![Funds Transfer Pricing | Banks [Video]](https://video.ednadigitalmarketing.com/wp-content/uploads/2021/09/mp_2317_0_0jpg.jpg)
Banks have a lot of different business units, and management would like to be able to evaluate each business unit as an independent profit center. This would allow the bank, for example, to compare the performance of its residential mortgage unit to its credit card unit. But there’s a problem. The bank’s treasury department manages the liability side of the balance sheet and therefore incurs interest expense, while the bank’s business units make loans that generate interest income.Thus, how do you evaluate the profit of the treasury department if it has no interest income? And how do you evaluate the profit of a business unit (e.g., commercial lending) if that unit incurs no interest expense? This is where funds transfer pricing comes into play. Funds transfer pricing is the process of allocating the cost of funds (interest expense) to business units and allocating interest income (from loans, credit cards, etc.) to the treasury department. This permits each business unit to be treated as an independent profit center. To determine the cost of funds for different business units, the treasury department would create a cost of funds curve (FTP curve) that represents the current costs of raising funds. A higher cost of funds would be assigned to business units that have riskier products.Funds transfer pricing is thus a mechanism for allocating interest income and expense so that each business unit can be evaluated for its net interest margin.The allocation of interest expense and interest income to business units is purely for internal use and performance evaluation; it doesn’t affect the financial statements reported to investors.— Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education accessible to all people.— SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS: • A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING• A 44-PAGE GUIDE TO U.S. TAXATION• A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS• MANY MORE FREE PDF GUIDES* http://eepurl.com/dIaa5z— HIRE MICHAEL MCLAUGHLIN, PHD, CPA * https://michaelmclaughlin.com/hire-me — GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT * https://edspira.thinkific.com — LISTEN TO THE SCHEME PODCAST * Apple Podcasts: https://podcasts.apple.com/us/podcast/scheme/id1522352725 * Spotify: https://open.spotify.com/show/4WaNTqVFxISHlgcSWNT1kc * Website: https://www.edspira.com/podcast-2/ — GET TAX TIPS ON TIKTOK * https://www.tiktok.com/@prof_mclaughlin — ACCESS INDEX OF VIDEOS * https://www.edspira.com/index — CONNECT WITH EDSPIRA * Facebook: https://www.facebook.com/Edspira * Instagram: https://www.instagram.com/edspiradotcom * LinkedIn: https://www.linkedin.com/company/edspira — CONNECT WITH MICHAEL * Twitter: https://www.twitter.com/Prof_McLaughlin * LinkedIn: https://www.linkedin.com/in/prof-michael-mclaughlin — ABOUT EDSPIRA AND ITS CREATOR * https://www.edspira.com/about/
![Join AICPA & CIMA Women’s Global Leadership Summit- Live online [Video]](https://video.ednadigitalmarketing.com/wp-content/uploads/2021/09/mp_2311_0_0jpg.jpg)
Join AICPA & CIMA Women’s Global Leadership Summit- Live onlineJoin hundreds of accounting and finance professionals online who are committed to creating an inclusive and equal profession, just like you.#AICPAwgl
![DuPont ROE Analysis – Meaning, Formula, Calculation & Interpretations [Video]](https://video.ednadigitalmarketing.com/wp-content/uploads/2021/09/mp_2298_0_0jpg.jpg)
