Category: Financial Terms

What Is a Proxy? A proxy is a person or document that authorizes someone to act on another’s behalf. In corporate settings, “voting by proxy” lets a shareholder cast votes on corporate matters without attending the meeting in person. Proxy arrangements ensure shareholders’ ownership interests are represented even when they cannot be physically present. Key…

Provision for Credit Losses Explained: Uses and Examples What is a Provision for Credit Losses (PCL)? A provision for credit losses (PCL) is an accounting estimate that reflects the portion of receivables a company expects will not be collected. It protects the balance sheet from overstating assets by recognizing expected credit losses up front. The…

Contract Provisions What is a contract provision? A contract provision is a stipulation within a contract, legal document, or statute that sets out an obligation, right, condition, timeframe, or requirement intended to protect the interests of one or more parties. Provisions often require action by a specific date or within a specified period. How contract…

Provident Fund: Definition and How It Works for Retirement What is a provident fund? A provident fund is a government‑mandated, government‑managed retirement savings plan commonly used in countries across Asia and Africa. Workers and their employers contribute regularly to individual benefit accounts. The fund’s purpose is to accumulate savings that provide income to workers at…

Protective Put: A Guide to Risk Management A protective put is an options strategy that acts like insurance on a long stock (or other asset) position. By buying a put option while holding the underlying asset, an investor limits downside risk while preserving upside potential. Key takeaways A protective put protects against declines in the…

Protectionism Protectionism is a set of government policies designed to limit international trade in order to protect domestic industries. Governments may use tariffs, quotas, product standards, subsidies, and other measures to make imported goods more expensive or less available, with the goal of preserving jobs, supporting local businesses, and addressing safety or quality concerns. Key…

What Is a Prospectus? A prospectus is a formal disclosure document companies use to inform potential investors about an offering of securities (for example, stocks, bonds, or mutual funds). It is part of a company’s registration filing with the U.S. Securities and Exchange Commission (SEC) and describes the offering’s terms, the issuer’s business and finances,…

Prospect Theory: What it Is and How It Works Prospect theory, developed by Amos Tversky and Daniel Kahneman, describes how people actually make choices under risk. It departs from classical expected-utility models by showing that individuals evaluate gains and losses relative to a reference point and that losses typically loom larger than equivalent gains—a phenomenon…

Proration What is proration? Proration is a corporate action used to allocate limited consideration (cash or shares) among shareholders when demand exceeds the available supply. It commonly arises during mergers and acquisitions when an acquiring company offers a mix of cash and equity and target shareholders can elect which form of payment. If more shareholders…

Proprietary Trading What is proprietary trading? Proprietary trading (or “prop trading”) is when a financial firm uses its own capital and balance sheet to trade financial instruments for its own profit, rather than executing trades on behalf of clients. Instruments can include stocks, bonds, commodities, currencies, derivatives and other complex vehicles. How it works A…

Proportional Tax A proportional tax—often called a flat tax—applies the same tax rate to all taxpayers regardless of income. Under this system, everyone pays the same percentage of their taxable income, so marginal and average tax rates are identical across income levels. How it works A single tax rate is applied to taxable income for…

Property Tax Deduction What it is State and local real estate taxes that are levied for the general public welfare can be deducted from federal income taxes if the taxpayer itemizes deductions. Deductible real property taxes include assessments on a primary residence, vacation home, land, or certain foreign property. Taxes charged for specific services (trash…

Property Tax Key takeaways Property tax is an ad valorem tax based on the assessed value of real estate (and in some jurisdictions, tangible personal property). It is the primary source of local government revenue in the U.S., funding schools, public safety, roads, libraries, and utilities. Rates and rules vary widely by state and locality;…

Understanding Property Rights: Definition and Importance Property rights are the legal entitlements that let a person or entity control, use, and transfer property. Property can be tangible (land, buildings, vehicles) or intangible (patents, copyrights, trademarks, other intellectual property). Well-defined property rights support market exchanges, investment, and efficient resource use by clarifying who may use an…

Property, Plant, and Equipment (PP&E) Definition Property, plant, and equipment (PP&E) are tangible, long-term assets a business uses in operations and that are not expected to be converted into cash within a year. Common examples include land, buildings, machinery, vehicles, and equipment. PP&E is often called fixed assets. Why PP&E Matters PP&E represents investments in…

Comprehensive Guide to Property Management: Definitions, Roles, Types, and Duties What is property management? Property management is the day-to-day oversight, maintenance, and administration of real estate by a third-party professional or company. Property managers preserve and enhance property value, handle operations that generate income, and free owners from routine responsibilities. Explore More Resources › Read…

Property Insurance: What It Is and How It Works Key takeaways * Property insurance is an umbrella term for policies that protect owners and renters against damage, theft, and liability related to a structure and its contents. * Common forms include homeowners, renters, flood, and earthquake insurance; lenders often require coverage while a mortgage is…

What is property? Property is any asset—tangible or intangible—that a person or entity legally owns and has enforceable rights to use, manage, transfer, or bequeath. Examples range from land and buildings to vehicles, bank accounts, patents, and brand identities. Property often represents economic value but can also create liabilities (for example, an owner may be…

