A floating-rate loan is a type of mortgage or loan that provides the borrower with an interest rate that can change at any time. The interest rates will typically be set for one month, three months, six months, or one year and then adjust to reflect current market conditions. Floating-rate …

The term capital represents assets that companies use to generate income. In exchange, companies also incur some costs on it. This capital may include fixed assets, such as property or land, or liquid assets, such as cash, receivables. These are crucial for both long- and short-term operational needs. Based on …

What is the Bird in Hand Theory? The bird-in-hand theory suggests that investors would prefer dividends from stock investments over capital gains. This theory believes that investors are likely to favour returns that are certain rather than uncertain. Because of the uncertainty involved around capital gains, the bird-in-hand theory assumes …

There are various business structures around the world. The most basic types are sole proprietorships and partnerships. However, these come with a limited number of owners and capital. Due to these restrictions, some businesses may take the form of corporations. Corporations fix some problems with basic business structures. However, they …

When companies are performing capital budgeting, they must consider various costs related to the projects. Mostly, these include costs directly associated with the project, such as material and labour. However, it may also consist of some other costs, which may not be as clear. These usually include opportunity and sunk …

What is an Initial Public Offering (IPO)? An initial public offering (IPO) is a process that companies use to offer their shares to the public. These companies are private entities that want to go public with new stock issuance. Issuing shares to the public allows companies to raise funds from …

What are Liquidity Ratios? Liquidity ratios are crucial financial metrics that help measure a company’s ability to pay off its short-term obligations using its current assets. The capacity of a company to stay liquid in the long-term is vital for its long-term success. Therefore, liquidity ratios help users measure if …

At the end of each year, companies or businesses must report their activities to their stakeholders. They achieve that through financial reports, also known as financial statements. What is a Financial Report? A financial report, or a financial statement, represents formal records of an entity’s activities. Usually, financial reports represent …

What is Hypothesis Testing? Hypothesis testing is a concept in statistics in which analysts test an assumption regarding a population parameter. It is a method used in statistical inference. The use of hypothesis testing is useful when determining if a statement regarding a population parameter is statistically significant. Overall, it …

Financial statements are written records of a company that gives information about its activities and performance. Almost all companies around the world prepare financial statements. Usually, the laws and accounting standards that a company operates in requires it to prepare financial statements. However, some companies may also voluntarily prepare financial …