This tutorial will walk you through the DuPont ROE concept from scratch, including the formula, step-by-step calculations, and interpretation. Following that, we will use the Colgate Case Study to calculate and interpret the DuPont ROE in Excel. You can download the Colgate DuPont ROE template from this link – https://www.wallstreetmojo.com/ratio-analysis-template/What is DuPont ROE?——————————————–The DuPont Formula, developed by the DuPont Corporation in 1920, divides Return on Equity (ROE) into three parts: Profit Margin, Total Asset Turnover, and Leverage Factor. Investors and financial analysts widely use it to determine how a firm generates its return on shareholders’ equity.Formula——————————————–DuPont ROE Formula = Profit Margin * Total Asset Turnover * Leverage FactorUses——————————————— DuPont ROE helps investors determine how effectively a firm uses its resources and how leveraged it is.- The correlation between net income and shareholders’ equity is clearly highlighted by DuPont ROE. For more details, you can refer to our article – https://www.wallstreetmojo.com/dupont-formula-roe/Connect with us! YouTube https://www.youtube.com/channel/UChlNXSK2tC9SJ2Fhhb2kOUwLinkedIn https://www.linkedin.com/company/wallstreetmojo/mycompany/Facebook https://www.facebook.com/wallstreetmojoInstagram https://www.instagram.com/wallstreetmojoofficial/?utm_medium=copy_linkTwitter https://twitter.com/wallstreetmojo
![Tax Planning Strategies for Businesses [Video]](https://video.ednadigitalmarketing.com/wp-content/uploads/2021/09/mp_2244_0_0jpg.jpg)
Here’s what it means for a business to engage in good tax planning:Avoid income recognition by generating tax-exempt income.Defer income recognition by postponing the sale of assets, doing a 1031 exchange.Maximize deductions by keeping receipts for business meals, using a portion of your home exclusively for business (home office deduction).Accelerate deductions by using § 179 expensing, bonus depreciation, cost segregation.Maximize tax credits by hiring individuals who face obstacles finding a job (work opportunity tax credit). You can also reduce your effective tax rate by:• Shifting income from high-tax jurisdictions to low-tax jurisdictions • Shifting income from high-bracket taxpayers to low-bracket taxpayers• Shifting income from high-bracket tax years to low-bracket tax years• Converting ordinary income to capital gains• And avoiding double taxation— Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education accessible to all people. — SUBSCRIBE FOR FREE PDF GUIDES TO THE FINANCIAL STATEMENTS, MANAGERIAL ACCOUNTING, TAX, AND MORE* http://eepurl.com/dIaa5z — HIRE MICHAEL MCLAUGHLIN, PHD, CPA* https://michaelmclaughlin.com/hire-me— GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT* https://edspira.thinkific.com—LISTEN TO THE SCHEME PODCAST * Apple Podcasts: https://podcasts.apple.com/us/podcast/scheme/id1522352725* Spotify: https://open.spotify.com/show/4WaNTqVFxISHlgcSWNT1kc* Website: https://www.edspira.com/podcast-2/—GET TAX TIPS ON TIKTOK* https://www.tiktok.com/@prof_mclaughlin—ACCESS INDEX OF VIDEOS* https://www.edspira.com/index—CONNECT WITH EDSPIRA * Facebook: https://www.facebook.com/Edspira* Instagram: https://www.instagram.com/edspiradotcom* LinkedIn: https://www.linkedin.com/company/edspira—CONNECT WITH MICHAEL * Twitter: https://www.twitter.com/Prof_McLaughlin* LinkedIn: https://www.linkedin.com/in/prof-michael-mclaughlin—ABOUT EDSPIRA AND ITS CREATOR* https://www.edspira.com/about/
![Return on Owners Equity – Meaning, Formula, Calculation & Interpretations [Video]](https://video.ednadigitalmarketing.com/wp-content/uploads/2021/09/mp_2232_0_0jpg.jpg)
This is a comprehensive tutorial on Return on Owners Equity. You will learn precisely what Return on Owners Equity is, how to calculate it, and how to interpret the results. Using the Colgate Case Study, we will also go over how to compute the Return on Owners Equity in Excel.You can download the Colgate Return on Owners Equity template from this link – https://www.wallstreetmojo.com/ratio-analysis-template/What is Return on Owners Equity?——————————————–Return on Owners Equity is a profitability indicator that compares a company’s profits to its owner’s equity. Moreover, the return on owner’s equity is calculated solely on the common shareholder’s equity. Since preferred dividends and minority interests constitute a priority claim, they are subtracted from Net Income.Formula——————————————–Return on Owners Equity Formula = Net Income (after preferred dividends and minority interest) / Common Shareholder’s Equity Interpretation——————————————— Because common shareholder’s equity is a year-end number, some analysts prefer to use average shareholder’s equity (average of beginning and year-end). – ROE can be viewed as a profitability ratio from the perspective of a shareholder. This shows how much profit is earned through shareholder investments rather than the company’s overall asset investment.