Canary Call – Explained

by TheBusinessProfessor | Feb 23, 2025 | Investments, Trading, and Financial Markets

What is a Canary Call?A canary call refers to a step-up bond that cannot be called once a certain period elapses. After the step-up bond has completed its first-step period, a call cannot be made. A step-up bond is a bond that pays investors a low interest rate at the...

Engel’s Law – Explained

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is Engel’s Law?Engel’s law, being an economic theory, was founded by a German statistician named Ernst Engel in the year 1875. According to this theory, with the increase in income levels, there is a decrease in the extent of income apportioned for...

CAPE Ratio – Explained

by TheBusinessProfessor | Feb 23, 2025 | Business Finance, Personal Finance, and Valuation Principles

What is a CAPE Ratio?The CAPE ratio is defined as a price earnings ratio that measures the average of adjusted earnings over a period of 10 years. It is a price valuation method that determines the real earnings per share (EPS) over a period of 10 years which is...

Equation of Exchange (Economics) – Explained

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is the Equation of Exchange?The equation of exchange refers to an economic equation that establishes the link or relationship between velocity of money, money supply, index of expenditures, and the average price level. John Stuart Mill came up with this equation...

Chooser Option (Finance) – Explained

by TheBusinessProfessor | Feb 23, 2025 | Investments, Trading, and Financial Markets

What is a Chooser Option?A chooser option in finance refers to a contract that offers the holder a chance to decide whether to take a put or call option. This is usually done ahead of the expiration date. A call option refers to a contract that allows an investor to...

Active Stocks – Explained

by TheBusinessProfessor | Feb 23, 2025 | Investments, Trading, and Financial Markets

What are Active Stocks?Active stocks refer to stocks which are heavily-traded on an exchange. They are actively purchased and sold, and frequently have outstanding shares in large numbers. Because active stocks are heavily-traded, they often have bid-ask spreads that...

Accounting Interpretation – Explained

by TheBusinessProfessor | Feb 23, 2025 | Managerial & Financial Accounting & Reporting

What is an Accounting Interpretation?Accounting Interpretation is a statement issued by an accounting standard group clarifying the methods of implementing the accounting standards. The Financial Accounting Standards Board (FASB), International Accounting Standards...

Accounting Insolvency – Explained

by TheBusinessProfessor | Feb 23, 2025 | Managerial & Financial Accounting & Reporting

What is Accounting Insolvency?Accounting insolvency is a situation when the value of an organization’s liabilities to its creditors exceeds the total value of its asset. It is different from the actual insolvency or cash flow insolvency. Actual insolvency is a...

Accounting Convention – Explained

by TheBusinessProfessor | Feb 23, 2025 | Managerial & Financial Accounting & Reporting

What is an Accounting Convention?Accounting conventions are standards, customs or guidelines associated with the practical application of accounting principles, and are aimed at bringing about consistency in the maintenance of accounts. Are Accounting Conventions...

Accrual Rate – Explained

by TheBusinessProfessor | Feb 23, 2025 | Business Finance, Personal Finance, and Valuation Principles

What is an Accrual Rate?Accrual rate refers to the interest percentage rate charged on financial instruments such as bonds, pension, credit card, and mortgage loans among other loans. Accrual rates vary according to the financial instrument. However, it is commonly...