Category: Financial Terms

Equity Co-Investment An equity co-investment is a minority equity stake that an outside investor (usually an institutional investor or a high‑net‑worth individual) makes alongside a private equity (PE) or venture capital (VC) firm in a portfolio company. Co-investors typically pay lower or reduced fees compared with investing through a commingled PE fund, but they accept…

Equity Capital Market (ECM): Overview Equity capital markets (ECMs) are the parts of the capital markets where companies raise equity and where equity instruments are traded. ECM encompasses the issuance, distribution, and trading of shares—covering both primary activities (new equity issues) and secondary activities (trading existing equity and related instruments). Key participants: * Issuers (companies)…

Equity Accounting: A Clear Overview Key takeaways Equity accounting (the equity method) records an investor’s share of an investee’s profits or losses on the investor’s income statement and adjusts the carrying amount of the investment on the balance sheet. It is typically applied when the investor has significant influence over the investee—commonly presumed at 20–50%…

Equity: Meaning, How It Works, and How to Calculate It What is equity? Equity is the residual value of an asset or investment after subtracting any associated debt. In finance, it most commonly refers to ownership interest: – For a company: shareholders’ (or owners’) equity = total assets − total liabilities. – For a homeowner:…

Equitable Relief: How It Works Equitable relief is a court-ordered remedy that requires a party to take—or stop—specific actions when monetary damages would not adequately remedy a wrong. It is commonly used in breaches of contract, intellectual property disputes, and other situations where restoring the parties to a fair position requires more than money. Key…

Equilibrium Quantity Equilibrium quantity is the amount of a good or service bought and sold when the market is in balance: quantity supplied equals quantity demanded. At this point, there is no persistent shortage or surplus, and the corresponding price is the equilibrium price. How it works Supply and demand are plotted with price on…

Equilibrium Definition Equilibrium is the state in which market supply and demand balance each other so that prices become stable. When supply equals demand at a given price, there is no tendency for price to change — that price is the equilibrium price and the associated quantity is the equilibrium quantity. Key takeaways Equilibrium occurs…

Equation of Exchange The equation of exchange is an accounting identity that links the money supply, the velocity of money, the price level, and real economic activity. It formalizes the idea that the total money changing hands in an economy equals the total nominal value of goods and services exchanged. Key takeaways The basic identity…

Equated Monthly Installment (EMI) What is an EMI? An Equated Monthly Installment (EMI) is a fixed monthly payment that a borrower makes to repay a loan over a pre‑set term. Each EMI covers both interest and principal so the loan is fully repaid by the end of the term. EMIs are common for mortgages, auto…

Equal Weight Investing Definition Equal-weight investing assigns the same importance to each stock in a portfolio or index regardless of company size. In an equal-weight index or fund, every constituent represents an identical percentage of the portfolio, so small-cap constituents count as much as the largest companies when measuring overall performance. How it differs from…

Equal Employment Opportunity Commission (EEOC) The Equal Employment Opportunity Commission (EEOC) is the federal agency charged with enforcing U.S. laws that prohibit workplace discrimination. It investigates charges of discrimination, provides education and outreach to prevent discrimination, and can seek remedies—including mediation, damages, and lawsuits—when violations occur. What the EEOC does Enforces federal laws that make…

Equal Credit Opportunity Act (ECOA) The Equal Credit Opportunity Act (ECOA) is a federal law that prohibits discrimination in credit transactions. Enacted in 1974 and implemented through Regulation B, ECOA requires creditors to evaluate applicants only on factors related to creditworthiness and ensures equal access to credit for individuals and businesses. Key takeaways ECOA bans…

Environmental, Social, and Governance (ESG) Investing: What It Is and How It Works Key takeaways ESG investing evaluates companies on environmental, social, and governance criteria in addition to financial performance. Investors use ESG screens, ratings, and themed funds (ETFs, mutual funds, robo-advisor portfolios) to align capital with values or risk preferences. ESG analysis can highlight…

Environmental Protection Agency (EPA): Mission, Regulations, and Impact Overview The Environmental Protection Agency (EPA) is a U.S. federal agency charged with protecting human health and the environment. It develops and enforces national standards for air, water, land, and chemical safety; conducts research; provides grants and technical assistance; and runs public-facing programs to promote energy efficiency…

Environmental Economics: Definitions, Approaches, and Key Issues Environmental economics studies how societies allocate and manage scarce natural resources while accounting for environmental impacts. It evaluates the costs and benefits of using, conserving, and restoring environmental goods—such as clean air, water, biodiversity, and climate stability—and designs policies to correct market failures created by environmental externalities. Key…

Envelope: What it is, How it Works, Example An envelope is a technical analysis indicator consisting of two trend lines (upper and lower) plotted above and below a central moving average. Envelopes help traders identify potential overbought and oversold conditions and define trading ranges based on mean-reversion principles. Key takeaways An envelope consists of an…

Entrepreneur: What It Means and How to Get Started Definition An entrepreneur is someone who launches and runs a business or startup, using their own ideas, time, and resources while assuming financial risk to bring products or services to market. Entrepreneurship is the process of turning an idea into a functioning enterprise that creates value…

Entity Theory What it is Entity theory is a legal and accounting doctrine that treats a business as a separate entity from its owners. Under this view, a corporation or limited liability company (LLC) is a distinct legal “person” that can own property, enter contracts, incur debt, and be sued independently of the individuals who…

