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Financial Terms | |
Comparative Advantage |
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Definition of Comparative AdvantageComparative AdvantageA country has a comparative advantage over another country in the production of good A if to produce a unit of A it forgoes more of the production of good B than would the other country when it produces a unit of good A. Its efficiency in the production of good A relative to its efficiency in the production of good B is greater than is the case for the other country. See also absolute advantage.
Related Terms:Absolute AdvantageThe ability to produce a good or service with fewer resources than competitors. See also comparative advantage. Comparative credit analysisA method of analysis in which a firm is compared to others that have a desired Competitive AdvantageThe strategies, skills, knowledge, resources or competencies that differentiate a business from its competitors. Net advantage of refundingThe net present value of the savings from a refunding. Net advantage to leasingThe net present value of entering into a lease financing arrangement rather than Net advantage to mergingThe difference in total post- and pre-merger market value minus the cost of the merger. Absolute priorityRule in bankruptcy proceedings whereby senior creditors are required to be paid in full ![]() Absolute Right of ReturnGoods may be returned to the seller by the purchaser without restrictions. Accidental Dismemberment: (Credit Insurance)Provides additional financial security should an insured person be dismembered or lose the use of a limb as the result of an accident. activity analysisthe process of detailing the various repetitive actions that are performed in making a product or Amortization (Credit Insurance)Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity. BARRA's performance analysis (PERFAN)A method developed by BARRA, a consulting firm in Beneficiary (Credit Insurance)The person or party designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event. In the case of credit insurance, the beneficiary will always be the creditor. Best-interests-of-creditors testThe requirement that a claim holder voting against a plan of reorganization Borrower (Credit Insurance)A consumer who borrows money from a lender. Break-even analysisAn analysis of the level of sales at which a project would make zero profit. ![]() break-even analysisanalysis of the level of sales at which the company breaks even. Break-Even AnalysisAn analytical technique for studying the relationships between fixed cost, variable cost, and profits. A breakeven chart graphically depicts the nature of breakeven analysis. The breakeven point represents the volume of sales at which total costs equal total revenues (that is, profits equal zero). capital investment analysisRefers to various techniques and procedures Cluster analysisA statistical technique that identifies clusters of stocks whose returns are highly correlated Commercial Business Loan (Credit Insurance)An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes. Common-base-year analysisThe representing of accounting information over multiple years as percentages Consumer creditcredit granted by a firm to consumers for the purchase of goods or services. Also called Consumer Credit Protection ActA federal Act specifying the proportion of correlation analysisan analytical technique that uses statistical Cost-Benefit AnalysisThe calculation and comparison of the costs and benefits of a policy or project. cost-benefit analysis the analytical process of comparing therelative costs and benefits that result from a specific course ![]() cost driver analysisthe process of investigating, quantifying, Cost–volume–profit analysis (CVP)A method for understanding the relationship between revenue, cost and sales volume. CreditMoney loaned. CreditBuying or selling goods or services now with the intention of payment following at some time in CreditOne side of a journal entry, usually depicted as the right side. CreditA rating of a company's credit (ability to payback debt), usually by a third party credit agency. creditOn your bank statement, 'credit' represents funds that you have deposited into your account. The opposite of a credit is a debit. Credit analysisThe process of analyzing information on companies and bond issues in order to estimate the credit analysisProcedure to determine the likelihood a customer will pay its bills. credit bureauAn organization that provides financial institutions with credit information concerning existing or potential customers who are looking to obtain credit services. credit cardA revolving source of credit with a pre-established limit. You have to pay interest on a credit card if you have an outstanding balance. Credit CrunchA decline in the ability or willingness of banks to lend. Credit enhancementPurchase of the financial guarantee of a large insurance company to raise funds. Credit LossA loan receivable that has proven uncollectible and is written off. credit memoA record of the funds which have been credited to your account. Credit periodThe length of time for which the customer is granted credit. credit policyStandards set to determine the amount and nature of credit to extend to customers. Credit RationingRestriction of loans by lenders so that not all borrowers willing to pay the current interest rate are able to obtain loans. Credit riskThe risk that an issuer of debt securities or a borrower may default on his obligations, or that the Credit RiskFinancial and moral risk that an obligation will not be paid and a loss will result. Credit scoringA statistical technique wherein several financial characteristics are combined to form a single Credit spreadRelated:Quality spread Credit TermsConditions under which credit is extended by a lender to a borrower. Credit Unioncredit unions are community based financial co-operatives and most offer a full range of services. All are owned and controlled by members who are also shareholders. credit unions are regulated provincially and insured by a stabilization fund, deposit insurance or guarantee corporation. Crediting rateThe interest rate offered on an investment type insurance policy. CreditorLender of money. CreditorPerson or business that is owed money. Creditor (Credit Insurance)A lender or lending institution that offers financing and loans to a borrower, for the purpose of acquiring a commodity. Creditor Proof ProtectionThe creditor proof status of such things as life insurance, non-registered life insurance investments, life insurance RRSPs and life insurance RRIFs make these attractive products for high net worth individuals, professionals and business owners who may have creditor concerns. Under most circumstances the creditor proof rules of the different provincial insurance acts take priority over the