Weighted Average Cost Of Capital – WACC
DefinitionThe weighted average cost of capital is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Importantly, it is dictated by the external market and not by management. The WACC represents the minimum return that a...
Earnings Before Interest After Taxes (EBIAT)
What is 'Earnings Before Interest After Taxes - EBIAT' Earnings before interest after taxes (EBIAT) is a financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT, measures a company's profitability without taking into account the capital structure, like ratios such as debt to equity. EBIAT measures a company's ability to generate...
Uncovered Interest Rate Parity (UIP)
What is the 'Uncovered Interest Rate Parity - UIP' The uncovered interest rate parity (UIP) is a parity condition stating that the difference in interest rates between two countries is equal to the expected change in exchange rates between the countries' currencies. If this parity does not exist, there is an opportunity to make a risk-free profit...
Greater Fool Theory
Definition When it comes to pricing an item, the greater fool hypothesis asserts that the price is decided not by its inherent worth, but rather by the irrational beliefs and expectations of market players. In the event that a reasonable buyer believes that another party is prepared to pay an even greater price, he or she may justify the purchase...
Targeted Accrual Redemption Note (TARN)
What is a ‘Targeted Accrual Redemption Note – TARN' A targeted accrual redemption note (TARN) is an investment vehicle, calculated based on a variation of the LIBOR formula, which provides a guaranteed sum of coupons. Once the coupons you've received reaches the target cap, the note will be redeemed and you will be paid the par value of the note. Targeted...
Take or Pay
DefinitionA take-or-pay contract is a rule structuring negotiations between companies and their suppliers. With this kind of contract, the company either takes the product from the supplier or pays the supplier a. For any product the company takes, they agree to pay the supplier a certain price, say $50 a ton. Furthermore, up to an agreed-upon ceiling, the company...
Japan ETFs
What is 'Japan ETFs' A type of exchange-traded fund that invests the majority of its assets in Japanese equities that trade on local stock exchanges. The performance of Japan ETFs does not correlate to the performance of the underlying index when measured in U.S. dollars, because the change in the exchange rate between the yen and the...
Unconventional Cash Flow
What is an ‘Unconventional Cash Flow' A series of inward and outward cash flows over time in which there is more than one change in the cash flow direction. This contrasts with a conventional cash flow, where there is only one change in cash flow direction. In terms of mathematical notation – where the – sign represents an outflow and...
Equity
Simply put: Equity = Assets – Liabilities However, since there are a number of different types of assets, this definition cannot encompass them all and will have different meanings for each. The following are some common definitions for different equities: An ownership equity is represented by a security such as a stock. This can be in a private company...
Hard Inquiry
What is 'Hard Inquiry' A type of credit report check that may lower an individual's credit score. A hard inquiry occurs when an individual applies for any type of credit, such as a mortgage, credit card or auto loan. The reason a hard inquiry may lower an individual's credit score is because someone who has recently applied...