Finance Questions

RAROC is a risk-adjusted framework for profitability measurement and profitability management. It is a tool for measuring risk-adjusted financial performance. And it provides a uniform view of profitability across businesses (Strategic Business Units / divisions). RAROC and related concepts such as RORAC and RARORAC are mainly used within (business lines of) banks and insurance companies. RAROC is defined as the ratio of risk-adjusted return to economic capital.

Undergraduates may get this question as feelers of their business knowledge. Insider trading describes the illegal activity of buying or selling stock based on information that is not public information. This is to prevent those with privileged information (company execs, I-bankers and lawyers) from using this information to make a tremendous amount of money unfairly.

Crossover rates have to do with the amount of earnings that are generated by two different but similar projects. The crossover rate is the point at which the two projects achieve the same net present value. In terms of investments, calculating a crossover rate between two similar securities can help an investor determine what to buy and what to sell.

Regular dividend payments are signals that a company is healthy and profitable. Also, issuing dividends can attract investors (shareholders). Finally, a company may distribute earnings to shareholders if it lacks profitable investment opportunities.

According to the classification, the claim of bond holder should be accounted first. After fulfilling all the claims of bond holder company should look after the stock holder.

In economic terms, inflation is the rise in the prices of goods and services in the given economy over a period of time. As the prices rise, each unit of the country's currency will buy fewer goods and services.

when the purchasing power of a currency go down then more money comes to the market it is called inflation.

In business, a takeover is the purchase of one company by another.

CDs are the least risky investment choice when compared to flipping, renting and bonds.

A certificate of deposit (CD) is a savings certificate with a fixed maturity date, specified fixed interest rate and can be issued in any denomination aside from minimum investment requirements. A CD restricts access to the funds until the maturity date of the investment. CDs are generally issued by commercial banks.

CDs are issued by the bank and are guaranteed by the government. So even if the bank goes bankrupt the investor's money is guaranteed to a certain extent.

Flipping and renting are subjected to market fluctuations while bonds are not insured.