Category: Financial Terms

Electronic Federal Tax Payment System (EFTPS) The Electronic Federal Tax Payment System (EFTPS) is a U.S. Department of the Treasury service that lets individuals and businesses make federal tax payments online or by phone, 24 hours a day. It streamlines payment scheduling and recordkeeping and is commonly used for estimated tax payments and other IRS…

Electronic Data Gathering, Analysis, and Retrieval (EDGAR) Overview EDGAR (Electronic Data Gathering, Analysis, and Retrieval) is the SEC’s online system for receiving, storing, and publishing required filings from public companies and certain securities issuers. It increases transparency and speeds public access to company financial and regulatory disclosures. Purpose and history Built to replace paper filing…

Electronic Communication Networks (ECNs) An Electronic Communication Network (ECN) is an automated, electronic system that matches buy and sell orders for securities and other financial instruments. ECNs connect buyers and sellers directly—bypassing a human intermediary—so trades can execute quickly and, in many cases, outside regular exchange hours. How ECNs work ECNs aggregate limit orders from…

Electronic Commerce (E‑commerce) What is e‑commerce? E‑commerce (electronic commerce) is the buying and selling of goods and services over the internet using computers, tablets, smartphones, and other connected devices. It ranges from individual sellers on marketplaces to multinational online retailers and includes both physical products and digital services. Key takeaways: * E‑commerce lowers barriers to…

Electronic Check (E-Check): How They Work and Why They’re Used Electronic checks, or e-checks, are the digital equivalent of paper checks. They use electronic fund transfer systems to move money between checking accounts, typically over the Automated Clearing House (ACH) network. E-checks enable payments that would traditionally be made by paper check to occur electronically,…

Electronic Bill Payment and Presentment (EBPP) Electronic Bill Payment and Presentment (EBPP) is a system companies use to deliver bills electronically and collect payments via channels such as the Internet, direct-dial access, and ATMs. EBPP has become a core component of online banking and is widely used by utilities, telecommunications, insurance providers, and many other…

Elective-Deferral Contribution What it is An elective-deferral contribution is a portion of an employee’s salary that the employee elects to have withheld and deposited into an employer-sponsored retirement plan (for example, a 401(k) or 403(b)). These contributions can be made on a pre-tax (traditional) or after-tax (Roth) basis depending on the plan. Key points Pre-tax…

Elasticity: Definition and How It Works Elasticity is an economic concept that measures how responsive one variable is to changes in another. In business and finance, it most commonly describes how quantity demanded or supplied responds to a change in price. Key idea Price elasticity of demand = (percentage change in quantity demanded) / (percentage…

Elasticity: What It Means in Economics, Formula, and Examples What is elasticity? Elasticity measures how responsive one variable is to changes in another. In economics, it most commonly describes how quantity demanded or supplied responds to changes in price, income, or the price of related goods. A high elasticity means quantity changes a lot when…

Egalitarianism: Definition, Ideas, and Types Key takeaways * Egalitarianism is the belief that people are fundamentally equal and deserve equal treatment and opportunities. * It applies across social, legal, political, and economic domains. * Economic egalitarianism focuses on reducing wealth and income gaps; legal egalitarianism focuses on equal application of the law. * Egalitarian ideas…

Efficient Market Hypothesis (EMH) Key Takeaways * The Efficient Market Hypothesis (EMH) states that asset prices reflect all available information, so consistently earning excess risk‑adjusted returns (alpha) through public information or market timing is unlikely. * EMH supports low‑cost, passive investing as the most reliable strategy for most investors. * Markets are not perfectly efficient…

Efficient Frontier Definition The efficient frontier is the set of portfolios that offer the highest expected return for a given level of risk, or the lowest risk for a given expected return. It is a central concept in modern portfolio theory introduced by Harry Markowitz. How it works Graphically, the efficient frontier is a curved…

Efficiency Ratio Explained: Definition, Formula, and Banking Example What is an efficiency ratio? An efficiency ratio measures how effectively a company uses its assets and liabilities to generate income. It’s part of a family of activity ratios that quantify short-term operational performance—how quickly a business converts resources (receivables, inventory, fixed assets) into sales or cash….

Efficiency Efficiency describes how well resources are used to produce a desired output. It compares useful output to the total input consumed, revealing how effectively labor, materials, energy, time, and capital are being deployed. Key takeaways Efficiency = useful output ÷ total input (multiply by 100 to express as a percentage). Higher efficiency reduces waste,…

Effective Yield: Definition and Key Takeaways Effective yield is the actual annual return on a bond when its coupon (interest) payments are reinvested at the same rate and compound. It adjusts the bond’s nominal (stated) coupon rate for the effects of compounding and therefore often exceeds the nominal yield. Key takeaways: * Effective yield accounts…

Effective Tax Rate: How It’s Calculated and How It Works What the effective tax rate is The effective tax rate is the average percentage of income that an individual or a corporation actually pays in income taxes. It reflects total tax paid divided by the income base (taxable income for individuals; pre-tax earnings for corporations)…

Effective Gross Income (EGI) What is EGI? Effective Gross Income (EGI) is the total income a rental property is expected to produce after accounting for vacancies and uncollected rent. It reflects the realistic cash inflows available to cover operating expenses and debt service. EGI formula EGI = Potential Gross Rental Income + Other Income −…

