This is the total payment received in exchange for a service as well as a reward for outstanding performance. It is usually used in reference to a person’s salary or wages. Compensation includes the following: Basic pay Dearness allowance House rent allowance Leave travel allowance Overtime pay Bonus Perks, incentives, or commission Stock options or …
Post Type Archives: Glossary
Compounding
Compounding refers to the ability of money to increase exponentially over time by the repetitive additions of earnings to the principal amount. This happens because the interest amount is not withdrawn. Instead, it gets reinvested to earn additional returns. A higher compounding period leads to a higher compound interest. Here is an example for better …
Consolidate
To consolidate means to merge assets, liabilities or other financial entities into one. It also refers to consolidating the financial statements of a company. It helps companies display their cumulative assets, revenue or expenses and report them under the financial statements of one parent organisation. Consolidation is also a term that is used when the …
Credit History
You may wonder what is credit history in relation to your credit score since your score is based on your credit history. Credit history refers to all the credit-related transactions you have undertaken in the past. It captures the loans and credit cards you have taken and your repayment behavior. With a good credit history, …
Credit Line Vs Credit Limit
A credit line, also known as a line of credit, establishes a predetermined borrowing limit that you can access from a financial institution. You can borrow and repay the money up to the credit line at any point in time. You can secure the line of credit by staking collateral or leaving it unsecured. Unsecured …
Credit Scoring
Credit scoring refers to a lender’s analysis or assessment model to decide a person or enterprise’s creditworthiness. It is used to determine whether or not to lend money to an applicant. Traditional credit scoring models rely on credit scores, such as the CIBIL score or Equifax credit score. Alternative credit scoring models consider other aspects, …
Customs Duties
Customs duties, meaning the indirect taxes that a country’s customs authorities collect on the imports and exports of goods, can influence the purchase prices of goods. The amount of customs duty depends upon several factors, including the worth of the materials, their weight, dimensions and more. If this tax is based on the goods’ value, …
Debenture
A debenture is a loan or debt using which a company or the government raises funds. This capital is then used to purchase assets, build roads and more, based on the entity issuing debentures. Usually, debentures are unsecured, but you may also come across secured debentures. A common example of government-issued debentures is treasury bills …
Depreciation
Depreciation refers to the decrease in the value of an asset due to use and over time as a result of wear and tear or being outdated. It is a commonly used term in accounting as well as insurance, where depreciation is considered when calculating the value of assets like machinery, vehicles and more in …
Direct Deposit
The best way to understand what is direct deposit is to think of how you receive your salary in your bank account. This electronic transfer of funds that gives you easy access to money without a paper cheque is the exact direct deposit meaning. A direct deposit helps your account get credited without requiring you …