?
A code of ethics is a guide of principles designed to help professionals conduct business honestly and with integrity. A code of ethics document may outline the mission and values …