Category: Financial Terms

Asset Financing: Definition, How It Works, Benefits and Downsides What is asset financing? Asset financing lets a company borrow money by pledging its balance-sheet assets—such as accounts receivable, inventory, machinery, buildings, or short-term investments—as security for a loan. The lender takes a security interest in the pledged assets and can seize and sell them if…

Asset Coverage Ratio What it is The asset coverage ratio measures a company’s ability to repay its debt by liquidating assets. It helps lenders, creditors, and investors assess solvency: a higher ratio means more assets available to cover debt and generally lower credit risk. Key takeaways Shows how many times a company’s tangible assets can…

Asset Class What is an asset class? An asset class is a category of financial instruments that share similar characteristics, behave similarly in markets, and are often governed by the same rules. Grouping investments by asset class helps investors compare risk and return profiles and build diversified portfolios. Explore More Resources › Read more Government…

What is asset-based lending? Asset-based lending (ABL) is a business financing method in which a loan or line of credit is secured by the borrower’s assets—commonly accounts receivable, inventory, equipment, real estate, or marketable securities. It’s often used by small and mid-sized companies that need short-term liquidity but cannot obtain traditional unsecured credit because of…

What Is an Asset‑Based Approach? An asset‑based approach values a business by estimating its net asset value (NAV): the difference between its assets and liabilities. It can use book values from the balance sheet or adjusted values that reflect current market conditions. This approach is commonly used for private or distressed companies, liquidation analysis, and…

Asset-Backed Security (ABS) Key takeaways * An asset-backed security (ABS) is a bond-like instrument backed by a pool of income-producing assets (loans, receivables, leases). * Securitization converts illiquid assets into marketable securities, enabling issuers to raise cash and investors to gain exposure to diverse cash flows. * ABS come in tranches with different risk/return profiles;…

Asset-Backed Commercial Paper (ABCP) Asset-backed commercial paper (ABCP) is a short-term money‑market security issued by a special-purpose vehicle (SPV) or conduit and backed by a pool of assets. Maturities are typically up to 270 days. Corporations and financial institutions use ABCP to fund short‑term financing needs; investors use it as a short‑term yield alternative to…

Asset Allocation What is asset allocation? Asset allocation is the process of dividing an investment portfolio among different asset classes—primarily equities (stocks), fixed income (bonds), and cash or cash equivalents—to balance risk and return. The mix you choose should reflect your financial goals, time horizon, and tolerance for risk. Why it matters Asset allocation is…

Asset: Definition, Types, and Examples What is an asset? An asset is anything of monetary value that an individual, business, or government owns or controls and that can generate economic benefit now or in the future. Assets may produce income, appreciate in value, reduce expenses, or support operations and growth. They can be tangible (physical)…

Key Takeaways * Assessed value is the dollar amount assigned to real property for tax purposes. * It’s often calculated as a percentage of a property’s fair market value and is used to compute property taxes. * Local government assessors set and periodically update assessed values; owners can usually appeal or request a reassessment. *…

Assemble-to-Order (ATO) Overview Assemble-to-Order (ATO) is a production strategy in which standardized components are manufactured and stocked in advance, then assembled into final products only after a customer order is received. It blends aspects of make-to-stock (MTS) and make-to-order (MTO) to deliver faster fulfillment while allowing customization. How ATO works Components (modules, subassemblies) are produced…

Ask: Definition, How It Works, and How Spreads Differ Across Markets What is the ask? The ask (or offer) is the price at which a seller is willing to sell a security. It is always higher than the bid—the price a buyer is willing to pay. The difference between the ask and the bid is…

Asian Infrastructure Investment Bank (AIIB) Overview The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank that finances infrastructure and related development projects across Asia and its neighboring regions. Launched in 2016 following a proposal by China, the AIIB aims to improve social and economic outcomes by funding projects in transport, energy, telecommunications, water,…

Asian Financial Crisis Overview The Asian Financial Crisis unfolded from mid-1997 to 1998, beginning in Thailand when the government abandoned its currency peg to the U.S. dollar after depleting foreign exchange reserves defending it. The initial collapse of the Thai baht triggered rapid currency devaluations, capital flight, and financial stress across Southeast and East Asia….

Asian Development Bank Overview The Asian Development Bank (ADB) is a regional development bank that promotes economic growth, cooperation, and poverty reduction across the Asia-Pacific region. Established in 1966 and headquartered in Manila, Philippines, the ADB provides financing, technical assistance, grants, and equity investments to support sustainable and inclusive development. Explore More Resources › Read…

Asia-Pacific Economic Cooperation (APEC) What APEC is APEC is a regional economic forum of 21 members (referred to as “economies”) founded in 1989 to promote free trade, economic cooperation, and sustainable development across the Asia-Pacific region. Its core aim is to make it easier for goods, services, capital, and people to move across borders by…

Ascending Triangle What is an ascending triangle? An ascending triangle is a technical-analysis chart pattern formed by: * A horizontal resistance line drawn through at least two swing highs. * A rising support trendline drawn through at least two higher swing lows. Explore More Resources › Read more Government Exam Guru › Free Thousands of…

Ascending Channel An ascending channel is a price pattern bounded by two parallel, upward-sloping lines: a lower trend line that connects successive swing lows and an upper channel line that joins swing highs. The pattern reflects higher highs and higher lows and signals an uptrend. The opposite formation is a descending channel. How it works…

Artificial Intelligence (AI) Artificial intelligence (AI) enables machines to analyze data, learn from it, and act to achieve specific goals. It combines data, algorithms, and computing power to mimic or augment human thinking and problem‑solving. Machine learning (ML) and deep learning are key subfields that let systems improve performance from training data without explicit programming…

Articles of Incorporation: Definition, Purpose, and Key Requirements What they are Articles of incorporation (also called a corporate charter, articles of association, or certificate of incorporation) are the formal documents filed with a state government to create a corporation. Filing them legally establishes the corporation and makes basic company information a matter of public record….

