Earnings before interest after taxes is one of a number of financial measures of a firm’s profitability. What is EBIAT? EBIAT is a financial measure of a firm’s profitability that removes the tax benefit of any financial leverage (i.e., debt financing) the firm uses. It is often used as an after-tax measure of a firm’s …
A hurdle rate is the minimum rate of return that should be required on an investment, based on the risk of that investment. What Is a Hurdle Rate? A hurdle rate is the rate of return on a project that must be expected to be able to be achieved before management will undertake the project. …
To calculate net exports, you simply add up all the goods and services that are exported to other countries from your home country and subtract all the goods and services that are imported from other countries into your country over a specific period of time, typically a year. What Is Net Exports? Net exports is …
Net realizable value is the expected selling price of an asset, less any reasonable projection of costs associated with the sale of the asset. Although it can be applied to any asset, it is most commonly used in the valuation of accounts receivable and inventory for accounting purposes, in accordance with the principal of conservatism. …
When investing in a security or a portfolio of assets, you are subject to two types of risk: systematic risk and unsystematic risk: Total risk of investment = systematic risk + unsystematic risk Systematic risk is the risk inherent in all investments to one degree or another. Unsystematic risk is company or industry-specific. We can …
The Fisher Equation is a mathematical formula that describes the theoretical relationship between the interest rates we observe and the expected rate of inflation. What is the Fisher Equation? The Fisher Equation is named after Irving Fisher, a tremendously insightful classical economist whose work in capital theory influenced many of today’s leading economists. In 1895, …
Yield to worst is the lowest potential rate of return an investor could receive on his or her investment in a callable bond, assuming the bond does not go into default. Yield to Worst Meaning Callable bonds are bonds that allow the issuing firm to redeem them prior to maturity if the firm so chooses. …
