# Financial Analysis

68 posts ## Default Risk Definition: Overview – Explanation – Examples

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 […] ## Stepwise Regression: Definition – Explanation – Example

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 […] ## Nonparametric Statistics: Definition – Explanation – Example

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 […] ## Efficiency Ratio Definition – Explanation – Example

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 […] ## Gordon Growth Model (GGM): Formula – Explanation – Example

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 […] ## Invested Capital Definition – Explanation – Example

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 […]