federal bankruptcy rules. CreditorsPurchases of goods or services from suppliers on credit to whom the debt is not yet paid. Or a Critical Illness Insurance (Credit Insurance)Coverage that provides a lump-sum payment should you become seriously ill with a specified illness. The payment is made to your creditors to pay off your debt owing. Debt (Credit Insurance)Money, goods or services that someone is obligated to pay someone else in accordance with an expressed or implied agreement. Debt may or may not be secured. Demand line of creditA bank line of credit that enables a customer to borrow on a daily or on-demand basis. Disability Insurance (Credit Insurance)Group Insurance designed to cover monthly obligations due to a borrower being unable to work due to sickness or injury. Discriminant analysisA statistical process that links the probability of default to a specified set of financial ratios. EurocreditsIntermediate-term loans of Eurocurrencies made by banking syndicates to corporate and Evergreen creditRevolving credit without maturity. Export Credit InsuranceThe granting of insurance to cover the commercial and political risks of selling in foreign markets. Factor analysisA statistical procedure that seeks to explain a certain phenomenon, such as the return on a Failure analysisThe examination of failure incidents to identify components Federal credit agenciesAgencies of the federal government set up to supply credit to various classes of Financial Trend AnalysisProcess of analyzing financial statements of a company for any continuing relationship. Five Cs of creditFive characteristics that are used to form a judgement about a customer's creditworthiness: Foreign tax creditHome country credit against domestic income tax for foreign taxes paid on foreign Formalized Line of CreditA contractual commitment to make loans to a particular borrower up to a specified maximum during a specified period, usually one year. Full Credit PeriodThe period of trade credit given by a supplier to its customer. Full faith-and-credit obligationsThe security pledges for larger municipal bond issuers, such as states and Fundamental analysisSecurity analysis that seeks to detect misvalued securities by an analysis of the firm's Horizon analysisAn analysis of returns using total return to assess performance over some investment horizon. Horizontal analysisThe process of dividing each expense item of a given year by the same expense item in incremental analysisa process of evaluating changes that Insurance Policy (Credit Insurance)A policy under which the insurance company promises to pay a benefit of the person who is insured. Investment tax creditProportion of new capital investment that can be used to reduce a company's tax bill Investment Tax CreditA reduction in taxes offered to firms to induce them to increase investment spending. Job Loss Insurance (Credit Insurance)Coverage that can pay down your debt should you become involuntarily unemployed. The payment is made to your creditors to reduce your debt owing. Lease (Credit Insurance)Contract granting use of real estate, equipment or other fixed assets for a specified period of time in exchange for payment. The owner or a leased property is the lessor and the user the lessee. least squares regression analysisa statistical technique that investigates the association between dependent and independent variables; it determines the line of "best fit" for a set of observations by minimizing the sum of the squares Lender (Credit Insurance)Individual or firm that extends money to a borrower with the expectation of being repaid, usually with interest. Lenders create debt in the form of loans. Lenders include financial institutions, leasing companies government lending agencies and automobile dealers. Letter of credit (L/C)A form of guarantee of payment issued by a bank used to guarantee the payment of Letters of CreditA letter of credit is a guarantee of payment by a bank (issuing institution)to a third party for a specific amount of money, if certain conditions are met. Life Insurance (Credit Insurance)Group Term life insurance that pays or reduces the balance due on a loan if the borrower dies before the loan is repaid. Line of credit An informal arrangement between a bank and a customer establishing a maximum loan Line of creditAn informal arrangement between a bank and a customer establishing a maximum loan line of creditAgreement by a bank that a company may borrow at any time up to an established limit. Line of CreditAn agreement negotiated between a borrower and a lender which establishes the maximum amount against which a borrower may draw. The agreement also sets out other conditions, such as how and when money borrowed against the line of credit is to be repaid. line of creditA revolving source of credit with a pre-established limit. You access the funds only as you need them, and any amount that you pay back becomes accessible to you again. Unlike a personal loan, a line of credit permits you to write cheques and make bank machine withdrawals, and requires you to pay interest only on the funds that you actually use. Mean-variance analysisEvaluation of risky prospects based on the expected value and variance of possible outcomes. Mortgage (Credit Insurance)An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for purposes of purchasing a loan secured by a home. Mortgage Life insurance (Credit Insurance)Decreasing term life insurance that provides a death benefit amount corresponding to the decreasing amount owed on a mortgage. Multiple-discriminant analysis (MDA)Statistical technique for distinguishing between two groups on the Operating Line of CreditA bank's commitment to make loans to a particular borrower up to a specified maximum for a specified period, usually one year. Pareto analysisa method of ranking the causes of variation Pareto analysisThe 80:20 ratio that states that 20% of the variables included in an Performance attribution analysisThe decomposition of a money manager's performance results to explain Personal Line of credit (Credit Insurance)A bank's commitment to make loans to a borrower up to a specified maximum during a specific period, usually one year. personal line of credit (PLC)A revolving source of credit with a pre-established limit. You access the funds only as you need them, and any amount that you pay back becomes accessible to you again. Unlike a personal loan, a PLC permits you to write cheques and make bank machine withdrawals, and requires you to pay interest only on the funds that you actually use. Pre-existing medical condition (Credit Insurance)A medical condition that existed before you became insured. Most policies exclude benefits if the condition is related to the event that triggers a claim if occurs within a certain period (6-12 months) after you became insured. Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |