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« Archive for the ‘Glossary’ Category

What are Treasury Notes?

Known as the “medium-term” government debt security. Treasury notes have a maturity period of one to ten years. Treasury notes are negotiable either through competitive bidding system where you can select the yield that you want or non-competitive bidding where you accept the yield given at the auction. T-notes are backed by the full faith […]

What are Treasury Bonds?

Long term securities released by the treasury. T-Bonds have a maturity rate of more than ten years with interests paid out semi-annually. T-Bonds are taxed at the federal level only. U.S. T-Bonds have the lowest taxable yield of any bonds since the U.S. government have the highest credit rating among fixed income securities. Treasury bonds […]

What is Money Market Funds?

Money Market Funds Mutual fund that invests in high-yielding and short term money market instruments. These instruments include U.S. Treasury Bills, bank certificates of deposit, and commercial paper. This fund sells its shares to individuals in order to reinvest the money in short-term securities. The income from the money market fund is distributed among shareholders. […]

What are Treasury Bills (T-Bills)?

Short term securities that mature for one year or less. T-Bills are issued by the U.S. government at a discounted value. Various T-Bills are sold between denomination of $1,000 to $5,000,000. T-Bills have common maturities of one month (30 day T-Bill), three months (60 day T-Bill), and six months (90 day T-Bill). Various T-Bills carry […]

What is Inventory Turnover Ratio?

Inventory Turnover Ratio A ratio that measures the inventory cycle from being sold to being replaced. Generally, inventory turnover is measured  by dividing  the cost of goods sold over average inventory.  A low inventory turnover represents poor sales or excess inventory. Meanwhile higher inventory turnover could mean strong sales or ineffective replacement of inventory. The […]

What is Maturity Date?

Maturity Date The date where a security, note, draft, or other debt instruments becomes due and payable to the investor. Usually, interest payments should stop during the maturity date. The maturity date also marks the full repayment for installment loans. This date is important for investors because it gives them a time frame when to […]

What is Inventory Turnover?

Inventory Turnover Measures how an inventory is sold and replenished during a time period. Usually, inventory turnover is measured throughout the year. To arrive at a figure, the average inventory is computed and compared to the cost of goods sold within the same period. Inventory turnover is measures against industry averages. A low inventory turnover  […]

What is Income Statement?

Income Statement A measure of company’s performance over a specific period. This report shows the revenues, and expenses from operating and non-operating activities. An income statement should also show the net profit or loss incurred by a company over an accounting period. This term is also known as as the “profit and loss statement” or […]

What are Sweep Accounts?

A bank account program where the funds are auto-managed between a primary savings account and a second investment account. At the close of business day, the account automatically transfers the surplus balance into an interest earning overnight account usually within the same bank. The funds are then returned to the primary account with interest at […]

What is Internal Rate of Return?

Internal Rate of Return The discount rate that  makes the net present value of a revenue flow equal to zero.  It is a tool to analyze investments that reflects the time value for money. The higher the investment’s internal rate of return, the more valuable the investment becomes.  IRR is also known as the economic […]

What is Free Cash Flow?

Free Cash Flow A measure of a company’s cash after deducting money from maintaining or expanding its asset base. This measure represents how cash-rich a company is that will allow them to spend on other opportunities to enhance the share holder’s value. A large free cash flow gives company the ability to pay dividends, pursue […]

What is Certificate of Deposit Index?

Certificate of Deposit Index A matrix of prices used to determine the changes in the interest rates of rate adjusted mortgages. In general terms, it is the average of what banks are paying for CDs. The certificate of deposit index is not as volatile as other mortgage indices and is usually dependent on changes to […]

What is Certificate of Deposit?

Certificate of Deposit A CD is a document released by a bank stating that a party has a specified sum on deposit. Certificate of deposit can be purchased from brokers as brokered deposit. These certificates usually cover a specific period of time at a fixed interest rate. Certificates of Deposit can either be negotiable or […]

What is Annual Percentage Yield (APY)?

Annual Percentage Yield (APY) The percentage rate that reflects the true amount of interest from a saving account or the annual rate of return. The Annual Percentage Yield is based on the interest rate and the frequency of compounding over the year. This rate is measured by having one plus the periodic rate raised to […]

What is Money Market?

