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What Does ‘Empirical Rule’ Mean?
What Is the Empirical Rule? The Empirical Rule, also known as the 68-95-99.7 Rule, is a concept in statistics that helps to calculate the probability of a certain event occurring. The rule states that for a normal distribution, approximately 68% of values will fall within one standard deviation of the mean, 95% of values will…
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What Does ‘Mark to Market’ Mean?
Understanding Mark to Market Mark to market (also known as “fair value accounting”) is an accounting method that values assets according to their market value as opposed to their cost. This method has been used in banking as well as financial securities since the 1980s. As a college student interested in business and finance, you…
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What Does ‘PIK’ Mean?
What Does PIK Mean? The acronym PIK stands for payment in kind. This term is commonly used in finance and business when referring to an agreement or transaction in which the issuer or obligor compensates their loan with a debt instrument, such as bonds or stocks, instead of cash. A payment in kind can also…
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What Does ‘EBITA’ Mean?
What Is EBITA? EBITA stands for Earnings Before Interest, Taxes, and Amortization. It is a measure of a company’s profitability before non-operating expenses such as taxes, interest payments, and depreciation are taken into account. It is often used as an indicator of a company’s underlying capabilities, because it provides a more accurate picture of the…
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What Does ‘W9’ Mean?
What Is a W9 Form? The W9 form is an Internal Revenue Service (IRS) form that businesses use to collect key financial information from their independent contractors. A W9 is required to be completed by anyone claiming tax exempt status from the IRS and is used for verifying an individual’s taxpayer identification number, or TIN,…
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What Does ‘Interest Coverage Ratio’ Mean?
What Is an Interest Coverage Ratio? The interest coverage ratio (ICR) is a financial metric used to measure a company’s ability to pay its interest expenses on its debt. It calculates the number of times a company’s EBIT (Earnings Before Interest and Taxes) covers its interest expense for a given period. Typically, lenders look for…
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What Does ‘Sandbagging’ Mean?
Introducing Sandbagging Sandbagging is a common business and finance practice that every college student should understand. But what exactly does it mean? Sandbagging can refer to either understating or exaggerating an estimation. In other words, it involves deliberately setting targets too low or too high to give yourself a better chance. What Are Typical Examples…
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What Does ‘Receivership’ Mean?
What Is Receivership? Receivership is a legal process wherein a designated third-party, known as a Receiver, is appointed by a court to manage the operations and assets of a business or legal entity. Receivership is typically used in situations where a company has defaulted on its financial obligations or when a company is deemed insolvent…
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What Does ‘Quick Ratio’ Mean?
What Is Quick Ratio? The quick ratio, also known as the quick asset ratio, is a liquidity measure that assesses a company’s ability to meet their short-term financial obligations. It’s calculated by taking a company’s current assets (assets that can be turned into cash within a year) and subtracting its current liabilities (debts that must…
