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What is a REPO?
REPO is shorthand for Repurchase Agreement. It is a money-market practice where two entities agree to buy/sell government securities overnight and reverse the transaction the next day for the sake of providing the selling entity with short-term cash. Repurchase Agreements provide the selling party with short term liquidity, and are considered a money-market instrument. A third party usually acts as a clearing agent. Continue reading...
What is Cash and Cash Equivalents?
Cash and cash equivalents are negotiable instruments which have a stable value and are highly liquid. Cash and Cash Equivalents is a phrase used often in the financial world. Generally money market accounts are the most used cash equivalent. They are invested in currency, and their goal is to preserve the value of the the investor’s dollars. Money market accounts are basically completely liquid, and investors can even write checks and make ATM withdrawals from their money market accounts. Continue reading...
What is a Bond Purchase Agreement?
If a municipality or company decides to issue bonds, they will need to form an alliance with an underwriting entity to help them price and distribute the bonds, and the Purchase Agreement outlines their contract. Underwriters on debt issues are normally large investment banks. They help the issuer, which could be a city government or company, structure the bonds and price them in a way that is suitable to their needs, and also agrees to help them distribute them. Continue reading...
What is a Buyback?
When a company decides to use excess cash to purchase its own shares from the market, it is called a buyback or “share repurchase program.” There are only so many things a company can do with earnings in excess of their projections; among these are issuing a dividend, paying off debts, expanding, acquiring another company, or buying back shares of its own stock. Buybacks are also known as Stock Repurchase Agreements. There may be guidelines in state law or the company’s contracts or buy laws that determine what options they have and how many shares can be repurchased. Continue reading...
What is an Accelerated Share Repurchase?
An Accelerated Share Repurchase (ASR) is a method by which companies can buy back a significant amount of their outstanding shares with the help of an investment bank. By enlisting the help of an investment bank to accelerate a buy-back, a company can cleanly retire a large bulk of shares at once. These agreements have come into use in the last 10 years, and there is of course some variation in their composition. They fall under a category of buybacks known as structured buybacks. Continue reading...
What is Annual Percentage Yield (APY)?
APY is an annualization of an interest rate which may be assessed on a different schedule, such as on a monthly basis, and is useful for comparing debt and loan agreements that use different schedules. Annual Percentage Yield is a way to compare products and loans with different interest rates and different schedules for calculating the interest. It is a calculation of the effective annual rate, and it takes into account the effects of compounding interest, which a similar calculation for APR (Annual Percentage Rate) does not do. Continue reading...
What are Articles of Partnership?
Articles of Partnership lay out the nature of the agreement entered into by partners in business entity. Also called a ‘partnership agreement,’ articles of partnership plainly describe the nature of the partnership, which partners are General Partners and which are Limited Partners, and other important details. Partnerships can take the form of Limited Liability Partnerships, General Partnerships, and even S Corporations (but those file articles of incorporation instead). Continue reading...
What is accommodation trading?
Accommodation Trading is when two traders enter into a non-competitive trade agreement which disregards the current market price for the securities being traded. The primary reason to engage in accommodation trading is for an investor to avoid taxes by harvesting more losses than actually occurred. One investor will buy shares from another investor for a price significantly below the market value so that the selling investor can report more losses. The partners will typically agree to allow the selling party to buy the shares back later at the same price. Continue reading...
What is Lifetime Cost?
Lifetime cost is the total amount of money that a good will cost a consumer over the entire course of ownership. This included related, add-on costs such as maintenance, fuel, insurance and so on. These costs can dwarf the actual purchase price of the item. Lifetime cost is also known as total cost of ownership (TCO), and it is a budgetary way to look at the expenses that go along with the purchase of an item. Continue reading...
What is Acquisition Accounting?
Also known as Business Combination Accounting, there are specific guidelines and bits of information that must be documented on the books during an acquisition. Acquisition Accounting is a standardized way to account for the assets and liabilities of companies who are part of a merger or acquisition. International Financial Reporting Standards (IFRS) stipulate that even in a merger where a new company is formed, one company must play the role of acquirer and the other of acquiree, but that rule really only applies outside of the US. Continue reading...
How is the Consumer Price Index (CPI) Calculated?
