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Adjusted Present Value (APV)
Adjusted Present Value (APV)What is Adjusted Present Value (APV)? The Adjusted Present Value (APV) is defined as the sum of the present value of a project assuming solely equity financing and the PV of all financing-related bene...
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Annual Percentage Yield (APY)
Annual Percentage Yield (APY)What is APY? The Annual Percentage Yield (APY) calculates the interest rate earned on a deposit or investment while incorporating the effects of compound interest.
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Callable Bond
Callable BondWhat is a Callable Bond? A Callable Bond contains an embedded call provision, in which the issuer can redeem a portion (or all) of the bonds prior to the stated maturity date.
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Capital Allocation
Capital AllocationWhat is Capital Allocation? Capital Allocation is the process of strategically distributing resources to maximize profits and create positive economic value, contributing toward a higher firm valuatio...
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Compound Interest
Compound InterestWhat is Compound Interest? Compound Interest is the incremental interest earned on the original principal (or deposit amount) and the accrued interest from prior periods.
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Discounted Payback Period
Discounted Payback PeriodWhat is the Discounted Payback Period? The Discounted Payback Period estimates the time needed for a project to generate enough cash flows to break even and become profitable.
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Dividend
DividendWhat is a Dividend? A Dividend is the distribution of a company’s after-tax profits to its shareholders, either periodically or as a special one-time issuance.
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Face Value
Face ValueWhat is Face Value? Face Value is the nominal or dollar value ascribed to a particular security, such as a bond or stock, by the issuer on the date of original issuance. The face value of a security—o...
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Finance Careers Infographic
Finance Careers InfographicOverview of Careers in Finance So you want to break into a career in finance? Buy side or sell side? M&A or private equity? Here we’ve put together an infographic showing all of corporate fi...
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Future Value (FV)
Future Value (FV)What is Future Value? The Future Value (FV) refers to the implied value of an asset as of a specific date in the future based upon a growth rate assumption.
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Gearing Ratio
Gearing RatioWhat is Gearing Ratio? The Gearing Ratio measures a company’s financial leverage stemming from its capital structure decisions.
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Growing Perpetuity
Growing PerpetuityWhat is Growing Perpetuity? A Growing Perpetuity is a series of future cash flows expected to grow indefinitely at a constant rate.
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Internal Growth Rate (IGR)
Internal Growth Rate (IGR)What is Internal Growth Rate? The Internal Growth Rate (IGR) estimates the maximum rate that a company could grow using solely its retained earnings without external financing.
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Make-Whole Call Provision
Make-Whole Call ProvisionWhat is the Make-Whole Call Provision? A Make-Whole Call Provision stipulates that the borrower has the contractual right to redeem a debt obligation prior to the original maturity date.
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Net Capital Spending
Net Capital SpendingWhat is Net Capital Spending? Net Capital Spending (NCS) measures the difference between a company’s capital expenditure (Capex) and depreciation in a given period.
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Net Present Value (NPV)
Net Present Value (NPV)What is NPV? The Net Present Value (NPV) is the difference between the present value (PV) of a future stream of cash inflows and outflows. In practice, NPV is widely used to determine the perceived pr...
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Par Value
Par ValueWhat is Par Value? The Par Value is the face value (FV) on the issuance of securities like bonds or stocks, as established on the issuer’s security certificate.
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Paypack Period Formula, Calculations, and Examples
Paypack Period Formula, Calculations, and ExamplesWhat is Payback Period? The Payback Period measures the amount of time required to recoup the cost of an initial investment via the cash flows generated by the investment.
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Pecking Order Theory
Pecking Order TheoryWhat is Pecking Order Theory? The Pecking Order Theory outlines a hierarchical structure by which corporations abide by that dictates their funding sources (and capital structure). In simple terms, th...
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Perpetuity
PerpetuityWhat is Perpetuity? A Perpetuity refers to a constant stream of cash flows payments anticipated to continue indefinitely.
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Present Value (PV)
Present Value (PV)What is Present Value? The Present Value (PV) is a measure of how much a future cash flow, or stream of cash flows, is worth as of the current date. Conceptually, any future cash flow expected to be r...
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Present Value Annuity Calculator
Present Value Annuity CalculatorWhat is Present Value of Annuity? Present value of annuity is the current value of an annuity’s future payments, discounted to reflect the time value of money. When calculated properly, it represents...
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Present Value Factor (PVF)
Present Value Factor (PVF)What is the Present Value Factor? The Present Value Factor (PVF) estimates the present value (PV) of cash flows expected to be received on a future date. The formula to calculate the present value fac...
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Present Value of Growth Opportunities (PVGO)
Present Value of Growth Opportunities (PVGO)What is PVGO? PVGO, or “present value of growth opportunities”, estimates the portion of a company’s share price attributable to expectations of future earnings growth.
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Profitability Index (PI)
Profitability Index (PI)What is Profitability Index? The Profitability Index (PI) is the ratio between the present value of cash inflows and the present value of cash outflows.
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Recapitalization
RecapitalizationWhat is Recapitalization? Recapitalization is a catch-all term referring to measures taken by companies to adjust the debt-to-equity (D/E) mixture within their capital structures.
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Simple Interest
Simple InterestWhat is Simple Interest? Simple Interest refers to a interest rate pricing structure in which the amount of interest owed is based only on the original principal value.
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Stakeholders
StakeholdersWhat are Stakeholders? Stakeholders describe any party, either internal and external, with a vested interest in a corporation such as the management team, shareholders, suppliers and creditors. The de...
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Structural Subordination
Structural SubordinationWhat is Structural Subordination? Structural Subordination determines the order in which subsidiary-level claims are repaid relative to claims held at the parent (or holding) company level of the oper...
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Sustainable Growth Rate (SGR)
Sustainable Growth Rate (SGR)What is Sustainable Growth Rate? The Sustainable Growth Rate (SGR) is the approximate rate at which a company could grow if its current capital structure – i.e. the mixture of debt and equity – is mai...
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Time Value of Money (TVM)
Time Value of Money (TVM)What is the Time Value of Money? The Time Value of Money is a core principle of valuation that states that money as of the present date carries more value than the same amount received in the future.