Money Market Market for securities for short-term debt and other monetary instruments. The money market are generally more liquid and has shorter maturity date. Money markets as represented mainly by T-Bills are relatively risk free compared to the stock market. The money market is known as a place for large institutions and government to manage […]

What is Annual Percentage Rate (APR)?

Annual percentage rate (APR) The APR is the periodic rate multiplied to the number of periods in a year. This measures the value of your monthly, or quarterly interest rates in a year. As an example, a credit card with an annual percentage rate of 12% has a periodic rate of 1% per month, or […]

What is Add-On Certificate of Deposit?

Add-On Certificate of Deposit A special (CD) certificate of deposit account allowing the bearer to place more funds to his account after the initial purchase date. The added funds should bear the same interest rates as the initial funds. This certificate gives the investor the advantage to guarantee a minimum interest rate even if interest […]

What is EBITDA?

Acronym for EBITDA (earnings before interest, taxes, depreciation and amortization). This is also represented as the operational cash flow of the company. This data present the viability of the company before any other intervention. With this measure, the company can be assessed with the earnings that they can generate given a set period. It is […]

What is Charge Card?

Charge Card A consumer financing tool that acts like a credit card without the interest rate. In return,the borrower should pay the debt upon the receipt of the statement. A charge card has a much higher spending limit than a credit card. However, stringent penalties will apply for any unpaid balance and charge card transactions […]

What is Brokered Deposit?

Brokered Deposit A deposit purchased from a broker that acts as the agent for the depositor. Brokered deposits usually apply to large deposits with a certificate of deposit included. The broker pools these certificate of deposits and bargains them to financial institutions so that they can negotiate for a higher rate. Brokered deposits are sold […]

What is A Ton of Money?

A slang term used to refer to a large sum of money. The amount of money is subjective according to individuals, company, or situation. What is a ton of money for one can be pennies for the other. While we may have different ideas how a ton of money is quantified, one ton of $1 […]

What is Balance Sheet?

Balance Sheet A summary of the company’s assets, liabilities, and equity ranged at a certain date. The balance sheet measures the performance of a company or individual by measuring the assets owned by the company. The balance sheet can be more detailed in presentation depending on the preference of the company. In principle, the balance […]

What is Debt Ratio?

Debt Ratio The borrower’s monthly obligation divided by their income. This is also known as debt-to-income ratio. For companies, the debt ratio gives investors an idea on the financial health of the company or its ability to face risks with its debt load. It also gives an insight on the ability of the individual or […]

What is Credit Card?

Credit Card A bank-issued plastic card that allows consumers to pay for products without cash payable at a later date. Credit cards carry interests on the outstanding balance and it may be carried month over month. Credit cards is one of the most recognized payment systems across borders and is universally accepted around the world. […]

What is Compound Growth Rate Calculator?

Compound Growth Rate Calculator A financial tool that determines the annual growth rate of an investment. This is useful when the value of an investment has fluctuated from one period to the next. The calculator measures the value of your investment based on the beginning value, ending or present value, and the number of period. […]

What is Glass Steagall Act?

Glass Steagall Act Passed in 1933, the Glass Steagall Act prohibits commercial banks from collaborating with brokerage firms. Under this act, banks are not also allowed to participate in investment banking activities. This act was enacted during the great depression as a way to enhance the security if the depositors. The act was abolished in […]

What is Fiscal Policy?

Fiscal Policy Government policy on taxation, amount of spending, and priorities of public funds. This policy is a large input to the macroeconomic situation of a country as it also decides on the budgets of government units. Fiscal policy can affect consumer decisions based on tax rates, price stability, and business cycles. This government policy […]

What is Debt to Equity Ratio?

Debt to Equity Ratio A financial tool that measures the proportion of debt and equity used to cover a company’s assets. This gives investors the composition of capitalization of the company. The company’s leverage is also reflected by the debt to equity ratio. If the company has a high owner-supplied capital, the debt to equity […]

What are Penny Stocks?

Penny stocks are a low-priced stock that requires low market capitalization. Penny stocks are traded outside major market exchanges. With their volume and price, penny stocks are generally highly speculative and are considered as high risk since the companies involved lack liquidity, has limited following, and has large bid-ask spreads. Penny stocks are traded over […]

What is Charge Back?

Charge Back The charge taken back from the merchant to the consumer. The merchant pays back the value of the amount charged to consumer after a successful credit card dispute. A credit card dispute may be validated when the merchant or the product was not able to follow the terms of the transaction. This is […]