What Is Default Risk? Default risk is a component of credit risk. It represents the danger linked to lending money that a borrower may not be able to fully repay. Every lender assumes a degree of risk that a borrower may fail to make the due payments on their debt […]
Financial Analysis
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What Is Stepwise Regression? Stepwise regression is a statistical technique for regressing several variables while concurrently deleting those that aren’t significant. The process uses a step-by-step iterative construction of a regression model. Independent variables are selected for use in a final model through a series of automated steps. At every […]
What Are Nonparametric Statistics? Nonparametric statistics is a statistical inference method focusing on rankings rather than numbers or underlying distribution assumptions. With nonparametric statistics, data are not expected to come from specified models determined by a small number of parameters. Examples of such models include the normal distribution model and […]
What is an Efficiency Ratio? An efficiency ratio is a financial metric that measures a company’s internal ability to effectively manage its assets and liabilities. There are a number of ratios used in corporate finance to assess a company’s or financial institution’s operational efficiency. Ultimately, these ratios assess a company’s […]
What Is the Gordon Growth Model (GGM)? The Gordon Growth Model is a stock valuation method that measures a stock’s present value by computing the future series of dividends assumed to be growing at a constant rate. The model is used to calculate a stock’s intrinsic value based on a […]
What Is Invested Capital? Invested capital is the total investment by shareholders and bondholders when a company raises money by selling stock shares or issuing bonds. Debt, capital leases, and stockholder’s equity are all shown separately on the balance sheet. Therefore, invested capital is not a line item in the company’s […]