What is an Economic Derivative? An economic derivative is an over-the-counter (OTC) contract, where the payout is based on the future value of an economic indicator. It is similar to other derivatives in that it is designed to spread the risk to parties that are willing to take on risks to participate in the rewards.
What Is Earnest Money? Earnest money is a deposit made to a seller that represents a buyer’s good faith to make a purchase such as the acquisition of a new home. The money gives the buyer extra time to get financing and conduct the title search, property appraisal, and inspections before closing. In many ways
What Are Earning Assets? Earning assets are income-producing investments that are owned, or held, by a business, institution, or individual. These assets also have a base value and the ability to produce additional funds beyond the inherent value for the investment holder. This allows the investment holder to maintain the assets as a source of earnings or sell the assets
What Is an Earnings Announcement? An earnings announcement is an official public statement of a company’s profitability for a specific period, typically a quarter or a year. An earnings announcement occurs on a specific date during earnings season and is preceded by earnings estimates issued by equity analysts. If a company has been profitable leading
What Is Earnings Management? Earnings management is the use of accounting techniques to produce financial statements that present an overly positive view of a company’s business activities and financial position. Many accounting rules and principles require that a company’s management make judgments in following these principles. Earnings management takes advantage of how accounting rules are
What Is the Earnings Multiplier? The earnings multiplier is a financial metric that frames a company’s current stock price in terms of the company’s earnings per share (EPS) of stock, that’s simply computed as price per share/earnings per share. Also known as the price-to-earnings (P/E) ratio, the earnings multiplier can be used as a simplified valuation
What Is an Earnings Recast? An earnings recast is the act of amending and re-releasing a previously released earnings statement, with specific intent. Some of the most typical reasons for recasting earnings are to show the impact of a discontinued business or to separate out earnings-related events that are deemed to be non-recurring or otherwise
What Is a Quarterly Earnings Report? A quarterly earnings report is a filing made by public companies every three months to report on their recent financial performance. Quarterly earnings reports include items such as net income, earnings per share, earnings from continuing operations, and net sales. Stock analysts and investors use quarterly earnings reports as
What is Earnings Season? Earnings season refers to the months of the year during which most quarterly corporate earnings are released to the public. Earnings season generally occurs in the month immediately following the end of each fiscal quarter. This means that earnings seasons typically fall in January, April, July, and October, because firms need time
What Is Earnings Stripping? Earnings stripping is a common tactic used by multinational corporations to escape high domestic taxation by using interest deductions in a friendly tax regime area to lower their corporate taxes. In other words, earnings stripping is a technique used by corporations that try to minimize their U.S. tax bills by shifting