- To have a better view of the company’s progress, ROE should be examined over a long period of time (5 to 10 years). Shareholders do not benefit directly from higher ROE. A higher ROE equals a higher stock price.Connect with us! YouTube https://www.youtube.com/channel/UChlNXSK2tC9SJ2Fhhb2kOUwLinkedIn https://www.linkedin.com/company/wallstreetmojo/mycompany/Facebook https://www.facebook.com/wallstreetmojoInstagram https://www.instagram.com/wallstreetmojoofficial/?utm_medium=copy_linkTwitter https://twitter.com/wallstreetmojo
![Tax Loss Harvesting for Crypto [Video]](https://video.ednadigitalmarketing.com/wp-content/uploads/2021/09/mp_2176_0_0jpg.jpg)
If you own cryptocurrency and its value declines, you can sell it to book a tax loss, and then repurchase that same cryptocurrency later. Thus, you get a tax loss for the decline in your crypto while staying invested in that crypto. You can’t do this with stocks. If you sell a stock at a loss, you have to wait at least 31 days before repurchasing that stock. Otherwise the IRS treats it as a wash sale and you can’t deduct the loss.But the wash sale rules don’t apply to cryptocurrency because crypto is property, not stock.You can sell crypto to book a loss and then repurchase that same crypto. Now you don’t want to repurchase the crypto 5 seconds after you sell it, or the IRS could categorize this as a sham transaction and disallow the loss. You should wait at least a day if you don’t want problems with the IRS.— Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education accessible to all people. — SUBSCRIBE FOR FREE PDF GUIDES TO THE FINANCIAL STATEMENTS, MANAGERIAL ACCOUNTING, TAX, AND MORE* http://eepurl.com/dIaa5z — HIRE MICHAEL MCLAUGHLIN, PHD, CPA* https://michaelmclaughlin.com/hire-me— GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT* https://edspira.thinkific.com—LISTEN TO THE SCHEME PODCAST * Apple Podcasts: https://podcasts.apple.com/us/podcast/scheme/id1522352725* Spotify: https://open.spotify.com/show/4WaNTqVFxISHlgcSWNT1kc* Website: https://www.edspira.com/podcast-2/—GET TAX TIPS ON TIKTOK* https://www.tiktok.com/@prof_mclaughlin—ACCESS INDEX OF VIDEOS* https://www.edspira.com/index—CONNECT WITH EDSPIRA * Facebook: https://www.facebook.com/Edspira* Instagram: https://www.instagram.com/edspiradotcom* LinkedIn: https://www.linkedin.com/company/edspira—CONNECT WITH MICHAEL * Twitter: https://www.twitter.com/Prof_McLaughlin* LinkedIn: https://www.linkedin.com/in/prof-michael-mclaughlin—ABOUT EDSPIRA AND ITS CREATOR* https://www.edspira.com/about/
![Value-at-Risk Explained [Video]](https://video.ednadigitalmarketing.com/wp-content/uploads/2021/09/mp_2123_0_0jpg.jpg)
The 2008 financial crisis showed banks that a liquidity crisis could have catastrophic results, possibly resulting in the bank’s failure. Not surprisingly, banks now take great interest in assessing liquidity risk. One way to measure liquidity risk is value-at-risk (VaR).VaR measures the maximum potential loss in the value of a financial instrument over a period of time (called the “VaR time horizon”) for a certain confidence level. For example, let’s say a bank paid $940 for a corporate bond with a face value of $1,000. The value of this bond will fluctuate on a daily basis as interest rates change. But what if you want to know the maximum loss the bank could expect to have on the bond in the next 6 months, with a 90% confidence level? Let’s say you perform an analysis and find that the VaR for the next 6 months at a 90% confidence level is $200. This means the maximum expected loss is $200 in the next 6 months, but there is a 10% chance that the maximum loss will turn out to be higher than $200.You can estimate the VaR using historical returns or Monte Carlo simulation.We can apply the same concepts behind VaR to examine the effects of risk factors, such as changes in interest rates