The Consumer Price Index (CPI) is calculated using prices of sample goods from predetermined urban areas. According to the Bureau of Labor Statistics (BLS), the CPI is a product of a series of interrelated samples. First, using data from the 1990 Census of Population, BLS selected the urban areas from which data on prices were collected and chose the housing units within each area that were eligible for use in the shelter component of the CPI. The Census of Population also provided data on the number of consumers represented by each area selected as a CPI price collection area. Continue reading...
What is a Mortgage Forbearance Agreement?
In the event that a borrower is having issues making mortgage payments on time, they may try to seek a mortgage forbearance agreement to delay the foreclosure process. The mortgage forbearance agreement would specify the plan for resuming mortgage payments on time, and is designed to be a temporary solution to an unforeseen issue with the borrower (unemployment, health issues). Continue reading...
What is Securitization?
Securitization is to turn an asset which would otherwise not be a liquid, tradable security, into one. Simply put, securitization turns assets into securities. The most common example when discussing securitization is mortgage-backed securities, in which the cash flow of interest and principal payments on mortgage loans has been pooled, cut up, and distributed for sale in the form of marketable securities which can be held by an everyday investor. The bank or institution who sold the mortgage-backed securities receives cash which they can loan out to more home-buyers. Continue reading...
What Is a Non-Disclosure Agreement (NDA)?
Discover the power of Non-Disclosure Agreements (NDAs) in safeguarding your business secrets. This comprehensive guide covers NDA types, applications, and the vital role they play in protecting intellectual property and sensitive data. Learn how NDAs foster trust and security in various business relationships. Don't miss out! Continue reading...
Exploring Rent-to-Own Homes: What is a Rent-to-Own Agreement and How Can It Benefit You?
Ever considered the rent-to-own route to homeownership? This innovative approach offers a unique blend of renting with an end goal of owning, providing a lifeline for those facing credit or down payment challenges. Dive into our comprehensive guide to understand the nuances of lease options, the potential benefits, and how to navigate this distinctive pathway. Whether you're looking to rehabilitate your credit, bridge the down payment gap, or simply seek financial flexibility, rent-to-own might be the key to unlocking your dream home. Discover if this unconventional route aligns with your homeownership aspirations. Continue reading...
What motivates companies to repurchase their own shares?
Unlocking the Secrets of Stock Buybacks Discover the driving forces behind companies repurchasing their own shares. From reducing capital costs to enhancing financial ratios, explore the strategies that improve shareholder value. Learn how stock buybacks impact the broader economy and why they're a vital tool in modern corporate finance. Continue reading...
What Is an Import?
An import is a fundamental concept in international trade, shaping the economic landscapes of nations and influencing global markets. In this article, we will delve into the intricacies of imports, explore their implications, and weigh their pros and cons. At its core, an import refers to a product or service that is produced in one country and then purchased and consumed in another. This exchange forms the bedrock of international trade, connecting economies, facilitating resource allocation, and enabling specialization. The opposite of an import is an export, where goods or services produced domestically are sold abroad. Continue reading...
What does the term "Acquirer" mean?
Unlock the Secrets of Acquirers in Corporate Finance and Payments! Dive into the world of corporate and merchant acquirers as we demystify their roles, types, and impact on businesses. From reshaping industries to powering electronic payments, acquirers are the linchpins of change and facilitators of commerce. Discover the pivotal dynamics behind the scenes! Continue reading...
What Are Employee Stock Options and How Do They Work?
Unlock the potential of Employee Stock Options (ESOs) with our expert guide. Whether you're a seasoned executive or a new hire, ESOs can significantly impact your financial future. Learn how to navigate the nuances of exercise prices, tax implications, and strategic selling for optimal benefit. Our comprehensive guide demystifies ESOs, providing you with the insights to leverage these powerful incentives. Stay ahead in the equity compensation game and turn your stock options into a cornerstone of your investment portfolio. Dive into our guide and start maximizing your ESOs today! Continue reading...
What is Escrow in Real Estate and How Does It Protect Financial Transactions?
Unlock the intricacies of escrow, a cornerstone in finance and real estate transactions. Originating as a protective mechanism, escrow ensures assets are securely held until specific conditions are met. Whether you're a buyer, seller, or lender, escrow plays a crucial role in safeguarding your interests. From understanding its anatomy to its application in real estate deals, this comprehensive guide sheds light on how escrow functions to protect all parties involved. Dive deep into the world of escrow and discover how it shapes the landscape of secure financial transactions. Continue reading...