Assignment of accounts receivable is the transfer of the right to receive payment from a customer in exchange for goods or services to a third party, typically a financial institution, in exchange for immediate cash. The assignee becomes the creditor and has the right to collect payment from the customer. The customer is typically unaware … Read more
Write Offs and Methods for Estimating. Bad debt is defined as any debt that is unlikely to be repaid by the debtor. This can occur for a variety of reasons, such as the debtor being unable to pay, the debtor being unwilling to pay, or the debtor being deceased. There are two main methods for … Read more
A cramdown is a type of bankruptcy reorganization in which a judge confirms a reorganization plan over the objections of some creditors. In a cramdown, the judge may “cram down” the plan by approving it over the objections of creditors who do not support the plan. Cramdowns are relatively rare, and they are most likely … Read more
Debt overhang is a situation where a firm’s outstanding debt is so high that it discourages potential investors from providing new financing, even though the new financing would be used to invest in productive projects that would increase the value of the firm. The main reason why debt overhang can be a problem is that … Read more
Debtor-in-Possession (DIP) financing is a type of corporate debt that is typically used by companies that have filed for bankruptcy protection. The purpose of DIP financing is to provide the company with the working capital it needs to continue operating during the bankruptcy process. DIP financing is typically provided by a group of creditors known … Read more
. What is net interest margin? Net interest margin is a financial ratio that measures the difference between the interest income earned on a financial institution’s investments and the interest expenses incurred on its borrowings. The ratio provides insight into a company’s profitability and its ability to generate income from its investments. Formula The net … Read more
A debt assignment definition is a legal document that defines the terms of a debt assignment agreement. This document outlines the rights and obligations of the parties involved in the agreement, and sets forth the conditions under which the debt may be assigned. The debt assignment definition may also include provisions for the payment of … Read more
Long-term debt is defined as any debt owed by a company that has a maturity date of more than one year from the date of the balance sheet. Long-term debt can come in the form of bonds, loans, or lines of credit. What are the three components of debt? 1) The principal: This is the … Read more
The net charge-off rate definition is the percentage of a company’s total loans that have been written off as uncollectible. This is an important metric for investors to watch, as it can be an early indicator of financial distress. A company’s charge-off rate is the percentage of its loans that it has written off as … Read more
Solvency refers to a company’s ability to pay its debts as they come due. If a company is insolvent, it means that it cannot pay its debts. A company may be insolvent even if it is profitable. There are two types of insolvency: cash flow insolvency and balance sheet insolvency. Cash flow insolvency occurs when … Read more