or currency exchange rates, on the bank’s economic value of equity (EVE) and net interest income (NII). • Equity-at-risk is the maximum decrease in the bank’s EVE for a given time period and confidence interval• Earnings-at-risk is the maximum decrease in the bank’s NII for a given time period and confidence interval— Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education accessible to all people. — SUBSCRIBE FOR FREE PDF GUIDES TO THE FINANCIAL STATEMENTS, MANAGERIAL ACCOUNTING, TAX, AND MORE* http://eepurl.com/dIaa5z — HIRE MICHAEL MCLAUGHLIN, PHD, CPA* https://michaelmclaughlin.com/hire-me— GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT* https://edspira.thinkific.com—LISTEN TO THE SCHEME PODCAST * Apple Podcasts: https://podcasts.apple.com/us/podcast/scheme/id1522352725* Spotify: https://open.spotify.com/show/4WaNTqVFxISHlgcSWNT1kc* Website: https://www.edspira.com/podcast-2/—GET TAX TIPS ON TIKTOK* https://www.tiktok.com/@prof_mclaughlin—ACCESS INDEX OF VIDEOS* https://www.edspira.com/index—CONNECT WITH EDSPIRA * Facebook: https://www.facebook.com/Edspira* Instagram: https://www.instagram.com/edspiradotcom* LinkedIn: https://www.linkedin.com/company/edspira—CONNECT WITH MICHAEL * Twitter: https://www.twitter.com/Prof_McLaughlin* LinkedIn: https://www.linkedin.com/in/prof-michael-mclaughlin—ABOUT EDSPIRA AND ITS CREATOR* https://www.edspira.com/about/
![Return on Equity (ROE) – Meaning, Formula, Calculation & Interpretations [Video]](https://video.ednadigitalmarketing.com/wp-content/uploads/2021/09/mp_2120_0_0jpg.jpg)
This in-depth Return on Equity (ROE) tutorial explains everything there is to know about ROE, from its definition to its formula, calculations, and interpretations. It also uses the Colgate Case Study to explain how to calculate Return on Equity in Excel.You can download the Colgate Return on Equity template from this link – https://www.wallstreetmojo.com/ratio-analysis-template/What is Return on Equity? (also known as Return on Total Equity)——————————————–Return on Equity is a profitability indicator that compares a company’s profits to the value of its shareholders’ equity. Formula——————————————–Return on Equity Formula = Net Income /Shareholder’s Equity Uses——————————————— The Return on Total Equity is useful for comparing the performance of businesses in the same industry.- It also helps measure the management’s potential to generate income from the available equity. For more details, you can refer to our article – https://www.wallstreetmojo.com/return-on-equity-roe/ Connect with us! YouTube https://www.youtube.com/channel/UChlNXSK2tC9SJ2Fhhb2kOUwLinkedIn https://www.linkedin.com/company/wallstreetmojo/mycompany/Facebook https://www.facebook.com/wallstreetmojoInstagram https://www.instagram.com/wallstreetmojoofficial/?utm_medium=copy_linkTwitter https://twitter.com/wallstreetmojo
![The Repo Market Explained [Video]](https://video.ednadigitalmarketing.com/wp-content/uploads/2021/09/mp_2103_0_0jpg.jpg)
While banks can raise funds from deposits and securitizations, they can also access short-term funds through the repo market. In the repo market, organizations sell securities with an agreement to repurchase them at a higher price in the future (in many cases, they agree to repurchase the securities the next day).The seller of the securities is known as the repo side, whereas the buyer of the securities is known as the reverse repo side.The repo side is essentially executing a secured borrowing, while the reverse repo side is lending funds on a short-term basis. The repo market is usually highly liquid and the cost of borrowing is low. This makes it a popular way to raise short-term funds. The repo term can be for a single trading day or multiple days; in some cases, it doesn’t have a set term.Single trading day = overnight repoMultiple trading days= term repoNo set term = open repoThus, if a bank has securities (e.g., Treasury bills) but it needs cash today, it can sell the securities with an agreement to repurchase them the next day. The repo side (the borrower) remains the owner of the security and gets any coupon payments or