Correlation: What It Means and How to Calculate It. What is correlation in analysis? Correlation is a statistical measure of the relationship between two variables. In finance, correlation is often used to measure the degree to which two assets move in relation to each other. A high degree of correlation between two assets means that … Read more
The Dividend Irrelevance Theory holds that a firm’s dividend policy does not affect the firm’s value or the shareholders’ wealth. In other words, the theory states that whether a firm pays dividends or not, and how much it pays, is irrelevant to the shareholders. The theory is based on the idea that shareholders can always … Read more
The Central Limit Theorem (CLT) is a statistical theory that states that, for a sufficiently large sample size, the distribution of sample means will be approximately normal, regardless of the shape of the underlying distribution. The CLT is an important result in statistics because it allows us to make inferences about a population based on … Read more
Statistics in Math: Definition, Types, and Importance What is data in statistics? Data in statistics is defined as information that is collected and used to analyze trends, patterns, and relationships. This information can be in the form of numeric values, text, or even images. Statistics is a branch of mathematics that deals with the collection, … Read more
EBITA, or earnings before interest, taxes, and amortization, is a financial metric that helps investors evaluate a company’s performance. EBITA excludes items that can be affected by a company’s capital structure or tax status, making it a more accurate measure of operating profitability. EBITA is calculated by adding back interest expense, income taxes, and amortization … Read more
Valuation is the process of determining the present value of an asset. The most common method of valuation is to use the asset’s market value, which is the price that the asset would fetch if it were sold on the open market. Other methods of valuation include the asset’s intrinsic value, which is the value … Read more
Negative growth is when a company’s sales, earnings, or some other metric decreases from one period to the next. This can be a quarterly or annual comparison. Negative growth can be caused by a variety of factors, ranging from macroeconomic conditions to specific company problems. When analysts talk about growth, they are usually referring to … Read more
An unqualified opinion is the most common type of opinion issued by an auditor. It means that the financial statements of the audited entity are free from material misstatement, whether due to fraud or error. In other words, the auditor has found no evidence that the financial statements are not accurate and reliable. Why would … Read more
The term idle time refers to the time during which a worker is not working but is still being paid. Idle time can be caused by a number of factors, including downtime due to a lack of work, breaks, or waiting for materials. When calculating the cost of idle time, businesses will often include the … Read more
The long-run average total cost (LRATC) definition is the average cost incurred by a firm over a period of time, usually taken to be infinite. The LRATC is calculated by dividing the total cost by the quantity of output. The LRATC provides a snapshot of a firm’s average cost over the long run and is … Read more
