Value of risk (VOR) is the financial benefit that a risk-taking activity will bring to the stakeholders of an organization. It requires the organization to determine whether an activity will help to move it closer to completing its objectives.
A Pigovian (Pigouvian) tax is a tax assessed against private individuals or businesses for engaging in activities that create adverse side effects for society. Adverse side effects are those costs that are not included as a part of the product’s market price. These include environmental pollution, strains on public healthcare from the sale of tobacco products, and any other side effects that have an external, negative impact. Pigovian taxes were named after English economist, Arthur Pigou, a significant contributor to early externality theory.
In corporate finance, the debt-service coverage ratio (DSCR) is a measurement of the cash flow available to pay current debt obligations. The ratio states net operating income as a multiple of debt obligations due within one year, including interest, principal, sinking-fund and lease payments.
A debt/equity swap is a transaction in which the obligations or debts of a company or individual are exchanged for something of value, equity. In the case of a publicly traded company, this generally entails an exchange of bonds for stock. The value of the stocks and bonds being exchanged is typically determined by the market at the time of the swap.
The industry life cycle refers to the evolution of an industry or business through four stages based on the business characteristics commonly displayed in each phase. The four phases of an industry life cycle are the introduction, growth, maturity, and decline stages. Industries are born when new products are developed, with significant uncertainty regarding market size, product specifications, and main competitors. Consolidation and failure whittle down an established industry as it grows, and the remaining competitors minimize expenses as growth slows and demand eventually wanes.
Economic integration is an arrangement among nations that typically includes the reduction or elimination of trade barriers and the coordination of monetary and fiscal policies. Economic integration aims to reduce costs for both consumers and producers and to increase trade between the countries involved in the agreement.
The free look period is a required period of time in which a new life insurance policy owner can terminate the policy without penalties, such as surrender charges. A free look period often lasts 10 or more days (depending on the insurer), allowing the contract holder to decide whether or not to keep the insurance policy; if he or she is not satisfied and wishes to cancel, the policy purchaser can receive a full refund.
Petrodollars are U.S. dollars paid to an oil exporting country for the sale of the commodity. Put simply, the petrodollar system is an exchange of oil for U.S. dollars between countries that buy oil and those that produce it.
Administrative expenses are the expenses an organization incurs not directly tied to a specific function such as manufacturing, production, or sales. These expenses are related to the organization as a whole as opposed to an individual department or business unit. Salaries of senior executives and costs associated with general services such as accounting and information technology (IT) are examples of administrative expenses. They tend to be unrelated to gross margins.
Petrodollars are U.S. dollars paid to an oil exporting country for the sale of the commodity. Put simply, the petrodollar system is an exchange of oil for U.S. dollars between countries that buy oil and those that produce it.