Concept
Capital reserves are funds set aside by a company from its profits, not intended for distribution as dividends, but rather to strengthen the financial stability and support future growth or unforeseen liabilities. These reserves are often used for purposes such as funding expansion projects, absorbing unexpected losses, or repurchasing shares.
Relevant Degrees
Concept
Retained earnings are the cumulative profits a company has reinvested in the business rather than distributing to shareholders as dividends. They reflect the company's ability to generate profit and reinvest in growth, impacting its financial health and future potential.
Concept
Shareholder equity represents the net value of a company, calculated as total assets minus total liabilities, and reflects the residual interest of shareholders in the company's assets after debts are settled. It is a crucial indicator of a company's financial health and is used to assess its long-term viability and capacity to generate returns for investors.
Concept
Financial stability refers to a condition in which the financial system, comprising banks, financial markets, and other financial institutions, operates efficiently and is capable of withstanding shocks without significant disruption. It is essential for sustainable economic growth, as instability can lead to crises that have widespread negative impacts on economies and societies.
Concept
Dividend policy is a company's approach to distributing profits back to its shareholders, which can signal financial health and influence stock prices. It involves balancing the needs for reinvestment in growth opportunities with providing returns to shareholders, often reflecting management's confidence in future earnings potential.
Concept
A balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time, detailing its assets, liabilities, and shareholders' equity. It is crucial for assessing the financial health, liquidity, and capital structure of a business, allowing stakeholders to make informed decisions.
Concept
Corporate finance involves the financial activities related to running a corporation, with a primary goal of maximizing shareholder value through long-term and short-term financial planning and the implementation of various strategies. It encompasses decisions regarding capital investment, financing, dividends, and risk management to ensure the efficient allocation of resources and optimal financial performance.
Concept
Risk management involves identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. It is essential for ensuring that an organization can achieve its objectives while safeguarding its assets and reputation against potential threats.
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Concept
Loss Given Default (LGD) is a crucial metric in credit risk management that estimates the amount of loss a lender incurs when a borrower defaults on a loan, expressed as a percentage of total exposure. It is vital for calculating expected losses and setting aside capital reserves, influencing both risk assessment and pricing strategies in lending institutions.
Concept
Perpetual bonds are a type of fixed-income security with no maturity date, providing issuers with permanent capital and offering investors regular interest payments indefinitely. They are often used by financial institutions to bolster capital reserves, but carry the risk of interest rate changes and issuer default, as the principal is never repaid.
Concept
Additional Tier 1 Capital (AT1) is a form of contingent convertible bonds that banks use to bolster their capital reserves, providing a buffer to absorb losses and maintain financial stability during times of stress. These instruments are high-risk, high-yield securities that can be converted into equity or written down when a bank's capital falls below a certain threshold, thus protecting depositors and the financial system.
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