Articles of Association Articles of Association are an internal corporate document that defines a company’s purpose, governance rules, and operational procedures. They function as the company’s rulebook, covering how the business is managed, how decisions are made, and how ownership is structured. Key takeaways Define the company’s name, purpose, and legal form. Specify share capital,…

Article 50 What is Article 50? Article 50 of the Treaty on European Union (part of the Lisbon Treaty) sets out the procedure for a member state to voluntarily withdraw from the European Union. Invoking Article 50 formally notifies the EU of the member state’s intention to leave and triggers negotiation of a withdrawal agreement…

Arrow’s Impossibility Theorem: Definition, Example, and Implications Arrow’s Impossibility Theorem, formulated by economist Kenneth J. Arrow, shows a fundamental limitation of ranked voting systems: no method for aggregating individual preference rankings into a single collective ordering can satisfy a small set of seemingly reasonable fairness conditions simultaneously when there are three or more options. The…

Aroon Oscillator What it is The Aroon Oscillator is a trend-following momentum indicator that measures the strength and direction of a trend by comparing the recency of recent highs and lows. It is derived from the Aroon Indicator system (Aroon Up and Aroon Down) and was developed to highlight short-term trend changes. Key points *…

Aroon Indicator Definition The Aroon indicator measures how recently price made new highs or lows to identify trend direction and strength. It consists of two lines: * Aroon Up — measures time since the most recent high. * Aroon Down — measures time since the most recent low. Readings range from 0 to 100. Values…

Arms Index (TRIN) What is the Arms Index (TRIN)? The Arms Index, commonly called TRIN (TRading INdex), is a short-term technical indicator that compares the breadth of market moves (advancing vs. declining stocks) to the corresponding volume (advancing vs. declining volume). Invented by Richard W. Arms, Jr. in 1967, TRIN is used mainly for intraday…

Arm’s Length Transaction Definition An arm’s length transaction is a business deal in which the buyer and seller act independently and in their own self-interest, without any special relationship, pressure, or collusion. Such transactions tend to produce prices and terms that reflect true market conditions. Why It Matters Ensures fair pricing and protects third parties…

Arithmetic Mean What it is The arithmetic mean (commonly called the simple average) is the sum of a set of numbers divided by the count of those numbers. Formula: * Arithmetic mean = (x1 + x2 + … + xn) / n Explore More Resources › Read more Government Exam Guru › Free Thousands of…

Arc Elasticity Key takeaways Arc elasticity measures the responsiveness of one variable to another between two specific points using the midpoint method. It is commonly used to estimate how quantity demanded responds to a change in price when the change is large. The midpoint (arc) formula gives the same elasticity regardless of which point is…

Arbitration: What It Is and How It Works Arbitration is a formal dispute-resolution process for conflicts involving FINRA‑registered brokers and their clients or disputes between brokers. It provides a final, binding decision by an arbitration panel and is distinct from mediation (which is voluntary and nonbinding unless both sides agree) and from filing an investor…

Arbitrageur Definition An arbitrageur is an investor who seeks to profit from market inefficiencies—most commonly by exploiting price differences for the same asset across markets or by trading around corporate events such as mergers and acquisitions. While some arbitrage strategies are viewed as low-risk, arbitrage trading carries real risks and requires careful analysis, fast execution,…

Arbitrage Pricing Theory (APT) Definition Arbitrage Pricing Theory (APT) is a multi-factor model for estimating an asset’s expected return. It links an asset’s return to a linear combination of several macroeconomic or market factors that capture sources of systematic risk. Explore More Resources › Read more Government Exam Guru › Free Thousands of Mock Test…

What is arbitrage? Arbitrage is the practice of profiting from temporary price differences of the same or equivalent assets across different markets or instruments. By buying where the price is lower and simultaneously selling where it is higher, an arbitrageur captures the price gap. In theory these trades are risk-free, but in practice they are…

The Arab League: Purpose, Structure, History, and Challenges Key facts * Official name: League of Arab States (commonly the Arab League). * Membership: 22 member states and four observer states (including Brazil, Eritrea, India, Venezuela). * Headquarters: Cairo, Egypt. * Founded: 1945; charter (Pact of the League of Arab States) defines structure and goals. *…

Aptitude Test An aptitude test evaluates a person’s natural ability to learn or perform tasks in a specific area. Unlike achievement tests that measure what you already know, aptitude tests aim to predict how well you are likely to perform in a role, field of study, or type of work based on underlying strengths and…