Enterprise Value-to-Sales (EV/Sales) Enterprise value-to-sales (EV/Sales) is a valuation multiple that compares a company’s enterprise value (the theoretical takeover price) to its annual sales. It helps investors gauge whether a stock appears expensive or inexpensive relative to revenue. Key takeaways EV includes market capitalization plus debt minus cash (and can include preferred shares and minority…

Enterprise Value-to-Revenue (EV/R) Multiple What it is The Enterprise Value-to-Revenue (EV/R) multiple compares a company’s enterprise value (EV) to its revenue. It shows how much an acquirer would pay for each dollar of the company’s revenue and is especially useful for firms with low or negative profits, where earnings-based multiples are not meaningful. How to…

Enterprise Value (EV) Enterprise value (EV) is a measure of a company’s total value that reflects not only equity value but also debt and cash. It’s commonly used in valuations and mergers & acquisitions because it represents the theoretical takeover price of a company—what an acquirer would effectively pay to buy the business. EV —…

Enterprise Risk Management (ERM) What is ERM? Enterprise Risk Management (ERM) is a top-down, organization-wide approach to identifying, assessing, and responding to risks that could affect a company’s objectives, operations, finances, reputation, or compliance. Rather than leaving risk decisions to individual business units, ERM aligns risk appetite and responses across the whole enterprise. Key takeaways…

Enterprise Resource Planning (ERP): What It Is, How It Works, and How to Choose One Key takeaways * ERP is a unified software system that integrates core business processes across departments. * Modern ERPs are typically cloud-based, modular, and accessible remotely. * Benefits include real-time reporting, improved collaboration, and greater efficiency; risks include poor implementation,…

Enterprise Multiple (EV/EBITDA): A Financial Valuation Guide What is the enterprise multiple? The enterprise multiple, commonly expressed as EV/EBITDA, compares a company’s enterprise value (EV) to its earnings before interest, taxes, depreciation, and amortization (EBITDA). It is used to assess a company’s valuation while accounting for both debt and cash—making it particularly useful for potential…

What Was Enron? What Happened and Who Was Responsible Enron was an American energy, commodities and services company based in Houston that became synonymous with corporate fraud. Once a Wall Street favorite, Enron collapsed into bankruptcy in December 2001 after executives used deceptive accounting and complex off‑balance‑sheet structures to hide losses and inflate revenue. The…

Enrolled Agent (EA): Overview, History, FAQ Key takeaways An Enrolled Agent (EA) is a federally authorized tax practitioner with unlimited rights to represent taxpayers before the IRS (audits, collections, appeals). Prospective EAs must pass the Special Enrollment Examination (SEE) or qualify by prior IRS experience; all must pass a suitability/background check and obtain a PTIN….

Enhanced Oil Recovery (EOR) Enhanced Oil Recovery (EOR), also called tertiary recovery, refers to techniques used to extract oil that remains after primary and secondary recovery methods. Primary recovery relies on natural reservoir pressure and pumping; secondary recovery uses injected water or gas to maintain pressure. EOR alters reservoir conditions or oil properties to mobilize…

Understanding Engel’s Law What Engel’s Law Says Engel’s Law, formulated by Ernst Engel in 1857, states that as household (or national) income rises, the proportion of income spent on food falls, even if absolute food spending increases. Higher incomes shift consumption toward nonfood items such as education, recreation, health, and other services. Explore More Resources…

Engagement Letter An engagement letter is a written agreement that defines the working relationship between a service provider and a client. It outlines the scope of work, terms, fees, timelines, and other expectations to reduce ambiguity and limit liability. While usually less formal than a full contract, an engagement letter is legally binding once signed…

Energy Sector Overview The energy sector includes companies involved in producing, refining, transporting, and supplying energy that powers homes, transportation, industry, and commerce. It spans traditional fossil fuels (oil, natural gas, coal), nuclear, and a rapidly growing set of renewable technologies (solar, wind, hydropower, biofuels), as well as the electricity systems that deliver energy to…

Energy Risk Professional (ERP) What the ERP was The Energy Risk Professional (ERP) was a credential awarded by the Global Association of Risk Professionals (GARP) for practitioners in energy markets—oil, coal, natural gas, electricity, and alternative energy. The program focused on the intersection of physical energy markets and the financial instruments used to trade and…

Energy Return on Investment (EROI) What is EROI? Energy Return on Investment (EROI) is a ratio that measures how much usable energy is produced from an energy source relative to the energy expended to obtain that energy. It summarizes the net energy gain of an energy-producing process and helps determine whether that process is energetically…

Endowment Effect The endowment effect is a cognitive bias where people assign greater value to things simply because they own them. Ownership creates emotional attachment and loss aversion, leading individuals to demand more to give up an item than they would be willing to pay to acquire the same item. This bias affects everyday decisions,…

Endowment: Definition, Types, Policies, and Role in Higher Education What is an endowment? An endowment is a financial gift to a nonprofit—often a university, museum, hospital, or religious organization—where the principal (the corpus) is preserved and only the investment income is used for the purposes specified by the donor. Endowments can also refer to the…

Endorsement An endorsement is an expression of approval or authorization. It can be a signature that authorizes payment or transfer, an amendment that modifies a legal document or insurance policy, or a public declaration supporting a person, product, or idea. Key takeaways Endorsements commonly signify approval, authorization, or modification of terms. They appear as signatures…