Income from operations (IFO) is a measure of a company’s financial performance during a given period. It represents the company’s revenues less its operating expenses, and is typically used to assess a company’s core profitability. Income from operations is typically reported on a company’s income statement, and can be found by subtracting a company’s operating … Read more
The target cash balance definition is the desired amount of cash that a company aims to maintain on its balance sheet. This target is usually set by management in order to ensure that the company has enough cash on hand to cover its short-term obligations and to take advantage of opportunities that may arise. The … Read more
Overhead rate definition is the rate used to allocate overhead expenses to products or services. The overhead rate is calculated by dividing the total overhead expenses by the total activity for the period. The overhead rate is then applied to the activity of each product or service to allocate the overhead expenses. Is depreciation an … Read more
A normal-course issuer bid (NCIB) is a process whereby a public company may purchase its own outstanding shares in the open market, in order to reduce the number of shares outstanding. The company must obtain approval from its shareholders before conducting an NCIB. NCIBs are typically used when a company’s stock price has fallen sharply, … Read more
Multilateral netting is an agreement between multiple parties to settle all outstanding obligations between them on a regular basis. This type of arrangement is often used by financial institutions in order to reduce the risk of default by any one party. In a typical multilateral netting arrangement, each party agrees to provide the other parties … Read more
If a company has too much debt and not enough cash flow to service that debt, it is said to be overleveraged. This can put the company at risk of defaulting on its debt obligations, which can lead to bankruptcy. A company may become overleveraged for a variety of reasons, including taking on too much … Read more
An escalator clause is a clause in a contract that provides for periodic increases in the contract price based on an index or other measure, such as the Consumer Price Index. The escalator clause protects the contracting parties from the effects of inflation. What is an escalation clause in business? An escalation clause is a … Read more
The cost of acquisition, also known as the cost of goods sold (COGS), is the total cost of acquiring the goods or services that a company sells during a period. This includes the cost of materials, labor, and shipping. COGS does not include the cost of marketing or overhead. How is cost of acquisition determined … Read more
Incentive distribution rights (IDR) are a type of compensation that a general partner (GP) of a limited partnership receives from the limited partnership. The GP is typically entitled to a certain percentage of the partnership’s profits, but the IDR allows the GP to receive a greater percentage of the profits above a certain threshold. The … Read more
Retained cash flow (RCP) is a term used in corporate finance to describe the amount of cash that a company keeps on its balance sheet after paying out dividends to shareholders. RCP can be a useful metric for investors to assess a company’s financial health and its ability to reinvest cash back into the business. … Read more
