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What is Collateralized Mortgage Obligation (CMO)? A CMO is a mortgage bond that consists of a large number of different individual mortgages bundle...

When a bond is secured, it means it's protected, i.e. there are assets that would be forfeited if repayment is not made. When it's unsecured... it'...

What is Counterparty Risk? Counterparty risk is the risk to either party within a transaction that the other will not or be unable to abide by the...

What are Bond Anticipation Notes (BANS), Revenue Anticipation Notes (RANS), and Tax Anticipation Notes (TANS)? BANS, RANS and TANS are all short-te...

What is Contingent Liability? Contingent liability refers to a possible liability in the future contingent upon some other event being the trigger....

Power of attorney refers to the authorization to conduct business on legal and financial matters on behalf of another party. So...choose wisely.

What are T-Notes, T-Bonds, and TIPS? T-Notes are debt securities (like bonds) that are issued by the government and mature within one to 10 years....

What is liquidity? Think: water. It's liquid. It can be squeezed into little, tiny spaces and infused into large spaces. A defining trait of liquid...

A liquid market is a market featuring high trading volumes, i.e. investors actually want to put their cash to work.

What's a yankee bond, and does it stick a feather in its cap and call it macaroni?

What is a Country Basket (Index Fund)? Investing internationally can be a challenge, as foreign exchange, different accounting rules, time zones an...

What is AMBAC? AMBAC stands for American Municipal Bond Assurance Corporation. It provides insurance for municipalities that sell muni bonds, such...

What are credit ratings and how are they interpreted? Credit ratings describe a borrower’s likelihood to pay back their debts; it’s a look at h...

The Federal Open Market Committee's purpose is to manage financial outcomes through monetary policy.

What are bond ratings and what do they mean? Bond ratings are just credit ratings used on bonds. Just like a credit rating, they give the investor...

What is the Federal Funds Rate? The federal funds rate is the interest rate used for overnight lending between banks. The amount banks are able to...

What is Accrual Accounting? Accrual accounting is used to determine how well a company is doing by looking at the present and the future. It takes...

What is the Acid Test Ratio/Quick Ratio? The Acid Test Ratio is used to determine if a company can cover their liabilities in the short-term. It on...

What are Return on Equity and Return on Assets? Return on equity is a percentage that is found by dividing net income by shareholder’s equity. It...

A wrap account is an account that wraps into one annual fee all of the services you'd normally pay for a la carte at a given brokerage.

An omnibus account is an investment account in which a collection of investors have invested their capital to own a pro rata share of that cooperative investment. Either that, or it’s a lot of buses.

What is a balance sheet? A balance sheet is a financial document that public corporations are required to use. It shows their assets and liabilities (what they have and what they owe). It also includes shareholder’s equity, or how much is invested in the company, and this number combined with liabilities should be equal to assets (balanced).

What are Fixed Assets, Tangible Assets and Intangible Assets? Fixed assets are long term, illiquid assets that are necessary for a company’s operation. Accountants usually categorize Fixed Assets as Property, Plant and Equipment (PPE). Tangible Assets include fixed assets as well as other physical assets, such as inventory, vehicles, and other tactile assets. Intangible assets are those that exist as legally enforceable constructs, such as licenses, patents, goodwill, social media influence, branding, etc.

Unearned income is more than just the lunch money you stole on the playground. Hit play to find out more about unearned and earned income. And maybe send some apology notes to your elementary school classmates while you're at it...

What is Accrued Interest? Most bonds pay interest on a fixed calendar schedule, which can be quarterly, bi-annually, or annually. The interest earned accrues from zero after each payment, until the next payment date. However, since they are tradeable, bonds that change hands in a transaction have earned a certain number of calendar days’ worth of interest for the prior owner before the date of the trade. As such, the new buyer of the bond must pay accrued interest, or the accumulated interest earned during that period, on top of the sale price of the bond.

An MBO is a Management Buy Out (a buy out by inside management); an LBO is a Leveraged Buy Out (taking on debt to buy a company).

What are Debt Service and Debt Service Ratio? Debt service is the amount of funds needed by a borrower to successfully cover interest and principal payments over a specified time period. The debt service ratio is a calculation of net operating income divided by total debt service. The quotient of the calculation gives the Debt Service Ratio and the difference of the service numbers from the income indicate if the borrower can handle additional debt if needed.

What is an Accumulated Dividend? Accumulated dividends are dividends paid on cumulative preferred stock. They are referred to as accumulated because they are a combination of previous and current dividends, none of which have been paid to the shareholder yet.

What is Dividend Yield? Similarly to how a bond’s price and coupon is calculated to determine yield, dividend paying stocks also have a yield ascribed to their dividends. This is calculated by the amount of the dividend divided by the share price. Just like with bonds, the lower the share price, or cost basis, the higher the yield, which is crucial for portfolio management accounting.

What is paid-in-capital and capital surplus? Hit play to find out.

In trying to assess the value of a company, market capitalization refers to the number of stock shares times the stock price. Perceived value in this case is predicated upon the price that buyers are willing to pay for the stock in the market. When referring to equity, it is a more detailed calculation of worth, as it subtracts liabilities from assets to determine the company’s break up value, i.e, if everything in the company had to be sold. An analogy would be what a diamond necklace might be worth at an auction at Sotheby’s vs. its breakup individual stone value per karat weight at a pawnshop jeweler.

A pooled interest occurs when two or more investors combine capital in order to make a joint investment. Especially if investing in a prosthetics company.

What is Earnings Per Share (EPS)? Earnings Per Share is a metric by which to measure the profitability of a public company as a result of how much profit per common share was generated, after accounting for any dividends and both the weighted average of common shares as well as diluted shares when including warrants, stock options, restricted shares, and possible debt to equity common shares via convertible bonds or preferred shares.

What is a Money Market Fund/Commercial Paper? Money Market Funds are mutual funds that are very safe and liquid. They invest in cash and securities with short-term maturities. Commercial paper is similar in that it has the short-term aspect. It is different because it’s issued by companies and used to take care of various financial obligations in the short term, or to buy inventory.

What is the Debt-to-Equity Ratio? Debt to Equity ratio is a metric used to determine the degree of financial leverage a company has. The formula is the quotient of Total Liabilities divided by Total Shareholder Equity. Different industries, especially ones that may be capital intensive, such as aircraft manufacturing, may traditionally have higher Debt to Equity ratios than those with relatively low overhead, such as IT. If a company’s growth and profits continue to increase, investors are willing to accept higher debt to equity ratios, such as with Netflix or Amazon. The underlying rationale is that the increased debt funds are being used to gain more market share and increase business in a positive manner that can justify the higher ratios.

What is recapitalization? Pay attention the first time, there won't be a recap.

What is inflation, and if we poke it with a pin, will it pop?

What is the process of a loan? Collateral. Do you have it? The bank lending you money wants to be sure that A) they get paid back, and B) they charge you enough rent or interest on the money you are borrowing such that it matches the risk the bank is taking.

What is the Dividend Discount Model? Valuation of stocks can take numerous forms. One way in which one perspective on undervalued stocks is determined is by use of the Dividend Discount Model. Applying this method involves calculating dividends and expected dividend growth rates from the cost of equity to determine a stock’s current value and whether or not the current market price is discounted or at a premium to that value calculation.

What is the loan-to-value ratio? Loan us some of your time and watch this handy video.