Understanding Proof of Work (PoW) in Blockchain: Key Mechanism Explained What is Proof of Work (PoW)? Proof of Work (PoW) is a consensus mechanism used by many blockchains to validate transactions and secure the network. It requires participants (miners) to perform computationally intensive tasks to propose and confirm new blocks. The computational effort acts as…

Understanding Proof-of-Stake: How PoS Transforms Cryptocurrency Proof-of-Stake (PoS) is a consensus mechanism that replaces energy-intensive mining with a system of validators who stake cryptocurrency as collateral to secure the network. By selecting validators (often at random or by weighted stake) to validate transactions and create blocks, PoS dramatically reduces computational work and energy consumption while…

Proof of Funds (POF): What It Is, Qualifying Documents, and How to Obtain Proof of funds (POF) is documentation that verifies an individual or entity has the money available and accessible to complete a transaction. POF is commonly required for large transactions—especially real estate purchases—but also for investments, loan applications, business deals, immigration, auctions, and…

What Is a Promotion? A promotion refers to any action that raises the visibility, status, or value of a person, product, or financial instrument. In the workplace, it means advancement in rank, duties, or pay. In marketing, it refers to tactics that increase awareness or sales. In finance, promotion can describe efforts to generate interest…

Understanding Stock Promoters A stock promoter is an individual or organization that markets investment opportunities and raises capital for a company or fund. Promoters operate across markets but are most commonly associated with small-cap and penny stocks. Because promoters often work outside the strict regulatory framework applied to brokers and investment advisers, their messaging can…

Promissory Note A promissory note is a written promise by one party (the maker or promisor) to pay a specified sum to another party (the payee) either on demand or at a set future date. It is more formal than an IOU but less complex than a full loan agreement, and it can be used…

What Is Promissory Estoppel? Key Requirements and Examples Promissory estoppel is an equitable legal doctrine that allows a promise to be enforced even when a formal contract (with consideration) does not exist. It prevents a promisor from reneging on a clear promise if the promisee reasonably relied on it and suffered a detriment as a…

Projected Benefit Obligation (PBO) Definition A projected benefit obligation (PBO) is an actuarial estimate of the present value of a company’s future pension liabilities. It reflects the benefits employees have earned to date, adjusted for expected future salary increases and other assumptions about future events. Key points PBO assumes the pension plan will continue and…

Project Management Project management is the practice of organizing people, time, budget, and resources to complete a defined set of tasks and deliver a specific outcome. It coordinates the work needed to move a project from idea to delivery while managing scope, quality, risk, and stakeholder expectations. Key takeaways Five core phases: initiation, planning, execution,…

Project Finance Explained Project finance is a funding method for large, long-lived infrastructure, industrial, or public-service projects (for example, power plants, pipelines, toll roads, and telecom systems). Instead of relying on the sponsor’s balance sheet, lenders look primarily to the project’s own future cash flows and assets for repayment. This structure is commonly used in…

Progressive Tax: Definition, How It Works, Advantages, and Drawbacks Key takeaways * A progressive tax levies higher rates on higher levels of taxable income. * Tax brackets create marginal rates so taxpayers pay higher percentages only on income above each bracket threshold. * Progressive systems aim to align tax burden with ability to pay; critics…

Progress Billings: Definition, Purpose, Benefits, and Example Progress billings are invoices issued periodically during a long-term project to request payment for work completed to date. They enable contractors to receive incremental payments as milestones or percentages of work are achieved rather than waiting until project completion. Why use progress billings? Preserve client cash flow by…

Program Evaluation Review Technique (PERT) A Program Evaluation Review Technique (PERT) chart is a graphical project-management tool that maps a project’s timeline by listing all tasks (events or milestones), their durations, and the dependencies among them. PERT helps managers estimate the time and resources needed, identify the critical path, and evaluate schedule risks. Origins PERT…

Profitability Ratios Definition Profitability ratios are financial metrics that assess a company’s ability to generate profit relative to its revenue, assets, or shareholders’ equity. They help investors, managers, and analysts evaluate financial performance, operational efficiency, and the effectiveness of capital deployment. Why they matter Indicate how well management converts revenue into profit and cash. Help…

What Is the Profitability Index (PI)? The profitability index (PI) is a capital budgeting metric that compares the present value of a project’s expected future cash inflows to its initial investment. It shows how much value is created per dollar invested and helps prioritize projects when resources are limited. Key formula PI = Present Value…

Profits Interest Profits interest is an equity right in a partnership or LLC that gives a recipient a share of the entity’s future profits and appreciation without requiring an upfront capital contribution. It is commonly used to incentivize employees or service providers—especially in LLCs taxed as partnerships where traditional stock options are not available. Key…

Profit-Sharing Plan: What It Is and How It Works A profit-sharing plan is a company-sponsored program that distributes a portion of a business’s profits to employees. Payouts can be immediate cash or deferred into retirement accounts (deferred profit-sharing plans). Employers fund profit-sharing plans — employees do not contribute — and distributions are typically tied to…