dividends attributed to the security. The reverse repo side (the lender) profits by selling the securities back to the repo side at a higher price. The difference between the selling price and the repurchase price is implicit interest:repurchase price – selling price = interestThe repurchase price (and hence the interest) is determined using the repo rate. If the repo side can’t come up with the funds to execute the purchase, the reverse repo side can take possession of the securities and liquidate them to ensure repayment. However, there is a risk the securities will have declined in value and the reverse repo side won’t be able to recover the amount they lent. For this reason, the reverse repo side won’t lend the full amount of the securities’ value. The difference between the value of the securities and the amount of cash lent is called a haircut:cash lent – value of security = haircutThe repo market is used by banks, mutual funds, hedge funds, pension funds, etc. In the U.S., the repo market is also used by the Federal Reserve as part of its open market operations.— Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education accessible to all people. — SUBSCRIBE FOR FREE PDF GUIDES TO THE FINANCIAL STATEMENTS, MANAGERIAL ACCOUNTING, TAX, AND MORE* http://eepurl.com/dIaa5z — HIRE MICHAEL MCLAUGHLIN, PHD, CPA* https://michaelmclaughlin.com/hire-me— GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT* https://edspira.thinkific.com—LISTEN TO THE SCHEME PODCAST * Apple Podcasts: https://podcasts.apple.com/us/podcast/scheme/id1522352725* Spotify: https://open.spotify.com/show/4WaNTqVFxISHlgcSWNT1kc* Website: https://www.edspira.com/podcast-2/—GET TAX TIPS ON TIKTOK* https://www.tiktok.com/@prof_mclaughlin—ACCESS INDEX OF VIDEOS* https://www.edspira.com/index—CONNECT WITH EDSPIRA * Facebook: https://www.facebook.com/Edspira* Instagram: https://www.instagram.com/edspiradotcom* LinkedIn: https://www.linkedin.com/company/edspira—CONNECT WITH MICHAEL * Twitter: https://www.twitter.com/Prof_McLaughlin* LinkedIn: https://www.linkedin.com/in/prof-michael-mclaughlin—ABOUT EDSPIRA AND ITS CREATOR* https://www.edspira.com/about/
![Return on Assets (ROA) – Meaning, Formula, Calculation & Interpretations [Video]](https://video.ednadigitalmarketing.com/wp-content/uploads/2021/09/mp_2098_0_0jpg.jpg)
In this step-by-step tutorial, we will cover everything you need to know about Return on Assets (also known as Return on Total Assets), including its meaning to its formula, calculations, and interpretations. This tutorial also demonstrates how to calculate Return on Total Assets in Excel using the Colgate Case Study.You can download the Colgate Return on Assets template from this link – https://www.wallstreetmojo.com/ratio-analysis-template/What is Return on Assets?——————————————–Return on assets (ROTA) is a profitability indicator that analyzes how well a company manages its assets to generate profits during a given period. Formula——————————————–Return on Assets Formula = Operating Profit (EBIT) /Average Total Assets Uses——————————————— A higher return on Total Assets ratio is considered more favorable to stakeholders or investors since it shows that the company is managing its assets more effectively in order to earn or produce more profit or revenue.- This ratio is often utilized when comparing organizations in the same industry because assets are employed differently in different industries. For more details, you can refer to our article – https://www.wallstreetmojo.com/return-on-total-assets-formula/Connect with us! YouTube https://www.youtube.com/channel/UChlNXSK2tC9SJ2Fhhb2kOUwLinkedIn https://www.linkedin.com/company/wallstreetmojo/mycompany/Facebook https://www.facebook.com/wallstreetmojoInstagram https://www.instagram.com/wallstreetmojoofficial/?utm_medium=copy_linkTwitter https://twitter.com/wallstreetmojo
![Accounting Principles Definition [Video]](https://video.ednadigitalmarketing.com/wp-content/uploads/2021/09/mp_2090_0_investing185bfc2b8fc9e77c005143f183jpg.jpg)
Accounting principles are the rules and guidelines that companies must follow when reporting financial data.
