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Finance GlossaryInternal Rate Of Return
Internal Rate Of Return
Definition of Internal Rate Of Return
Internal Rate Of Return (IRR) is used to measure the compound annual return generated by a financial asset. IRR is a tool in Discounted Cash Flow financial analysis that operates by bringing the Net Present Value (NPV) of cash flow to zero. That’s why IRR can be used to compare a variety of financial assets from the equity market or bond market to real estate.
Related Terms
Gravestone Doji
A Gravestone Doji is a candlestick pattern that signals the reversal of a bullish trend into a bearish one. The key marker of a Gravestone Doji pattern is the open, low, and closing prices being near to one another.
This is a price action type trading strategy that is formed with a tall upper shadow, which is a signal of a bearish reversal.
This is a price action type trading strategy that is formed with a tall upper shadow, which is a signal of a bearish reversal.
Short Selling
Short selling is a popular intraday selling strategy. Through this strategy, traders can sell shares that they currently don’t own. They expect the prices to fall, so they borrow the shares and sell them at the current price. The goal is to buy the stock back later at a lower price. However, traders can incur significant losses if the prices rise instead. That’s why risk management is crucial in short selling.
Cash Conversion Cycle
A Cash Conversion Cycle (CCC) tells you how many days it will take to convert a company’s inventory or resources into cash. The formula for Cash Conversion Cycle is:
Cash Conversion Cycle = (DIO + DSO) – DPO
Cash Conversion Cycle = (DIO + DSO) – DPO
- DIO: Days Inventory Outstanding is the average number of days it takes for a company to turn inventory into cash through sales
- DSO: Days Sales Outstanding is the average number of days it takes for a company to collect its receivables
- DPO: Days Payable Outstanding is the average number of days it takes fo a company to fulfil its obligations or payables
Mark-to-Market (MTM)
Mark-to-market is the practice of valuing an asset or position at its current market price rather than its purchase price. For instance, a futures contract is marked to market daily, meaning profits or losses are adjusted each day based on the latest market price.
Deferred Tax Asset
A deferred tax asset is an item on a company’s financial statement that can be used to get tax relief, generally in the event of overpaying taxes or net losses that are carried forward.
Companies tend to deduct these overpayments or losses for accounting purposes and to reduce their overall taxable income. Common examples of deferred tax assets include:
Companies tend to deduct these overpayments or losses for accounting purposes and to reduce their overall taxable income. Common examples of deferred tax assets include:
- Depreciation of fixed assets
- Net financial loss
- Bad debt
Relative Vigor Index (RVI)
The Relative Vigor Index (RVI) is a technical oscillator comparing the closing price to the opening price relative to the day’s trading range, smoothed over periods. Positive values show bullish vigor as closes exceed opens, while negative signal bearish weakness. It helps confirm trends and spot divergences, often used alongside other indicators for trading signals.
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