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Cash equivalents are short-term commitments "with temporarily idle cash and easily convertible into a known cash amount". [1] An investment normally counts as a cash equivalent when it has a short maturity period of 90 days or less, and can be included in the cash and cash equivalents balance from the date of acquisition when it carries an ...
The key variables for (credit) risk assessment are the probability of default (PD), the loss given default (LGD) and the exposure at default (EAD).The credit conversion factor calculates the amount of a free credit line and other off-balance-sheet transactions (with the exception of derivatives) to an EAD amount [2] and is an integral part in the European banking regulation since the Basel II ...
In monetary economics, the equation of exchange is the relation: = where, for a given period, is the total money supply in circulation on average in an economy. is the velocity of money, that is the average frequency with which a unit of money is spent.
Since the balance sheet is founded on the principles of the accounting equation, this equation can also be said to be responsible for estimating the net worth of an entire company. The fundamental components of the accounting equation include the calculation of both company holdings and company debts; thus, it allows owners to gauge the total ...
For example, if someone purchases 100 shares at a starting price of 10, the starting value is 100 x 10 = 1,000. If the shareholder then collects 0.50 per share in cash dividends, and the ending share price is 9.80, then at the end the shareholder has 100 x 0.50 = 50 in cash, plus 100 x 9.80 = 980 in shares, totalling a final value of 1,030.
Calculating how much should be invested in an asset in order to achieve a desired result (i.e., purchasing a storage tank with a 20-year life, as opposed to one with a 5-year life, in order to achieve a similar EAC). [11] Comparing to estimated annual cost savings, in order to determine whether it makes economic sense to invest. [12]
The cash flow for a period represents the net change in money of that period. [3] Calculating the net present value, , of a stream of cash flows consists of discounting each cash flow to the present, using the present value factor and the appropriate number of compounding periods, and combining these values. [1]
Current assets include cash, cash equivalents, short-term investments in companies in the process of being sold, accounts receivable, stock inventory, supplies, and the prepaid liabilities that will be paid within a year. [1] Such assets are expected to be realised in cash or consumed during the normal operating cycle of the business.