Gordon Growth Model

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

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 […]

Cost-cutting

Cost-cutting Definition – Strategy – Example

What Is Cost-cutting? Cost-cutting occurs when an organization strategically reduces expenditures and directly implements measures to improve profitability. Measures implemented by a corporation to cut costs and expenses while boosting profitability are referred to as cost reduction. These steps are often taken when a company is in financial difficulties or […]

Discrete Probability Distribution

Discrete Probability Distribution: Definition – Explanation – Examples

What Is a Discrete Probability Distribution? A discrete probability distribution describes the occurrence of a discrete random variable with a countable value and a non-zero probability. A discrete probability distribution displays the occurrence of discrete, individually countable events like 1, 2, 3,… or zero vs. one. For instance, the binomial […]

PEG Ratio

PEG Ratio Definition – Explanation – Example

PEG Ratio – What Is the Price/Earnings-to-Growth? The PEG ratio is a metric that assists in determining the value of a stock by comparing market price, earnings, and future growth potential. The PEG ratio is the price/earnings to growth ratio.  It is a stock’s price-to-earnings (P/E) ratio divided by the […]

Forward Contract

Forward Contract Definition – Explanation – Example

What Is a Forward Contract? A forward contract is a tailored agreement between two parties to acquire or sell an item at a predetermined price on a future date. Forward contracts can be used for hedging or speculating, although due to their non-standardized character, they are best suited for hedging. […]