A credit rating is like a grade given to a person, business, or even a country, that says how likely that person is to make payments on a loan as promised. Credit ratings for people are called credit scores and are maintained by credit bureaus like Experian and TransUnion. Credit rating agencies like Moody’s or Standard and Poor’s give ratings to companies and countries that tell investors how safe it is to buy their securities, like bonds or stocks.
Archive for the ‘Grow Page’ Category
A Security Deposit is…
Friday, August 21st, 2009A security deposit is a form of collateral, or item of value, that is pledged when making a financial agreement. It can be used for a range of business agreements, such as contracts, rentals, or purchases. For example, when you rent an apartment, you have to put down a security deposit, and if you do damage to the apartment or stop paying rent, the deposit is forfeited.
Cash Flow is…
Friday, August 21st, 2009Cash flow is the amount of cash that is generated and used by a company over a certain period of time. It is calculated by adding any non-cash charges, such as depreciation expense, to the company’s net income after taxes. This is why earnings and cash earnings are not always the same!
A Buyout is…
Friday, August 21st, 2009A buyout is when a person or company buys the majority of shares, i.e. a controlling interest, in another company. This means they control the majority of votes at the annual meeting, can impact the board of directors, and influence other company decisions.
Fixed Interest is…
Friday, August 21st, 2009Fixed interest is a classification that refers to any financial instrument in which the interest rate does not fluctuate or is not variable. For example, a bond’s price may change but the interest rate remains the same throughout the life of the bond.
Two and Twenty is…
Friday, August 21st, 2009Two and twenty is a typical fee structure of hedge funds, or other alternative investment vehicles, where the annual management fee is 2% of assets and there is also a performance fee of 20% of investment returns.
A Time Deposit is…
Friday, August 21st, 2009A time deposit is a type of savings account from which you cannot withdraw funds before a specified date or without giving written notice of your intention to take out money. To compensate for this drawback, time deposits usually offer high rates of interest and extremely low risk.
A Valuation is…
Friday, August 21st, 2009A valuation is an estimate of something’s worth (in finance, it usually refers to a company’s worth). There are many ways to value a company or asset – Net Present Value, Price to Cash Flow, Price to Earnings, Price to Growth, etc. Valuations are typically performed by professionals (people who are specially trained and whom you can hire to perform specific valuations for you).
A CD is…
Friday, August 21st, 2009A CD is a Certificate of Deposit, which is basically a savings account with a higher interest rate. In return for the higher rate, you aren’t allowed to touch your money for a set period of time. In general, shorter periods of time (like three months) have lower interest rates, while the longer time periods have much higher ones.