Understanding Effective Duration: Definition, Formula & Examples Effective duration measures a bond’s sensitivity to changes in interest rates when the bond has embedded options (for example, call or put provisions). It accounts for how expected cash flows may change as yields move, making it the preferred duration metric for securities whose cash flows are not…

Effective Dates The effective date is the date when an agreement or transaction becomes legally binding and the parties’ obligations begin. In different contexts it can mean slightly different things—for example, in contract law it marks when contractual duties start; in securities law it marks when a registration or offering becomes effective and securities may…

Effective Annual Interest Rate (EAR) The effective annual interest rate (EAR) is the actual annual rate of return on an investment or the true annual cost of borrowing after accounting for compounding. It shows what you effectively earn or pay over one year, unlike the nominal (stated) rate which ignores compounding frequency. Formula EAR =…

Education IRA (Coverdell ESA) What it is An Education IRA, formally called a Coverdell Education Savings Account (ESA), is a tax-advantaged investment account used to save for a child’s qualified education expenses. Contributions are nondeductible, but earnings grow tax-free and qualifying withdrawals for education expenses are tax-free. How it works Contributions can be made for…

Education Loan: Definition, Types, and Debt-Management Strategies Key takeaways * An education loan (student loan) helps finance postsecondary education costs: tuition, books, supplies, and living expenses. * Loans commonly include a grace period while the borrower is enrolled; federal loans often have lower rates and borrower protections than private loans. * Main federal loan types:…

What is EdTech? EdTech (education technology) refers to hardware and software designed to enhance teaching and learning. It includes classroom devices (tablets, interactive whiteboards), online content and delivery systems, adaptive learning platforms, and large-scale offerings such as MOOCs (Massive Open Online Courses). The aim is to improve student outcomes, support individualized learning, and reduce administrative…

Economy: Definition, Types, and Key Indicators An economy is the system of production, distribution, and consumption of goods and services within a defined area—ranging from a household or industry to a city, nation, or the global economy. It comprises consumers, businesses, and governments whose decisions determine how scarce resources are allocated. Key takeaways * An…

Economist: Role, Duties, and Career Outlook What is an economist? An economist analyzes how societies use resources to produce goods and services and how those choices affect production, distribution, and consumption. Economists study data and trends at local, national, and global levels to explain past behavior and forecast future economic conditions. Their findings inform policy,…

Economies of Scope An economy of scope occurs when a firm lowers its average total cost by producing a variety of goods or services together rather than separately. Producing complementary products, sharing inputs, or turning byproducts into saleable goods can make a multi‑product operation more cost‑efficient than parallel single‑product operations. Key takeaways Economies of scope…

Economies of Scale What they are Economies of scale are cost advantages firms gain when increasing production. As output rises, average cost per unit typically falls because fixed costs, specialized inputs, and efficiencies are spread across more units. Key takeaways Larger production can lower per‑unit costs and boost competitiveness. Cost savings arise when production increases…

Economics Economics is the social science that examines how individuals, businesses, governments, and societies allocate scarce resources to produce, distribute, and consume goods and services. It informs decisions ranging from household spending to national fiscal and monetary policy and intersects with politics, law, psychology, and business. Key takeaways Economics studies allocation of limited resources to…

Economic Value of Equity (EVE) The Economic Value of Equity (EVE) measures a bank’s long-term interest rate risk by calculating the net present value (NPV) of all expected cash flows from assets minus the NPV of expected cash flows from liabilities. EVE estimates how changes in market interest rates affect a bank’s total capital and…

Economic Value Added (EVA): Measuring True Economic Profit Economic Value Added (EVA) is a financial metric that evaluates whether a company generates returns above its cost of capital. It converts accounting profits into a measure of true economic profit by charging the business for the capital it uses. EVA helps assess management effectiveness, capital efficiency,…

Economic Value Economic value is the benefit an individual assigns to a good or service based on how well it meets their needs. It is subjective and depends on personal preferences, intended use, and the trade-offs a person is willing to make. Economic value differs from market value, which is the actual price at which…

Economic Stimulus Key takeaways Economic stimulus comprises government actions—fiscal and/or monetary—designed to encourage private-sector spending and investment to boost growth. Common tools include tax cuts, increased government spending, interest rate cuts, and central-bank asset purchases (quantitative easing). Stimulus can shorten recessions and revive demand, but critics warn of crowding out, delayed private adjustment, and uncertain…

Economic Shock An economic shock is an unexpected event that changes fundamental macroeconomic variables and significantly affects measures of economic performance—such as unemployment, consumption, investment, and inflation. Shocks are usually unpredictable and often stem from events outside routine market activity. They can trigger recessions or amplify business-cycle fluctuations. Key takeaways Economic shocks are sudden, often…

Understanding Economic Rent Economic rent is any payment to a factor of production that exceeds what is required to keep that factor in its current use. In other words, it is income above the minimum necessary to secure a resource’s supply. Economic rent typically arises from market imperfections—scarcity, exclusive rights, monopoly power, or information advantages—rather…

Economic Recovery Tax Act of 1981 (ERTA) Overview The Economic Recovery Tax Act of 1981 (ERTA), also known as the Kemp–Roth tax cut, was the largest tax reduction in U.S. history when enacted. Signed into law early in President Ronald Reagan’s administration, ERTA implemented broad cuts to individual and capital taxation, accelerated deductions for business…