The long-run is a period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all costs, whereas, in the short run, firms are only able to influence prices through adjustments made to production levels. Additionally, while a firm may be a monopoly in the short term, they may expect competition in the long run.
Research and development (R&D) includes activities that companies undertake to innovate and introduce new products and services. It is often the first stage in the development process. The goal is typically to take new products and services to market and add to the company’s bottom line.
Foregone earnings represents the difference between earnings actually achieved and the earnings that could have been achieved with the absence of fees, expenses, or lost time. Foregone earnings represents the investment capital that the investor spent on investment fees. The assumption is that if the investor had been exposed to lower fees, there would have been a better return. The concept of foregone earnings is typically used when referring to sales charges, management fees, or total expenses paid to funds.
A unitholder is an investor who owns one or more units in an investment trust or master limited partnership (MLP). A unit is equivalent to a share, or piece of interest. Unitholders are afforded specific rights that are outlined in the trust declaration, which governs the trust’s actions.
A bond rating is a way to measure the creditworthiness of a bond, which corresponds to the cost of borrowing for an issuer. These ratings typically assign a letter grade to bonds that indicates their credit quality. Private independent rating services such as Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings Inc. evaluate a bond issuer’s financial strength, or its ability to pay a bond’s principal and interest, in a timely fashion.
The quick ratio is an indicator of a company’s short-term liquidity position and measures a company’s ability to meet its short-term obligations with its most liquid assets. Since it indicates the company’s ability to instantly use its near-cash assets (assets that can be converted quickly to cash) to pay down its current liabilities, it is also called the acid test ratio. An acid test is a quick test designed to produce instant results—hence, the name.
The optimal capital structure of a firm is the best mix of debt and equity financing that maximizes a company’s market value while minimizing its cost of capital. In theory, debt financing offers the lowest cost of capital due to its tax deductibility. However, too much debt increases the financial risk to shareholders and the return on equity that they require. Thus, companies have to find the optimal point at which the marginal benefit of debt equals the marginal cost.
EOS is a blockchain-based decentralized operating system that is designed to create, host, and support decentralized autonomous applications (dApps).
Insurance coverage is the amount of risk or liability that is covered for an individual or entity by way of insurance services. Insurance coverage, such as auto insurance, life insurance—or more exotic forms, such as hole-in-one insurance—is issued by an insurer in the event of unforeseen occurrences.
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm’s cost of equity represents the compensation the market demands in exchange for owning the asset and bearing the risk of ownership. The traditional formula for the cost of equity is the dividend capitalization model and the capital asset pricing model (CAPM).