Risk Retention is the process where an individual or a company accepts the financial risks and does not act on them before they actually occur. These risks may be too small for which paying attention before could be too early. Some other risks are so big that taking any action on them is impossible due to the costs. These all fall under the risk retention philosophy.Risk-retention helps companies avoid negligible risks while paying more interest to operations. It is a valuable strategy applicable to budgeting and prioritization. Risk acceptance is a part of a risk management policy in which small ... Read More

Accepted Quality Level (AQL) is a quality control process where a minimum threshold is set which has to be achieved by a batch of manufactured products. If there are more defects than AQL, the batch is completely rejected. AQL sets the standards of manufacturing and quality of a product and it helps companies avoid too many defects in the production of a good.The quality of goods is usually checked via sampling. A set of standards is set for the batch of products and it may vary from industry to industry. If the batch of products meets the benchmark, they are ... Read More

In Accelerated Depreciation, a capital asset loses its face value faster in an earlier year in comparison to later years. It is a process where the net value of depreciation in beginning is the highest while it gets reduced increasingly as the asset ages. This is not applicable to traditional methods such as the Straight Line Method. In the straight-line method, the rate of depreciation remains the same over the entire life of the asset.Due to accelerated depreciation, a company reports less profit as it pays more for the asset in earlier years. This profit goes up gradually as the ... Read More

Essentially a Property Market tool, Absorption Rate refers to the rate at which homes are sold in the market. It is given by homes sold divided by the total number of houses available in the market.Absorption cost shows the demand for houses in the market apart from showing whether there is an ample number of homes in a given market over a specific period of time. The reverse of absorption rate shows the required and probable time it would take to get the houses sold in the market completely. In accounting, businesses use the absorption rate to find the overhead ... Read More

Absorption cost is the total cost of manufacturing a product. It includes all types of costs associated right from the beginning and till the end of manufacturing a product. Labor, insurance, and costs of raw materials are included while calculating absorption costs. Companies also include overhead costs to calculate the final absorption cost.There are differences between absorption and variable costs. Absorption cost considers all costs, such as overhead costs and costs of raw materials even if all the products are not sold at the end of the accounting period. Absorption costing being applied to accounting, inventory in the balance sheet ... Read More

Absolute Return is simply the return generated by an investment vehicle. For example, the returns generated by bonds are their absolute return. Absolute Return is not compared to any other measure of the market or benchmarks. It is a single entity and is related to the performance of the investments in the market.Absolute Return Vs Relative ReturnAbsolute Return differs from Relative Return because, while calculating Relative Return, we have to take in consideration the returns of other investment funds that are active for a certain period of time.Relative return compares the performance of the investment against market value, category of ... Read More

Abnormal return refers to abnormally high or low returns of investment. In the case of an abnormal return, the performance of the investment or funds diverges from the anticipated and usual rate of return. The effects of abnormal return are short-term and they may be due to abnormal fundamentals or fraudulent behavior of the firm holding the funds. The estimated Rate of Return (RoR) which is risk-adjusted remains completely missing in case of abnormal returns.Abnormal return is different from Alpha and excessive returns which are due to the good performance of the investments managers. Cumulative Abnormal Returns (CAR) are a ... Read More

Ability to pay is a philosophy that asks individuals to pay tax according to their ability. This means that rich people should pay more in taxes than a poorer one. The ability to pay is based on the concept that since the value of one dollar is more for poorer individuals, they should pay less than the rich.The ability to pay encourages authorities to collect and levy more taxes to the rich as they are in a better position to pay more taxes. At the same time, since poorer people are unable to pay the same amount due to various ... Read More

Abenomics refers to the collective set of reforms undertaken by the Japanese government in 2012 when Shinzo Abe became the prime minister for the second time. The aim was to bring the Japanese economy out of the stagnation that started in the 1980s.Abenomics contained stimulus and various measures to bring a change to the gloomy economy out of deflation. The reforms were put in place to make the economy competitive and end the shortage of demand that lasted for at least two decades. Achieving inflation of 2% was also a major aim of Abenomics. Additionally, Abenomics sought to increase employment ... Read More

The bonds are usually rated on their creditworthiness and long-term yield. AAA is such a rating. It is considered the best rating any bond can get and as mentioned, only bonds with a high degree of creditworthiness and yield get this rating.Businesses also get AAA ratings but the guidelines are too tough. For example, in 2020 only Microsoft and Johnson & Johnson got AAA ratings. The AAA ratings are offered to bonds that are interpreted to achieve the obligations in time. As is obvious, for the same reason, AAA bonds never face a lack of investors' interest.Creditworthiness and yield are ... Read More