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What is shareholders’ equity?

An equity instrument is any financial instrument that evidences the legal right of ownership in a company and where all the payments on the instrument are at the discretion of the…


What is secured debt?

One component of the senior debt of a company is typically a revolving line of credit.  Accounts receivable financing and inventory financing are the two most common types of senio…


What is revenue recognition?

The revenue recognition principle calls for the recognition of revenue in the period when a sale takes place or a service is performed (i.e., when it is earned), regardless of when…


What is retail leasing?

Retail leasing encompasses micro- and small-ticket leasing.  Micro-ticket leasing involves the leasing of high-volume relatively low-price assets, such as office equipment, shop ma…


What is residual value risk?

When a finance lease is terminated and the residual value is unguaranteed, the lessor will repossess the asset and may be unable to re-lease or sell it at its residual value.  Resi…


What is residential real estate? What is commercial real estate?

The two major types of real estate are residential and commercial.  There is no industry standard for classifying property and sub-property types.  The two leading organizations in…


What is repossession?

The act of taking possession of property by the owner of the asset or a creditor with a security interest in that asset upon termination of or debtor default on the agreement that…


What is recourse and nonrecourse lease assignment?

The right of an assignee or buyer in a financial transaction to demand performance from the transaction assignor or seller in the event of default on the underlying debt is recours…


What is real property security?

Real property is permanent, nonmovable property, such as buildings, land and permanent improvements to land, including the interests, benefits and rights inherent in ownership of r…


What is property, plant and equipment (PP&E)?

Property, plant and equipment (PP&E) comprises such noncurrent assets as land, buildings, machinery and equipment, furniture and fixtures, and leasehold improvements that are a…


What is personal property security?

Personal property is any tangible or intangible property other than real property (real estate) that is movable and separable from realty, such as fixtures, tools, vehicles and inv…


What is paid-in capital?

The principal component of the shareholders’ equity section is the paid-in capital accounts.  Paid-in capital reports the total amount of equity capital invested in the company by…


What is operational risk?

The risk of loss due to inadequate or failed internal processes, people and systems or from external events is operational risk.  Errors in data, books and records; omissions in th…


What is operating profit?

Operating expenses comprise all expenses that are incurred in carrying out a firm’s ordinary activities, including advertising, salaries, rent, research and development, office sup…


What is operating cash flow?

Operating activities are the main revenue producing activities of a firm.  Operating cash flow (OCF) is the cash flow arising from day-to-day revenue and expense transactions due t…


What is one-line consolidation?

For tax purposes, dividends are the only revenue realized from the investee.  Consequently, the investor must recognize deferred income tax expense on the investee’s undistributed…


What is net income?

The difference between earnings before interest and taxes (EBIT) and earnings before taxes (EBT) is an entity’s financial results.  Financial results is determined by the earning o…


What is mid-ticket leasing?

Mid-ticket leasing encompasses the leasing of low-volume, relatively high-price assets, such as industrial equipment and machinery, fleets of cars and commercial vehicles, computer…


What is mid-ticket equipment leasing? What is big-ticket equipment leasing?

Mid-ticket equipment includes low-volume, relatively high-price equipment with an original cost of $100,000-$500,000 according to DBRS and Fitch and $250,000-$5mn according to the…


What is MACRS?

Tax laws generally grant depreciation rights only to the asset’s legal owner, who depreciates the cost of the asset over its economic life and claims any available investment tax c…


What is long-term debt?

Long-term debt is the total principal amount of a company’s financial obligations that is to be retired after the following accounting period, including term loans, bond and notes,…


What is liquidity risk?

The possibility of financial loss or lower-than-expected returns due to the inability of a finance provider (bank, leasing company) to meet its funding needs at a cost that is not…


What is liquidity and solvency analysis?

Balance sheet analysis is commonly conducted quarterly and annually to help lenders and other creditors, investors and financial intermediaries determine the company’s creditworthi…


What is lien perfection?

The security interest of a creditor (lender/lessor) in personal property is perfected upon the filing of the financing statement with the appropriate authorities.  Lien perfection…


What is lease termination?

Lease termination is the discontinuation of a lease either voluntarily before the scheduled end of its contractual lease term, involuntarily or cancellation by the lessor.  The ter…


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