![Collateralized Mortgage Obligations and Collateralized Debt Obligations [Video]](https://video.ednadigitalmarketing.com/wp-content/uploads/2021/09/mp_2073_0_0jpg.jpg)
A mortgage-backed security (or an asset-backed security) can be divided into different tranches so investors can invest according to their risk appetite. When this is done with mortgages it’s called a collateralized mortgage obligation (CMO). When this is done with other types of debt (student loans, corporate debt, auto loans, etc.) it’s called a collateralized debt obligation (CDO). Each tranche has different schedules for the return of principal, coupon rates, and the allocation of prepayment. If you’re concerned about default, you would invest in a tranche with a higher repayment priority. The Z-tranche (or Z-bond) is the riskiest because it receives cash flows last. The CMO/CDO structure generally results in more predictable cash flows for investors because they can choose a tranche based on their desired level of risk.Here’s an example of how this works:1. A loan originator, such as a bank, makes loans2. The loan originator sells the loans to a special purpose entity (SPE), which is a separate entity (the SPE is usually set up as a trust)3. The SPE then sells debt securities (notes or bonds, called “investor certificates”) to investors. The cash inflows these investors will receive from the debt securities come from the cash inflows of the underlying assets (in this case, loans)4. The debt securities are classified into various tranches based on (a) repayment priority and (b) credit risk (a senior tranche has a higher repayment priority and less risk). A security that is structured in tranches is a “multi-class” ABS (as opposed to a “single-class” ABS where all investors have the same claim on the underlying pool of assets) 5. A ratings agency assigns a rating to the notes/bonds based on (a) the quality of the underlying assets, (b) the securitization structure, and (c) the result of stress tests6. The loans are usually serviced by a subsidiary of the loan originator. The subsidiary collects payments from the borrowers on behalf of the SPE in exchange for a fee— Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education accessible to all people. — SUBSCRIBE FOR FREE PDF GUIDES TO THE FINANCIAL STATEMENTS, MANAGERIAL ACCOUNTING, TAX, AND MORE* http://eepurl.com/dIaa5z — HIRE MICHAEL MCLAUGHLIN, PHD, CPA* https://michaelmclaughlin.com/hire-me— GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT* https://edspira.thinkific.com—LISTEN TO THE SCHEME PODCAST * Apple Podcasts: https://podcasts.apple.com/us/podcast/scheme/id1522352725* Spotify: https://open.spotify.com/show/4WaNTqVFxISHlgcSWNT1kc* Website: https://www.edspira.com/podcast-2/—GET TAX TIPS ON TIKTOK* https://www.tiktok.com/@prof_mclaughlin—ACCESS INDEX OF VIDEOS* https://www.edspira.com/index—CONNECT WITH EDSPIRA * Facebook: https://www.facebook.com/Edspira* Instagram: https://www.instagram.com/edspiradotcom* LinkedIn: https://www.linkedin.com/company/edspira—CONNECT WITH MICHAEL * Twitter: https://www.twitter.com/Prof_McLaughlin* LinkedIn: https://www.linkedin.com/in/prof-michael-mclaughlin—ABOUT EDSPIRA AND ITS CREATOR* https://www.edspira.com/about/