Category: CORPORATE FINANCE

Net Pay: Definition, Calculation, Formula, vs Gross Pay, Example

An employment contract specifies the salaries or wages employees receive for their work. However, the actual amount they get may differ from that amount. Employees may wonder why the payment varies from the one mentioned in the employment contract. Therefore, it is crucial to understand how this difference generates and …

Variable Interest Entity: Definition, Example, Structure, Model

A company allows shareholders to buy its stock to give them partial control over its operations. Once shareholders own enough shares in that company, they hold a controlling interest. Usually, this interest comes with having enough voting stock shares. Sometimes, it may not be necessary, as in variable interest entities. …

The Federal Home Loan Banks: How They Work and What They Offer

The Federal Home Loan Banks (FHLBs) are a group of federally-chartered banks that provide liquidity and credit support to member institutions, which include commercial banks, thrifts, and credit unions. The FHLBs were created in 1932 in the aftermath of the Great Depression to ensure that there was a reliable source …

Debt Covenants: Definition, Examples, Calculation, Types

In business or investing, debt is a very common type of financing arrangement in which one party (the creditor, often a financial institution) loans another party (the debtor) a sum of money with the expectation that it will be repaid. Debt covenants are also a type of agreement between the …

Overheads: Definition, Types, Examples

To make a business budget, you need to understand your overhead costs. Every business has some kind of cost that is not related to making or selling a product or service. These costs are called overheads. Overheads are crucial for businesses because they must be recorded and paid regardless of …

Loan Loss Reserve: What It Is and Why Banks Need One

When a bank makes a loan, it is not just giving away money. It is also taking on the risk because there is always the possibility that the borrower will default on the loan. To protect itself against this risk, a bank sets aside money to cover potential losses. This …

Loan Servicing: What You Need to Know

If you’re a business owner who has taken out a loan, then you’ll need to know about loan servicing. This process is how the lender ensures that you’re making your payments on time and in full. In this blog post, we will discuss everything you need to know about loan …

Consignor vs. Consignee: Meaning, Difference, Examples

When it comes to the world of business, there are a lot of important terms and concepts that one needs to be familiar with. Two of these are consignors and consignees. Though consignor and consignee may sound similar, they have very different meanings. Both of them are a huge part …

Cost Pool: Definition, Example, Formula, Accounting

Costs are a significant part of the operations of companies and businesses. Usually, these costs help generate revenues which help in making profits. Companies analyze and classify these costs to understand them better and report them accordingly. In this regard, the concept of cost pools is highly crucial. Before discussing …