Working capital management is the process of monitoring and optimizing a company’s short-term assets and liabilities to ensure it can meet its operational needs and financial obligations. It focuses on maintaining a balance between current assets, such as cash and receivables, and current liabilities, such as accounts payable and short-term debt.
The working capital ratio, also known as the current ratio, is a financial metric that measures a company’s ability to cover its short-term liabilities with its short-term assets. It is calculated by dividing current assets by current liabilities. A ratio greater than 1 indicates that a company has more assets than liabilities, signaling good liquidity and financial health.
The XIRR method is a calculation technique used to determine the internal rate of return (IRR) for cash flows that occur at irregular intervals.
Yield refers to the return on investment or profit generated by an investment. It is a measure of the income earned on an investment relative to the amount invested.
The yield curve is a graphical representation that shows the relationship between interest rates and the maturity dates of debt securities, typically government bonds. It illustrates how the yield (return) on bonds changes as the time to maturity increases. The curve can take different shapes—normal, inverted, or flat—each providing insights into market expectations and economic conditions.
Yield management, also known as revenue management, is a dynamic pricing strategy used to maximize revenue by adjusting prices based on demand, customer behavior, and market conditions. This approach is commonly used in industries with fixed capacities, such as airlines, hotels, and event management, where it helps optimize the balance between price and volume sold.
Zero-based budgeting (ZBB) is a budgeting approach where every expense must be justified for each new budgeting period, starting from a "zero base." Unlike traditional budgeting methods that adjust previous budgets incrementally, ZBB requires a detailed review of all expenditures to ensure they align with current goals and priorities.
A zero-sum game is a concept from game theory where one participant’s gain is exactly balanced by another participant’s loss. In such scenarios, the total benefit or loss remains constant, and the success of one party directly comes at the expense of another. Zero-sum games are often used to describe competitive situations in economics, business, or politics.
A zombie company refers to a company that continues to operate even though it is insolvent or facing significant financial distress. These companies are typically unable to generate enough revenue to cover their debts and ongoing expenses, yet they somehow manage to keep operating.
