A type of tax shelter product used by high net worth individuals that involves making a large paper multimillion dollar loan to a foreign party. This party is usually a company that is related to the company that is brokering out the tax shelter. After a series of asset related swaps, the individual receives a paper loss that is equivalent to the original value of the loan. This paper loss can then be used to offset real gains that the individual has earned. |||CARDS were used in 2000-2002, but the IRS has since deemed them to be illegal, arguing that taxpayers should not be allowed to benefit from losses that were not realized.Providing CARDS and other questionable tax shelter products was so lucrative that some companies based their businesses on providing them. For example, one of these companies allegedly charged $2 million to create a tax shelter for sum as large as $50 million.
A measure of the average number of days that a company takes to collect revenue after a sale has been made. A low DSO number means that it takes a company fewer days to collect its accounts receivable. A high DSO number shows that a company is selling its product to customers on credit and taking longer to collect money. Days sales outstanding is calculated as: |||Due to the high importance of cash in running a business, it is in a company's best interest to collect outstanding receivables as quickly as possible. By quickly turning sales into cash, a company has the chance to put the cash to use again - ideally, to reinvest and make more sales. The DSO can be used to determine whether a company is trying to disguise weak sales, or is generally being ineffective at bringing money in. For most businesses, DSO is looked at either quarterly or annually.
A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory (including goods that are work in progress, if applicable) into sales. Generally, the lower (shorter) the DSI the better, but it is important to note that the average DSI varies from one industry to another.Here is how the DSI is calculated: Also known as days inventory outstanding (DIO). |||This measure is one part of the cash conversion cycle, which represents the process of turning raw materials into cash. The days sales of inventory is the first stage in that process. The other two stages are days sales outstanding and days payable outstanding. The first measures how long it takes a company to receive payment on accounts receivable, while the second measures how long it takes a company to pay off its accounts payable.
1. In corporate finance, it is the amount of cash flow available to meet annual interest and principal payments on debt, including sinking fund payments. 2. In government finance, it is the amount of export earnings needed to meet annual interest and principal payments on a country's external debts. 3. In personal finance, it is a ratio used by bank loan officers in determining income property loans. This ratio should ideally be over 1. That would mean the property is generating enough income to pay its debt obligations. In general, it is calculated by: |||A DSCR of less than 1 would mean a negative cash flow. A DSCR of less than 1, say .95, would mean that there is only enough net operating income to cover 95% of annual debt payments. For example, in the context of personal finance, this would mean that the borrower would have to delve into his or her personal funds every month to keep the project afloat. Generally, lenders frown on a negative cash flow, but some allow it if the borrower has strong outside income.
In international trade, a contract specification requiring the seller to deliver goods to a named destination, usually a border location, by a predetermined time. Up to the border, the seller is responsible for all risks and expenses associated with the delivery. |||Terms used in international trade, such as delivered at frontier, outline who bears the risks and expenses of transporting goods under international transactions. A variety of terms exist for various methods of transportation. Delivered at frontier is most often used when using ground transport, such as truck or rail, to supply the goods.It's important to realize that because this is a legal term, its exact definition is much more complicated and differs by country. It is suggested that you contact an international trade lawyer before using any trade term.
A liquidity metric that looks at a company's ability to support short-term expenditures. Degree of relative liquidity is determined by looking at the total percentage of cash that a company has available on hand. The cash must be earned through regular operations and be able to be spent on expenditures and short-term debt obligations through a specific period. Companies that possess a higher degree of relative liquidity will probably have less difficulty in retrieving funds for payment purposes. |||As with all liquidity metrics, indications that a company is barely able to make short-term payments can be a sign that the company could be facing more serious financial issues in the long term. Financial distress as a result of inability to make debt payments could lead to bankruptcy.
Typically used in the insurance industry, this is when a company defers the sales costs that are associated with acquiring a new customer over the term of the insurance contract. |||Most of the sales costs arise from referral commissions to external distributors and brokers.
An efficiency ratio that measures how many days a company can operate without having to access non-current (long-term) assets. The defensive interval ratio (DIR) is calculated as:DIR = Current Assets / Daily Operational ExpensesAlso known as the "Defensive Interval Period". |||The DIR is thought by many people to be a better liquidity measure than the quick and current ratios. Because these ratios compare assets to liabilities rather than comparing assets to expenses, the DIR and current/quick ratios would give quite different results if the company had alot of expenses, but no debt.The DIR is not a replacement to the other ratios, but a complement. As with all financial analysis, a prudent investor will use a basket of different analysis when deciding on whether a company is a good investment.
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